A critical eye when dealing with the extraction of oil and shale gas

The extraction of oil is currently still commercially interesting, but does impose major risks. The extraction of oil and gas from shale rock layers, for instance, can have negative effects; not just on the landscape due to the storage of wastewater, but also because of the damaging effects on the social cohesion within a community as there is a certain amount of resistance against this form of oil and gas extraction. And this doesn't even take into account the emission of greenhouse gases. This means that engagement with companies in this sector is necessary to develop improvements in both policy and behaviour.

Risks relating to the extraction of shale oil and gas

Shale oil can be found in porous shale rock layers and is often detected together with shale gas. Water and chemicals are used to pump the gas and oil to the surface. The production of gas and oil from the layer of shale leads to higher emissions of greenhouse gases than during the production of conventional natural gas. There are two causes for this. The extraction of shale oil and gas requires the drilling of more wells than necessary for conventional oil and gas extraction, which results in an increased use of energy. In addition, a larger amount of gas is flared and larger methane emissions end up into the atmosphere.

Start of the engagement

ACTIAM is in contact with a number of companies that are active in the extraction of shale oil and gas. We focus on how these companies deal with the wide range of environmental aspects and the future plans of the respective companies. Do they, for example, use specific systems that prevent the pollution of the groundwater? ACTIAM studies the reports made by the companies concerned and looks into the information from data providers that monitor this industry. ACTIAM has also carried out responsive engagement activities with Continental Resources, an American company active in the oil and gas exploration and production.

Lack of cooperation

Continental Resources was not cooperative when it came to providing information and eventually only supplied little information. The company took a defensive stand, did not feel the need to have a dialogue, and requested ACTIAM to submit the questions by email.

As it was unable to engage with the company, ACTIAM could not assess whether Continental Resources applies the best available technology in the area of the use of chemicals, water management, waste management, and the detection of methane leakages. Furthermore, the ownership structure of the company inhibits the implementation of innovative changes. No less than 75% of the company's shares are in the hands of one party, meaning that changing the corporate policy via resolutions during shareholders' meetings would be nearly impossible.

Result of the engagement

The company was insufficiently open to a dialogue and transparency or for taking steps to control the risks. The corporate governance of the company did not show any improvement. Moreover, the company did not present any plans for a transition towards cleaner energy sources. All these factors were the reason for ACTIAM to ultimately decide to exclude Continental Resources from its investment portfolio.

Source: ACTIAM, as per end of March 2021