NEW YORK -- A coalition of mostly institutional investors is demanding oil and gas companies disclose their existing safeguards and plans of action in the event of another offshore rig disaster and possible oil spill like the one experienced by BP PLC and other companies in the Gulf of Mexico.
Led by Ceres, a Boston-based nonprofit committed to promoting investor activism in environmental and social issues, more than 50 U.S. and global investors sent letters to major offshore oil and gas producers. The letters request, among other things, that companies disclose their investments in spill prevention technologies, their contingency plans in the event of a deepwater well blowout and their risk exposure to possible new regulations on deepwater drilling activities.
Insurance companies that back policies for the oil and gas industry also received letters from the group. Those letters ask insurers to disclose whether they are considering adjusting their relative exposure to the industry or are changing underwriting rules in the wake of the disaster.
"The shareholder harm that has flowed from the BP spill has focused investor attention on governance, compliance and management systems needed to minimize risks associated with deepwater offshore oil and gas development worldwide," the investor coalition writes in a letter to Steven Farris, CEO of Apache Corp., one sample of the dozens of letters sent. "We write to request additional information on the measures and programs Apache has in place for managing risks associated with its offshore oil and gas operations, as well as any changes the company plans to make in its risk management framework as a result of the BP Gulf of Mexico spill."
Letters were sent to a total of 27 oil and gas companies and 26 insurance companies. Energy companies receiving the requests for information include the giants Exxon Mobil Corp., ConocoPhillips, Chevron Corp., Royal Dutch Shell PLC, Total SA and Statoil, as well as smaller producers like Apache, Marathon Oil Corp. and Tullow Oil PLC. AIG Inc., Swiss Re and Lloyd's were among the insurers receiving letters that requested disclosure.
Investors seeking details on company plans and policies say the Deepwater Horizon rig explosion and spill has cost them hundreds of millions of dollars as BP shares plummeted. They characterize their request as an act of shareholders exercising their rights and protecting their interests in the companies they have invested in.
"In my state alone, the nation's two largest public employee pension funds have seen the value of their BP holdings plummet by $349 million," said California Treasurer Bill Lockyer, trustee of the CalPERS and CalSTRS pension funds. "Investors have a right to full disclosure of the risks associated with oil companies' offshore operations and the prevention, response and governance measures they have in place to minimize those risks."
Other signatories to the letter include New York City Comptroller John Liu; New York State Comptroller Thomas DiNapoli; AFL-CIO investment director Daniel Pedrotty; and Pax World Management's vice president for sustainable investing, Julie Fox Gorte. Public fund managers in Connecticut, Florida, Maryland, North Carolina, Oregon, Pennsylvania and Rhode Island also signed.
Details that the investors are seeking from the oil and gas firms include:
- How much companies have invested in offshore drilling safety technology in the past three fiscal years.
- Detailed contingency plans in the event of an offshore blowout, including details on how the plan was formulated and approved by the boards of directors.
- Lessons learned from the BP Macondo spill, including evidence of how companies' drilling practices differ from BP's or how they involve superior spill prevention technologies and safeguards.
- Information on how contractors are selected and monitored.
- Disclosure on governance, including how board members or individual company managers are involved in spill response prevention and planning.
Companies receiving the letters say that it will take time for them to formulate an adequate response given the volume of details requested by the investor groups.
"We've received the letter. We will review it and we will develop a thoughtful response," said Apache spokesman Bill Mintz. "We try to do better every day and when there's a major event like the Macondo blowout everyone in the industry is going to try to look at what happened and see what the lessons learned are."