Does a newer process of extracting natural gas damage the environment and threaten water supplies? Activist shareholders are working to get some public gas drilling companies to report on the environmental impact of these operations, which are growing rapidly in some areas.

Green Century Equity Fund, for example, filed a shareholder resolution at EOG Resources Inc., one of the largest independent oil and gas companies in the U.S. The firm has operations throughout the country, including Pennsylvania, where gas-drilling companies are using the controversial process-hydraulic fracturing-to remove natural gas from the Marcellus Shale, a black shale formation extending deep underground from Ohio and West Virginia northeast into Pennsylvania and southern New York. In fact, the Pennsylvania Department of Environmental Protection plans to issue 5,000 Marcellus Shale gas-drilling permits this year. New York state has been considering a moratorium on the process.

Shareholder resolutions also are expected to be voted on in May and June at Chesapeake Energy, ExxonMobil, Williams Companies Inc. and Ultra Petroleum, says the Investor Environmental Health Network. Production from traditional reserves of natural gas has been dwindling, and an increasing number of new wells can currently only be developed using hydraulic fracturing-a process where water, chemicals and particles such as sand are injected into the ground under extremely high pressure-to unlock vast reserves previously unavailable, IEHN says.  It has been estimated that 60% to 80% of new wells will require hydraulic fracturing; investors are concerned that this process carries potentially serious financial and environmental risks, the group adds. 

Meanwhile, on March 18 the federal Environmental Protection Agency announced that it will be conducting a comprehensive two-year research study to investigate the potential adverse impact that hydraulic fracturing may have on water quality and public health.

The resolution filed by Green Century was supported by 31% of voting shareholders last week and came on the heels of the results at Cabot Oil & Gas, where 36% of voting shareholders supported a similar proposal. In both cases, the resolutions called for the companies to report on the environmental impacts of their hydraulic fracturing operations and the management practices they're adopting to minimize environmental and associated business hazards, says Larisa Ruoff, director of shareholder advocacy for Green Century Capital Management.

"These are remarkable results for an environmental issue raised for the first time at corporate annual meetings and demonstrate the depth of shareholder concern," Ruoff adds. "Investors believe that both companies should now move expeditiously to respond to shareholder concern."

EOG opposed the resolution, saying additional reports on hydraulic fracturing are unnecessary. "There have been no known hydraulic fracturing-related incidents of groundwater contamination from any EOG operation and, based on information that we consider reliable, there have been no verified incidents of groundwater contamination from hydraulic fracturing by other operators during the more than 60 years this technology has been in use. EOG believes that its hydraulic fracturing operations, which are subject to federal, state and local laws and state oversight, pose minimal impact to the environment and to human health. EOG has taken prudent steps, through the use of technology and best practices, to further minimize any associated risks," the company said.

However, according to Green Century's resolution, there is virtually no public disclosure of chemicals used at fracturing locations. One independent analysis of fluids used in hydraulic fracturing in Colorado identified 174 chemicals, many of which are associated with skin, eye or sensory organ effects, respiratory effects and gastrointestinal or liver effects.

Fracturing operations can have significant impacts on surrounding communities, including the potential for increased incidents of toxic spills from waste water ponds, impacts to local water quantity and quality, and degradation of air quality, the resolution adds, noting that government officials in Ohio, Pennsylvania and Colorado have documented methane gas in drinking water linked to fracturing operations.

Among the other investors and investment advisors encouraging increased transparency and disclosure regarding hydraulic fracturing are As You Sow, Boston Common Asset Management, Catholic Healthcare West, First Affirmative Financial Network, MMA Praxis Mutual Funds, the Mercy Investment Program, Miller/Howard Investments, the New York State Common Retirement Fund, the Shareholder Association for Research and Education, the Sisters of St. Francis of Philadelphia, and the Sustainability Group. They have asked more than 20 companies to increase transparency and disclosures of the risks associated with this process.