ADVOCACY POSITION: Methane Accounting


Luan Steinhilber
Director of Operations and Shareholder Advocacy, Miller/Howard

Over the past year, the threats posed by methane emissions have been a flashpoint for investors. U.S. institutions, including foundations and endowments, have grappled with the controversies surrounding fossil fuels.

The need for timely, accurate information becomes particularly acute as the country shifts from coal to gas and moves toward energy efficiency. Last year the U.S. became the world’s largest producer of natural gas, a remarkable achievement that could reap enormous returns for investors over time. But the economic returns could be lost or come at a steep price. Natural gas produces less carbon dioxide than coal or oil, but methane, the main component of natural gas, is more potent than carbon dioxide, and its contribution to global warming could profoundly negate the environmental benefits.

At the crux of investor concerns is a lack of effective regulation. Without appropriate data, national and state greenhouse gas reduction strategies may be difficult to develop. A recent report in the Proceedings of the National Academy of Sciences calls into question the U.S. Environmental Protection Agency’s recent reduction of its methane emissions estimates. The report, based on actual measurements of atmospheric methane, concluded that the EPA’s current inventories underestimate total U.S. methane emissions by 1.5 times, and that greenhouse gas emissions from fossil fuel extraction and agriculture are “likely” two or more times greater than prevailing estimates.

Industry players such as Energen do recognize that climate change could have a significant impact on the bottom line. It is among several companies that have invested in emissions-reduction technology measures as part of EPA’s Natural Gas Star voluntary program.

As an Energen shareholder, Miller/Howard Investments welcomes these efforts so far. But we felt the company and the industry overall can do more to raise the standards of operations and adopt best practices for emissions control. The EPA requires reduced emission completions by 2015, and states such as New York are likely to impose tighter regulations. All this would increase companies’ compliance or risk mitigation costs.

We recently asked Energen and Kinder Morgan to implement a comprehensive program of measurement, disclosure, and target setting for emissions across operations. That our 2012 shareholder resolution with Energen garnered a near majority 49.5 percent of the vote is a testament to the magnitude of shareholder concerns. By being proactive, Energen and others would avoid the risks of litigation and stiff penalties, and ultimately improve their standing as leaders in corporate social responsibility.

For more information, download Proxy Preview 2014 to find more methane accounting shareholder resolutions.