"We want to encourage companies to articulate plans for resolving this issue while shale oil production is still in its relative infancy," said Karina Litvack, the head of governance and sustainable investment at F&C Asset Management.

Litvack is one of 36 investors who sent a letter to 21 oil drillers including Continental Resources Inc (CLR.N), Exxon Mobil (XOM.N), and Chesapeake Energy Corp (CHK.N) asking them to disclose the amount of natural gas they are burning off, or flaring, at shale oil operations in North Dakota, Texas, Colorado and Ohio.

While shale oil drilling has helped reverse a decades old decline in U.S. crude output, the lightening pace of new development may also have an environmental dark side. The investors and others say emissions from flaring and venting natural gas cause air problems and increase global warming.

The investors want the companies to disclose by May 1 how much flaring they are doing and to meet with them to plan ways to tackle the problem.

The practice "poses significant risks for the companies involved, and for the industry at large, ultimately threatening the industry's license to operate," they wrote in a letter to the companies.

Energy companies flare natural gas they are unable to capture and sell as they produce shale oil which is much more valuable. The practice, which had been in decline in the traditional oil business, is now soaring at shale oil formations in North Dakota and Texas where the infrastructure is not keeping up with the boom.

Techniques including hydraulic fracturing, or fracking, have given drillers in those states access to vast new deposits of shale oil. But some states, many of which are new to drilling, do not have strong regulatory systems in place.

One third of the gas North Dakota produces is flared. The amount flared per day by last July had increased 1,200 percent since 2004, when development of the Bakken shale formation began, according to the state's government.

The investors estimate flared gas in North Dakota produced 2 million tons of carbon dioxide last year, equal to 384,000 extra cars on the road. And even with low natural gas prices, the state lost about $110 million in revenue last year from the flaring, they say.

Continental, whose CEO Harold Hamm is Republican presidential hopeful Mitt Romney's top energy advisor, Exxon, and Chesapeake would not comment on the letter.

As the shale gas fracking boom in Pennsylvania and Texas helps sink natural gas prices to 10-year lows, drillers are hesitant to invest in pipelines that would capture the gas.

"Such a short sited approach raises significant concerns," said Steven Heim, a managing director at Boston Common Asset Management and one of the investors who sent the letter.

Persuading companies to build natural gas pipelines at the Bakken formation in North Dakota is no easy task as oil output there outpaces the building of even crude pipelines and much of the petroleum has to be shipped in trucks.

But some companies have been responsible, he said. EOG Resources Inc, (EOG.N), for example, put in some pipelines before they started fracking for shale oil.

(Reporting By Timothy Gardner; Editing by Sugita Katyal)

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