Shareholders Smell Gas (Methane, Actually)
By Michael Schweibinz
Shareholders in natural gas companies are increasingly skeptical of methane leakage levels. Recent shareholder votes have sent a strong message requesting that companies issue adequate statements on how they are handling “high-climate-change-impact methane emissions.”
Shareholder proposals asking Houston-based Spectra Energy (NYSE: SE), Tulsa-based Oneok (NYSE: OKE), and Fort Worth-based Range Resources (NYSE: RRC) to issue reports on how they are managing methane emissions have received favorable votes from company shareholders: 35.4%, 38.2% and 21.7% respectively.
Methane has “72 times the impact of CO2 on global temperatures over a 20 year period, and a leakage rate above 3.2% makes natural gas worse than coal in driving global warming.” Even more alarming, recent academic reports have revealed “leakage rates up to 9%; three times Environmental Protection Agency (EPA) estimates and five times industry estimates.” Statistics like these cannot continue to be ignored by investors or policy makers.
A logical approach for a company developing “a strong methane management program would indicate both a reduction in risk, as well as efficient operations maximizing gas for sale and shareholder value.” However, despite mounting concerns on the part of investors and communities, Range Resources’ management has lashed out against its own shareholders. Such a response is likely to aggravate shareholders and put the company at a competitive disadvantage when compared with other natural gas companies with more progressive programs to control fugitive methane emissions.
Investors have every reason to inquire into how natural gas companies are preventing economic and environmental waste. As of now, investors are somewhat blinded by the inadequate reporting—but given the appetite for more transparency to mitigate investment risk, that will likely change, and soon.
After all, where there are challenges, there are almost always also opportunities for competitors that do a better job of managing environmental impacts. According to the National Resource Defense Council, implementing methane leakage “control processes could generate $2 billion in annual revenues for the industry and reduce methane pollution by 80%.” As companies improve their management techniques, reporting, and implement profitable control technologies, the sustainability of the industry should improve—perhaps drastically
Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: July 10, 2013