Disclosing the Facts:

Transparency and Risk in Hydraulic Fracturing Operations

Previous editions:2016201520142013

Disclosing the Facts 2014

Read the Executive Summary

The Executive Summary, including key findings from the report and recommendations for industry, is available to read online. Continue >>

Read the Full 2014 Report

The full report can be read here or downloaded. Read the
Full 2014 Report

Review the Company Data

Look through the data to see how each company stacks up for individual indicators. Continue >>

EXECUTIVE SUMMARY

Disclosing the Facts 2014 is the third in a series of investor reports intended to promote improved operational practices among oil and gas companies engaged in horizontal drilling and hydraulic fracturing. Hydraulic fracturing operations use high volumes of water and toxic chemicals, release significant levels of greenhouse gas and other emissions, and have the potential to adversely impact local communities when not properly managed. These issues may translate into financial risks to companies and shareholders related to fines, regulations, resource constraints, or threats to their social license to operate. Following the maxim of “what gets measured, gets managed,” this report encourages oil and gas companies to increase disclosures about their use of current best practices to minimize the environmental risks and community impacts of their “fracking” activities. Disclosure of best management practices and associated key performance indicators is the primary means by which investors may gauge how companies are managing the business risks associated with their environmental and community impacts.

Download the Executive Summary

This 2014 scorecard benchmarks the public disclosures of 30 oil and gas companies on 35 key performance indicators. It serves to distinguish companies disclosing more about their practices and impacts from those disclosing less. The scorecard assesses five areas of environmental, social, and governance metrics: (1) toxic chemicals; (2) water and waste management; (3) air emissions; (4) community impacts; and (5) management accountability, emphasizing quantitative disclosure on a play-by-play basis. It relies solely on publicly available information companies provide on their websites or in financial statements or other reports linked from their websites.

As was the case with the 2013 scorecard, the results of this year’s scorecard demonstrate a widespread industry trend of underperformance in disclosing key performance metrics. Across the board, companies are failing to provide investors and the public with sufficient quantitative information to adequately understand and compare the risks and opportunities these companies present regarding their shale play operations.

Although industry-wide performance continues to lag investor expectations, several companies have significantly improved their disclosures over the past year. This change is consistent with continued close investor, public, and regulatory scrutiny of hydraulic fracturing activities as well as broader patterns of innovation within the industry, where companies deploy better practices and other companies follow in what we hope is a race to the top for best performance. Investors plan to continue pressing companies to adopt effective practices for managing the risks and impacts, and thus capturing the full value, of their hydraulic fracturing operations.

Key Findings

  1. Failure to quantitatively disclose key performance metrics remains the industry-wide standard. Across the industry, companies are failing to provide investors and other key stakeholders with quantitative, play-by-play disclosure of operational impacts and best management practices. Existing company disclosures remain mostly qualitative and narrative, or focus anecdotally on just one or a few of their multiple plays, making systematic comparisons across companies difficult.
  2. A small group of companies has dramatically improved disclosure. BHP-Billiton emerged as the highest scoring company this year. BHP is the first company to score points on more than half the report’s indicators, rising from near the bottom of 2013’s rankings to the top this year. Both Hess, the second-highest scorer, and EQT, the third-ranked company, doubled their scores from 2013. Finally, Noble Energy nearly doubled its score. These four companies accounted for approximately two-thirds of the total overall improvement in industry scores. Encana and Apache, leaders in 2013, round out the top 20% of this year’s industry leaders. Most other companies changed their scores only marginally or not at all.
  3. Broadly applied policies and technical practices, not quantitative key performance metrics in specific plays, are the most commonly reported indicators. The scorecard includes a mix of quantitative indicators and non-quantitative best practice indicators. The five most commonly reported indicators among the 30 companies are policies to: substitute pipelines for trucks to reduce traffic and emissions (20 companies); use nonpotable water sources where possible (e.g., treatment plant effluent and briny subsurface waters) instead of fresh water (18 companies); use health, environment, and safety (HES) metrics in setting executive compensation (18 companies); use infrared cameras to some degree in detecting air contaminant leaks (16 companies) and; not use diesel fuel in fracturing fluids (14 companies). These are broad company policies that lack quantitative metrics.
  4. Companies still fail to disclose comprehensive systems for identifying community concerns and corporate responses. Although the number of companies that scored any points in this category increased to 13 from a mere 6 in 2013, companies continue to score worst on their disclosed policies and practices for addressing the community impacts of their operations compared to the scorecard’s other four topical areas. Improved disclosures were primarily on indicators regarding traffic congestion and management systems for tracking community concerns. Still largely absent, however, are discussions by companies of which impacts are of greatest concern in communities in diverse plays and the company’s specific practices to address them.

Core Recommendation: Companies Should Increase Quantitative Reporting

As stated in our previous assessments, narrative reporting—anecdotal reporting of activities in one or two plays—and aggregated company-wide reporting of impacts on a national or company-wide level, do not sufficiently inform investors about how effectively companies are managing the risks or opportunities associated with their operations. Companies should report data associated with their operational impacts using quantitative metrics, on a play-by-play basis, in order for investors to be able to rigorously assess company practices.

Conclusion

As evidenced by continuing controversy over allowing shale energy development to move forward in Colorado, California, New York, Eastern Canada, and elsewhere, energy companies have still not managed to allay public concerns about the risks associated with their operations and continue to face potential loss of their social license to operate. We believe companies implementing current best practices in operations and providing thoroughly transparent information about these efforts will: enhance the likelihood of securing and maintaining their social license to operate; reduce regulatory and reputational risks; reduce liabilities associated with poor performance, spills, contamination, and lawsuits; and thereby increase their access to capital.

2014 DATA TABLES

These tables contain the score breakdown for each company by indicator. A checkmark means the company earned a point for that metric.

Company Total Scores

Company2014 Score
Out of 35
2013 Score
Out of 32
Change from
2013
ANADARKO PETROLEUM74+3
APACHE1310+3
BHP BILLITON182+16
BP62+4
CABOT OIL & GAS85+3
CARRIZO *0  
CHESAPEAKE ENERGY75+2
CHEVRON 63+3
CONOCOPHILLIPS550
CONSOL ENERGY550
CONTINENTAL RESOURCES *0  
DEVON ENERGY54+1
ENCANA1514+1
EOG RESOURCES96+3
EQT 165+11
EXCO RESOURCES *7  
ExxonMobil52+3
HESS178+9
NEWFIELD RESOURCES *4  
Noble Energy137+6
Occidental Petroleum72+5
PENN VIRGINIA *9  
QEP110
RANGE RESOURCES93+6
SHELL97+2
Southwestern Energy220
TALISMAN ENERGY43+1
ULTRA PETROLEUM ^910-1
WHITING PETROLEUM *3  
WPX ENERGY330

* Companies with asterisks were not scored in 2013

^ In 2013, Ultra was active in a single play only. In 2014, Ultra is a multi-play company. Its lower score in 2014 indicates a failure to expand its reporting to reflect its increased activity.

Toxic Chemicals

CompanyQuantitative Reporting Toxicity ReductionNo Diesel Fuel in Fracturing FluidsNo BTEX in Fracturing FluidsWebsite Disclaimer CBI ExclusionSection Score
ANADARKO PETROLEUM01001
APACHE01113
BHP BILLITON01113
BP00011
CABOT OIL & GAS01113
CARRIZO00000
CHESAPEAKE ENERGY00000
CHEVRON 10001
CONOCOPHILLIPS00000
CONSOL ENERGY 00000
CONTINENTAL RESOURCES00000
DEVON ENERGY00000
ENCANA01001
EOG RESOURCES00011
EQT 11002
EXCO RESOURCES00000
ExxonMobil01001
HESS11114
NEWFIELD RESOURCES00000
NOBLE ENERGY01001
OCCIDENTAL PETROLEUM01102
PENN VIRGINIA00000
QEP01001
RANGE RESOURCES01102
SHELL01012
SOUTHWESTERN ENERGY00000
TALISMAN ENERGY00000
ULTRA PETROLEUM01102
WHITING PETROLEUM00000
WPX ENERGY00000

QUESTIONS

  1. Does the company provide quantitative reporting on its website of progress in reducing the toxicity of hydraulic fracturing additives?
  2. Does the company state a practice to not use diesel in its fracturing fluids?
  3. Does the company state a practice to not use BTEX in its fracturing fluids?
  4. Does the company clearly state on its website that FracFocus reports may exclude chemicals rotected by claims of confidential business information?

Water and Waste Management

CompanyWell IntegrityPre-drill H2O monitor^Post-drill H2O monitor^Total water use^Flowback water reuse %^Water source types^Non-potable water policyWater intensity^Closed tank waterstore^Closed loop drilling residuals^NORMS disclosureSection Score
ANADARKO PETROLEUM000000000000
APACHE100000100013
BHP BILLITON000101110116
BP010000000001
CABOT OIL & GAS100000001002
CARRIZO000000000000
CHESAPEAKE ENERGY000000110002
CHEVRON 000000100001
CONOCOPHILLIPS000000100001
CONSOL ENERGY 000000100102
CONTINENTAL RESOURCES000000000000
DEVON ENERGY000000100001
ENCANA110000100003
EOG RESOURCES100000100002
EQT 010010000114
EXCO RESOURCES100000101003
ExxonMobil000000000000
HESS111110101108
NEWFIELD RESOURCES000000100001
NOBLE ENERGY110000100104
OCCIDENTAL PETROLEUM000000100001
PENN VIRGINIA111000101117
QEP000000000000
RANGE RESOURCES000000100012
SHELL011000100003
SOUTHWESTERN ENERGY000000000000
TALISMAN ENERGY010000000001
ULTRA PETROLEUM000000101013
WHITING PETROLEUM000000000000
WPX ENERGY110000000002

QUESTIONS

  1. Does the company report on its website the principal practices it uses to test well integrity beyond pressure testing (e.g., temperature, acoustic, or ultrasonic methods?)
  2. For each shale play, does the company disclose whether it routinely assesses existing groundwater quality before it drills?
  3. For each shale play, does the company disclose whether it routinely assesses groundwater quality after it drills?
  4. For each shale play, does the company report the aggregate quantity of water used for operations?
  5. For each shale play, does the company disclose the percentage of flowback water managed and reused for subsequent well completions?
  6. For each shale play quantity reported in response to the question immediately above, does the company report the share of water sourced from various water types (e.g., x% from groundwater, y% from suface water, z% flowback water, etc.)?
  7. Does the company state it has a policy of using non-potable water sources to the fullest extent technically practicable?
  8. F.e.p., does company report intensity of water use--amount of water required to produce measurable units of energy (e.g., gallons/million BTU[MMBTU]?
  9. Does the company disclose a policy to store flowback water in closed tanks for its wells in all shale plays?
  10. For each shale play, does the company report whether it routinely uses closed-loop systems for the management of drilling residuals?
  11. Does the company report its practices for identifying and managing the hazards from NORMs?

Air Emissions

Company% green completions^Low emission engines pad ops.^% low emission vehicle conversionNOX and VOCs reporting^Pipelines replace trucksNOX and VOCs reductions^Methane leakageLow-bleed controllersLeak detection camerasLeak inspection frequencySection Score
ANADARKO PETROLEUM10101000114
APACHE10101010104
BHP BILLITON10001000102
BP00000000101
CABOT OIL & GAS00000000000
CARRIZO00000000000
CHESAPEAKE ENERGY00100000102
CHEVRON 00001000113
CONOCOPHILLIPS00001000102
CONSOL ENERGY 01000000001
CONTINENTAL RESOURCES00000000000
DEVON ENERGY10001001002
ENCANA10101001115
EOG RESOURCES10001000102
EQT 10101010003
EXCO RESOURCES01001000002
ExxonMobil00001000001
HESS00001000001
NEWFIELD RESOURCES00000000000
NOBLE ENERGY01101000104
OCCIDENTAL PETROLEUM00001000102
PENN VIRGINIA00000000000
QEP00000000000
RANGE RESOURCES00101010104
SHELL00001000102
SOUTHWESTERN ENERGY00001000102
TALISMAN ENERGY10001000001
ULTRA PETROLEUM10001000113
WHITING PETROLEUM10000000101
WPX ENERGY00001000001

QUESTIONS

  1. For each play, does the company report the percentage of wells for which it used green completions?
  2. For each shale play, does the company report whether it uses any of the following--natural gas, low emission diesel engines, or other reduced-emission methods to power well pad operations?
  3. Does the company report the percentage, if any, of its vehicle fleet converted from diesel to lower emission non-diesel fuels?
  4. For each play, does the company disclose data or estimates for NOX and VOC emitted from well drilling and completions?
  5. Does the company report when pipelines have been used to replace trucks in transporting water used for fracturing operations?
  6. For each play, does the company report quantitatively on reductions of NOX and VOC emissions from emission reduction efforts?
  7. Does co. report the percentage leakage rate for methane from its drilling, completion, and production operations?
  8. Does co. report % or # of high-bleed controllers replaced with low-emission alternatives?
  9. Does co. report technologies it uses (e.g., infrared cameras) to monitor operations for fugitive emissions?
  10. Does the company report with what frequency it conducts monitoring for fugitive emissions?

Community Impacts

CompanyDisclose community impact concerns, company response^Aggregate statistics for local concernsUpward reporting of local concern statisticsTraffic congestion policiesRoad damage payment policiesSection Score
ANADARKO PETROLEUM000000
APACHE000000
BHP BILLITON011114
BP010102
CABOT OIL & GAS000101
CARRIZO000000
CHESAPEAKE ENERGY011002
CHEVRON 000000
CONOCOPHILLIPS010001
CONSOL ENERGY 000000
CONTINENTAL RESOURCES000000
DEVON ENERGY000000
ENCANA010102
EOG RESOURCES011103
EQT 111104
EXCO RESOURCES000000
ExxonMobil010102
HESS000101
NEWFIELD RESOURCES000101
NOBLE ENERGY000101
OCCIDENTAL PETROLEUM000000
PENN VIRGINIA000000
QEP000000
RANGE RESOURCES000000
SHELL000101
SOUTHWESTERN ENERGY000000
TALISMAN ENERGY000000
ULTRA PETROLEUM000000
WHITING PETROLEUM000000
WPX ENERGY000000

QUESTIONS

  1. Does the company disclose internal processes for aggregating local concern statistics?
  2. Does the company disclose its internal processes for reporting local concern statistics upward within the company?
  3. Does the company disclose a clearly stated policy to adjust activity schedules to prevent or reduce traffic congestion?
  4. Does the company have a clearly stated policy, to reimburse state and local authorities for road damage caused by its operations?

Management and Accountability

CompanySenior management pay tied to HES3rd party audit for HES3rd party information prior to hiring contractorsNOVs and fines^NOV trends^Section Score
ANADARKO PETROLEUM100001
APACHE101002
BHP BILLITON101002
BP100001
CABOT OIL & GAS011002
CARRIZO000000
CHESAPEAKE ENERGY100001
CHEVRON 100001
CONOCOPHILLIPS100001
CONSOL ENERGY 101002
CONTINENTAL RESOURCES000000
DEVON ENERGY100001
ENCANA111003
EOG RESOURCES000000
EQT 101002
EXCO RESOURCES011002
ExxonMobil100001
HESS111003
NEWFIELD RESOURCES101002
NOBLE ENERGY111003
OCCIDENTAL PETROLEUM101002
PENN VIRGINIA011002
QEP000000
RANGE RESOURCES001001
SHELL100001
SOUTHWESTERN ENERGY000000
TALISMAN ENERGY100001
ULTRA PETROLEUM000000
WHITING PETROLEUM000101
WPX ENERGY000000

QUESTIONS

  1. Does the company report it provides compensation and incentive packages for senior management linked to HSE and social impact performance and results?
  2. Does the company require third party independent auditing of health, safety, and environmental functions for its operations?
  3. Does the company rely on third party databases for information to evaluate potential contractors before hire?
  4. F.e.p., does co. disclose notices of violation numbers (or equivalent administrative actions) and numbers and amounts of fines related to its operations?
  5. For each play, does the company report reductions, if any, in numbers of notices of violations received over the past year?

The information in this report has been prepared from sources and data the authors believe to be reliable, but we assume no liability for and make no guarantee as to its adequacy, accuracy, timeliness or completeness. Boston Common Asset Management and the mutual funds that they manage may have invested in and may in the future invest in some of the companies mentioned in this report. The information in this report is not designed to be investment advice regarding any security, company or industry and should not be relied upon to make investment decisions. We cannot and do not comment on the suitability or profitability of any particular investment. All investments involve risk, including the risk of losing principal. No information herein is intended as an offer or solicitation of an offer to sell or buy, or as a sponsorship of any company, security, or fund. Opinions expressed and facts stated herein are subject to change without notice.