EOG shareholders face undisclosed risks associated with hydraulic fracturing
Green Century urges EOG to improve transparency at annual meeting
April 28, 2010 Boston, MA—Today investors challenged EOG Resources, Inc.* to improve disclosure of the risks to shareholder value associated with its gas drilling (hydraulic fracturing) operations.
Production from traditional reserves of natural gas has been dwindling, and an increasing number of new wells can currently only be developed using hydraulic fracturing— a process where water, chemicals and particles such as sand are injected into the ground under extremely high pressure—to unlock vast reserves previously unavailable. It has been estimated that 60 to 80 percent of new wells will require hydraulic fracturing and investors are concerned that this process carries potentially serious financial and environmental risks. According to the company’s 2009 10-K filing with the SEC, over 80% of EOG's net proved reserves (on a natural gas equivalent basis) in the US and Canada were natural gas.
“Investors are requesting increased transparency because we are concerned that shareholder value may be undermined by company actions that fall behind public and regulatory expectations for environmental protection,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management (Green Century). “In the absence of meaningful disclosure, investors have no way of fully assessing the risks and rewards from investing in various companies in the energy sector,” she continued.
The Green Century Equity Fund filed a resolution at EOG asking the company to report on the environmental impact of the company’s hydraulic fracturing operations and for a discussion of the potential policies the company could adopt, above and beyond regulatory requirements, to reduce or eliminate hazards to air, water and soil quality from those activities. Along with the Green Century Equity Fund, the proposal was co-filed by the Benedictine Sisters of Mount St. Scholastica, Catholic Health East, MMA Praxis Core Stock Fund, the Sustainability Group at Loring, Wolcott and Coolidge and Trinity Health.
“Hydraulic fracturing operations have been linked to significant environmental concerns that could have financial implications for the companies involved and are leading to increased regulatory scrutiny,” said Richard Liroff, Executive Director of the Investor Environmental Health Network. He continued, “As a result, all companies that employ the process face substantial business risks. EOG currently does not provide investors sufficient information to determine if they are successfully managing the associated risks.”
As the use of hydraulic fracturing skyrockets, communities, regulators and investors are growing increasingly concerned about the environmental impacts of this process. Regulation at the state or federal level could have dramatic implications for all companies engaged in hydraulic fracturing by subjecting them to EPA oversight, potentially restricting areas in which hydraulic fracturing may be performed, limiting materials that may be used, or otherwise increasing costs. According to EOG’s 2009 10-K, approximately 75 percent of the company’s reserves (on a natural gas equivalent basis) are located in the U.S.; consequently investors are seeking more information about the company’s policies that, by minimizing environmental and associated business risks, will reduce uncertainties associated with possible regulatory changes.
Yesterday, Cabot Oil & Gas* was the first company to have this resolution presented at its annual meeting. In addition, investors will raise this issue at Chesapeake Energy*, ExxonMobil*, Williams Companies, Inc.* and Ultra Petroleum*.
Green Century and the Investor Environmental Health Network are leading the investor effort to ensure that natural gas drilling is done in a way that protects investor interests by avoiding unnecessary risks to human health and the environment. Numerous investors and investor advisors including As You Sow, Boston Common Asset Management, Catholic Healthcare West, First Affirmative Financial Network, Green Century Capital Management, MMA Praxis Mutual Funds, the Mercy Investment Program, Miller/Howard Investments, the New York State Common Retirement Fund, the Shareholder Association for Research and Education, the Sisters of St. Francis of Philadelphia, and the Sustainability Group have engaged over 20 companies in efforts to encourage increased transparency and disclosures of the risks associated with this process.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability. Green Century manages two environmentally responsible mutual funds, the Green Century Balanced Fund and the Green Century Equity Fund.
The Investor Environmental Health Network is a collaborative partnership of investment managers, advised by nongovernmental organizations, concerned about the financial and public health risks associated with corporate toxic chemicals policies. IEHN, through dialogue and shareholder resolutions, encourages companies to adopt policies to continually and systematically reduce and eliminate the toxic chemicals in their products.
*As of December 31, 2009, EOG Resources, Inc. was not held by the Green Century Balanced Fund and comprised 0.47% of the Green Century Equity Fund; Cabot Oil & Gas. was not held by the Green Century Balanced Fund nor the Green Century Equity Fund; Chesapeake Energy was not held by the Green Century Balanced Fund and comprised 0.32% of the Green Century Equity Fund; ExxonMobil was not held by the Green Century Balanced Fund nor the Green Century Equity Fund; Williams Companies, Inc was not held by the Green Century Balanced Fund and comprised 0.24% of the Green Century Equity Fund; and Ultra Petroleum was not held by the Green Century Balanced Fund and comprised 0.14% of the Green Century Equity Fund. Portfolio composition will change due to ongoing management of the Funds. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holding. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
You should consider the Funds' investment objectives, risks, charges, and expenses carefully before investing. For a prospectus that contains this and other information about the Funds, call 1-800-93-GREEN, visit www.greencentury.com or email firstname.lastname@example.org. Please read the prospectus carefully before investing. Investments are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
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