April 01, 2016

A Susquehanna University professor of accounting has created a formula to rank the nation’s oil and gas companies based on their environmental impact.

Associate Professor of Accounting John Pendley

The formula, developed by Associate Professor of Accounting John Pendley, was unveiled in an article, titled “Using Inspection Violations as an Environmental Performance Indicator for Natural Gas Companies,” that was recently published in Oil, Gas & Energy Quarterly. Pendley created the formula after seeing the need for objective research on Marcellus shale drilling.

“It seems logical and reasonable that some gas companies are more careful than others,” Pendley says. “But despite that, there has been little substantive work on the topic.”

Early on, Pendley decided that a simple list of the top violators would be an insufficient indicator because it would stack the deck, so to speak, against larger companies engaged in more work. Pendley’s formula accounts for a company’s operating activity by dividing the amount of hydrocarbon (fuel) the company produces by the number of violations assessed against it.

Using data publically available from the state Department of Environmental Protection, Pendley ranked 20 companies from best to worst, with CONSOL Energy topping the list and ExxonMobile coming in last.

“The smaller, independent companies tend to do a better job environmentally than the larger companies,” Pendley says. “That could be because the smaller companies are more specialized in the work they are doing in Pennsylvania and the larger companies direct their environmental efforts to their offshore operations and may find it more expeditious to simply pay a fine when levied than try to avoid it.”

Pendley says the rankings can be immediately useful to the groups most affected by Marcellus shale operations.

“It could be immediately valuable to local landowners who could use the environmental performance data when deciding whether to lease their property to oil and gas companies,” he says. “Or for individuals trying to decide what company to work for, or for communities making zoning decisions.”