Almost two years ago, President Obama set a goal of reducing U.S. greenhouse gas emissions by 17 percent below 2005 levels by 2020, which was made public in the President’s 2013 Climate Action Plan. On Jan. 14, the White House took a step towards achieving that objective by announcing a goal to reduce methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025.

To achieve this goal, the administration has put forth a plan outlining a collaborative effort among the many agencies that regulate oil and gas production and distribution. The President has asked the Environmental Protection Agency to propose new standards for methane emissions from new or modified oil and gas production sources, and natural gas processing and transmission sources. The Department of Interior, which oversees oil and gas production on public lands, will set new standards to “reduce wasteful venting, flaring, and leaks of natural gas,” from oil and gas wells, and the Department of Transportation is tasked with developing new natural gas pipeline safety standards that will focus on safety, but also lower methane emissions. In addition, the Department of Energy will receive funding to develop cost-effective leak detection and capture technology for natural gas transmission and distribution systems.

While methane makes up about 10 percent of U.S. greenhouse gas emissions, methane is much more effective at trapping heat and has 86 times the impact on global temperature than that of carbon dioxide over a 20-year period. In addition, 30 percent of total U.S. methane emissions come from “fugitive” (or “leaking”) emissions from the oil and natural gas industry.

According to the White House announcement, “Achieving the Administration’s goal would save up to 180 billion cubic feet of natural gas in 2025, enough to heat more than 2 million homes for a year and continue to support businesses that manufacture and sell cost-effective technologies to identify, quantify, and reduce methane emissions.”

Some Republicans and the oil and gas industry have been opposed the new regulations, arguing that industry, through the use of new technology and innovation, has already been able to reduce methane emissions. Even as production has increased, methane emissions have been reduced by 16 percent since 1990. In addition, they argue that oil and gas producers already have a strong incentive to contain leaks and capture methane because it is a marketable commodity.

Methane Emissions as a Shareholder Concern

In March 2012, Ceres-organized investors representing $500 billion in assets and sent a letter to 21 of the industry’s largest shale oil producers, urging them to reduce or eliminate the flaring of methane emissions. The letter said, “As shareholders in oil and gas companies, investors are concerned with the regulatory and reputational risks associated with fugitive methane and the significant climate change concerns methane emissions raise.”

The following proxy season, one of the investor signatories, Mercy Investment Services, filed a shareholder resolution at Continental Resources, one of the largest oil producers in North Dakota’s Bakken region, requesting that the firm “adopt quantitative, company-wide goals, based on current technologies, for reducing or eliminating flaring in all operations and facilities under the company’s financial or operational control.” The resolution was withdrawn following productive dialogue with the company, and shortly thereafter Continental committed in its 10-K to reduce natural gas flaring from its operated well sites to “as close to zero percent flaring as possible.” It further stated that it had already reduced flaring in the Bakken region by 50 percent in just one year.

That same year, shareholders filed resolutions at three additional companies asking them to report on how they are managing fugitive methane emissions. The shareholders argued that capturing and managing methane emissions is a win-win for companies as it represents an economic opportunity for the company to capture a product that can be sold. It also has the added benefits of improving worker safety and protecting human health. The three resolutions receiving an average support of 31.8 percent

In 2014, shareholders filed 12 proposals, triple the number filed in 2013. As in the previous year, the companies were reluctant to reach agreements with the proponents, resulting in the majority of the resolutions going to a vote, and gaining generally substantial support. The ten resolutions that went to a vote received an average of 27 percent shareholder support. A resolution on flaring, similar to the one filed at Continental the year prior, was withdrawn at Oasis Petroleum after the company agreed to continue engaging with the proponent and disclose additional information in its 10-K.

This momentum is continuing into the 2015 proxy season. Shareholders have re-filed methane emissions resolutions at the following companies: Dominion Resources (21.9 percent in 2014), Energen (26.8 percent), EOG Resources (28.1 percent), Kinder Morgan (17.7 percent), Marathon Oil (38.6 percent), Occidental Petroleum (30.4 percent), Southwestern Energy (22.6 percent), and Targa Resources (23.2 percent). In addition, Hess Corporation received the proposal for the first time this year. The majority of the resolutions filed ask the companies to report the actions the companies have taken to measure, disclose, mitigate, and set reduction targets for methane emissions from company operations.–Limor Bernstock, ESG Research