May 25 2011

Shift Happens

Energy Industry Struggles with Power Shift Driven

by Technology & Worldwide Web

Nuclear Industry Lost Public Confidence;

Is Shale Gas Next?

Age of ‘Absolutes’ Over for Industry

 

What digital and the internet did to the traditional music, photo and news industry, it is now doing to the energy industry.  Shift happens, and the energy industry is struggling to understand what this shift is about and what it means.

At a natural gas industry symposium, GasMart 2011, industry publication NGI’s Shale Daily reported on sober comments from attendees.1

David Ciarlone, manager of Global Energy Services for Alcoa, said (emphasis added):   “I clearly remember how a promising energy technology, the nuclear industry, lost the confidence of the public and billions of dollars that had been invested were abandoned,” Ciarlone said.  “It’s been 30 years since Three Mile Island, and nuclear is just gaining traction again…. Without significant changes, shale gas, like nuclear power, could be more remembered for promises made than hopes realized.”

Truth Behind Brand?

John Hanger, former head of the Pennsylvania Department of Environmental Protection and now special counsel for law firm Eckert Seamans, warned the industry audience about protecting its “brand identity.”

“There has to be truth behind the brand,” Hanger said. “It is under siege to say the very least.”

The industry is wrestling with a power shift – no pun intended – driven by digital technology and the worldwide web.  Three indicators characterize this shift:

1.    Rise of public opinion via a global ‘neighborhood watch’ – an extension beyond Marshall McLuhan’s global village.  It isn’t just the energy industry that is global.  Property owners and citizens worldwide know about “gaz de schiste” in France and the National Assembly vote there to prohibit hydraulic fracturing.  Australia’s Frackman has his own Facebook page.

2.    Rise of the transparent culture – not the energy industry, of course, but property owners, corporate governance shareholders and activists.  It is increasingly damaging to corporate brands for gas/oil companies to pretend the industry’s drilling, storage and pipeline practices have no adverse affects on health, environment and the communities in which they operate.  (Or to rationalize that the biggest problem is truck traffic.)

3.    It’s personal – every student of social media knows that “authenticity” is the watchword.  Energy industry execs should have listened to the property owners who told them:  “You created me; now you have to live with me.”  Today’s global, wired challenge to the energy industry is motivated by personal testimony – a striking phenomenon when you see it in action across state and national borders.  Property owners with authenticity are challenging the cash-rich PR machine of the energy industry and they are much more credible.

The energy industry’s traditional operating model is in decay.  Like other industries impacted by similar transformational shifts (music, photo, news), the energy industry will likely poke at the edges of this shift but cling to past practices and remain in denial.  Except, it cannot afford to wait.

Not All Transformations Have Happy Endings

Transformations require tough choices, and they do not have happy endings for companies and industries incapable of adapting.  Just talk to former executives in the music, photo and news industries.

Political critics of the gas industry also grasp the shift in trust.  Senator Benjamin Cardin (D-Md) said at recent Senate hearings on the health and environmental impacts of natural gas drilling:  “In the face of its extraordinary promise, why is natural gas faltering?”

It is losing in the court of public opinion even while it is spending more for “indulgences” in the form of lobbying and legal firewalls.  (That is also part of its credibility problem.)

The industry model is failing for three reasons:

1.    The energy industry speaks in absolutes that, until recently, were not seriously challenged.

2.    The industry characterizes citizen opposition as left-wing environmental wackos and even extremists.  (It ignores its trampling of property rights which is fundamentally a conservative principle.)

3.    The industry demonstrates it is not capable of living up to its own published principles such as environmental protection, accountability and transparency.  (After 7 months, the Marcellus Shale Coalition still cannot explain what its second guiding principle means it will do at the well site.)2

Even Texas is no longer a sanctuary for the energy industry.  The Dallas Morning News recently editorialized (emphasis added):

“Local governments across North Texas are sounding alarms about the possibility of increased air pollution, groundwater contamination, noise and declining property values coinciding with drilling companies’ push into urban areas.

These concerns are not overblown . . . . But the industry’s tendency has too often been to deny, deflect and use judicial bullying to get its way.

“Such tactics aren’t exactly winning friends ….”3

To return to the comparison with the nuclear industry, the shale gas fracking industry is radioactive in terms of public trust.  And it achieved this distinction the old fashioned way – it “earned” it.

Links & Resources

1 GasMart 2011: Shale Gas ‘Under Siege,’ Says Former Regulator – May 12, 2011, NGI’s Shale Daily http://shaledaily.com/news/sd20110512a.shtml

2 Marcellus Shale Coalition Guiding Principles – Last October, the Coalition announced its “Guiding Principles” to much fanfare.  The second guiding principle states:  “We implement state-of-the-art environmental protection across our operations.”  Does that mean industry will employ the latest, state-of-the-art technology at hydraulic fracturing gas well sites such as closed loop systems, vapor recovery units on condensate tanks, and zero emission glycol dehydration units?  The coalition does not respond.  See this op-ed piece published by the Pittsburgh Post-Gazette titled, “Guiding principles or guiding platitudes?  Natural gas companies haven’t set real standards for drilling in the Marcellus Shale” Pittsburgh Post-Gazette Link: http://www.post-gazette.com/pg/11041/1124307-109.stm

Guiding Principles Link:  http://marcelluscoalition.org/about/guiding-principles/

3 Editorial: Despite gas company protests, go-slow approach on drilling is justified – Editorial, The Dallas Morning News, May 16, 2011 http://www.dallasnews.com/opinion/editorials/20110516-editorial-despite-gas-company-protests-go-slow-approach-on-drilling-is-justified1.ece

NOTE: This article is cross-posted on the Accountability Central website at this link: http://www.accountability-central.com/nc/single-view-default/article/voices-from-the-shale-power-shift-in-energy-industry/ Accountability Central is part of the Governance & Accountability Institute, Inc.

2 Responses

  1. Kim Feil Says:

    The push for drilling is at all costs. Now that these drill sites are in neighborhoods, the attitude of Mayor Cluck is that “they aren’t perfect, they make mistakes”…H E L L O, Chesapeake just spewed in a southeast Arlington TX neighborhood and sickened a resident (and her 150 lb dog who couldn’t walk the next day) when the home filled with fumes the night of a storm. So what does Chesapeake do? Well they “say” they only emitted 6,000 cubic feet or $26 worth of methane and the public was never in harms way. Who do you believe? Tornados, freezes, flooding and Texas extreme heat will challenge the drill site’s safety records. Who looses when accidents occur? Those closest to the drill sites-not just when there is an accident…it’s 24/7 having been made to co-exist with a toxic industrial site in your backyard. NIMBY is alive and “well”-no pun inteneded.

  2. Gary Hogan Says:

    This Gas & Oil Industry should be very afraid of the rising TIDE of mistrust. Instant internet and communication via computers and I-phone and other digital media is creating a new weapon of attack for those of us in the fight to educate people to the truth and exposing the PR lies of BIG Industry. BUT when will they get it through their thick minded culture of years of arrogance, power and greed that you CAN LOSE in a BIG way — and us little piss ants as they treat people, citizens, communities and neighborhoods in which they hope to operate that the time is way past due to Really do what they do right or suffer the rath of us swarming over them. WE ARE NOT GOING AWAY!!!!!!!!!!!!!!!!!!!

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