EXTRACTIVES & MINERALS PROCESSING SECTOR

BASIS FOR CONCLUSIONS 

 

Oil & Gas - Midstream

Sustainable Industry Classification System® (SICS®) EM-MD

Prepared by the
Sustainability Accounting Standards Board

October 2018

sasb.org

© 2018 The SASB Foundation. All rights reserved. 
About SASB
The SASB Foundation was founded in 2011 as a not-for-profit, independent standards-setting organization. The
SASB Foundation’s mission is to establish and maintain industry-specific standards that assist companies in
disclosing financially material, decision-useful sustainability information to investors.

The SASB Foundation operates in a governance structure similar to the structure adopted by other
internationally recognized bodies that set standards for disclosure to investors, including the Financial
Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). This structure
includes a board of directors (“the Foundation Board”) and a standards-setting board (“the Standards Board” or
“the SASB”). The Standards Board develops, issues, and maintains the SASB standards. The Foundation Board
oversees the strategy, finances and operations of the entire organization, and appoints the members of the
Standards Board.

The Foundation Board is not involved in setting standards, but is responsible for overseeing the Standards
Board’s compliance with the organization’s due process requirements. As set out in the SASB Rules of
Procedure, the SASB’s standards-setting activities are transparent and follow careful due process, including
extensive consultation with companies, investors, and relevant experts.

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BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY

Table of Contents
Introduction ............................................................................................................................................................. 4 

The Standards Board ........................................................................................................................................... 4 

Development of the Sustainability Accounting Standards .................................................................................... 4 

Approval of the Industry Standard....................................................................................................................... 5 

Future Updates to the Standards ......................................................................................................................... 6 

Revision EM-MD:01 – Industry: Oil & Gas – Midstream; Topic Name: Greenhouse Gas & Other Air Emissions
.................................................................................................................................................................................. 7 

Revision EM-MD:02 – Industry: Oil & Gas – Midstream; Topic Name: Greenhouse Gas & Other Air Emissions
.................................................................................................................................................................................. 9 

Revision EM-MD:03 – Industry: Oil & Gas – Midstream; Topic Name: Greenhouse Gas & Other Air Emissions
................................................................................................................................................................................ 11 

Revision EM-MD:04 – Industry: Oil & Gas – Midstream; Topic Name: Ecological Impacts ............................... 13 

Revision EM-MD:05 – Industry: Oil & Gas – Midstream; Topic Name: Operational Safety, Emergency
Preparedness, and Response ................................................................................................................................ 15 

Appendix A. Standards Board – Sector Committee Assignments ..................................................................... 18 

Appendix B. Redline Metric Tables ...................................................................................................................... 19 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY

Introduction
The publication of the Sustainability Accounting Standard (“Standard”) for the Oil & Gas - Midstream Industry marks
an important milestone for the industry and for global capital markets more generally. It is the first Standard designed
to assist companies in the Oil & Gas - Midstream industry in disclosing financially material, decision-useful
sustainability information to investors.

The Oil & Gas - Midstream Industry Standard was first released in a provisional form in June 2015 after an extensive
standard-setting process. Following the release of the Provisional Standard, the SASB staff, under the guidance of the
SASB standard-setting board (“the Standards Board” or “the SASB”), engaged in further due process to revise the
Standard. In October 2018, the Standards Board approved revisions to the Standard. The Standards Board
subsequently voted to approve the Oil & Gas - Midstream Industry Standard, thereby including it in as one of the 77
industries for which the SASB has developed and published an industry standard.

The Basis for Conclusions describes the rationale for revisions made to the provisional industry standard. Additionally,
the document outlines the standard-setting process the Standards Board used to codify the standard. All standard-
setting documentation, including prior drafts of the standard, summary reports, and comment letters, which informed
the development of the standard, are publicly available at the Standard Setting Archive of the SASB website.

The Standards Board

The Standards Board is charged with developing, issuing, and maintaining SASB standards. The Standards Board
operates in accordance with its primary governance documents, including the SASB’s Conceptual Framework and
Rules of Procedure. The Conceptual Framework sets out the basic concepts, principles, definitions, and objectives that
guide the Standards Board in its approach to setting standards. The Rules of Procedure establishes the due process
followed by the Standards Board and staff in their standard-setting activities. The standard-setting process is designed
to ensure each industry standard reflects the core objectives established in the Conceptual Framework to facilitate
companies’ cost-effective reporting of financially material and decision-useful sustainability information to investors.

In its standard-setting role, the Standards Board operates in a transparent manner, including holding public board
meetings. The Standards Board currently uses a sector-based committee structure, with three Standards Board
members assigned primary responsibility for each given sector. In addition to sector committee reviews, the full
Standards Board evaluates revisions to the standards. Information on Standards Board meetings, including minutes,
agendas, and a schedule of upcoming meetings is available on the SASB website. A list of Standards Board members
and their respective sector committee assignments is included in Appendix A.

Development of the Sustainability Accounting Standards

SASB staff initiated its standard-setting activities in 2012 under the oversight of the Standards Council.1 From August
2012 to March 2016, the SASB staff developed provisional standards for each of the industries identified in the
Sustainable Industry Classification System® (SICS®).2 The provisional standards were developed through an iterative

                                                            
1
The Standards Council served in a process oversight role, distinct from the standard-setting role the Standards Board serves in. Upon
completion of the provisional phase in 2016, the Standards Council was disbanded.
2
At the time of the development of the provisional standards, SICS® contained 79 industries. SICS® was subsequently revised to 77
industries as a result of the combining of industries that contained similar sustainability-related risk and opportunity characteristics.

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 4

and transparent process centered on independent research, market input, and oversight from the Standards Council.
Each provisional industry standard was developed based on staff research, industry working group (“IWG”) feedback,
public comments, and individual consultations with companies, investors, and other relevant experts. Throughout the
development of the provisional standards, more than 2,800 individuals participated in IWGs, 172 public comment
letters were received, and hundreds of individual consultations were conducted with market participants by the SASB
staff.

In 2016, following the issuance of the provisional standards across all industries, the SASB staff initiated a dedicated
market consultation period to gain further insight into market views on the provisional standards. Subsequently, the
Standards Board was seated and initiated a due process phase that culminated in the codification of 77 industry
standards in October 2018. This standard-setting phase that began with the provisional standards and concluded with
the codified standards is described more fully below. All standard-setting documentation discussed below are publicly
available at the Standard Setting Archive of the SASB website.

 Consultation: In the six-month period from Q4 2016 – Q1 2017, the SASB staff conducted
consultations to gather additional input from companies, investors, and relevant experts on the
provisional standards. Throughout this phase, the SASB staff received input on the complete set of
industry standards from individual consultations conducted with 141 companies, 19 industry
associations, and 271 investor consultations via 38 institutional investors. The Consultation Summary
comprises the findings from the consultations.

 Technical Agenda: In July 2017, after a period of review to evaluate market input from consultations
on the provisional standards, the Standards Board worked with the SASB staff to publish the Technical
Agenda. The Technical Agenda formally lists the areas of focus to address in preparing the standards
for codification, emphasizing those issues for which strong evidence surfaced and/or those which
received significant market feedback during the consultation period.

 Public Comment Period: In October 2017, the Standards Board published exposure drafts of the
standards, which incorporated proposed changes guided by the Technical Agenda to the provisional
standards. This opened a 90-day period, subsequently extended to a 120-day period, from October
2017 to January 2018, for public comment and review of proposed changes to provisional standards.
Market participants provided 120 comment letters during the comment period. All letters received and
a Summary of Public Comments are available at the Standard Setting Archive.

The Standards Board and the SASB staff evaluated the public comments received in conjunction with previous market
input and research to determine the revisions to be made to the provisional standard.

Approval of the Industry Standard

On October 13, 2018, the Standards Board voted unanimously to revise the Provisional Standard for the Oil & Gas -
Midstream industry. In light of these revisions, on October 16, 2018, the Standards Board voted unanimously in favor
of removing this Standard’s provisional status. In doing so, the Standards Board considered all phases of the standard-
setting process, including those detailed in the above documents, to assess their underlying rationale, their adherence
to due process, and their faithfulness to the essential concepts of sustainability accounting, as described in the
Conceptual Framework.

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The following section of this document describes the rationale for the revisions. Appendix B contains a redline table
that summarizes these revisions. Revisions relative to the provisional standard that have not altered the scope or
content of disclosure topics or metrics, such as those that are intended to improve the consistency, clarity, and
accuracy of the standard, are not specifically addressed in the Basis for Conclusions.

Future Updates to the Standards

As social, economic, regulatory, and other developments alter an industry’s competitive landscape, the SASB
standards may need to evolve to reflect new market dynamics. The Standards Board will follow a regular standards
review cycle to address emerging and evolving issues that may result in updates to the SASB standards.

The Standards Board intends to direct the SASB staff to compile and publish a Research Agenda, which outlines items
that have been identified as requiring further analysis. Evidence-based research and market input, including feedback
from outreach and consultation, will inform reviews of issues on the Research Agenda. Items from the Research
Agenda may later be added to the Standards Board’s Technical Agenda for additional due process and formal
deliberation. All updates are subject to the standard-setting process described in the Rules of Procedure.

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Revision EM-MD:01 – Industry: Oil & Gas – Midstream;
Topic Name: Greenhouse Gas & Other Air Emissions
2017 Technical Agenda Item #4-12 Description
The SASB is evaluating splitting the topic to improve the quality and clarity of the standard.

Summary of Change – Split Topic

The SASB split the topic Greenhouse Gas & Other Air Emissions into Greenhouse Gas Emissions and Air Quality.

Provisional metric NR0102-01, “Gross global Scope 1 emissions, percentage covered under a regulatory program” and
NR0102-02, “Description of long-term and short-term strategy or plan to manage Scope 1 emissions, emissions
reduction targets, and an analysis of performance against those targets” are now associated with the Greenhouse Gas
Emissions topic.

Provisional metric NR0102-03, “Air emissions for the following pollutants: NOx (excluding N2O), SOx, volatile organic
compounds (VOCs), and particulate matter (PM)” is now associated with the Air Quality topic.

Adherence to Principles for Topic Selection

To better represent the distinct, industry-specific risks and management strategies associated with different elements
of the topic, the Greenhouse Gas & Other Air Emissions topic was split into Greenhouse Gas Emissions and Air
Quality.

While both relate to air emissions, the two topics are associated with differing regulatory risks and management
strategies. While the Greenhouse Gas Emissions topic is characterized by chronic, decentralized risk associated with
climate change, Air Quality is more directly associated with both chronic and acute localized risks associated with the
environmental and human health impacts of airborne pollutants. Actions or strategies to mitigate climate-related risk
include emissions reductions strategies such as carbon capture and sequestration, energy efficiency projects,
acquisition of carbon offsets through the production of renewable energy or direct acquisition, or other strategies.
Actions or strategies to mitigate air quality risk include project siting, installation of abatement or emissions-reduction
technologies, and/or localized community engagement and grievance management processes and procedures. As
such, actions taken by companies to manage and mitigate these risks are largely independent, and therefore it was
appropriate to separate these two topics.

Description of Greenhouse Gas Emissions Topic

Oil & Gas production and transportation activities generate significant direct Greenhouse Gas (GHG) emissions from a
variety of sources. Emissions can be combusted, including those arising from flaring or power generation equipment,
as well as uncombusted, including those emissions arising from gas processing equipment, venting, flaring, and
fugitive methane emissions. Regulatory efforts to reduce GHG emissions in response to the risks posed by climate
change may result in additional regulatory compliance costs and risks for E&P companies. With natural gas production
from shale resources expanding, the management of the emission of methane, a highly potent GHG, from oil and gas
E&P systems has emerged as a major operational, reputational, and regulatory risk for companies. Furthermore, the
development of unconventional hydrocarbon resources may be more or less GHG-intensive than conventional oil and
gas, with associated impacts to regulatory risk. Energy efficiency, use of less carbon-intensive fuels, or process

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improvements to reduce fugitive emissions, venting, and flaring, can provide benefits to E&P companies in the form of
climate risk mitigation, lower costs, and/or increased revenues.

Description of Air Quality topic

Air emissions from midstream companies include hazardous air pollutants, criteria air pollutants, and volatile organic
compounds (VOCs), which can have significant, localized human health and environmental impacts. Of particular
concern are sulfur dioxide, nitrogen dioxide, and VOC emissions. The financial impacts on companies from air
emissions will vary depending on the specific locations of operations and the prevailing air emissions
regulations. Active management of the issue—through technological and process improvements—could allow
companies to limit the impact of regulations in an environment of increasing regulatory and public concerns about air
quality. Companies could benefit from operational efficiencies that could lead to a lower cost structure over time.

Supporting Analysis for Greenhouse Gas Emissions Topic

Per SASB’s Oil & Gas – Midstream Research Brief, total GHG emissions in 2012 from natural gas processing,
transmission, underground storage, and Liquified Natural Gas (LNG) imports/exports reported to the Environmental
Protection Agency (EPA) accounted for about 85 million metric tons of carbon dioxide equivalent or 39 percent of the
total from petroleum and natural gas systems. Greenhouse gas emissions are likely to have received continued
regulatory scrutiny, as indicated by the Paris Agreement and associated Intended Nationally Determined Commitments
as well as the recent publication of the Recommendations Report of the Task Force on Climate-Related Financial
Disclosures (TCFD) formed by the Financial Stability Board. Of the top five companies in the industry by market
capitalization, all five discuss risks associated with regulatory and/or market transition risk associated with GHG
emissions.

Supporting Analysis for Air Emissions Topic

Air emissions represent a distinct yet important risk to the Midstream industry due to significant regulation and
potential fines or other regulatory actions related to violations of air emissions rules. In the U.S., the EPA’s Clean Air
Act (CAA) requires facilities in petroleum and natural gas systems to report emissions from combustion, venting,
equipment leaks, and flaring. In addition, several states have enacted regulations on air emissions associated with the
oil and gas production and transportation, including California, Pennsylvania, North Dakota, and others. Of the top
five companies in the industry by market capitalization, four discuss risks related to regulatory developments related to
air quality.

Market Input
Investors: No feedback was received from investors regarding the revision.

Companies: No feedback was received from companies regarding the revision.

Benefits
Improves the SASB Standard: The revision improves the quality and clarity of the standard by separating sustainability
topics that are likely to be material and represent distinct, industry-specific sustainability risks.

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 8

Revision EM-MD:02 – Industry: Oil & Gas – Midstream;
Topic Name: Greenhouse Gas & Other Air Emissions
2017 Technical Agenda Item #4-11 Description
The SASB is evaluating the revision of metric NR0102-013 to ensure the decision-usefulness and alignment with other
standards of the metrics associated with the topic.

Summary of Change – Revise Metrics

The SASB revised metric NR0102-01 from “Gross global Scope 1 emissions, percentage covered under a regulatory
program,” to “Gross global Scope 1 emissions, percentage methane, percentage covered under emissions-limiting
regulations.”

Adherence to Criteria for Accounting Metrics:

The Oil & Gas – Midstream Industry Provisional Standard includes a topic for Greenhouse Gas & Other Air Emissions as
well as associated metrics to describe a company’s emissions to the atmosphere. With respect to GHG emissions,
provisional metric NR0102-01 described a company’s direct GHG emissions and the percentage of those emissions
that are covered under a regulatory program. While this indicator was comparable and distributive with respect to
company exposure to GHG emissions and associated regulatory and/or reputational risks, metric NR0102-01 did not
provide a complete view of specific channels of regulatory and/or reputational risk specifically associated with
methane emissions. The revision of the metric to include an additional disclosure element related to methane
improves the completeness, representativeness, and alignment with external standards with respect to GHG emission
risks, thereby better accomplishing the core objectives of the Standard by offering investors a more decision-useful set
of disclosures that minimize the cost burden for companies.

Supporting Analysis
Methane (CH4,) emitted either intentionally or unintentionally from natural gas and oil wells is an extremely potent
greenhouse gas with a global warming potential. Per the EPA, that potential is 34 times that of CO2 over a 100-year
time horizon and 84 times over a 20-year time horizon. As a result, fugitive methane gas emissions have therefore
been the target of industry regulation as part of larger efforts related to climate regulation. Methane emissions are
already the subject of regulation by some oil-producing nations and are likely to receive additional attention per
Intended Nationally Determined Contributions (INDCs) association with the COP Agreement. A review of the COP
INDCs of Saudi Arabia and Canada, two of the top six oil-producing nations, identified methane reduction specifically.
Reducing methane emissions may require both capital and operational expenditures to address and therefore creates
potentially material financial impacts for operators. Further, a company’s actions to limit methane emissions (e.g.,
routine maintenance, capital expenditures, or lead detection protocols) are different than those used to manage CO2
emissions (e.g., carbon capture and sequestration, energy efficiency, or flaring reduction). Methane emissions have
broad and significant implications as 34 of the 47 U.S. Oil & Gas companies currently tracked by the SASB report
methane emissions to CDP where these companies’ methane emissions account for 43 percent of U.S. methane
emissions. Of the five largest Midstream companies by market capitalization, three discuss specific strategies for

                                                            
3
NR0102-01 - Gross global Scope 1 emissions, percentage covered under a regulatory program

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 9

identifying and reducing methane emissions. Thus, the revision of the metric to include methane emissions will result
in a more representative and complete disclosure of company management of GHG emission-related risks.

The revised metric is harmonized with the EPA's Greenhouse Gas Reporting Program, IPIECA (reporting element C1),
and CDP guidance which decreases company reporting burden due to the alignment of the disclosure metric with
existing, widely-used reporting frameworks.

Market Input
Investors: Multiple investors expressed an interest in additional granularity with respect to GHG emissions and
specifically noted methane emissions as decision-useful. Feedback highlighted that such disclosures should include
company policies and procedures to identify and mitigate such emissions. Investors noted that methane emission
reductions are one of the most cost-effective methods to reduce GHG emissions as such reductions are typically not
capital-intensive and result in additional product sales. Investors noted the importance of research, such as that
performed by Climate Central, which identified that the net benefit of the transition from coal to natural gas with
respect to GHG emissions is highly sensitive to the leakage rate of natural gas. Investors did not express a preference
with respect to the decision-usefulness of reporting GHG emissions by unconventional versus conventional resource
type.

Companies: Multiple companies noted the importance of methane emissions and management of such emissions
through maintenance and operating procedures across the sector. Companies cautioned that additional granularity of
disclosures may increase the cost burden of reporting.

Benefits
Improves the SASB Standard: The revised SASB Standard provides a distinction between types of GHG emissions (CO2
versus CH4), thereby improving representativeness and completeness.

Improves decision-usefulness: Adding a breakdown for methane emissions to the existing SASB CO2 metric improves
decision-usefulness as it enhances the completeness of GHG emissions disclosures and would allow investors to
differentiate among companies with outsized methane emissions that are therefore potentially exposed to higher
future expenditures, reputational harm, and regulatory scrutiny.

   

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 10

Revision EM-MD:03 – Industry: Oil & Gas – Midstream;
Topic Name: Greenhouse Gas & Other Air Emissions
Summary of Change – Revise Technical Protocol
The SASB revised the technical protocol associated with metric NR0102-02 to provide additional guidance with
respect to provide additional specificity with respect to company strategies to manage emissions.

Adherence to Attributes of Technical Protocols

The Oil & Gas – Midstream Industry Provisional Standard includes a topic for Greenhouse Gas & Other Air Emissions
with associated metrics that described a company’s management of risks and opportunities associated with its direct
greenhouse gas (GHG) emissions. Specifically, metric NR0102-02 includes a discussion of company strategies or plans
to manage Scope 1 emissions. While the provisional technical protocol provided relevant and measurable guidance, it
may not have been fully complete or representative of the strategies companies may employ to manage risks related
to greenhouse gas emissions. Specifically, the technical protocol lacked specific discussion elements describing specific
efforts companies may make to manage emissions by source, and additionally did not provide examples of the types
of emissions reduction strategies that can be employed, such as capital expenditures, operational efficiency
improvements, maintenance programs, or other strategies. The technical protocol was therefore revised to include this
additional guidance, facilitating more consistent and comparable disclosures and thereby enhancing the quality of the
information generated by the standard.

Supporting Analysis
Company strategies to manage greenhouse gas emissions can very depending on the constituent being emitted–such
as methane versus carbon dioxide–as well as the source of such emissions, which can include flared hydrocarbons,
other combustion, process emissions, other vented emissions, and fugitive emissions from operations. While the
magnitude of a company’s total emissions will be reported under metric NR0102-01, the technical protocol associated
with provisional metric NR0102-02 did not include a complete discussion of emissions management strategies that
companies can employ to measure and manage such emissions.

The 2009 API Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Natural Gas Industry broadly
categorizes emission sources broadly under combusted sources, process emissions and vented sources, fugitive
sources, and indirect emissions. The Compendium further breaks down such sources by the industry segment,
including several relevant to the Oil & Gas – Midstream industry, including Conventional Exploration and Production,
Oil Sands and Heavy Oil Upgrading, Coal Bed Methane Production, Gas Processing, Natural Gas Storage and Liquified
Natural Gas (LNG) Operations, and Energy Generation. For each segment, the Compendium offers additional guidance
regarding the types of equipment that may result in emissions per each source identified. Strategies to manage such
emissions may vary depending on the source. Strategies to reduce emissions associated with power generation
equipment, for example, may include the procurement of more energy-efficient equipment, optimization of operating
parameters to reduce energy consumption, or other strategies. Contrastingly, strategies to reduce fugitive emissions
may primarily relate to risk-based inspection procedures, leak detection and repair processes, or facility design. And
finally, emissions associated with logistical activities, including those from ground vehicles, helicopters, and supply
boats may be reduced through means such as logistical optimization to reduce trip frequency or the adoption of zero-
emission or hybrid technologies, when possible.

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 11

Such diverse strategies to management and mitigate emissions can be found in the existing disclosures of industry
participants. One company, for example, notes in its sustainability report its use of an internal price on carbon for
corporate planning and investment decision-making, its investments in alternative energy, investments in energy
efficiency projects such as the use of natural gas vehicles, and participation in emissions trading schemes. Another
large company mentions methane-specific emissions reduction efforts, investments in low-carbon technologies, and
programs with partners to increase energy efficiency across the value chain. Finally, a third company notes its use of
absolute and intensity-based emissions targets, the implementation of maintenance procedures designed to minimize
venting, the development of next-generation high-efficiency gas turbine power generation units, waste heat capture,
and facility integrity management programs to reduce leaks. While such strategies are informative of a company’s
overall strategy to manage risks related to direct emissions, they differ in the extent to which they relate to specific
sources of direct emissions. By revising the technical protocol to include better specificity of the strategies employed
by companies to manage greenhouse gas emissions, the usefulness of such information in facilitating a more
complete and representative understanding of company performance is improved.

Thus, to ensure the set of disclosures associated with the topic are complete and representative, the technical protocol
associated with metric NR0102-02 has been revised to specifically note that companies should consider disclosing
specific strategies to manage emissions associated with the sources as defined by the API Compendium, in the scope
of its disclosure.

Market Input
Investors: Investors supported the materiality of this disclosure topic and usefulness of the metric and were generally
supportive of revisions that improved the completeness of the data generated by the Standard.

Companies: Companies expressed concerns that the provisional technical protocol did not fully represent company
efforts to manage emissions.

Benefits
Improves the SASB Standard: The revision ensures that the set of disclosures associated with the topic provides
investors with a more complete understanding of company strategies to manage greenhouse gas emissions.

   

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Revision EM-MD:04 – Industry: Oil & Gas – Midstream;
Topic Name: Ecological Impacts
Summary of Change – Revise Technical Protocol
The SASB revised the technical protocol associated with metric NR0102-04 to provide additional guidance with
respect to reference to company management of risks related to the quantitative disclosures defined in metrics
NR0102-05, NR0102-06, and NR0102-07.

Adherence to Attributes of Technical Protocols

The Oil & Gas – Midstream Industry Provisional Standard includes a topic for Ecological Impacts with associated
metrics to describe a company’s management of risks and opportunities associated with the ability of companies to
operate successfully while minimizing impacts on surrounding biodiversity. Three quantitative metrics associated with
the topic specifically quantify the extent of a company’s owned, operated, or leased land near areas of elevated
biodiversity risk, the extent of disturbed terrestrial areas associated with operations, and the number of hydrocarbon
spills a company experienced. To supplement these quantitative disclosures, metric NR0102-07 includes a qualitative
description of a company’s environmental management policies and practices for active operations. While the
technical protocol associated with the provisional metric provided relevant guidance, it may not have been fully
complete or representative of the strategies companies may employ to manage risks related ecological impact
management. Specifically, the technical protocol lacked specific discussion elements describing specific efforts to
manage the impacts reported under the quantitative metrics associated with the topic. The technical protocol was
therefore revised to include a specific discussion of these impacts, facilitating more consistent, comparable disclosures
and thereby enhancing the quality of the information generated by the Standard.

Supporting Analysis
The storage and transportation of crude oil, natural gas, and related products through transportation vehicles,
pipelines, trains, and trucks can result in impacts on the local biodiversity. Companies that are able to manage and
minimize such impacts, and especially those in areas of high ecological sensitivity, can avoid adverse financial impacts
that can include fines, permit delays or revocations, or increased regulatory oversight, while at the same time
expanding the company’s social license to operate.

The Oil & Gas – Midstream Industry Provisional Standard includes three metrics that describe a company’s Ecological
Impacts. These include:

 NR0101-05 – Percentage of land owned, leased, and/or operated within areas of protected conservation
status or endangered species habitat

 NR0102-06 – Terrestrial acreage disturbed, percentage of impacted area restored

 NR0102-07 – Number and aggregate volume of hydrocarbon pills, volume in Arctic, volume in Unusually
Sensitive Areas (USAs), and volume recovered

These metrics provide investors with several key performance indicators with respect to company performance on
factors related to their impacts on the local environment.

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As evidenced by existing company disclosures, strategies to identify, manage, mitigate, and/or minimize such impacts
can vary. One company, for example, notes its application of its Integrated Management and Environmental
Management systems at the business-segment level to customize ecological impact strategies to the specific
requirements of the company’s operations. Through the application of this system, the company performs water risk
assessments to assess the potential impacts of spills and reviews pipeline routing to minimize pipeline length and
associated disturbed areas as well as the potential to avoid highly sensitive areas. Such management strategies relate
directly to the performance that would be reported against the quantitative metrics. Similarly, another pipeline
company notes its policies to avoid sensitive ecosystems where possible in its operations, minimize impacts where they
cannot be avoided, and restore ecosystems to a healthy state. A third company emphasizes its focus on pipeline
integrity to minimize the likelihood of incidents that may lead to a loss of containment, spills, and associated
environmental impacts.

To better represent company performance on the topic by capturing the strategies companies can employ to manage
topic-level risks, the technical protocol was revised to more directly align the description of the scope of disclosure to
the quantitative metrics. Specifically, the technical protocol was revised to recommend that "topics addressed by the
plan(s)" include "spills, including those in environmentally sensitive areas" as well as "ecological and biodiversity
impacts, including land disturbance and/or restoration as well as that which is within areas of protected conservation
status or endangered species habitat." The inclusion of this additional specificity ensures that companies are provided
the opportunity to fully address the quantitative disclosures made under NR0102-05, NR0102-06, and NR0102-07 in a
comprehensive and complete manner. This enhances the extent to which disclosures made for all metrics associated
with the topic fairly represent company topic-level performance.

Market Input
Investors: Investors were generally supportive of revisions that improved the completeness of the data generated by
the standard.

Companies: Companies expressed concerns that the provisional technical protocol lacked specificity and was therefore
not representative of company efforts to manage risks related to the topic.

Benefits
Improves the SASB Standard: The revision ensures that the set of disclosures associated with the topic provides
investors with a more complete understanding of company strategies to manage ecological impacts.

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Revision EM-MD:05 – Industry: Oil & Gas – Midstream;
Topic Name: Operational Safety, Emergency Preparedness,
and Response
2017 Technical Agenda Item #4-13 Description
The SASB is evaluating the addition of a metric to ensure the usefulness, completeness, and representativeness of the
metrics associated with the topic.

Summary of Change – Add Metric

The SASB added a metric to the Operational Safety, Emergency Preparedness, and Response topic describing,
“Percentage of (1) natural gas and (2) hazardous liquid pipelines inspected.”

Adherence to Criteria for Accounting Metrics

The Oil & Gas – Midstream Industry Provisional Standard includes a topic for Operational Safety, Emergency
Preparedness, and Response, which describes the risk of spills and accidents associated with the transport of
hydrocarbon products. The associated metrics describe an individual company’s performance as it relates to this issue.
Specifically, metric NR0102-09 describes the number of pipeline incidents that occurred during the reporting period.
Metric NR0102-10 describes the number of rail transportation-related incidents. Finally, NR0102-11 provides a
framework whereby the company can disclose its management systems used to integrate a culture of safety and
emergency preparedness. However, the set of metrics in the provisional Standard may not have offered a complete
and representative indication of company management of risks associated with the topic due to the lack of the
disclosure of significant and impactful efforts made by companies to prevent such incidents from occurring. The
addition of a metric describing efforts to inspect a company’s pipeline network better accomplishes the core objectives
of the Standard by providing investors with a more complete, representative, and distributive view of company
performance with respect to safety-related risks.

Supporting Analysis
Pipeline incidents are a significant issue for the Oil & Gas – Midstream industry, and pipeline inspection activities are a
key industry strategy to identifying potential issues before they escalate to an incident such as a spill or release. SASB’s
Oil & Gas – Midstream Research Brief notes that, “An aging pipeline infrastructure could increase the likelihood of
[accidents, spills, or leaks] without proper inspection, maintenance, and retrofitting.” Further, it notes that, “The 2002
and 2006 amendments to the HLPSA [Hazardous Liquid Pipeline Safety Act 0f 1979] resulted in the DOT adopting
rules that require pipeline operators to implement integrity management programs, including more frequent
inspections . . . ”

In its 2011 State of the National Pipeline Infrastructure report, the US Department of Transportation Pipeline and
Hazardous Materials Safety Administration (PHMSA) noted that integrity inspections have been a key factor in the
declining incident rate for pipelines despite aging infrastructure, stating “. . . in spite of the continued aging of our
pipeline infrastructure, safety performance continues gradually to improve. An older pipeline does not necessarily have
a higher likelihood of leaking or rupturing than a newer one. Even while materials, manufacturing techniques, joining
methods, and design standards have evolved, techniques for managing the integrity of older pipelines have also
improved. For example, technologies for evaluating the condition of pipelines using in-line inspection have improved

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 15

significantly over the past twenty years.” The report notes that the number of pipeline incidents with death or major
injury has been decreasing at a rate of approximately 10 percent every 3 years, referencing data from 1986-2011.

Current regulation requires pipelines be inspected on a regular basis, per U.S. 29 CFR 192 for gas pipelines and U.S.
49 CFR 195 for hazardous liquid pipelines and as enforced by the Pipeline and Hazardous Materials Safety
Administration (PHMSA) of the United States Department of Transportation (USDOT). Each regulation specifies how
pipeline operators must identify, prioritize, assess, evaluate, repair, and validate the integrity of pipelines. With respect
to inspection, the regulation specifies acceptable “assessment methods” including internal inspection tools, pressure
testing, direct assessments, or other equivalent technologies. This well-defined, externally valid framework is
referenced in the technical protocol for the updated metric to ensure the comparability and verifiability of qualifying
inspection activities for the purposes of disclosure per the metric.

A review of the top five Oil & Gas – Midstream companies by revenues showed that all five report information related
to pipeline inspection and integrity monitoring, including the use of in-line inspection tools, pressure testing, and
other assessment methods. Such reporting occurred through company websites, annual reports, regulatory filings,
and/or sustainability reports. While none quantitatively disclose the percentage inspected within a given year, all
qualitatively described inspection frequencies of specific activities, often referring to applicable regulatory
requirements.

The inclusion of this additional metric therefore offers a more representative view of the actions taken by Midstream
companies to manage and mitigate Operational Safety risk. Further, the additional metric adds a forward-looking or
predictive indicator to the existing set of backward-looking metrics, which define incident rates. Thereby its inclusion
offers investors a more complete view of company performance with respect to Operational Safety risk. Finally, the
added metric offers investors a distributive view of the breadth of company-specific inspection frequency relative to
peers and/or an industry average.

Market Input
Investors: Multiple investors expressed a consistent, strong interest in the inclusion of additional forward-looking or
predictive indicators with respect to safety, noting that the provisional metrics are largely backward-looking.
Disclosures related to infrastructure integrity were specifically mentioned as material and useful. Investors suggested
that such disclosures would improve several aspects of the decision-usefulness of the disclosure by adding a metric
that is a representative, complete, and distributive indicator of Operational Safety.

Companies: General feedback from companies from both the integrated oil and gas and pure-play pipeline companies
noted that SASB’s safety-related metrics are largely focused on backward-looking indicators of incident frequency
rates, and the inclusion of an appropriate, aligned forward-looking indicator may offer a fairer representation of
company efforts to prevent such incidents from occurring. Concerns were expressed regarding the potential cost
burden of these additional disclosures should they not be aligned with existing industry norms and/or regulatory
frameworks.

Benefits
Improves the SASB Standard: Adding a disclosure related to preventative asset integrity management offers a more
complete, representative, and distributive view of company efforts to manage Operational Safety.

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 16

Improves decision-usefulness: The metric provides investors with a representative and complete view of company
management of Operational Safety risk by describing both preventative efforts to avoid incidents as well as incident
rates to verify the effectiveness of such preventative efforts.

Improves alignment: Companies who operate pipelines are already required to conduct pipeline integrity inspections
per existing regulatory requirements and many report the results of such efforts. While the referenced regulation is
U.S.-based, its definitions for inspection requirements are broadly applicable and commonly employed in the industry.

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 17

Appendix A. Standards Board – Sector Committee
Assignments
STANDARDS BOARD MEMBER
Jeffrey Hales, PhD (Chair)
Professor, Georgia Institute of Technology – Ernest
Scheller Jr. College of Business
Verity Chegar (Vice Chair)
Vice President, BlackRock
Robert B. Hirth Jr. (Vice Chair)
Senior Managing Director, Protiviti; Chairman
Emeritus, COSO
Daniel L. Goelzer, JD
Senior Counsel, Baker & McKenzie LLP
Kurt Kuehn
Former CFO, United Parcel Service
Lloyd Kurtz, CFA
Senior Portfolio Manager, Head of Social Impact
Investing, Wells Fargo Private Bank
Elizabeth Seeger
Head of Sustainable Investing, KKR
Stephanie Tang, JD
Director of Legal, Corporate Securities, Stitch Fix
SECTOR CHAIR
Financials, Renewable Resources &
Alternative Energy
Extractives & Minerals Processing
Technology & Communications
Services
Transportation, Infrastructure
Health Care, Resource Transformation
Consumer Goods
Food & Beverage
BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 18
OTHER COMMITTEES
Transportation, Services, Resource
Transformation
Financials, Technology &
Communications, Infrastructure
Health Care, Extractives & Minerals
Processing, Services
Financials, Resource Transformation,
Infrastructure
Consumer Goods, Renewable
Resources & Alternative Energy
Technology & Communications, Food
& Beverage
Health Care, Extractives & Minerals
Processing, Food & Beverage
Transportation, Consumer Goods,
Renewable Resources & Alternative
Energy
Appendix B. Redline Metric Tables
Redline tables are provided below for all sustainability accounting metrics (Table 1) and activity metrics (Table 2). All
significant revisions to topics and metrics between the provisional standard and the codified standard are shown in
redline; however, such redlines are not intended to communicate the full scope of such revisions, for which readers
should refer to the codified Standard and accompanying content elsewhere in the Basis for Conclusions.

All redlines presented in these tables are associated with a revision number in the Revision Number column. Significant
revisions to the technical protocol associated with a given metric will not necessarily be apparent in redline in the
tables; however, the associated revision number will be noted in the Revision Number column of each table.

Any redlines that depict revisions to metrics but that are not accompanied by a revision number (i.e., “n/a”) are not
addressed in the Basis for Conclusions as these revisions have not altered the scope or content of metrics, such as
those that are intended to improve the consistency, clarity, and accuracy of the standard. Similarly, if a metric is not
accompanied by a revision number, the technical protocol may have been revised to improve the consistency, clarity,
and accuracy of the standard.

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 Oil & Gas - Midstream Industry
Table 1.
CODIFIED
UNIT OF PROVISIONAL REVISION
TOPIC ACCOUNTING METRIC CATEGORY METRIC
MEASURE METRIC CODE NUMBER
CODE4
Greenhouse Gas Gross global Scope 1 emissions, percentage methane, Metric tons CO2-
& Other Air e (t), EM-MD:01, EM-
percentage covered under a regulatory programemissions- Quantitative NR0102-01 EM-MD-110a.1
MD:02
Emissions limiting regulations Percentage (%)

Description Discussion of long-term and short-term

strategy or plan to manage Scope 1 emissions, emissions Discussion and EM-MD:01, EM-
n/a NR0102-02 EM-MD-110a.2
reduction targets, and an analysis of performance against Analysis MD:03
those targets

Air Quality
Air emissions for the following pollutants: (1) NOx
(excluding N2O), (2) SOx, (3) volatile organic compounds Quantitative Metric tons (t) NR0102-03 EM-MD-120a.1 EM-MD:01
(VOCs), and (4) particulate matter (PM10)

Ecological
Description of environmental management policies and Discussion and
Impacts n/a NR0102-04 EM-MD-160a.1 EM-MD:04
practices for active operations Analysis

Percentage of land owned, leased, and/or operated within

Percentage (%)
areas of protected conservation status or endangered Quantitative NR0102-05 EM-MD-160a.2 n/a
by acreage
species habitat

Terrestrial acreage disturbed, percentage of impacted area Acres,

Quantitative NR0102-06 EM-MD-160a.3 n/a
restored Percentage (%)

Number and aggregate volume of hydrocarbon spills,

Number,
volume in Arctic, volume in Unusually Sensitive Areas Quantitative NR0102-07 EM-MD-160a.4 n/a
Barrels (bbls)
(USAs), and volume recovered

                                                            
4
The Provisional Metric Code column provides the metric code that appeared in the Provisional Standard. The Codified Metric Code column provides the revised metric code that appears in the
Codified Standard. The revised metric code is structured as follows: [Sector Code]-[Industry Code]-[Topic Code].[Metric Number].

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 20

 CODIFIED
UNIT OF PROVISIONAL REVISION
TOPIC ACCOUNTING METRIC CATEGORY METRIC
MEASURE METRIC CODE NUMBER
CODE4
Competitive
Behavior Amount of legal and regulatory fines and settlementsTotal
amount of monetary losses associated with federal Quantitative U.S. Dollars ($) NR0102-08 EM-MD-520a.1 n/a
pipeline and storage regulations

Operational Number of reportable pipeline incidents, percentage Number,

Safety, Quantitative NR0102-09 EM-MD-540a.1 n/a
significant Percentage (%)
Emergency
Preparedness, Percentage of (1) natural gas and (2) hazardous liquid
Quantitative Percentage (%) n/a EM-MD-540a.2 EM-MD:05
&and Response pipelines inspected

Number of (1) accident releases and (2) non-accident

Quantitative Number NR0102-10 EM-MD-540a.3 n/a
releases (NARs) from rail transportation

Discussion of management systems used to integrate a

Discussion and
culture of safety and emergency preparedness throughout n/a NR0102-11 EM-MD-540a.4 n/a
Analysis
the value chain and throughout project lifecycles

Table 2.
CODIFIED
PROVISIONAL REVISION
ACTIVITY METRIC CATEGORY UNIT OF MEASURE METRIC
METRIC CODE NUMBER
CODE5

Total metric ton-kilometers of: (1) natural gas, (2) crude oil,
and (3) refined petroleum products transported, by mode of Quantitative Metric ton-kilometers NR0102-A EM-MD-000.A n/a
transport (e.g., pipelines, rail, tanker, truck)
 
 
                                                            
5
The Provisional Metric Code column provides the metric code that appeared in the Provisional Standard. The Codified Metric Code column provides the revised metric code that appears in the
Codified Standard. The revised metric code is structured as follows: [Sector Code]-[Industry Code]-[Topic Code].[Metric Number].

BASIS FOR CONCLUSIONS | OIL & GAS - MIDSTREAM INDUSTRY | 21

 

SUSTAINABILITY ACCOUNTING STANDARDS BOARD

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415.830.9220
info@sasb.org

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