Kinder Morgan shareholders urge better methane emissions reporting by gas pipeline operator

Kinder Morgan is being asked by shareholders to issue a report by the fall that sets targets for reducing methane emissions and details its plans to monitor operations for such releases.

Environmental advocates and some investors have long pushed for greater disclosure by the energy industry of the effects its activities have on air quality, waterways, public lands and on climate change.

As it moves more than one-third of the natural gas consumed in the US through its pipeline systems, Kinder Morgan is a prime target for those efforts as it prepares to hold its annual meeting of shareholders in Houston in May. The shareholder proposal, which was detailed in the company's proxy filing with regulators on Thursday, will be debated and voted on at the meeting.

"Research indicates methane leaks from gas operations could erase the climate benefits of reducing coal use," the shareholder proposal said. "While utilities are increasingly reliant on the safe, reliable, and efficient delivery of gas along the value chain, the 2015 failure of a gas injection well at Southern California Gas Company's Aliso Canyon Storage Field in Los Angeles revealed major vulnerabilities in the maintenance and safety of natural gas storage facilities. The incident exposed both a lack of oversight and contingency planning in the face of a well blowout."
 

The proposal -- submitted by Robeco Quant Developed Markets Equities Fund, Mercy Investment Services, and the founder of Miller/Howard Investments -- said a strong program of measurement, mitigation, target setting and disclosure would reduce regulatory and legal risk, maximize gas for sale and bolster value for Kinder Morgan shareholders.

Specifically, the proposal seeks to have Kinder Morgan issue a report by October "reviewing the company's policies, actions and plans to measure, monitor, mitigate, disclose, and set quantitative reduction targets for methane emissions resulting from all operations, including storage and transportation, under the company's financial or operational control."

The proponents said, "We believe the report should include the leakage rate as a percentage of production, throughput, and or stored gas; management of high-risk infrastructure; best practices; worst performing assets; environmental impact; reduction targets and methods to track progress over time."

REPORT WOULD BE DUPLICATIVE: KINDER MORGAN'S BOARD

In a response filed with the proxy, Kinder Morgan's board urged shareholders to reject the proposal, saying such a report would be duplicative of other efforts the company has already taken to reduce its carbon footprint and to disclose those efforts.

"Our board has considered the stockholder proposal and believes that our Methane Reduction Commitment, the other information we provide on our website, the annual and quarterly reports we file with the SEC and the publicly available environmental reports and filings that we make with the US Environmental Protection Agency and other federal, state and local regulatory agencies adequately describe our methane management strategy," the board said.

Two years ago, the Environmental Defense Fund released a study that asserted that oil and gas companies were putting themselves and their investors at risk by failing to disclose enough useful data on their methane emissions or what they are doing to reduce them. The study examined disclosures by 40 top production companies and 25 leading midstream oil and gas companies. It found that less than one-third disclosed information on methane emissions on accessible investor-facing data sources. Where the companies did report, the information was vague, the study contended.

But Kinder Morgan said in its case, it believes its existing disclosures are sufficient to show investors the company takes the matter seriously.

"At Kinder Morgan, we recognize that operating thousands of miles of pipelines, 20 natural gas storage facilities and hundreds of terminals across North America is a huge responsibility," the board said. "Throughout our organization, from the top down, we are committed to maintaining and operating our assets safely and in an environmentally responsible manner."

--Harry Weber, Harry.Weber@spglobal.com

--Edited by Gail Roberts, newsdesk@spglobal.com