Energen Corporation: Report on Water Management Risks
WHEREAS: Climate change is expected to exacerbate water shortages nationwide. According to a report by the Department of Energy, “there is agreement among climate models that there will be a redistribution of water, as well as changes in the availability by season.” That report highlights increasing regional droughts.
Climate change-induced water risk is a material liability affecting companies as water shortages increase across the globe. Risks to companies include disruption of operations due to water shortages at production facilities. Companies also face political risks due to competition for water resources by local communities or other companies or industries. Producing at a lower capacity or having to halt operations are both possible outcomes of drought and water scarcity, an outcome that poses material harm to the Company and investors alike.
Oil and gas operations like those of Energen require significant amounts of water. Energen operates in the Permian Basin, an area where water shortages are a growing issue. As the availability of fresh water grows scarcer, contamination of precious freshwater supplies presents increased reputational risk to companies like Energen. The potential for hydraulic fracturing operations to contaminate water sources if not responsibly managed is also a significant risk; groundwater contamination, in particular, is of great concern to nearby communities.
Most large companies have developed water planning, reduction, recycling, and leak prevention initiatives to diminish water risk and reduce costs. Peer companies like Anadarko and Apache inform investors about their water resource management through voluntary reporting initiatives such as CDP Water Information Requests and sustainability reports. Energen Corporation has yet to provide adequate information to shareholders on its water stewardship initiatives.
Disclosure is the primary means by which investors can gauge whether our Company is sufficiently managing its water risks, including adoption of best practices for water management and quantitative performance metrics on the company’s water-related impacts. Current disclosures provided by Energen are generalized and lack critical information. For instance, while Energen acknowledges that it faces risk from having concentrated operations in the drought-prone Permian Basin, the company fails to disclose a comprehensive strategy to mitigate this risk. Instead, Energen briefly mentions its use of brackish and recycled water but offers no quantitative information on how much water is recycled and how much risk is reduced by these activities, or whether Energen has defined targets that will enable it to mitigate water-related risks now and in the future.
BE IT RESOLVED: Shareholders request that Energen, with board oversight, provide a report on its climate-related water risk, including comprehensive strategies to mitigate that risk beyond regulatory requirements. Such a report should omit proprietary information and be prepared at reasonable cost.
SUPPORTING STATEMENT: Investors seek information such as:
Data on the sources and volumes of withdrawals and company consumption levels
Competing local demands for key water supplies
Water quality impacts from leaks or wastewater discharges
Quantitative goals to manage or reduce water use at the company’s operations