CDP CLIMATE CHANGE QUESTIONNAIRE 2020
SM Energy is pleased to participate in the 2020 CDP Climate Change Questionnaire.
Following investor engagement and discussions relating to environmental, social and governance ("ESG") matters, it was determined that increased disclosure regarding ESG risk management and metrics would provide better insight to SM Energy's sustainability business practices. Please note:
- The CDP Questionnaire incorporates all Task Force on Climate related Financial Disclosures (TCFD) requirements; and
- SM Energy's responses exclusively comprise 2019 results.
FORWARD-LOOKING STATEMENTS
SM Energy's responses to the 2020 CDP Climate Change Questionnaire (the "CDP Questionnaire"), which are exclusively comprised of 2019 data and information, contain "forward-looking
statements" within the meaning of securities laws. Responses are given as of August 26, 2020, the date the CDP Questionnaire was completed, and include discussion of potential future risks and opportunities, the Company's planned processes for evaluating potential future risk, and certain plans, objectives, expectations and forecasts. These statements, when made, involved known and unknown risks, which may have caused, or may in the future cause, SM Energy's actual results, plans, objectives, expectations and forecasts to differ materially from results, plans, objectives, expectations and forecasts expressed or implied by the forward-looking statements. All statements, other than statements of historical fact, included in the CDP Questionnaire that address plans, objectives, expectations and forecasts that SM Energy expects, believes or anticipates will or may occur or be taken in the future are forward-looking statements. Such statements are subject to assumptions, risks and uncertainties that are beyond SM Energy's control. Future results, plans, objectives, expectations and forecasts may be impacted by the risks discussed in the Risk Factors section of SM Energy's most recent Annual Report on Form 10-K, as supplemented by any subsequent Form 10-Q or other filings with the SEC. The forward- looking statements contained in the 2020 CDP Questionnaire speak only as of the date of the questionnaire. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.
SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Welcome to your CDP Climate Change
Questionnaire 2020
C0. Introduction
C0.1
(C0.1) Give a general description and introduction to your organization.
SM Energy Company ("SM Energy" or the "Company") is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids. Founded in 1908, SM Energy, a Delaware corporation, has been publicly traded on the New York Stock Exchange (NYSE) since 2002, under the ticker symbol SM. SM Energy operations are located onshore in the United States in two main operating areas: the Midland Basin in West Texas, and the Maverick Basin in South Texas. Proved reserves are balanced equally among the two operating areas, with 462 million barrels of oil equivalent (Boe) at the end of 2019. In 2019, the Company reported full year sales volumes of 132 thousand barrels of oil equivalent per day, consisting of 45% crude oil, 38% natural gas, and 17% natural gas liquids. SM Energy has a longstanding, principled approach to doing business ethically and responsibly. Our company culture drives our behavior and we build open, honest and transparent relationships with our stakeholders. Our goal is to make people's lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. For more information about SM Energy, please visit www.sm-energy.com.
SM Energy's responses to the CDP Climate Change Questionnaire contain "forward-looking statements" within the meaning of securities laws. Responses include discussion of potential future risks and opportunities, the Company's planned processes for evaluating potential future risk, and certain plans, objectives, expectations and forecasts. These statements involve known and unknown risks, which may cause SM Energy's actual results, plans, objectives, expectations and forecasts to differ materially from results, plans, objectives, expectations and forecasts expressed or implied by the forward-looking statements. All statements, other than statements of historical fact, included in the CDP Climate Change Questionnaire that address plans, objectives, expectations and forecasts that SM Energy expects, believes or anticipates will or may occur or be taken in the future are forward-looking statements. Such statements are subject to assumptions, risks and uncertainties that are beyond our control. Future results, plans, objectives, expectations and forecasts may be impacted by the risks discussed in the Risk Factors section of SM Energy's most recent Annual Report on Form 10-K, Form 10-Q or other filings with the SEC. The forward-looking statements contained herein speak as of the date of this questionnaire. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
C0.2
(C0.2) State the start and end date of the year for which you are reporting data.
Start date | End date | Indicate if you are providing emissions data for | |
past reporting years | |||
Reporting | January 1, | December 31, | No |
year | 2019 | 2019 | |
C0.3
(C0.3) Select the countries/areas for which you will be supplying data.
United States of America
C0.4
(C0.4) Select the currency used for all financial information disclosed throughout your response.
USD
C0.5
(C0.5) Select the option that describes the reporting boundary for which climate- related impacts on your business are being reported. Note that this option should align with your chosen approach for consolidating your GHG inventory.
Operational control
C-OG0.7
(C-OG0.7) Which part of the oil and gas value chain and other areas does your organization operate in?
Row 1
Oil and gas value chain
Upstream
Other divisions
C1. Governance
C1.1
(C1.1) Is there board-level oversight of climate-related issues within your organization?
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Yes
C1.1a
(C1.1a) Identify the position(s) (do not include any names) of the individual(s) on the board with responsibility for climate-related issues.
Position of | Please explain |
individual(s) | |
Board-level | As a result of stakeholder engagement and input from a third party environmental, |
committee | social and governance (ESG) advisory firm engaged in spring 2020, the Company |
amended the charter and enhanced the duties of the existing Nominating and | |
Corporate Governance Committee of the Board of Directors to include oversight of | |
ESG matters. The charter for this committee, which is now renamed the | |
Environmental, Social, and Governance Committee, was approved by the Board of | |
Directors in July 2020. Prior to establishment of the Environmental, Social and | |
Governance Committee, ESG matters were under the oversight of the entire Board | |
of Directors with updates and discussion presented at quarterly Board meetings. | |
During 2019, decisions under the purview of the entire Board included | |
environmental, health, and safety performance goals for TRIR, spill volumes, | |
greenhouse gas emissions, and certain safety training objectives. These metrics | |
were tied to short-term incentive compensation and, as a result of the Company's | |
outstanding EHS performance during 2019, the Compensation Committee adjusted | |
the quantitative multiplier upward by 0.02. | |
The charter to our Environmental, Social, and Governance Committee of the Board | |
of Directors can be accessed at: sm-energy.com/about-us/governance. | |
C1.1b
(C1.1b) Provide further details on the board's oversight of climate-related issues.
Frequency with | Governance | Please explain |
which climate- | mechanisms into | |
related issues are | which climate-related | |
a scheduled | issues are integrated | |
agenda item | ||
Scheduled - some | Reviewing and guiding | The Board of Directors is actively engaged in the |
meetings | strategy | oversight of environmental matters impacting the |
Reviewing and guiding | Company. The Board regularly reviews the | |
major plans of action | Company's status in regards to federal, state, and | |
Reviewing and guiding | local regulations for air, water, wildlife, spill reporting, | |
safety, and general operations. In addition to | ||
risk management | ||
regulatory requirements, the Board regularly reviews | ||
policies | ||
updated data pertaining to climate-related issues. | ||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Reviewing and guiding annual budgets
Reviewing and guiding business plans Setting performance objectives Monitoring implementation and performance of objectives Overseeing major capital expenditures, acquisitions and divestitures
Monitoring and overseeing progress against goals and targets for addressing climate-related issues
In early 2019, the Company began presenting the following data dashboards: (1) Air Emission dashboard and (2) Water Stewardship dashboard. These dashboards provide up-to-date metrics. The air emissions dashboard covers GHG emissions intensity, methane emissions rate, and leak detection and repair. The water stewardship dashboard includes metrics on fresh water used, disposal rates, and spilled water. The current data provided by these dashboards is reviewed and discussed at each quarterly Board meeting. These dashboards are provided in conjunction with dashboards for safety metrics. In addition, the Board reviews environmental topics during regularly scheduled quarterly meetings. The most recent examples are in-depth reviews of flaring, water, and seismicity. These in-depth review sessions consider potential risks, sources, potential impacts to the community, mitigation strategies, and opportunities for improvements.
C1.2
(C1.2) Provide the highest management-level position(s) or committee(s) with responsibility for climate-related issues.
Name of the position(s) | Responsibility | Frequency of reporting to the |
and/or committee(s) | board on climate-related | |
issues | ||
Chief Executive Officer | Both assessing and managing | Quarterly |
(CEO) | climate-related risks and | |
opportunities | ||
Chief Financial Officer | Assessing climate-related risks and | Quarterly |
(CFO) | opportunities | |
Chief Operating Officer | Both assessing and managing | Quarterly |
(COO) | climate-related risks and | |
opportunities | ||
Other, please specify | Assessing climate-related risks and | Quarterly |
General Counsel | opportunities | |
C1.2a
(C1.2a) Describe where in the organizational structure this/these position(s) and/or committees lie, what their associated responsibilities are, and how climate-related issues are monitored (do not include the names of individuals).
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
The executive team, including CEO, COO, CFO, and General Counsel share oversight of climate -related decisions and strategy. To support the executive team in ESG matters, the Company has established an ESG working committee representing leadership oversight from key disciplines including the General Counsel and corporate officers who lead HR, EHS, operations and IR. The committee works to identify, assess, monitor and report on ESG matters. Updates are provided to the executive team at each monthly senior management meeting. Specific to monitoring climate-related items, the senior management team (including the executive team) reviews, as first priority at each meeting, dashboards for safety and environmental metrics. As described above, in early 2019, the Company developed environmental data dashboards: (1) Air Emissions dashboard, and (2) Water Stewardship dashboard. These dashboards provide up-to-date metrics. The air emissions dashboard covers GHG emissions intensity, methane emissions rate, and leak detection and repair. The water stewardship dashboard includes metrics on fresh water used, disposal rates and spilled water. The current data provided by these dashboards is reviewed and discussed at each regular senior management meeting, typically held once per month. These dashboards are provided in conjunction with dashboards for safety metrics. The dashboards are available to operating personnel on a daily basis and used for monitoring and mitigation.
C1.3
(C1.3) Do you provide incentives for the management of climate-related issues, including the attainment of targets?
Provide incentives for the management of climate-related issues | Comment | |
Row 1Yes
C1.3a
(C1.3a) Provide further details on the incentives provided for the management of climate-related issues (do not include the names of individuals).
Entitled to | Type of | Activity | Comment |
incentive | incentive | inventivized | |
Chief | Monetary | Emissions | Short-term incentive compensation at SM Energy is |
Executive | reward | reduction | based partially on environmental, health, and safety |
Officer | target | (EHS) performance. In 2019, the EHS targets included | |
(CEO) | spill volumes, greenhouse gas emissions (GHG) including | ||
CO2 equivalent and methane (as a percentage of | |||
methane produced), total recordable incident rate (TRIR), | |||
and certain safety training objectives. Short-term incentive | |||
compensation was tied to top-quartile performance or | |||
other defined targets and has quantitative and qualitative | |||
components. Top-quartile is based on surveyed and/or | |||
publicly available data from American Exploration & | |||
Production Council (AXPC) members. For 2020, incentive | |||
compensation targets are tied to AXPC top-quartile | |||
performance in spill volumes and TRIR. Additionally, | |||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
goals include targets for CO2 emissions and methane | |||
emissions. Also for 2020, a portion of bonus | |||
compensation is dependent on the completion of our | |||
triennial independent EHS compliance audit, and to put | |||
systems in place for tracking broader ESG metrics to | |||
enable increased reporting in the future and to increase | |||
employee awareness. | |||
Chief | Monetary | Emissions | Short-term incentive compensation at SM Energy is |
Financial | reward | reduction | based partially on environmental, health, and safety |
Officer | target | (EHS) performance. In 2019, the EHS targets included | |
(CFO) | spill volumes, greenhouse gas emissions (GHG) including | ||
CO2 equivalent and methane (as a percentage of | |||
methane produced), total recordable incident rate (TRIR), | |||
and certain safety training objectives. Short-term incentive | |||
compensation was tied to top-quartile performance or | |||
other defined targets and has quantitative and qualitative | |||
components. Top-quartile is based on surveyed and/or | |||
publicly available data from American Exploration & | |||
Production Council (AXPC) members. For 2020, incentive | |||
compensation targets are tied to AXPC top-quartile | |||
performance in spill volumes and TRIR. Additionally, | |||
goals include targets for CO2 emissions and methane | |||
emissions. Also for 2020, a portion of bonus | |||
compensation is dependent on the completion of our | |||
triennial independent EHS compliance audit, and to put | |||
systems in place for tracking broader ESG metrics to | |||
enable increased reporting in the future and to increase | |||
employee awareness. | |||
Chief | Monetary | Emissions | Short-term incentive compensation at SM Energy is |
Operating | reward | reduction | based partially on environmental, health, and safety |
Officer | target | (EHS) performance. In 2019, the EHS targets included | |
(COO) | spill volumes, greenhouse gas emissions (GHG) including | ||
CO2 equivalent and methane (as a percentage of | |||
methane produced), total recordable incident rate (TRIR), | |||
and certain safety training objectives. Short-term incentive | |||
compensation was tied to top-quartile performance or | |||
other defined targets and has quantitative and qualitative | |||
components. Top-quartile is based on surveyed and/or | |||
publicly available data from American Exploration & | |||
Production Council (AXPC) members. For 2020, incentive | |||
compensation targets are tied to AXPC top-quartile | |||
performance in spill volumes and TRIR. Additionally, | |||
goals include targets for CO2 emissions and methane | |||
emissions. Also for 2020, a portion of bonus | |||
compensation is dependent on the completion of our | |||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
triennial independent EHS compliance audit, and to put | |||
systems in place for tracking broader ESG metrics to | |||
enable increased reporting in the future and to increase | |||
employee awareness. | |||
All | Monetary | Emissions | Short-term incentive compensation at SM Energy is |
employees | reward | reduction | based partially on environmental, health, and safety |
target | (EHS) performance. In 2019, the EHS targets included | ||
spill volumes, greenhouse gas emissions (GHG) including | |||
CO2 equivalent and methane (as a percentage of | |||
methane produced), total recordable incident rate (TRIR), | |||
and certain safety training objectives. Short-term incentive | |||
compensation was tied to top-quartile performance or | |||
other defined targets and has quantitative and qualitative | |||
components. Top-quartile is based on surveyed and/or | |||
publicly available data from American Exploration & | |||
Production Council (AXPC) members. For 2020, incentive | |||
compensation targets are tied to AXPC top-quartile | |||
performance in spill volumes and TRIR. Additionally, | |||
goals include targets for CO2 emissions and methane | |||
emissions. Also for 2020, a portion of bonus | |||
compensation is dependent on the completion of our | |||
triennial independent EHS compliance audit, and to put | |||
systems in place for tracking broader ESG metrics to | |||
enable increased reporting in the future and to increase | |||
employee awareness. | |||
C2. Risks and opportunities
C2.1
(C2.1) Does your organization have a process for identifying, assessing, and responding to climate-related risks and opportunities?
Yes
C2.1a
(C2.1a) How does your organization define short-, medium- and long-term time horizons?
From | To | Comment | |
(years) | (years) | ||
Short- | 0 | 2 | Short term - Our detailed corporate business plan focuses on a one |
term | to two-year time horizon intended to specifically provide a detailed | ||
operating plan that supports our long-term strategy and objectives. | |||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Medium- | 2 | 5 | Medium term - Our long-range plan (LRP) is a five-year plan and |
term | corresponds with the SEC timeline for developing the Company's | ||
proved oil and natural gas reserves and also supports achieving our | |||
long-term objectives. | |||
Long- | 5 | 25 | Long-term - The Company considers its long-term sustainability over |
term | 25 years, which incorporates field life, reserve replacement, | ||
enterprise value assessments and sets the course for long-term | |||
sustainability objectives. | |||
C2.1b
(C2.1b) How does your organization define substantive financial or strategic impact on your business?
The policy of the Company's enterprise risk management (ERM) committee sets forth a process whereby risks are identified, assessed and reviewed in consideration of the likelihood of the risk to occur, the potential impact of the risk and the time-frame of the risk. Impact is graded into five categories from minimal (<$10MM EBITDAX, <$50 MM equity value) to major (>$75MM EBITDAX, > $375 MM equity value).
C2.2
(C2.2) Describe your process(es) for identifying, assessing and responding to climate- related risks and opportunities.
Value chain stage(s) covered
Upstream
Risk management process
Integrated into multi-disciplinarycompany-wide risk management process
Frequency of assessment
More than once a year
Time horizon(s) covered
Short-term
Medium-term
Long-term
Description of process
Climate-related risks to the Company are addressed within our ERM. The policy of the Company's enterprise risk management (ERM) committee sets forth a process whereby risks are identified, assessed and reviewed in consideration of the likelihood of the risk to occur, the potential impact of the risk and the time-frame of the risk. Impact is graded into five categories from minimal (<$10MM EBITDAX, <$50 MM equity value) to major (>$75MM EBITDAX, > $375 MM equity value). The ERM committee evaluates, monitors
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
and mitigates (where possible) those risks. Emerging risks and trends are also considered. The Board annually reviews the Company's risk management philosophy and practices. The Board also considers potential risks to the Company's strategic initiatives. More broadly, environmental, health, and safety risks and opportunities are part of daily operations under the oversight of the SVP of Development and Environmental, Health, and Safety and SVP of Operations.
TRANSITIONAL RISK
With respect to the EPA's regulation New Source Performance Standards (NSPS) OOOO, the Company had adopted, prior to the regulation, a proactive approach to using intermittent or low-bleed gas pneumatics on many of our facilities. We have converted certain pneumatic devices to operate on a compressed instrument air system, which replaces the pressurized natural gas with atmospheric air, eliminating methane emissions. These systems have been installed at new facilities in our Midland Basin Region since 2017. In our South Texas Region, we are replacing gas pneumatic devices with solar and wind powered electronic controllers.
PHYSICAL RISK
SM Energy does not foresee physical risk due to climate change impacting our business any more than the current environment in either the short, medium, or long-term time frames. Oil and gas extraction operations have been successful in extreme environments around the world and we are confident in our ability to continue operating during those time frames.
C2.2a
(C2.2a) Which risk types are considered in your organization's climate-related risk assessments?
Relevance & | Please explain | |
inclusion | ||
Current | Relevant, | Current regulations are considered by the Company and discussed |
regulation | sometimes | with the Board of Directors. In addition, through our participation in |
included | industry trade groups, the Company is provided additional data and | |
assessment of current and proposed regulations. The Company | ||
meets or exceeds current regulations and establishes programs to | ||
monitor compliance. For example, in regard to the EPA's regulation | ||
NSPS OOOO, the Company had adopted, prior to the regulation, a | ||
proactive approach to using intermittent or low-bleed gas pneumatics | ||
on many of our facilities. We have converted certain pneumatic | ||
devices to operate on a compressed instrument air system, which | ||
replaces the pressurized natural gas with atmospheric air, eliminating | ||
methane emissions. These systems have been installed at new | ||
facilities in our Midland Basin Region since 2017. In our South Texas | ||
Region, we are replacing gas pneumatic devices with solar and wind | ||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
powered electronic controllers. Also, in regard to EPA regulations, we | ||
utilize various techniques across our operations, including audio/ | ||
visual/olfactory inspections (AVO) and optical gas imaging (OGI) | ||
cameras, to monitor fugitive emissions. Since 2017, we have been | ||
using a leak detection and repair (LDAR) program at all new facilities | ||
in accordance with EPA's NSPS OOOOa rules. In addition, we often | ||
undertake voluntary efforts that exceed regulatory requirements, such | ||
as our use of an OGI cameras to conduct LDAR as part of our | ||
maintenance program in both our Midland and South Texas assets. | ||
The foregoing discussion is subject to and supplemented by the "Risk | ||
Factor" sections of the Company's Form 10-K and other regulatory | ||
filings. | ||
Emerging | Relevant, | Current and proposed regulations are considered by the Company |
regulation | sometimes | and discussed with the Board of Directors. For example, the potential |
included | for increased regulation of methane emissions through flaring is a key | |
topic across oil and gas production basins. SM Energy seeks to | ||
minimize flaring by establishing appropriate targets, developing and | ||
installing the appropriate monitoring tools and facilities, and training | ||
personnel to support these goals. The Company has established | ||
flaring goals and monitors daily operational data that provides | ||
operations management with the information needed to identify root | ||
causes to implement appropriate actions. Actions could include | ||
notifying and working with our midstream gas purchasers to identify | ||
and install gas off-loads to other purchasers, de-bottle necking and | ||
optimizing pipelines and equipment, shutting in production to | ||
minimize flaring, and rescheduling capital expenditures in order to | ||
allow infrastructure to catch-up with development, thus eliminating or | ||
minimizing flaring. We are also members of The Environmental | ||
Partnership and Texas Methane and Flaring Coalition, both of which | ||
focus on reducing flaring. The foregoing discussion is subject to and | ||
supplemented by the "Risk Factor" sections of the Company's Form | ||
10-K and other regulatory filings. | ||
Technology | Relevant, | There are risks and opportunities associated with the various |
sometimes | emission and spill related technologies available to the oil and gas | |
included | industry and the Company seeks to implement appropriate | |
technologies in its business. In general, innovation, data, and | ||
technologies are applied in our efforts to mitigate environmental | ||
impacts on an ongoing basis. Examples of such innovation, applied | ||
data and new technologies are listed in detail in the Company's | ||
Corporate Responsibility Report and include with respect to air | ||
emissions: development of our dashboard that tracks/monitors | ||
emissions; implementation of vapor recovery technology; controller | ||
equipment upgrades; and application of LDAR. For land protection it | ||
includes: collection of LIDAR and aerial imagery data; implementation | ||
of spill prevention and expanded recycling. With respect to water | ||
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protection: implementation of water management systems, including | ||
construction of facilities for the recycling and disposal of produced | ||
water. The foregoing discussion is subject to and supplemented by | ||
the "Risk Factor" sections of the Company's Form 10-K and other | ||
regulatory filings. | ||
Legal | Relevant, | Climate-related legal risks could include, but not be limited to, the |
sometimes | potential for increased litigation involving climate-related laws or | |
included | regulations and the Company's disclosures concerning climate- | |
related matters. Federal, state, and local authorities regulate the oil | ||
and gas industry. Legislation and regulations affecting the industry | ||
are often amended or supplemented. SM Energy is in substantial | ||
compliance with applicable Texas and federal GHG and methane | ||
regulatory requirements. The foregoing discussion is subject to and | ||
supplemented by the "Risk Factor" sections of the Company's Form | ||
10-K and other regulatory filings. | ||
Market | Not relevant, | We believe that climate-related risks are likely to result in changes in |
explanation | demand for, or pricing of, oil, gas and NGLs. The Company sells oil, | |
provided | gas and NGLs at the well head and does not own gathering assets, | |
mitigating risk exposure. The foregoing discussion is subject to and | ||
supplemented by the "Risk Factor" sections of the Company's Form | ||
10-K and other regulatory filings. | ||
Reputation | Relevant, | Certain segments of the public, the business community, and the |
sometimes | investment community, have developed negative sentiment towards | |
included | our industry. Recent equity returns in the sector versus other industry | |
sectors have led to lower oil and gas representation in certain key | ||
equity market indices. In addition, some investors, including | ||
investment management firms, sovereign wealth and pension funds, | ||
university endowments and other investment advisors, have adopted | ||
policies to discontinue or reduce their investments in the oil and gas | ||
sector based on social and environmental considerations. | ||
Furthermore, other influential stakeholders have pressured | ||
commercial and investment banks and other service providers to | ||
cease doing business with the oil and gas industry, including to | ||
reduce or cease financing of oil and gas companies and related | ||
infrastructure projects. The foregoing discussion is subject to and | ||
supplemented by the "Risk Factor" sections of the Company's Form | ||
10-K and other regulatory filings. | ||
Acute | Not relevant, | SM Energy does not foresee acute physical risk due to climate |
physical | explanation | change impacting our business any more than the current |
provided | environment in either the short, medium, or long-term time frames. | |
The foregoing discussion is subject to and supplemented by the "Risk | ||
Factor" sections of the Company's Form 10-K and other regulatory | ||
filings. | ||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Chronic | Not relevant, | SM Energy does not foresee chronic physical risk due to climate |
physical | explanation | change impacting our business any more than the current |
provided | environment in either the short, medium, or long-term time frames. | |
The foregoing discussion is subject to and supplemented by the "Risk | ||
Factor" sections of the Company's Form 10-K and other regulatory | ||
filings. | ||
C2.3
(C2.3) Have you identified any inherent climate-related risks with the potential to have a substantive financial or strategic impact on your business?
Yes
C2.3a
(C2.3a) Provide details of risks identified with the potential to have a substantive financial or strategic impact on your business.
Identifier
Risk 1
Where in the value chain does the risk driver occur?
Direct operations
Risk type & Primary climate-related risk driver
Current regulation
Mandates on and regulation of existing products and services
Primary potential financial impact
Increased indirect (operating) costs
Company-specific description
Fugitive methane emissions during natural gas production has become a concern for the oil and gas industry as production of natural gas has increased with the emergence of shale gas. According to the 2019 IEA Global Methane Tracker, fugitive emissions were believed to account for approximately 20% of upstream methane emissions during the year. As a result of increased fugitive methane emissions, there is a risk to SM Energy that increased regulations will be implemented to control these emissions, which could reduce our revenues or increase our costs. In 2016, the U.S. Environmental Protection Agency (EPA) and the Bureau of Land Management finalized regulations related to fugitive methane emissions. In 2019, the EPA began revising some of those regulations, and these considerations are still under review.
In response to the risk in 2019, SM Energy focused on leak detection and repair (LDAR) at our production facilities in both operating areas, the Midland Basin and South Texas. This focus was voluntary, but if programs like this are not implemented, increased
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
fugitive methane emissions could result in additional government regulations around flaring and/or methane emissions. Additionally, increased regulations in this area could result in the need to shut-in certain wells, which could materially reduce revenue or increase operating costs if we are unable to meet volume commitments.
Time horizon
Medium-term
Likelihood
Unlikely
Magnitude of impact
Medium
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)
Potential financial impact figure - minimum (currency)
1,000,000
Potential financial impact figure - maximum (currency)
3,000,000
Explanation of financial impact figure
Increasingly stringent methane emission regulations could include LDAR inspections on 100% of SM's wells and facilities, multiple times per year. Quarterly inspections of 100% of SM's wells and facilities could cost upwards of $3,000,000 per year.
Cost of response to risk
650,000
Description of response and explanation of cost calculation
In response to the potential risk of increased regulation of fugitive emissions, the COO and operations team set a goal to implement LDAR at 50% of facilities in 2019. This exceeded government regulations and includes the Company's commitment to The American Petroleum Institute (API) Environmental Partnership, which sets targets beyond regulatory requirements. During 2019, SM exceeded this goal by implementing LDAR at 100% of Midland Basin and 50% of South Texas facilities.
The approximate cost to implement LDAR at these facilities was $650,000, which includes costs associated with a third-party contractor to conduct surveys at locations, as well as a maintenance crew to simultaneously address issues as they were found. This successful project resulted in approximately 18,850 Mcf of recovered gas during the year at a cost of $34.50 per Mcf.
Comment
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
In addition to the inspections discussed, we have changed our facility designs and construction techniques. We use welded vs screwed connections, high efficiency flares and combustors, new generation thief hatches, as well as compressed air (vs natural gas) to operate our control and safety systems. The foregoing discussion is subject to and supplemented by the "Risk Factor" sections of the Company's Form 10-K and other regulatory filings.
Identifier
Risk 2
Where in the value chain does the risk driver occur?
Upstream
Risk type & Primary climate-related risk driver
Emerging regulation
Mandates on and regulation of existing products and services
Primary potential financial impact
Increased indirect (operating) costs
Company-specific description
CO2e emissions have become a top concern for the oil and gas industry as production has increased significantly with the development of shale reservoirs.
The Midland Basin, which is our primary area of operations, has become one of the most prevalent oil and gas basins in the United States, with extremely high activity levels. Because of the high activity levels, there is a risk that the capacity at gas processing systems can become constrained at times. When a capacity constraint occurs, wells could be shut-in and/or there could be an increase in flaring. An increase in flaring would lead to higher CO2e emissions and the potential for increased regulation, which is a risk to SM because it could result in increased costs. In addition, the potential need to shut-in wells could have the effect of materially reducing revenues or increasing costs.
In response to this risk in 2019, SM Energy's operations team led a project to add interconnections between gas processing systems to offload production. As part of this effort, multiple midstream companies were utilized to provide sales redundancy, and offloads were added as bottlenecks were identified. Collaboration with the midstream companies included the sharing of oil, gas, and water forecasts to allow a reasonable amount of time to size and design facility upgrades. Additionally, the assessment of gas and oil midstream capacity and reliability was well scoped.
The expected impact of this project is to reduce our flaring related to downstream capacity constraints. This project was voluntary, but if programs like this are not implemented, increased CO2e emissions could result in additional government regulations around flaring.
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Time horizon
Medium-term
Likelihood
More likely than not
Magnitude of impact
Medium
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)
Potential financial impact figure - minimum (currency)
0
Potential financial impact figure - maximum (currency)
72,000,000
Explanation of financial impact figure
Stricter flaring regulations in the Midland Basin could lead to deferred production and lost revenues. For example, a possible cap on flaring could be set at 5% of total gas production. SM flared 9.4% of its Midland gas production in 2019, primarily as a result of downtime events by third-party gas gatherers. If flaring was capped at 5% of natural gas production, the oil associated with the 4.4% excess gas would have to be shut in. Using 2019 gas production of 34,365,000 Mcf, the curtailed volume would have been 1,512,000 Mcf. Using an average GOR of 1.67 Mcf/Bbl would correspond to a loss in oil production of 900,000 Bbls, or lost cash flow of $36,000,000 at a margin of $40/Bbl. If the hypothetical cap on flaring was set at 2.5%, the deferred cash flow would $72,000,000.
Cost of response to risk
7,600,000
Description of response and explanation of cost calculation
In response to the risk of higher CO2e emissions, the Board set a flaring goal of 12% for 2019. The flaring goal was set at 12% based on expected basin-wide transportation constraints during the year.
During 2019, we exceeded this goal by reducing flaring related to gas processing system capacity restraints to 9.4% of total gas production. In addition, we worked with several gas gatherers to inter-connect systems and provide extra redundancy. This allowed an extra 150,000 Mcf of gas to be sold instead of shut-in or flared.
189,000 Boe of production was shut in during 2019 at an approximate value of $40/Boe or $7,600,000. The approximate cost to complete the interconnection project was $60,000. This successful project resulted in the reduction of flaring related to gas
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processing system constraints of 150,000 Mcf, at a cost of $0.40/Mcf.
Comment
The foregoing discussion is subject to and supplemented by the "Risk Factor" sections of the Company's Form 10-K and other regulatory filings.
Identifier
Risk 3
Where in the value chain does the risk driver occur?
Direct operations
Risk type & Primary climate-related risk driver
Emerging regulation
Mandates on and regulation of existing products and services
Primary potential financial impact
Increased indirect (operating) costs
Company-specific description
Oil and natural gas production requires wastewater disposal. Because a large amount of water is used during oil and gas production operations, the disposal of that water has become a concern for oil and gas companies. Overall risks with produced water disposal include the risk of spilling the produced water, potential seismic events associated with disposing of the water into certain formations, and the large number of trucks used to transport the produced water. These risks could result in the regulation of produced water disposal, which would increase our costs.
In response to this risk, in 2018, SM Energy initiated a project to drill its own disposal wells and install pipeline across the middle of its acreage position in Howard County, Texas to transport produced water. The expected impact of this project included a reduction in produced water spills, reduction in the likelihood of seismic events, and a substantial decrease in the number of trucks used to transport produced water.
Time horizon
Medium-term
Likelihood
About as likely as not
Magnitude of impact
Medium
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)
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Potential financial impact figure - minimum (currency)
60,000,000
Potential financial impact figure - maximum (currency)
120,000,000
Explanation of financial impact figure
Potential regulations around water disposal could limit trucking of produced water to reduce emissions, and limit deep disposal of water due to seismicity concerns. If SM Energy's produced water had to be disposed of all by pipeline in deep disposal wells limited to 25,000 barrels of water per day, it would require 8-12 disposal wells plus the connecting pipelines at a cost of approximately $8-10MM each.
Cost of response to risk
59,000,000
Description of response and explanation of cost calculation
In response to the risk, SM Energy has installed more than 80 miles of pipeline in the Midland Basin and drilled 4 deep disposal wells to transport and inject produced water from our wells to minimize our environmental impact while improving operating costs. Approximately 95% of SM's produced water from the Howard County assets is transported to SM operated and third-party disposal wells via pipeline, which reduces spill risk, emissions, truck traffic, and operating costs. We carefully plan the location of our disposal wells with the intent to ensure that our operations minimize any potential environmental impacts. Our existing well sites were selected by integrated teams of geoscientists and engineers using subsurface imaging and characterization, including multi-attribute analysis from our 3D seismic data and earth modeling for well planning. These efforts are undertaken with the goal of minimizing any impact on fault lines and other potential seismic risks. This project had a positive impact on spill volumes in 2019, which were reduced 39% compared with 2018. Through 2019, this project has saved approximately 10,000 MT CO2e by transporting water by pipeline rather than truck.
SM Energy spent approximately $51.8 million in 2018 and $7.2 million in 2019 to drill its own disposal wells and install pipelines and seismic monitoring stations across its acreage position in Howard County, Texas.
Comment
When using third-party disposal wells, we periodically audit the operators to ensure they are approved and permitted by applicable governmental agencies and meet our expectations. In addition, we utilize our auditing program with the intent to confirm that each operator and its wells are in compliance with applicable regulations. To monitor potential seismic activity, SM Energy has deployed a fit-for-purpose,real-time seismic monitoring array in the vicinity of our Midland Basin disposal system. We serve on the TexNet Center for Integrated Seismic Research (CISR) Advisory Committee to remain informed about seismicity through science and data-based knowledge and to
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collaborate with other operators and researchers at the Bureau of Economic Geology in the State of Texas. The foregoing discussion is subject to and supplemented by the "Risk Factor" sections of the Company's Form 10-K and other regulatory filings.
C2.4
(C2.4) Have you identified any climate-related opportunities with the potential to have a substantive financial or strategic impact on your business?
Yes
C2.4a
(C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact on your business.
Identifier
Opp1
Where in the value chain does the opportunity occur?
Upstream
Opportunity type
Energy source
Primary climate-related opportunity driver
Use of lower-emission sources of energy
Primary potential financial impact
Increased revenues resulting from increased demand for products and services
Company-specific description
Coal-fired power generation is a primary source of GHG emissions. As more countries seek to reduce their impact on climate change, it is expected that global consumption of coal will be further reduced and replaced by cleaner natural gas/liquefied natural gas (LNG). This has the potential to have a substantive strategic and financial impact on our business.
Increased demand for cleaner natural gas and LNG would result in increased pricing for the commodity. In 2019, natural gas accounted for approximately 38% of SM Energy's production. The Company's sales revenue and profitability is very sensitive to the price of natural gas.
Time horizon
Long-term
Likelihood
More likely than not
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Magnitude of impact
Medium
Are you able to provide a potential financial impact figure?
No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure - minimum (currency)
Potential financial impact figure - maximum (currency)
Explanation of financial impact figure
Cost to realize opportunity
Strategy to realize opportunity and explanation of cost calculation
Our business strategy is to have commodity diversification, and our Company holds substantial natural gas reserves at approximately 1.2 Tcf at year-end 2019. In the fall of 2019, S&P Global presented to the Company's executive team and Board of Directors, providing scenarios of coal replacement by natural gas that support this potential.
Comment
Identifier
Opp2
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Energy source
Primary climate-related opportunity driver
Use of new technologies
Primary potential financial impact
Reduced indirect (operating) costs
Company-specific description
CO2e emissions have become a top concern for the oil and gas industry as production of natural gas has increased significantly with the emergence of shale gas.
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SM Energy has identified an opportunity to reduce CO2e emissions by converting pneumatic controllers, which are a source of CO2e emissions at oil and gas facilities. This opportunity involves using intermittent or low-bleed gas pneumatics on many of our facilities to reduce CO2e emissions at our facilities.
Time horizon
Medium-term
Likelihood
Very likely
Magnitude of impact
Medium
Are you able to provide a potential financial impact figure?
No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure - minimum (currency)
Potential financial impact figure - maximum (currency)
Explanation of financial impact figure
Cost to realize opportunity
520,000
Strategy to realize opportunity and explanation of cost calculation
To realize this opportunity, we have begun converting certain pneumatic devices to operate on a compressed instrument air system, which replaces the pressurized natural gas with atmospheric air, eliminating methane emissions. These systems have been installed at new facilities in our Midland Basin Region since 2017. In our South Texas Region, we are replacing gas pneumatic devices with solar and wind powered electronic controllers.
During 2019, we installed and replaced nearly 1,000 non-gas pneumatic controllers at a cost of approximately $520,000, which resulted in approximately 4,500 MT CO2e saved. To execute this strategy going forward, we estimate spending in our Midland region at approximately $30,000 per production battery and $8,000 per wellhead on installing instrument air, as well as annual operation and maintenance costs of approximately $118,000.
Comment
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Identifier
Opp3
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Resource efficiency
Primary climate-related opportunity driver
Use of more efficient production and distribution processes
Primary potential financial impact
Reduced indirect (operating) costs
Company-specific description
Oil and natural gas production requires the usage of water during completion activities. Because of this, there is risk that produced water spills will occur. Produced water spills are tracked and reported to the state when required. These spills require specific cleanup protocols, including the disposal of spilled fluids and potential soil remediation. As a result, produced water spills can increase indirect costs significantly.
SM Energy completes a large number of wells each year, which require the usage of water. Because of the potential negative impacts of handling this water, employee short term incentive compensation targets include a performance goal for spill volumes.
SM Energy has implemented a voluntary Spill Reduction Planning effort across the company. This effort, which began in 2013, goes beyond current EPA requirements for Spill Prevention, Control and Countermeasure (SPCC) Plans. A Spill Reduction Team, composed of operations personnel, engineers and environmental specialists, are responsible for analyzing common spill sources and causes, and developing mitigation strategies to reduce leaks and spills. We benchmark our spill performance against AXPC peer companies using the spill metric of Total Produced Fluid Spill Rate, which is the ratio of the total barrels of produced fluids that are spilled to the total barrels of produced fluids. In our operations, on average we spill less than 5 barrels of produced fluid per 100,000 barrels of fluids produced. Much of this spilled fluid is captured within secondary containment built to protect the land and environment.
Time horizon
Long-term
Likelihood
Virtually certain
Magnitude of impact
Medium
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Are you able to provide a potential financial impact figure?
No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure - minimum (currency)
Potential financial impact figure - maximum (currency)
Explanation of financial impact figure
Cost to realize opportunity
8,700,000
Strategy to realize opportunity and explanation of cost calculation
The best way to minimize any impact from spills is to prevent them from occurring in the first place. Accordingly, we seek to design and maintain our facilities to prevent spills, but in the event of a spill, we have safeguards intended to contain all fluids on location. When a spill does occur, we work to properly clean-up the affected area, dispose of any recovered fluids, and as necessary, remediate any contaminated soil or water. For each spill, we determine the source and the cause to analyze spill trends, and work to implement new procedures and practices to mitigate future occurrences.
In 2019, the SPCC at SM Energy took on multiple activities to reduce produced water spills totaling nearly $9 million, which included:
- Tank, vessel and pipeline inspections, and replacement as necessary;
- Extra manpower to help prevent spills, which include flowback crews and night lease operators;
- Projects to increase automation and associated maintenance to help reduce spills and leaks.
As a result of these activities to reduce produced water spills, SM ranked top-quartile among its peers for spill volumes in 2019.
Comment
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C3. Business Strategy
C3.1
(C3.1) Have climate-related risks and opportunities influenced your organization's strategy and/or financial planning?
Yes
C3.1a
(C3.1a) Does your organization use climate-related scenario analysis to inform its strategy?
No, but we anticipate using qualitative and/or quantitative analysis in the next two years
C3.1c
(C3.1c) Why does your organization not use climate-related scenario analysis to inform its strategy?
SM Energy realizes the global shift towards using a climate-related scenario analysis into its organizational strategy. The Company amended the charter and enhanced the duties of the existing Nominating and Corporate Governance Committee of the Board of Directors to include oversight of ESG matters. The charter for this committee, which is now renamed the Environmental, Social, and Governance Committee, was approved by the Board of Directors in July 2020. The ESG Committee is expected to consider whether a climate-related scenario analysis would be a beneficial undertaking at this time.
C3.1d
(C3.1d) Describe where and how climate-related risks and opportunities have influenced your strategy.
Have climate-related | Description of influence | |
risks and | ||
opportunities | ||
influenced your | ||
strategy in this area? | ||
Products and | Yes | Macro-economic scenario analysis is reviewed specifically for |
services | the impact on demand and pricing of our products. Each | |
quarter, our Board of Directors invites third party experts to | ||
identify key disruptors/technologies that could affect wide- | ||
scale change. Examples that affect supply and demand for | ||
our products and services include increased adoption of | ||
electric vehicles which may require increased natural gas for | ||
power generation. Also, as discussed above, we consider the | ||
global effect on natural gas demand and pricing as a | ||
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replacement fuel to coal-fired power generation. In the fall of | ||
2019, S&P Global presented to the Company's executive | ||
team and Board of Directors, providing scenarios of coal | ||
replacement by natural gas that support this potential. Due to | ||
the Company's sizable natural gas reserves at economic | ||
pricing, long-term strategy and planning considers the | ||
potential shift in global demand for natural gas. Coal-fired | ||
power generation is a primary source of GHG emissions. As | ||
more countries seek to reduce their impact on climate | ||
change, it is expected that global consumption of coal will be | ||
further reduced and replaced by cleaner natural gas/LNG. | ||
This has the potential to have a substantive strategic and | ||
financial impact on our business. Our business strategy is to | ||
have commodity diversification, and our Company holds | ||
substantial natural gas reserves at economic prices. In | ||
addition, our Board of Directors is presented with an in-depth | ||
environmental discussion topic each quarter, all of which is | ||
incorporated into our strategic thinking and operational | ||
planning. | ||
Supply chain | Yes | Our strategy to reduce emissions caused by downstream |
and/or value | capacity constraints involves our supply/value chain. During | |
chain | 2019, as part of our effort to increase interconnections | |
between gas processing systems, we worked with multiple | ||
mid-stream companies to provide sales redundancy. | ||
Collaboration with the midstream companies included the | ||
sharing of oil, gas, and water forecasts to allow a reasonable | ||
amount of time to size and design facility upgrades. | ||
Additionally, the assessment of gas and oil midstream | ||
capacity and reliability was well scoped. | ||
Investment in | No | |
R&D | ||
Operations | Yes | There are a number of climate related risks and opportunities |
considered in our long-term planning and operational | ||
strategies. Specific examples include: | ||
(1) We anticipated increased regulatory requirements for | ||
CO2 and methane emissions. As a result, three years ago we | ||
introduced specific targets in our bonus compensation to | ||
incentivize our employees to reduce our CO2e emissions and | ||
our methane emissions intensity. This has encouraged our | ||
employees to reduce flaring, to use better control | ||
technologies, and to employ more efficient combustion in our | ||
development activities. We proactively went well beyond | ||
regulations and implemented a comprehensive Leak | ||
Detection & Repair (LDAR) program to identify and repair | ||
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leaks across substantially all of our facilities rather than simply those mandated by regulation. We joined The API Environmental Partnership to remain at the forefront of the industry in terms of reducing emissions. Overall, we focus on improving development economics which leads to a continual search for more efficient ways to develop and produce oil and gas. This can be as simple as providing remote monitoring to limit the number of truck trips to visit specific locations, or to enable remote intervention through internet based controls;
- We have anticipated the potential for government bans on certain energy development activities on Federal land. As a result, we strategically re-cast our portfolio by divesting of properties in areas where development could be at risk from potential federal government action. Specifically, after identifying a scenario where the federal government could potentially ban certain types of development activity such as fracture stimulation, we divested of a large federal acreage holding. As another example on the local level, after identifying a scenario where local residents could seek to restrict or ban development activity, we focused our activity away from large population centers, generally through divestiture (Wyoming) or acreage trades (in the Midland Basin).
C3.1e
(C3.1e) Describe where and how climate-related risks and opportunities have influenced your financial planning.
Financial planning | Description of influence | |
elements that have been | ||
influenced | ||
Row | None of the above | As described above, risks and opportunities are considered in |
1 | our strategic planning, which is incorporated into our long-term | |
financial planning scenarios. | ||
C3.1f
(C3.1f) Provide any additional information on how climate-related risks and opportunities have influenced your strategy and financial planning (optional).
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C4. Targets and performance
C4.1
(C4.1) Did you have an emissions target that was active in the reporting year?
Intensity target
C4.1b
(C4.1b) Provide details of your emissions intensity target(s) and progress made against those target(s).
Target reference number
Int 1
Year target was set
2019
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1
Intensity metric
Other, please specify
Metric tons CO2e per thousand barrels of oil equivalent (MBoe)
Base year
2019
Intensity figure in base year (metric tons CO2e per unit of activity)
12.4
-
of total base year emissions in selected Scope(s) (or Scope 3 category) covered by this intensity figure
100
Target year
2019
Targeted reduction from base year (%)
0
Intensity figure in target year (metric tons CO2e per unit of activity) [auto- calculated]
12.4
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- change anticipated in absolute Scope 1+2 emissions
- change anticipated in absolute Scope 3 emissions
Intensity figure in reporting year (metric tons CO2e per unit of activity)
12.4
% of target achieved [auto-calculated] Target status in reporting year
Achieved
Is this a science-based target?
No, and we do not anticipate setting one in the next 2 years
Please explain (including target coverage)
For 2019, we achieved 100% of our GHG intensity target, which is not reflected in the auto-calculation above. The 2019 GHG intensity target was 14.5 mT; actual 2019 GHG intensity was 12.4 mT. 2020 GHG intensity target is based on top-quartile of publicly reported data by industry peers for the three-year trailing average. Coverage is company-wide for U.S. onshore operations including all Basins reporting GHG to EPA per GHG Mandatory Reporting Rule (40 CFR 98 Subpart W).
C4.2
(C4.2) Did you have any other climate-related targets that were active in the reporting year?
Target(s) to reduce methane emissions
C4.2b
(C4.2b) Provide details of any other climate-related targets, including methane reduction targets.
Target reference number
Oth 1
Year target was set
2019
Target coverage
Company-wide
Target type: absolute or intensity
Intensity
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Target type: category & Metric (target numerator if reporting an intensity target)
Methane reduction target
Other, please specify
Thousand Standard Cubic Feet
Target denominator (intensity targets only)
unit of production
Base year
2019
Figure or percentage in base year
0.11
Target year
2019
Figure or percentage in target year
0.11
Figure or percentage in reporting year
0.11
% of target achieved [auto-calculated] Target status in reporting year
Achieved
Is this target part of an emissions target?
Yes
Is this target part of an overarching initiative?
Other, please specify
Overall ESG
Please explain (including target coverage)
For 2019, we achieved 100% of our methane intensity target, which is not reflected in the auto-calculation above. The 2019 methane intensity target was 0.22%, which was based on top-quartile of publicly reported data by industry peers for three-year trailing average; actual 2019 methane intensity was 0.11%. 2020 methane intensity target is based on top-quartile of publicly reported data by industry peers for the three-year trailing average.This climate-related target is part of a company-wide effort to track and communicate more ESG metrics.
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C4.3
(C4.3) Did you have emissions reduction initiatives that were active within the reporting year? Note that this can include those in the planning and/or implementation phases.
Yes
C4.3a
(C4.3a) Identify the total number of initiatives at each stage of development, and for those in the implementation stages, the estimated CO2e savings.
Number of | Total estimated annual CO2e savings in metric | |
initiatives | tonnes CO2e (only for rows marked *) | |
Under investigation | ||
To be implemented* | ||
Implementation | ||
commenced* | ||
Implemented* | 1 | 10,004 |
Not to be implemented | ||
C4.3b
(C4.3b) Provide details on the initiatives implemented in the reporting year in the table below.
Initiative category & Initiative type
Fugitive emissions reductions
Oil/natural gas methane leak capture/prevention
Estimated annual CO2e savings (metric tonnes CO2e)
10,004
Scope(s)
Scope 1
Voluntary/Mandatory
Mandatory
Annual monetary savings (unit currency - as specified in C0.4)
0
Investment required (unit currency - as specified in C0.4)
650,000
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Payback period
No payback
Estimated lifetime of the initiative
Ongoing
Comment
In response to potential increased regulation of fugitive emissions, the COO and operations team set a goal to implement LDAR at 50% of facilities in 2019. This exceeded government regulations and includes the Company's commitment to The API Environmental Partnership, which sets targets far beyond regulatory requirements.
During 2019, SM exceeded this goal by implementing LDAR at 100% of Midland Basin and 50% of South Texas facilities. The approximate cost to implement LDAR at these facilities was $650,000. This successful project resulted in approximately 18,850 Mcf of recovered gas during the year at a cost of $34.50 per Mcf.
C4.3c
(C4.3c) What methods do you use to drive investment in emissions reduction activities?
Method | Comment |
Compliance with regulatory requirements/standards
C4.5
(C4.5) Do you classify any of your existing goods and/or services as low-carbon products or do they enable a third party to avoid GHG emissions?
No
C-OG4.6
(C-OG4.6) Describe your organization's efforts to reduce methane emissions from your activities.
Fugitive methane emissions during natural gas production has become a concern for the oil and gas industry as production of natural gas has increased with the emergence of shale gas. According to the 2019 IEA Global Methane Tracker, fugitive emissions were believed to account for approximately 20% of upstream methane emissions during the year. As a result of increased fugitive methane emissions, there is the possibility that increased regulations will be implemented to control these emissions, which could increase our costs. In 2016, the U.S. Environmental Protection Agency (EPA) and the Bureau of Land Management finalized regulations related to fugitive methane emissions. In 2019, the EPA began revising some of those regulations, and these considerations are still under review.
During 2019, SM Energy focused on leak detection and repair (LDAR) at our production facilities in both operating areas, the Midland Basin and South Texas. This focus was voluntary,
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but if programs like this are not implemented, increased fugitive methane emissions could result in additional government regulations around flaring and/or methane emissions. Additionally, potential increased regulations could result in certain wells being shut-in, which could increase operating costs if we are unable to meet volume commitments, and shut-ins could materially reduce operating revenues.
In response to potential increased regulation of fugitive emissions, the COO and operations team set a goal to implement LDAR at 50% of facilities in 2019. This exceeded government regulations and includes the Company's commitment to the API Environmental Partnership, which sets targets far beyond regulatory requirements.
During 2019, SM exceeded this goal by implementing LDAR at 100% of Midland Basin and
50% of South Texas facilities. The approximate cost to implement LDAR at these facilities was $650,000. This successful project resulted in approximately 18,850 Mcf of recovered gas during the year at a cost of $34.50 per Mcf.
SM Energy has implemented environmental goals around methane emissions that impact compensation for every employee.
SM also participates in two programs that are part of The API Environmental Partnership. Under the Leak Program for Natural Gas and Oil Production Sources program, SM conducted surveys at 1,399 sites in 2019. Additionally, SM Energy replaced high-bleed controllers prior to The API Environmental Partnership program in 2018 to replace, remove or retrofit high-bleed pneumatic controllers. During 2019, we installed and replaced nearly 1,000 gas pneumatic controllers, which resulted in approximately 4,500 MT CO2e saved.
C-OG4.7
(C-OG4.7) Does your organization conduct leak detection and repair (LDAR) or use other methods to find and fix fugitive methane emissions from oil and gas production activities?
Yes
C-OG4.7a
(C-OG4.7a) Describe the protocol through which methane leak detection and repair or other leak detection methods, are conducted for oil and gas production activities, including predominant frequency of inspections, estimates of assets covered, and methodologies employed.
Predominant frequency of inspections: semi-annual; estimates of assets covered: 50% (for CY
2020) ; methodologies employed: hand-held OGI camera following EPA 40 CFR 60 NSPS OOOOa.
In response to potential increased regulation of fugitive emissions, the COO and operations team set a goal to implement LDAR at 50% of facilities in 2019. This exceeded government
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regulations and includes the Company's commitment to The API Environmental Partnership, which sets targets far beyond regulatory requirements.
During 2019, SM exceeded this goal by implementing LDAR at 100% of Midland Basin and
50% of South Texas facilities. The approximate cost to implement LDAR at these facilities was $650,000. This successful project resulted in approximately 18,850 Mcf of recovered gas during the year at a cost of $34.50 per Mcf.
Additional methane emissions reductions can be achieved by installing zero-emission controllers (electronic or air pneumatic controllers).
SM Energy has adopted a proactive approach to using intermittent or low-bleed gas pneumatics on many of our facilities, even before the EPA's NSPS OOOO regulation in 2011, which prohibited high-bleed gas pneumatics at new or modified facilities. We have converted certain pneumatic devices to operate on a compressed instrument air system, which replaces the pressurized natural gas with atmospheric air, eliminating methane emissions. These systems have been installed at new facilities in our Midland Basin Region since 2017. In our South Texas Region, we are replacing gas pneumatic devices with solar and wind powered electronic controllers.
During 2019, we installed and replaced nearly 1,000 non-gas pneumatic controllers, which resulted in approximately 4,500 MT CO2e saved. To execute this strategy going forward, we estimate spending in our Midland region at approximately $30,000 per production battery and $8,000 per wellhead on installing instrument air, as well as annual operation and maintenance costs of approximately $118,000.
C-OG4.8
(C-OG4.8) If flaring is relevant to your oil and gas production activities, describe your organization's efforts to reduce flaring, including any flaring reduction targets.
SM Energy desires to eliminate or minimize flaring by setting targets, developing the appropriate monitoring tools, and identifying projects that support that objective. Each year a flaring goal is set and is monitored using daily operational data that provides operations management with the information needed to identify root causes for flaring and to take action. Actions could include notifying and working with our midstream gas purchasers to identify and install gas off-loads to other purchasers, de-bottle necking and optimizing pipelines and equipment, shutting in production to minimize flaring, and rescheduling capital expenditures in order to allow infrastructure to catch-up with development, thus eliminating or minimizing flaring. We are also members of The Environmental Partnership and Texas Methane and Flaring Coalition, both of which are focusing on reducing flaring. We had a Midland Basin flaring target for 2019, and have again for 2020.
In response to potential increased regulation of CO2e emissions, the Board set a flaring goal of 12% for 2019.
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During 2019, SM exceeded this goal by reducing flaring related to gas processing system capacity restraints to 9.5% of total gas production. The approximate cost to complete this project was $60,000. This successful project resulted in the reduction in flaring related to gas processing system restraints of approximately 150,000 Mcf, at a cost of $0.40/Mcf.
C5. Emissions methodology
C5.1
(C5.1) Provide your base year and base year emissions (Scopes 1 and 2).
Scope 1
Base year start
January 1, 2019
Base year end
December 31, 2019
Base year emissions (metric tons CO2e)
775,678
Comment
As reported per EPA GHG Mandatory Reporting Rule 40 CFR 98 Subpart W.
Scope 2 (location-based)
Base year start
January 1, 2019
Base year end
December 31, 2019
Base year emissions (metric tons CO2e)
86,338
Comment
Scope 2 (market-based)
Base year start
Base year end
Base year emissions (metric tons CO2e)
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Comment
C5.2
(C5.2) Select the name of the standard, protocol, or methodology you have used to collect activity data and calculate emissions.
US EPA Mandatory Greenhouse Gas Reporting Rule
C6. Emissions data
C6.1
(C6.1) What were your organization's gross global Scope 1 emissions in metric tons CO2e?
Reporting year
Gross global Scope 1 emissions (metric tons CO2e)
775,678
Comment
As reported per EPA GHG Mandatory Reporting Rule 40 CFR 98 Subpart W.
C6.2
(C6.2) Describe your organization's approach to reporting Scope 2 emissions.
Row 1
Scope 2, location-based
We are reporting a Scope 2, location-based figure
Scope 2, market-based
Comment
C6.3
(C6.3) What were your organization's gross global Scope 2 emissions in metric tons CO2e?
Reporting year
Scope 2, location-based
86,338
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Comment
C6.4
(C6.4) Are there any sources (e.g. facilities, specific GHGs, activities, geographies, etc.) of Scope 1 and Scope 2 emissions that are within your selected reporting boundary which are not included in your disclosure?
No
C6.5
(C6.5) Account for your organization's gross global Scope 3 emissions, disclosing and explaining any exclusions.
Purchased goods and services
Evaluation status
Not relevant, explanation provided
Please explain
We are unable to gather such information from our hundreds of counterparts, vendors, and service providers. Most do not maintain such information in a uniform way. However, we rely on our business partners to comply with all applicable state and federal laws, including applicable emissions reporting.
Capital goods
Evaluation status
Not relevant, explanation provided
Please explain
We are unable to gather such information from our hundreds of counterparts, vendors, and service providers. Most do not maintain such information in a uniform way. However, we rely on our business partners to comply with all applicable state and federal laws, including applicable emissions reporting.
Fuel-and-energy-related activities (not included in Scope 1 or 2)
Evaluation status
Not relevant, explanation provided
Please explain
We are unable to gather such information from our vendors and service providers. Most do not maintain such information in a uniform way. However, we rely on our business partners to comply with all applicable state and federal laws, including applicable emissions reporting.
Upstream transportation and distribution
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Evaluation status
Not relevant, explanation provided
Please explain
We are unable to gather such information from our hundreds of counterparts, vendors, and service providers. Most do not maintain such information in a uniform way. However, we rely on our business partners to comply with all applicable state and federal laws, including applicable emissions reporting.
Waste generated in operations
Evaluation status
Not relevant, explanation provided
Please explain
We are not in a position to gather such information from our counterparts and service providers. Most do not maintain such information in a uniform way. However, we rely on our business partners to comply with all applicable state and federal laws, including emissions reporting, to ensure their ability to continue receiving our product.
Business travel
Evaluation status
Not relevant, explanation provided
Please explain
We are not in a position to gather such information. Although we generally know the number of commercial airline segments flown on any given year, we are not in a position to report GHG emissions on said flight segments due to the number of variables and uncertainties.
Employee commuting
Evaluation status
Not relevant, explanation provided
Please explain
We are not in a position to gather such information. We do not track the commuting specifics of our employees.
Upstream leased assets
Evaluation status
Not relevant, explanation provided
Please explain
This would be reported in our Score 1 or Scope 2 emissions.
Downstream transportation and distribution
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Evaluation status
Not relevant, explanation provided
Please explain
We do not control downstream transportation and distribution.
Processing of sold products
Evaluation status
Not relevant, explanation provided
Please explain
We have no control or knowledge of the ultimate end use of the commodities we produce. Purchasers of our oil and natural gas resell the commodities for different uses and it would be impossible to track the ultimate use and emissions resulting from the final products.
Use of sold products
Evaluation status
Not relevant, explanation provided
Please explain
We have no control or knowledge of the ultimate end use of the commodities we produce. Purchasers of our oil and natural gas resell the commodities for different uses and it would be impossible to track the ultimate use and emissions resulting from the final products.
End of life treatment of sold products
Evaluation status
Not relevant, explanation provided
Please explain
We have no control or knowledge of the ultimate end use of the commodities we produce. Purchasers of our oil and natural gas resell the commodities for different uses and it would be impossible to track the ultimate use and emissions resulting from the final products.
Downstream leased assets
Evaluation status
Not relevant, explanation provided
Please explain
We do not have any downstream leased assets.
Franchises
Evaluation status
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Not relevant, explanation provided
Please explain
We do not have any franchises.
Investments
Evaluation status
Not relevant, explanation provided
Please explain
We do not have any investments.
Other (upstream)
Evaluation status
Please explain
Other (downstream)
Evaluation status
Please explain
C6.7
(C6.7) Are carbon dioxide emissions from biogenic carbon relevant to your organization?
No
C6.10
(C6.10) Describe your gross global combined Scope 1 and 2 emissions for the reporting year in metric tons CO2e per unit currency total revenue and provide any additional intensity metrics that are appropriate to your business operations.
Intensity figure
12.4
Metric numerator (Gross global combined Scope 1 and 2 emissions, metric tons CO2e)
775,678
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Metric denominator
Other, please specify
Thousand Barrels of Oil Equivalent (MBoe)
Metric denominator: Unit total
62,400
Scope 2 figure used
- change from previous year Direction of change
Reason for change
No change. This is our first year of reporting, so we cannot compare to last year. Scope 2 emissions are not included in intensity figure/metric.
C-OG6.12
(C-OG6.12) Provide the intensity figures for Scope 1 emissions (metric tons CO2e) per unit of hydrocarbon category.
Unit of hydrocarbon category (denominator)
Other, please specify
Thousand Barrels of Oil Equivalent (MBoe)
Metric tons CO2e from hydrocarbon category per unit specified
12.4
- change from previous year Direction of change
Reason for change
N/A
Comment
This is our first year of reporting, so we cannot compare to last year.
C-OG6.13
(C-OG6.13) Report your methane emissions as percentages of natural gas and hydrocarbon production or throughput.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Oil and gas business division
Upstream
Estimated total methane emitted expressed as % of natural gas production or throughput at given division
0.11
Estimated total methane emitted expressed as % of total hydrocarbon production or throughput at given division
0.04
Comment
C7. Emissions breakdowns
C7.1
(C7.1) Does your organization break down its Scope 1 emissions by greenhouse gas type?
Yes
C7.1a
(C7.1a) Break down your total gross global Scope 1 emissions by greenhouse gas type and provide the source of each used greenhouse warming potential (GWP).
Greenhouse | Scope 1 emissions (metric tons of | GWP Reference |
gas | CO2e) | |
CO2 | 695,512 | IPCC Fourth Assessment Report (AR4 - |
100 year) | ||
CH4 | 79,419 | IPCC Fourth Assessment Report (AR4 - |
100 year) | ||
N2O | 747 | IPCC Fourth Assessment Report (AR4 - |
100 year) | ||
C-OG7.1b
(C-OG7.1b) Break down your total gross global Scope 1 emissions from oil and gas value chain production activities by greenhouse gas type.
Emissions category
Combustion (excluding flaring)
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Value chain
Upstream
Product
Unable to disaggregate
Gross Scope 1 CO2 emissions (metric tons CO2)
695,512
Gross Scope 1 methane emissions (metric tons CH4)
3,177
Total gross Scope 1 emissions (metric tons CO2e)
775,678
Comment
Other includes pneumatic devices and pumps, storage tanks, reciprocating compressors, liquids unloading, completions with and without hydraulic fracturing.
C7.2
(C7.2) Break down your total gross global Scope 1 emissions by country/region.
Country/Region | Scope 1 emissions (metric tons CO2e) |
United States of America | 775,678 |
C7.3
(C7.3) Indicate which gross global Scope 1 emissions breakdowns you are able to provide.
By business division
C7.3a
(C7.3a) Break down your total gross global Scope 1 emissions by business division.
Business division | Scope 1 emissions (metric ton CO2e) |
Midland Basin | 692,437 |
South Texas | 83,241 |
C-CE7.4/C-CH7.4/C-CO7.4/C-EU7.4/C-MM7.4/C-OG7.4/C-ST7.4/C-TO7.4/C-TS7.4
(C-CE7.4/C-CH7.4/C-CO7.4/C-EU7.4/C-MM7.4/C-OG7.4/C-ST7.4/C-TO7.4/C-TS7.4) Break down your organization's total gross global Scope 1 emissions by sector production activity in metric tons CO2e.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Gross Scope 1 | Comment | |
emissions, metric tons | ||
CO2e | ||
Oil and gas production | 775,678 | Net GHG emissions not reported per EPA |
activities (upstream) | GHG Mandatory Reporting Rule 40 CFR 98 | |
Subpart W. | ||
Oil and gas production | ||
activities (midstream) | ||
Oil and gas production | ||
activities (downstream) | ||
C7.5
(C7.5) Break down your total gross global Scope 2 emissions by country/region.
Country/Region | Scope 2, | Scope 2, | Purchased and | Purchased and consumed |
location- | market- | consumed | low-carbon electricity, | |
based (metric | based | electricity, heat, | heat, steam or cooling | |
tons CO2e) | (metric tons | steam or cooling | accounted for in Scope 2 | |
CO2e) | (MWh) | market-based approach | ||
(MWh) | ||||
United States of | 86,338 | 204,298 | 158,126 | |
America | ||||
C7.6
(C7.6) Indicate which gross global Scope 2 emissions breakdowns you are able to provide.
By business division
C7.6a
(C7.6a) Break down your total gross global Scope 2 emissions by business division.
Business | Scope 2, location-based (metric tons | Scope 2, market-based (metric tons |
division | CO2e) | CO2e) |
Midland Basin | 86,338 | |
C-CE7.7/C-CH7.7/C-CO7.7/C-MM7.7/C-OG7.7/C-ST7.7/C-TO7.7/C-TS7.7
(C-CE7.7/C-CH7.7/C-CO7.7/C-MM7.7/C-OG7.7/C-ST7.7/C-TO7.7/C-TS7.7) Break down your organization's total gross global Scope 2 emissions by sector production activity in metric tons CO2e.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Scope 2, location- | Scope 2, market-based (if | Comment | |
based, metric tons | applicable), metric tons CO2e | ||
CO2e | |||
Oil and gas production | 86,338 | ||
activities (upstream) | |||
Oil and gas production | |||
activities (midstream) | |||
Oil and gas production | |||
activities (downstream) | |||
C7.9
(C7.9) How do your gross global emissions (Scope 1 and 2 combined) for the reporting year compare to those of the previous reporting year?
This is our first year of reporting, so we cannot compare to last year
C8. Energy
C8.1
(C8.1) What percentage of your total operational spend in the reporting year was on energy?
More than 0% but less than or equal to 5%
C8.2
(C8.2) Select which energy-related activities your organization has undertaken.
Indicate whether your organization undertook this energy- | |
related activity in the reporting year | |
Consumption of fuel (excluding | Yes |
feedstocks) | |
Consumption of purchased or | Yes |
acquired electricity | |
Consumption of purchased or | No |
acquired heat | |
Consumption of purchased or | No |
acquired steam | |
Consumption of purchased or | No |
acquired cooling | |
Generation of electricity, heat, | No |
steam, or cooling | |
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
C8.2a
(C8.2a) Report your organization's energy consumption totals (excluding feedstocks) in MWh.
Heating | MWh from | MWh from non- | Total (renewable | |
value | renewable | renewable | and non-renewable) | |
sources | sources | MWh | ||
Consumption of fuel | HHV (higher | 0 | 1,342,770 | 1,342,770 |
(excluding feedstock) | heating | |||
value) | ||||
Consumption of | 36,775 | 167,525 | 204,300 | |
purchased or acquired | ||||
electricity | ||||
Total energy | 36,775 | 1,510,295 | 1,547,070 | |
consumption | ||||
C8.2b
(C8.2b) Select the applications of your organization's consumption of fuel.
Indicate whether your organization undertakes this | |
fuel application | |
Consumption of fuel for the generation of | Yes |
electricity | |
Consumption of fuel for the generation of | No |
heat | |
Consumption of fuel for the generation of | No |
steam | |
Consumption of fuel for the generation of | No |
cooling | |
Consumption of fuel for co-generation or | No |
tri-generation | |
C8.2c
(C8.2c) State how much fuel in MWh your organization has consumed (excluding feedstocks) by fuel type.
Fuels (excluding feedstocks)
Diesel
Heating value
HHV (higher heating value)
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Total fuel MWh consumed by the organization
827,538
MWh fuel consumed for self-generation of electricity
4,713
MWh fuel consumed for self-generation of heat
0
Emission factor
0.4276
Unit
metric tons CO2e per barrel
Emissions factor source
EPA.
https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Comment
Fuels (excluding feedstocks)
Compressed Natural Gas (CNG)
Heating value
HHV (higher heating value)
Total fuel MWh consumed by the organization
53,234
MWh fuel consumed for self-generation of electricity
53,234
MWh fuel consumed for self-generation of heat
Emission factor
0.053
Unit
metric tons CO2e per million Btu
Emissions factor source
EPA.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Comment
Fuels (excluding feedstocks)
Propane Gas
Heating value
HHV (higher heating value)
Total fuel MWh consumed by the organization
82,627
MWh fuel consumed for self-generation of electricity
82,627
MWh fuel consumed for self-generation of heat
Emission factor
0.231
Unit
metric tons CO2e per barrel
Emissions factor source
EPA.
https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Comment
Fuels (excluding feedstocks)
Natural Gas
Heating value
HHV (higher heating value)
Total fuel MWh consumed by the organization
379,371
MWh fuel consumed for self-generation of electricity
101,126
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
MWh fuel consumed for self-generation of heat
Emission factor
Unit
metric tons CO2e per million Btu
Emissions factor source
EPA.
https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Comment
C9. Additional metrics
C9.1
(C9.1) Provide any additional climate-related metrics relevant to your business.
C-OG9.2a
(C-OG9.2a) Disclose your net liquid and gas hydrocarbon production (total of subsidiaries and equity-accounted entities).
In-year net production | Comment | |
Crude oil and condensate, million barrels | 21.9 | |
Natural gas liquids, million barrels | 8.1 | |
Oil sands, million barrels (includes bitumen and synthetic crude) | 0 | |
Natural gas, billion cubic feet | 109.8 | |
C-OG9.2b
(C-OG9.2b) Explain which listing requirements or other methodologies you use to report reserves data. If your organization cannot provide data due to legal restrictions on reporting reserves figures in certain countries, please explain this.
Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC's regulations. Our process for managing and monitoring our proved reserves is delegated to our corporate reserves group and is coordinated by our Corporate Engineering Manager, subject to the oversight of our management and the Audit Committee of our Board of Directors. Technical,
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
geological, and engineering reviews of our assets are performed throughout the year by our Development Department. Data, obtained from these reviews, in conjunction with economic data and our ownership information, is used in making a determination of estimated proved reserve quantities. Our Development Department's technical staff do not report to our Corporate Engineering Manager; they report to the Sr. Vice President of Development and EHS. This design is intended to promote objective and independent analysis in the proved reserves estimation process.
Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum engineering consulting services throughout the world for over 70 years. Ryder Scott performs an independent audit using its own engineering assumptions, but with economic and ownership data we provided. Ryder Scott audits a minimum of 80 percent of our total calculated proved reserve PV-10. In the aggregate, the proved reserve amounts of our audited properties determined by Ryder Scott are required, per our policy, to be within 10 percent of our proved reserve amounts for the total Company, as well as for each respective asset management level.
In addition to a third-party audit, our reserves are reviewed by our management with the Audit Committee of our Board of Directors. Our Management, which includes our Chief Executive Officer, Executive Vice President and Chief Financial Officer, and President and Chief Operating Officer, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate in conjunction with Ryder Scott's results and also meets with Ryder Scott representatives, apart from our management, from time to time to discuss processes and findings.
C-OG9.2c
(C-OG9.2c) Disclose your estimated total net reserves and resource base (million boe), including the total associated with subsidiaries and equity-accounted entities.
Estimated total net | Estimated total net | Estimated net | Comment | |
proved + probable | proved + probable + | total resource | ||
reserves (2P) (million | possible reserves (3P) | base (million | ||
BOE) | (million BOE) | BOE) | ||
Row | 462 | The Company | ||
1 | does not publish | |||
2P or 3P reserves. | ||||
C-OG9.2d
(C-OG9.2d) Provide an indicative percentage split for 2P, 3P reserves, and total resource base by hydrocarbon categories.
Net proved + | Net proved + | Net total | Comment | |
probable | probable + | resource | ||
possible | base (%) | |||
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
reserves (2P) | reserves (3P) | |||
(%) | (%) | |||
Crude oil/ | 56 | This percentage relates to our | ||
condensate/ | reported 1P reserves. The | |||
natural gas | Company does not publish 2P or | |||
liquids | 3P resources. From Company's | |||
2019 Form 10-K table, page 10. | ||||
Natural gas | 44 | This percentage relates to our | ||
reported 1P reserves. The | ||||
Company does not publish 2P or | ||||
3P resources. From Company's | ||||
2019 Form 10-K table, page 10. | ||||
Oil sands | 0 | The Company does not publish | ||
(includes bitumen | 2P or 3P resources. From | |||
and synthetic | Company's 2019 Form 10-K | |||
crude) | table, page 10. | |||
C-OG9.2e
(C-OG9.2e) Provide an indicative percentage split for production, 1P, 2P, 3P reserves, and total resource base by development types.
Development type
Onshore
In-year net production (%)
100
Net proved reserves (1P) (%)
Net proved + probable reserves (2P) (%)
Net proved + probable + possible reserves (3P) (%)
Net total resource base (%)
100
Comment
The Company does not publish 2P or 3P resources.
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
C-CE9.6/C-CG9.6/C-CH9.6/C-CN9.6/C-CO9.6/C-EU9.6/C-MM9.6/C-OG9.6/C-RE9.6/C-ST9.6/C-TO9.6/C-TS9.6
(C-CE9.6/C-CG9.6/C-CH9.6/C-CN9.6/C-CO9.6/C-EU9.6/C-MM9.6/C-OG9.6/C-RE9.6/C-ST9.6/C-TO9.6/C-TS9.6) Does your organization invest in research and development (R&D) of low-carbon products or services related to your sector activities?
Investment in low-carbon R&D | Comment | |
Row 1 | No | |
C-OG9.7
(C-OG9.7) Disclose the breakeven price (US$/BOE) required for cash neutrality during the reporting year, i.e. where cash flow from operations covers CAPEX and dividends paid/ share buybacks.
38
C10. Verification
C10.1
(C10.1) Indicate the verification/assurance status that applies to your reported emissions.
Verification/assurance status | |
Scope 1 | No third-party verification or assurance |
Scope 2 (location-based or market-based) | No third-party verification or assurance |
Scope 3 | No emissions data provided |
C10.2
(C10.2) Do you verify any climate-related information reported in your CDP disclosure other than the emissions figures reported in C6.1, C6.3, and C6.5?
No, we do not verify any other climate-related information reported in our CDP disclosure
C11. Carbon pricing
C11.1
(C11.1) Are any of your operations or activities regulated by a carbon pricing system (i.e. ETS, Cap & Trade or Carbon Tax)?
No, and we do not anticipate being regulated in the next three years
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
C11.2
(C11.2) Has your organization originated or purchased any project-based carbon credits within the reporting period?
No
C11.3
(C11.3) Does your organization use an internal price on carbon?
No, and we do not currently anticipate doing so in the next two years
C12. Engagement
C12.1
(C12.1) Do you engage with your value chain on climate-related issues?
No, we do not engage
C12.1e
(C12.1e) Why do you not engage with any elements of your value chain on climate- related issues, and what are your plans to do so in the future?
SM Energy recognizes the valuable role our independent contractors play in our operations and we want to work with others who share our commitment to health and safety and the proper stewardship of shared natural resources. SM Energy has utilized ISNetworld (ISN) to facilitate the collection, maintenance, and verification of contractor information. Contractors are required to submit their safety and training programs, safety performance data, and proof of insurance information to ISN, who independently verifies the information. Contractors are graded on the strength of their EHS management systems and training programs, as well as their performance. Contractors are generally selected based on their performance against defined benchmarks, and the use of each contractor is approved by Company representatives involved in the work to be performed. We maintain a list of qualified contractors and generally only those contractors are permitted to work in our operations.
While we have not implemented a formalized climate engagement program, we engage to the extent that we expect all of our contractors to comply with their respective EHS programs, state and federal regulations, and to respect our safety culture and core values. We conduct periodic audits of a sampling of our contractors at both the corporate and field level. Contractors are selected for these reviews based on the risks attendant to the work to be performed, activity level, past performance, and other factors.
C12.3
(C12.3) Do you engage in activities that could either directly or indirectly influence public policy on climate-related issues through any of the following?
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Trade associations
C12.3b
(C12.3b) Are you on the board of any trade associations or do you provide funding beyond membership?
Yes
C12.3c
(C12.3c) Enter the details of those trade associations that are likely to take a position on climate change legislation.
Trade association
American Exploration and Production Council (AXPC)
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association's position
American oil and gas producers have an irreplaceable role in meeting the challenge of global climate change. AXPC, representing large independent American oil and gas producers, supports innovative, collaborative solutions that lower greenhouse gas (GHG) emissions while meeting the world's growing need for abundant, low cost, reliable energy. Successful public policy must recognize that oil and gas underpins our standard of living and American oil and gas is critical to our national security and economic prosperity.
The following principles will guide AXPC's climate advocacy efforts, including policy that:
Facilitates meaningful GHG emissions reductions
- Requires proportional participation from all sectors of the economy
- Utilizes fair, consistent and transparent measurement methodologies across industries
- Encourages and appropriately accounts for early and/or voluntary actions
- Minimizes inconsistent, redundant and/or contradictory regulations and policies
● Attributes to energy producers only emissions arising during production operations
Balances economic, environmental and energy security needs
- Ensures the development of critical energy infrastructure
-
Makes the costs and associated climate benefits of any policy fully transparent to the
American public - Ensures that the United States shoulders an equitable burden under international agreements
- Does not disadvantage American oil and gas producers and workers against foreign competitors
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Promotes innovation
- Champions economy-wide public and private investment to develop cost-effective technologies that will materially reduce GHG emissions
- Relies upon predictable and economically efficient policy frameworks, such as the use of market-based policies and/or offsets, to deliver outcomes at the lowest cost to society
- Allows all energy sources to compete for innovation funding
How have you influenced, or are you attempting to influence their position?
None
C12.3f
(C12.3f) What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy?
SM Energy is committed to developing oil and gas resources in an environmentally responsible and sustainable manner. Our Board of Directors has been consistently engaged in reviewing our climate related efforts to date, and with the designation of a specific Board committee to oversee our ESG efforts, we expect to make even more transparent connections between our strategy, ESG performance goals, and compensation practices. Our leadership team is highly engaged with the trade associations that the Company participates in and monitors the positions of those trade associations to ensure their policies are consistent with SM Energy's overall climate change strategy. In early 2020, responsibilities of Corporate EHS were elevated as part of a re-organization. The Sr. VP Development and EHS is responsible for ensuring all EHS policies and programs are implemented effectively. This role works closely with Sr. VP of Operations to drive a strong EHS culture focused on continuous improvement within our organization and with all of our vendors and contractors. In addition, collaboration with senior leaders to set strategy and drive a forward-looking approach to ESG Matters and integration with EHS objectives was achieved in 2020. Other processes that we have in place include contractor safety training, contractor EHS monitoring, field contractor safety reviews, independent EHS field audits, and benchmarking and analysis of peer EHS and ESG performance.
C12.4
(C12.4) Have you published information about your organization's response to climate change and GHG emissions performance for this reporting year in places other than in your CDP response? If so, please attach the publication(s).
Publication
In mainstream reports
Status
Complete
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SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Attach the document
Proxy.pdf
Page/Section reference
Proxy
Content elements
Governance
Strategy
Risks & opportunities
Emissions figures
Emission targets
Other metrics
Comment
Publication
In voluntary communications
Status
Complete
Attach the document
8-2020_SM Energy_Combined.pdf
Page/Section reference
Corporate Responsibility Report
Content elements
Governance
Strategy
Risks & opportunities
Emissions figures
Emission targets
Other metrics
Comment
Publication
In mainstream reports
54
SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
Status
Complete
Attach the document
SM-2019.12.31-10K_AS FILED.pdf
Page/Section reference
2019 10-K
Content elements
Governance
Strategy
Risks & opportunities
Emissions figures
Emission targets
Other metrics
Comment
C15. Signoff
C-FI
(C-FI) Use this field to provide any additional information or context that you feel is relevant to your organization's response. Please note that this field is optional and is not scored.
C15.1
(C15.1) Provide details for the person that has signed off (approved) your CDP climate change response.
Job title | Corresponding job category | |
Row 1 | Chief Executive Officer | Chief Executive Officer (CEO) |
Submit your response
In which language are you submitting your response?
English
Please confirm how your response should be handled by CDP
I am submitting to | Public or Non-Public Submission | |
55
SM Energy Co. CDP Climate Change Questionnaire 2020 Monday, January 25, 2021
I am submitting my response | Investors | Non-public |
Please confirm below
I have read and accept the applicable Terms
56
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Disclaimer
SM Energy Company published this content on 05 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 February 2021 22:46:03 UTC.