Shareholder Resolutions

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Company: Southwestern Energy
Subject: Natural Gas Hydraulic Fracturing
Year: 2011
Sector: Energy Production
Lead Filer: Domini Social Investments
Cofiler(s): First Affirmative Financial Network
Outcome: Withdrawn in response to corporate commitments

Report on Hydraulic Fracturing Risks 


Onshore natural gas production increasingly requires hydraulic fracturing ("fracking"), which typically injects a mix of millions of gallons of water, thousands of gallons of chemicals, and particles deep underground to create fractures through which gas can flow for collection.    According to the American Petroleum Institute, "up to 80% of natural gas wells drilled in the next decade will require hydraulic fracturing."

The potential impacts of those operations stem from activities above and below the earth's surface -- including actions that are necessarily part of the life cycle of fracturing and extraction, such as assuring the integrity of well construction, and moving, storing, and disposing significant quantities of water and toxic chemicals.

High profile contamination incidents have fueled public controversy. Pennsylvania's Times-Shamrock Newspapers report "many of the largest operators in the Marcellus Shale have been issued violations for spills that reached waterways, leaking pits that harmed drinking water, or failed pipes that drained into farmers' fields, killing shrubs and trees." Southwestern holds leases to 150,800 acres in the Marcellus.

Southwestern Energy is the subject of a Pennsylvania lawsuit by 13 families alleging well contamination with carcinogenic and toxic chemicals, and negligence in the drilling, construction and operation of a Susquehanna County well.

Though state regulations vary, Pennsylvania, West Virginia, Colorado, Wyoming all tightened or are considering tightening regulations and permitting requirements, and in 2010 New York State placed a 6-month moratorium on new permits for gas drilling that relies on fracking. The federal Environmental Protection Agency is studying the potential adverse impact that fracking may have on water quality and public health.

A multi-sectoral assessment for investors, "Water Disclosure 2010 Global Report," noted the existence of reputational risks from water management for the oil and gas sector.

Proponents believe these potential environmental impacts and increasing regulatory scrutiny could pose threats to Southwestern's license to operate and enhance vulnerability to litigation. Proponents believe our company is not providing sufficient information on key business risks associated with fracking operations.  Proponents believe Southwestern should protect its long-term financial interests by taking measures beyond the existing, inconsistent regulatory requirements to reduce environmental hazards and associated business risks.

Therefore be it resolved:

Shareholders request that the Board of Directors prepare a report by October 2011, at reasonable cost and omitting confidential information such as proprietary or legally prejudicial data, summarizing: 1. Known and potential environmental impacts of fracturing operations of Southwestern;  and  2. Policy options for our company to adopt, above and beyond regulatory requirements and our company's existing efforts, to reduce or eliminate hazards to air, water, and soil quality from fracturing operations.

Supporting statement:

Proponents believe policies explored should include, for example, additional efforts to reduce toxicity of fracturing chemicals, recycle waste water, monitor water quality prior to drilling, cement bond logging, and other structural or procedural strategies to reduce environmental hazards and financial risks.  "Potential" includes occurrences that are reasonably foreseeable and worst case scenarios. "Impacts of fracturing operations" encompass the life cycle of activities related to fracturing and associated gas extraction.