Key Issue: Natural Resource Management

Shareholders have brought forward more than 40 resolutions this year to pressure companies on their management of natural resources. Many focus on gas fracturing and coal combustion waste. ProxyDemocracy continues its presentation of reports on key social and environmental issues coming before voters this proxy season. The Sustainable Investments Institute (SI2), a new research center based in Washington, produced the series. Amy Wilson, an analyst for SI2, wrote this report.

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This year’s crop of environmental proposals focuses heavily on natural resource management issues, with 45 resolutions filed by a broad coalition of investor activists. Natural resource management proposals are a diverse lot, targeting companies in a broad variety of industries and addressing a wide range of topics.

Two new shareholder campaigns target environmental impacts associated with fossil fuels — gas fracturing and coal combustion waste — illustrating the difficult choices investors and policy makers face in a world of increasingly limited resources and expanding energy demands.

While greenhouse gas emissions reduction is a central goal of these and other new and continuing campaigns waged by investor activists, these two big new initiatives primarily address the immediate risks that natural gas, oil and coal production and combustion may pose to water, air and land resources. Twelve proposals ask natural gas companies to report on their hydraulic fracturing operations, while five others to electric utility operators ask for information on coal combustion waste disposal practices and facilities.

Environmental activists hope the Environmental Protection Agency will enact regulations for hydraulic fracturing and coal combustion waste disposal, adding nationwide environmental standards to the current system of state and local regulation. This move would be contentious because political and economic pressures strongly favor maximizing domestic energy production and reducing consumer energy costs; companies and opponents of federal action argue it could both curb production and raise costs.

Natural gas combustion releases far fewer greenhouse gas emissions than does coal or oil, making it attractive as a “bridge fuel” to cleaner energy options. But recent events also have generated increased pressure to address environmental concerns about both gas fracturing and coal waste.

The accidental release of over a billion gallons of coal ash sludge from a Tennessee waste impoundment in December 2008 added weight to the argument for federal coal combustion waste disposal regulations. Further, a Gold Rush atmosphere surrounds natural gas drilling in the Marcellus Shale, which lies under densely populated Eastern states such as Pennsylvania and New York that have not seen gas development until recently.

This has piqued public concern about how hydraulic fracturing might affect aquifers and surface waters, pitting energy companies against urban water consumers and others worried about contamination.

Several other shareholder campaigns this year address other areas in which company activities may have direct impacts on natural resources. This report groups 18 proposals into this broad category — including two resolutions asking oil companies for the third year in a row to report on their operations in Canada’s oil sands, a significant source of crude oil for the United States.

New resolutions include two that ask about wetlands degradation caused by oil and gas drilling and two that have a new angle on rainforest protection. Three more address forestry practices, four address water pollution and use, and two are concerned with nuclear power safety; the final three address toxic emissions and environmental justice.

An additional 10 proposals take on the indirect impact that companies may have on natural resources. These proposals seek disclosure or policy changes on paper sourcing, recycling, and several different kinds of impact assessments. Of particular note are two proposals that seek a report on the financing of mountain top removal mining by two banks, both of which must surmount company challenges at the Securities and Exchange Commission to come to votes.

References

Hydraulic Fracturing

• U.S. Energy Information Administration, Annual Energy Outlook 2010 (Early Release) (http://www.eia.doe.gov/oiaf/aeo/index.html)
• Energy In Depth (http://energyindepth.org/)
•  Modern Shale Gas Development in the United States: A Primer. Ground Water Protection Council, and ALL Consulting for U.S. Department of Energy, 2009.(http://www.gwpc.org/e-library/documents/general/Shale%20Gas%20Primer%202009.pdf)
• ProPublica, “Buried Secrets,” investigative journalism coverage of hydraulic fracturing (http://www.propublica.org/series/buried-secrets-gas-drillings-environmental-threat)

Coal Combustion Waste

• Coal Combustion Residue: Status of EPA’s Efforts to Regulate Disposal. Government Accounting Office, 2009.
  (http://www.gao.gov/products/GAO-10-85R)
• Is Coal Ash Toxic? Electric Power Research Institute, 2009.
  (http://mydocs.epri.com/docs/public/000000000001020204.pdf)

Canadian Oil Sands

• The Viability of Non-Conventional Oil Development. Innovest Strategic Advisors, 2009. (http://solveclimate.com/sites/default/files/Viability%20of%20Non-Conventaional%20Oil.pdf)
• Lines in the Sands: Oil Sands Sector Benchmarking. Northwest & Ethical Investments, 2009  (http://www.ethicalfunds.com/SiteCollectionDocuments/docs/lines_in_the_sands_full.pdf)
• Government of Alberta Canada Oil Sands site. (http://www.energy.alberta.ca/OurBusiness/oilsands.asp)