Annual Oil and Gas Industry Report Finds Environmental Accountability is a Top Priority

U.S. Shale Boom Highlights the Intersection between Public Concern and Industry Efforts

Originally published on the Wall Street Journal.

The U.S. oil and gas industry is booming under the vast potential of its shale reserves, but it also faces the increased scrutiny and responsibility that comes with drilling in the public’s backyard. An annual report conducted by BDO USA, LLP, a leading accounting and consulting organization, found a striking increase in environmentally-focused risks cited by the most influential U.S. industry players. An analysis of the risk factors listed by these companies in their most recent 10-K filings reveals that regulatory and legislative changes remain the top concern, cited by 100 percent of companies. Yet this year, those regulatory risks are tied directly to public anxiety over the environmental ramifications of shale gas extraction.

Foremost among these concerns is the increasingly contentious issue of hydraulic fracturing. Oil and gas companies are facing the challenge head-on as they develop new technologies to reduce water usage and earthquake risks. This year, 74 percent of oil and gas companies cited hydraulic fracturing regulation as a risk factor, up from 52 percent in 2011. Moreover, risks related to the impact of climate change and greenhouse gas legislation grew by 17 percent (cited by 81 percent of companies in their financial statements, versus 69 percent in 2011). As the industry touts the promise of job opportunities and energy independence, it is also bracing for the complications that accompany a burgeoning industry with decades of development ahead. Liabilities related to pollution jumped 33 percent (59 percent in 2011 to 79 percent in 2012), and litigation risks were cited by 70 percent of respondents, compared to just 48 percent in 2011.

“The U.S. energy industry is tremendously optimistic about the potential of its natural gas reserves,” said Charles Dewhurst, partner and leader of the Natural Resources Practice at BDO USA, LLP. “Yet rather than bask in this relatively newfound world of opportunity, oil and gas companies are taking action and holding themselves accountable for the responsibilities that come with drilling on American soil. This accountability is reflected in an increasing awareness of the risks associated with the operational and legislative aspects of shale gas extractions.”

These findings are from the second-annual BDO RiskFactor Report for Oil and Gas Businesses, which examines the risk factors listed in the most recent SEC 10-K filings of the 100 largest (by revenue) publicly traded U.S. E&P companies. The risk factors were analyzed and ranked in order of frequency cited….

Continue reading on the Wall Street Journal.

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