Hydraulic Fracturing Proposals (U.S.)

Background and Overview

Hydraulic fracturing, also known as fracking, is a natural gas extraction technique that involves the high-pressure injection of water, sand, and chemicals into a gas-bearing shale rock formation to break the shale structure and enable the gas to flow to the wellhead. Concerns regarding possible environmental consequences of fracking have focused public attention on the process. 

In addition to the increasing media and public policy attention given to hydraulic fracturing, shareholder proposals requesting information on fracking policies and practices have received notable levels of support. Shareholder proposals on fracking were first submitted at companies in 2010, where they received an average of 30.3 percent shareholder support. In 2011, traction among shareholders increased and fracking proposals received an average of 40.7 percent support.

Key Changes Under Consideration

Currently, the ISS policy does not specifically address hydraulic fracturing-related shareholder proposals. Instead, the framework of ISS' General Environmental Proposals and Community Impact Assessments policy guides evaluation of such proposals. The proposed hydraulic fracturing policy with vote recommendation is below:

Generally vote FOR proposals requesting greater disclosure of a company's (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations, considering:

• The company's current level of disclosure of relevant policies and oversight mechanisms;
• The company's current level of such disclosure relative to its industry peers;
• Potential relevant local, state, or national regulatory developments; and
• Controversies, fines, or litigation related to the company's hydraulic fracturing operations.

Intent and Impact

The proposed policy clarifies ISS' position on a rapidly developing and high profile environmental proxy issue. ISS has recommended that shareholders support each of the 11 hydraulic fracturing proposals that have come to a shareholder vote. Therefore, the proposed policy is not expected to have an impact on ISS' recommendation practices regarding this issue.

Request for Comment

Please feel free to add any additional information or comments on the proposed policy change.  In addition, ISS is specifically seeking feedback on the following:

• Does your organization believe that the proposed new hydraulic fracturing policy appropriately and reasonably addresses fracking as a proxy issue?

• Does your organization believe that other factors should be considered when evaluating shareholder proposals requesting greater disclosure of a company's hydraulic fracturing operations in addition to those currently noted in ISS' proposed policy? If so, please explain.

To submit a comment, please send via e-mail to policy@issgovernance.com.Please indicate your name and organization for attribution. While ISS will consider all feedback that it receives, comments will not be published without attribution.

All comments received will be published as received, unless otherwise requested in the body of the e-mail submission.