The Fractured Ethics of Fracking
May 31, 2011 1 Comment
Thursday, May 26, 2011
The Fractured Ethics of Fracking
Shareholders of two large gas producers — ExxonMobil, and Chevron - voted yesterday not to require company officials to disclose more information about the growing practice known as fracking. Short for ‘hydraulic fracturing,’ the idea behind fracking is that companies drill down and then push under great pressure liquids sideways into oil and gas-rich shale rock. Millions of gallons of water, mixed with brine or chemicals, is injected into the shale and the resulting pressure fractures the rock layers which releases natural gas or oil. A proppant, usually sand, is injected into the fractures to keep the fissures open and the oil or gas flowing.
The practice is controversial because the chemicals, mixed with water, may find their way into aquifers which supply drinking water. Oil companies say that fracking is safe and poses no threat to drinking water. Although fracking has been used since the late 1940s, it has attracted attention lately because of its growing use in teasing out natural gas from virgin areas.
Right now, few groups are calling for an outright ban on fracking. What some shareholders – at least those who put the question before yesterday’s meetings – and others want is for companies to issue full disclosure about individual fracking operations and the chemicals used during the process. Some companies counter that they already abide by environmental laws and regulations and that further disclosure is not necessary.
Exxon and Chevron had urged shareholders to vote against disclosure. Even so, 30 percent of ExxonMobil shareholders and 41 percent of Chevron shareholders voted for increased disclosure. ExxonMobil spokeswoman Karen Matusic, quoted in Platts, before yesterday’s vote said that while the company supports the disclosure of chemical composition of hydraulic fracturing fluid, management has urged shareholders to vote against the activists’ resolution. “We believe state-level oversight of oil and gas operations, including hydraulic fracturing, is the most effective approach for protecting human health and the environment, since it best accounts for local geology and other local factors,” she said.
The voting was non-binding, no matter what the outcome, but I can see no reason why oil producers should not release everything they know about their fracking operations to shareholders, who, ultimately, own the company. Indeed, if fracking turns out to be a dangerous practice, shareholders will bear the financial loss as did BP shareholders after the company spilled millions of gallons of oil into the Gulf of Mexico. Beyond their financial interest, shareholders deserve to know if the companies they support through their share ownership are good environmental stewards. I’m dismayed that shareholders voted down full disclosure. On the other hand, shareholders rarely vote against their company’s recommendations because most of them just fill in the box that says: “I agree with management.” (Who has time to read proxy statements?)
I can appreciate the paperwork burden involved in releasing additional data especially when opposing lawyers will be poring over every word trying to find the basis for lawsuits. One law firm, Ashcraft and Gerel, already has a webpage devoted to fracking litigation. There’s also concern among drillers that releasing information about the specific chemicals used at certain wells would be giving away proprietary data to competitors. (Many drillers have registered their wells and chemicals at a websitehosted by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission. However, it does not include all chemicals because of these proprietary concerns. Also, it only includes 80 percent of U.S. shale gas production.)
Some people I’ve spoken to in the oil and gas exploration industry say, off the record, that very little is actually proprietary and that competitors know pretty well what others are doing as far as trying new chemical mixes. Others vehemently hide, on business grounds, the recipes for their chemical concoctions even from government agencies investigating the deaths of animals who drank these potions and keeled over.
In the end, these are simply distractions. If fracking is safe, as the oil companies claim, then why hide any details from shareholders and the public? People’s lives and health are at stake and that supersedes trade secrets.
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Larry Kahaner has been a business journalist for more than 20 years, a former Business Week Washington correspondent, and the author of many books about business ethics including: Values Prosperity and the Talmud: Business Lessons from the Ancient Rabbis; Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top; and Say It and Live It; The 50 Corporate Mission Statements that Hit the Mark, (co-author).