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From the Desk of the Executive Director – Shale Gas, Fracking and Social License to Operate

November 14, 2013

From the Desk of the Executive Director – Shale Gas, Fracking and Social License to Operate

By Jim Marchiori, GEM Executive DirectorJim

Welcome to the first installment of my Executive Director’s blog.  The purpose of this blog is to help keep the GEM community informed on topics that I think are timely in the ongoing energy conversation, and – more to the point – help generate discussion among all of you.  I’ll try to do these on some kind of regular basis, and I do intend to keep them short; it’s less about me expressing my thoughts than about building a forum for you to express yours.

It’s conference season in the industry and lately I’ve been going to a lot of them.  Between conferences, staff discussions here in the office, and the course of my meetings and other contacts, not to mention the fracking bans that have just passed in three (maybe four, we’re not sure yet) Colorado communities, I have been hearing about one topic over and over and over again – shale gas, fracking, and social license to operate.

Anyone who is reading this blog is familiar enough with the energy situation – specifically the North American energy situation – to know what technological innovation in geoscience, horizontal drilling, and hydraulic fracturing have done over the past five years.  Oil and natural gas supplies once thought scarce are now abundant almost beyond our dreams just a few years ago; supply exceeds demand and the price is on the floor.  Gas is rapidly replacing coal in power generation giving us cheaper and much cleaner electricity.  You may or may not know that the US, despite never ratifying the Kyoto environmental protocol, has either achieved its carbon target or is well on the way (depending whose opinion you read), all because of gas.  Strategically, gas significantly improves energy security, at least partially lessening the imperative to chase politically risky oil in countries like Libya or Iraq.  It’s an unmitigated good, right?

Not so fast, enter the fracking debate.  Virtually all of the growth in US oil and gas production is due to horizontal drilling and hydraulic fracturing of previously unproduceable formations.  Unfamiliarity of this technology to the public, along with production of oil and gas in areas where people are not used to it, has sparked passionate debate on public safety.  Communities are concerned about water (quality and quantity), methane or other emissions, truck traffic, spills, earthquakes, and a number of other real or imagined risks.  A whole range of actors – from radical environmentalists, to renewables advocates, to big conventional gas producers like the Russians – are scared to death simply of cheap, abundant gas, and will work to leverage more honest safety concerns to drive their own agendas.

It’s easy to dismiss this as irrational or disingenuous (honestly, a lot of it is).  But this makes no difference – we live in an era of instantaneous social media, local activism, local regulation, and snap decisions based on limited information and cultural prejudgments where a single image of a flaming water tap (never mind whether it has any connection whatsoever to oil or gas production) can override reams of technical rebuttal and ultimately prevent, delay, or seriously erode the value of a production project.  Without community acceptance – social license to operate – projects are significantly riskier and may not be done at all.

As an industry, we can take one of two tracks.  We can ignore these concerns and try to power through based on property rights, mineral rights, and locus of regulatory authority.  To some degree, some of this will probably be inevitable.  Or we can ask ourselves the fundamental question – are we here to make a point or are we here to make oil and gas?  If the latter, then the more productive approach is to acknowledge local concerns and work as an industry to alleviate them.  Happily, I see more and more of the industry taking this point of view.

The question then becomes, what can we do?  If nothing we say can dent irrational resistance, what’s the point?  I think it’s not about what we say, it’s about what we do.  I think the most important thing that we as an industry can do is work together responsibly with government to craft a regulatory regime based on our own best practices.  We can listen (really listen) to community concerns, understand the unique needs and issues of each location, manage water better, reduce truck traffic, work to recapture as much methane as possible with targets of 1% or less.  We need to demonstrate through our own behavior every single day that our communities are important, and our responsible industry leaders need to step up and reign in the last few rogue operators who are still supplying legitimate arguments to the opposition.

This won’t be fast, it won’t necessarily be easy, and it won’t be a smooth path to the finish.  I do believe it will ultimately prevail, though, simply because it has to.  The opportunity is too great and the value too profound in too many ways.  Ultimately, strategic, economic, and environmental forces will get us there but it’s up to us to decide what the trip will be like.

We have a role in this at GEM.  As individuals all of us – students, alumni, faculty, staff – need to understand the issues and be prepared to address them responsibly and objectively.  Remember, for most of us, in most of our social and community circles, we are the experts on this.  As a program we need to contribute to the societal dialogue.  We’re working now to develop a professional education class with the working title “Earning and Keeping Social License to Operate” that we hope to market to the industry in 2014, to help give our field locations skills and tools for more responsible – and responsive – behavior in their communities.  We’re also working with NREL and several key companies to explore the business issues around more productive use of water and energy on oil and gas sites.  You’ll see more on all of this over the coming months.

I’m sure all of you have a point of view on this topic – let’s hear it.

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One Comment leave one →
  1. November 15, 2013 7:26 pm

    JIm,

    Welcome to the blogosphere. It turns out now that the Broomfield fracking ban has swung the other way and passed by 17 votes (earlier they said it failed by 13 votes). I’m glad to see that we’re on the same page here… I addressed much the same topic on my blog at richmignogna.blogspot.com.

    Those who are interested in the topic of “Social License to Operate” should check out the IEA’s 2012 report entitled Golden Rules for a Golden Age of Gas.which is available at http://www.worldenergyoutlook.org/goldenrules/. I use it in my GEMM 6000 class.

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