Last week, two social- and environment-focused shareholder coalitions released an investor guide on fracking disclosure. The guide, “Extracting the Facts: An Investor Guide to Disclosing Risk from Hydraulic Fracturing Operations,” is clearly investor focused, but does reflect many current market practices. The Investor Environmental Health Network and the Interfaith Center on Corporate Responsibility, the groups that created the guide, stated that the effort is a response to investor concern about the impacts of fracking as well as corporate questions about what kinds of disclosure investors are seeking.
The IEHN/ICCR guide hits the market as demand for disclosure on fracking practices is already at a fever pitch. Earlier this month, ISS issued pro-disclosure recommendations for fracking companies in its annual proxy guidelines. The SEC has also reportedly been seeking additional fracking-related disclosure from filing companies. In fact, IEHN noted that one of the benefits of the guide could be to assist companies to better respond to SEC information requests.
Several of the notable recommendations for companies include: i) publicly disclose all chemicals and additives used in fracturing operations in individual wells; ii) include in RFPs requests for service providers to offer reduced-toxicity fluids; iii) pressure test wells prior to fracturing and routinely apply advance acoustic-testing methods on cemented casing strings; iv) implement third-party independent monitoring and auditing of EHS functions; and v) disclose all government penalties, fees, or notices of violations.
The IEHN/ICCR guide, incidentally, was published the same day that the Colorado Oil and Gas Conversation Committee adopted new disclosure rules for all fracking companies active in Colorado. The new rules, which go into effect in April 2012, will require oil and gas companies to disclose all chemicals, though not the precise formula, used hydraulic fracturing operations and will be the toughest fracking disclosure law in the country, according to the Aspen Daily News.
These recent developments underscore the ongoing push for detailed disclosure of fracking operations. Neither the IEHN/ICCR guide nor the COGCC rules, though, push for disclosure of specific fluid formulas or other trade secrets. As long as fracking companies and can guard proprietary information, there may be a competitive advantage to companies that meet the investing public’s desire for clear and robust disclosure of fracking operations and risk management practices.