Borden Ladner Gervais via Mondaq | 26 May 2016

Column: Social License in Canada

On 20 April, Alan Ross, a partner in Borden Ladner Gervais’ Calgary office, was invited to offer his insight to the Senate of Canada’s Transport and Communications Committee on their ongoing study of the transport of crude oil in Canada. 

At its essence, social license is the demand on, and expectations for, business enterprise that emerges from neighborhoods, environmental groups, First Nations, communities, and other members of the surrounding civil society. It is not a literal licensing arrangement but a “metaphor to encapsulate values, activities, and ideals that companies must espouse within society to ensure successful operation.”

Social license issues have become part of any sophisticated corporate risk management strategy. In sectors with highly visible business activities, long-term horizons, high exposure to global markets, or a wide range of stakeholders keen to influence the business, the need for a social license to operate is even more important.

In the current climate for pipeline development, companies are generally viewed as responsible for obtaining social license. The role of government is sometimes obscured in that debate. However, governments, as both regulators and recipients of a share of resource rents, have an important role to play. Both federal and provincial governments’ role in the social license debate arises from their powers to exercise reasonable control over persons and property within their jurisdictions respecting security, environment, health, safety, and welfare, among other interests. The federal government can address social license by improving regulatory processes that exist to ensure public trust. Alternately, governments and regulators through legislation, public policy, or ensuring public trust in institutions, can facilitate social license and the public acceptance necessary for new energy projects.

Social license is largely untested as a regulatory concept, but can be considered a form of regulation by drawing from market forces and norms that encourage certain types of behavior. Because there are consequences for failing to comply with social license conditions, such as reputational damage, delay, or ultimately preclusion of a natural resource project, it is nonetheless a de facto form of regulation.

Indiana University | 19 May 2016

Study Suggests Support for Hydraulic Fracturing Grows When Development Fees Stay Local

As voters in several states consider controlling oil and gas development in their communities, new Indiana University (IU) research offers valuable insight for developers as well as local and state officials.

The IU researchers determined that oil and gas development using hydraulic fracturing is greeted with more local support when the fees paid by developers go to municipal governments rather than into county or state general funds.

“There are two reasons for this,” said researcher Naveed Paydar of IU’s School of Public and Environmental Affairs. “The public prefers to give more responsibility to local units of government because they are confident they’re the people who can best handle any problems resulting from development. And the public also has greater trust that the revenues will be spent by their municipal government in ways that benefit the local economy.”

The conclusions are based on an in-depth public opinion survey of residents in Pennsylvania counties where there is oil and gas development. The research, the first to assess the association between public revenues and local support, is described in “Fee Disbursements and the Local Acceptance of Unconventional Gas Development: Insights From Pennsylvania,” published by the journal Energy Research & Social Science.

TripleOKLaw | 10 May 2016

Local Communities and Natural Resources in Kenya—Managing Expectations

Elias Masika, Partner at TripleOKLaw and an authority on environmental and energy law, comments on the concerns recent discoveries of natural resources in Kenya raise. The discovery, development, and exploitation of key natural resources such as oil and coal pose significant challenges to achieving balanced benefit sharing.

Uganda Oil | 10 May 2016

Column: Uganda Energy Ministry Must Expedite Implementation of National Local Content Policy

By Dickens Kamugisha,
Executive Director of African Institute For Energy and Governance, Uganda

I would like to congratulate Ugandans for having successfully elected a president and their parliamentary representatives.

To the winners and losers, I say we embark on the task of building the Uganda we want. Among these tasks is holding government accountable for its actions or lack thereof.

Before we went to the polls, the ministry of energy and mineral development published a report, Progress of the implementation of the National Oil and Gas Policy for Uganda, that appeared both in newspapers and on their website.

I want to commend the ministry for this because publishing the report and other information pertaining to the oil and gas sector enables Ugandans to, one, keep updated on the sector and, two, check on government.

That said, I want Ugandans to join me to task the ministry of energy to account for its failure to implement recommendations made to it by the auditor general in a June 2015 report, Implementation of National Content in the Oil and Gas Sector by the Ministry of Energy and Mineral Development.

When the ministry published its aforementioned report, it showed that it was taking steps to ensure national content, also known as local content. Among the steps taken to realize this is putting in place a national content office at the ministry, setting up an association of oil and gas service providers in Uganda and formulating a national content policy and plan, which is expected to be approved in 2016.

The ministry also said that draft national content regulations for the upstream and midstream acts have been prepared. The ministry painted a promising picture reporting that the oil and gas sector employed “over 1,000 Ugandans during 2013–14, with each of the licensed companies having more than 50% of its staff as Ugandans” and that over “1,000 national enterprises (which have employed more than 9,000 Ugandans) have provided services such as logistics, civil works, environment consulting services, catering, and hotel accommodation,” among others to companies in the oil and gas sector.

Looking at the above steps, one feels that the ministry has taken positive steps, but has it done enough?

The Associated Press | 21 March 2016

US Cancels Oil and Gas Lease on Montana Land Sacred to Tribe

The Obama administration on 17 March canceled a disputed oil and gas lease just outside Glacier National Park, on land considered sacred to the Blackfoot tribes of the US and Canada.

The move came after US District Judge Richard Leon criticized the government over its decades-long delay in addressing the matter. He accused the government of trying to “run out the clock” on a lawsuit from Solenex, a Louisiana company that wants to drill for oil and gas on the 6,200-acre site.

Leon now will decide if the company’s arguments were valid and the lease should be reinstated.

Left unresolved was the fate of 17 remaining leases in northwest Montana’s Badger-Two Medicine area, site of the Blackfoot creation story. Blackfoot leaders say the leases were illegally issued in 1982.

Bloomberg | 17 March 2016

USD 4.2 Million Hydraulic Fracturing Verdict Likely To Spark More Suits

A recent jury verdict and USD 4.2 million award in favor of two Pennsylvania families who alleged hydraulic fracturing operations contaminated their well water is likely to trigger the filing of more suits, sources tell Bloomberg.

A jury on 10 March found Cabot Oil & Gas acted negligently in drilling hydraulic fracturing wells in Dimock, Pennsylvania, which created a private nuisance and significantly harmed the plaintiffs in their use and enjoyment of the property. A number of other families involved in the litigation settled before trial for a total amount less than what was awarded here.

It is one of the first hydraulic fracturing nuisance verdicts finding for plaintiffs but is not unprecedented.

A Texas jury awarded USD 2.9 million in 2014 to a family who alleged contamination from hydraulic fracturing operations caused them a variety of personal injuries, in Parr v. Aruba Petroleum in 2014.

In this case, however, no personal injury allegations were put before the jury.

Counsel for the plaintiffs, Leslie Lewis, a solo practitioner in New York, declined to speculate whether the case will have an impact on further litigation.

“I have no idea what the future will bring regarding other cases and future verdicts; this case was a particular fact pattern, with shoddy operations occurring early in the so-called ‘gas boom’ years,” Lewis said.

Holland & Knight via Mondaq | 24 February 2016

Interior’s Proposed Rule on Flaring Would Restrict Oil and Gas Development on Tribal Lands

The US Department of the Interior on 22 January proposed a rule developed by the Bureau of Land Management (BLM) that would limit the flaring, leaking, and venting of natural gas on public and tribal lands.

The Proposed Rule
The proposed rule would require oil and gas producers to inspect their equipment for leaks, replace equipment that unnecessarily releases large quantities of gas into the air, and adopt processes and technology that limit the rate of flaring. Metering and reporting would also be required when flared volumes reach 50 Mcf)/d. According to the BLM, if implemented, this rule would cost the oil and gas industry from USD 125 million to USD 161 million per year.

Impacts On Tribal Lands And Economic Development
Given the discoveries of Bakken and Marcellus shale gas resources on tribal lands, the rule would impose additional and unnecessary cost barriers to production, restricting oil and gas development on tribal lands. As some tribal governments and Native American-owned developers are new market entrants to this industry, the proposed rule may directly impact their ability to develop tribal natural resources.

The proposed rule states, “BLM requirements would not supersede equally effective or more stringent state and tribal requirements.” However, BLM’s proposed rule appears inconsistent with the federal government’s support of economic independence for tribal governments in other respects (e.g., leasing regulations under the HEARTH Act).

Bloomberg | 17 February 2016

Anadarko Reaches Out to Communities To Fend Off Drilling Bans

Windsor High School junior Kamille Hocking worried a dozen oil wells on her family’s 132-acre Colorado homestead might sicken them. Then, Rebecca Johnson, an Anadarko Petroleum engineer, used a blender in her chemistry class to show the interaction of swirling frack sand, city water, and friction reducer.

Anadarko Petroleum’s Rebecca Johnson speaks to students at Windsor High School in Windsor, Colorado. Photographer: Matthew Staver/Bloomberg

“We heard a lot of stories about how it could get into the water and pollute the land,” said Hocking, who is 16. “I’m going to tell my parents that fracking fluid only makes cracks in the rock the size of a hair that the sand gets into and holds open.”

Facing 10 possible ballot initiatives restricting hydraulic fracturing, Anadarko has deployed 160 landmen, geologists, and engineers such as Johnson to Rotary clubs, high schools, and mothers groups. They demonstrate how drilling works and try to convince people that the technique and the accompanying chemicals and geological effects don’t harm the environment or public health.

These de facto ambassadors are proving effective in deflecting the effort by Colorado municipalities to gain greater control over drilling. They have been so successful that the Woodlands, Texas-based company also trained 2,000 additional employees in Colorado, Wyoming, Utah, and Texas to answer questions posed to them by community members. The Coloradans use a smartphone app that supplies basic fracking facts. Others elsewhere get colorful printed materials.

Alaska Dispatch News | 16 February 2016

Army Corps Launches Review of Proposed North Slope Oil Project

A federal agency is launching an environmental review of plans by the Spanish oil company Repsol to develop what may be one of Alaska’s biggest oil discoveries in years.

The US Army Corps of Engineers announced it will prepare an environmental impact statement associated with the Nanushuk project on the North Slope, near the village of Nuiqsut, that the oil company estimates could yield 120,000 B/D.

Plenty of questions surround the proposal, including when, or if, Armstrong Oil and Gas, a privately held company from Denver, will take over majority ownership and operation, said Lanston Chinn, chief executive of the village’s Native corporation, Kuukpik.

The companies announced restructuring in October that would make Repsol the minority owner. The change is expected to be completed this summer, said Jan Sieving, Repsol’s vice president of public affairs in North America.

Kuukpik owns land in the area and could benefit economically from development. But the corporation, which asked for the environmental impact statement, does not like the project so far, Chinn said.

He said the corporation is concerned that a small company like Armstrong won’t have the capital to properly develop the area. Kuukpik will be watching warily to make sure things such as gravel roads and pipelines don’t threaten subsistence hunting and the environment, he said.

“Subsistence resources and the subsistence lifestyle have to be protected to our liking for oil and gas development to move forward,” Chinn said.

Sieving said Repsol fully supports the Corps’ decision to review the proposal. She said Repsol will continue working closely with the village and regulatory agencies.

“We are committed to environmental and subsistence protections,” she said.

The Corps decided in October that the project could significantly affect the human and natural environment, leading to the review, said Ryan Winn, north section chief for the US Army Corps regulatory division in Alaska.

EHS Today | 15 January 2016

Creating Value: How Occupational Health and Safety Is Being Integrated Into Financial Reporting and Why You Should Care

Terms like “sustainability” and “corporate social responsibility” are not new. They’ve been around for 20 years or more. What is new is the financial investment community’s recognition of the value of collecting and reporting material nonfinancial information as part of the measurement of organizational value.

More and more, corporations are recognizing that material nonfinancial information is important to investors and analysts. While they may have declined to participate in sustainability reporting a few years ago, corporations are discovering that the long-term viability of their operations is being judged not only on profitability, but on nonfinancial factors as well. This means that a growing number of organizations are including occupational safety and health data in “integrated” reports that include financial and nonfinancial information.

This means that a career- and practice-changing opportunity is presenting itself to occupational safety and health professionals, says Kathy Seabrook, chairperson of the Center for Safety and Health Sustainability, which just released the report “The Accounting Revolution and the New Sustainability: Implications for the OHS Professional.”

“Safety and health professionals don’t have a clue, don’t understand their leadership role in their company’s enterprise risk management,” Seabrook said in an interview.

The new report by the Center for Safety and Health Sustainability claims that integrated reports on performance tell a business’ stakeholders of its ability to create value in a sustainable way and feature data on a range of nonfinancial matters. This means that “human capital” issues such as the mental and physical health of the workforce and employee engagement are considered material to a company’s performance, just like balance sheets and statements of cash flow.

Rigzone | 22 December 2015

Column: Fixing Oil’s PR Problem—What Consumers Believe vs. Reality

If you spent a few hours stopping people on the street and asking whether they like the oil industry, chances are you would not find many folks who are huge fans. A recent Gallup poll confirms this with numbers showing that the majority of Americans either dislike or have no feelings about the oil industry; only 34% feel positively about it.

What’s more, that 34% is actually a huge improvement over years past. Previous polls have shown the industry struggling even more to gain public approval. In 2012, another Gallup poll showed that Americans hate oil companies more than the federal government.

So why do Americans feel so negatively about the oil industry?

Digging deeper, there seem to be three catching points that keep the public from feeling good about the oil companies. Here’s a closer look at what the public believes, what is actually true, and how the two can be reconciled moving forward.