4 February 2015

A Workshop Reflection—What Will Your Tight-Rock Project Legacy Be?

Social responsibility is the newest evolving element within the health, safety, security, environment, and social responsibility sector of the upstream petroleum industry. In December, the Society of Petroleum Engineers held a workshop to discuss social responsibility issues related to project development. The workshop, titled Beyond Conventional Oil and Gas: New Social Opportunities and Risks, was held 2–4 December in Banff, Alberta, Canada. Workshop presenters Robert Sandilos with Chevron and Caleb Wall with Environmental Resources Management have compiled lessons from the workshop. Both, along with other social responsibility presenters, will be on hand at the 2015 SPE E&P Health, Safety, Security, and Environmental Conference—Americas on 16–18 March in Denver, where a special poster session will showcase the lessons from this and other social responsibility workshops.

This article is a brief exploration of a few key threats and opportunities, the sum of which will likely define the life-cycle legacy of most tight-rock developments, as discussed during the Banff workshop.

  • Evaluating social risks and impacts
  • Management frameworks for environmental and social risks
  • Water use in unconventional development
  • Industry impacts on community health
  • Industry relationships with indigenous peoples
  • Stakeholder engagement

Evaluating Social Risks and Impacts
In many prospective tight-rock basins globally, very few if any wells have been drilled. Stakeholders on both sides of the drilling divide start at the same place, but industry opponents have the advantage of a clean slate—no oil and gas activity (although there well may be pollution problems and environmental impacts already). A significant opportunity for industry is to set the full-field development bar high for all operators through government regulation and voluntary actions. A significant challenge for industry, in being transparent about operations, is to clearly communicate timing, specific activities, and mitigations from leasing through to plugging and abandonment.

Management Frameworks for Environmental and Social Risks
Numerous tools and management systems have been developed by operators and consultants to attempt to integrate social performance into now-traditional environmental impact assessments. A significant opportunity is to describe and plan better to manage societalrisks throughout the life cycle, most of which diminish significantly as drilling and completion moves on to long-term production. Potential economic and community investment benefits, of course, are the key long-term opportunities. The leading challenge over the life cycle of most projects is maintaining environmental protection, and the most fundamental is casing, cementing, and wellbore integrity.

Water Use in Unconventional Development
Reducing fresh and, in some regions, brackish water use is a primary objective of all tight-rock operators. Fortunately, water use declines substantially as a hydraulic-fracturing-dependent drilling program is completed. A life-cycle challenge is that this long-term view is often not very important to local residents or policy makers during water-stress or drought conditions such as those have persisted in parts of Texas and California since the shale boom really began in 2008. Two of the most important social responsibilities over the life of any upstream project surround water use are

  • The commitment to maximize recycling and reducing or eliminating use of fresh water and increasingly usable brines
  • The need to keep produced water in the pipe for safe disposal unless it is feasible to provide acceptable quality water for beneficial use

Industry Impacts on Community Health
This area is probably the fastest emerging set of local public concerns with oil and gas operations, and the most difficult to address for the long term with current data and messages. Changes in population, workers, and incomes stress health assets and relationships. Completion-phase hydraulic-fracturing-chemical use and production-phase air emissions continue to raise public questions notwithstanding industry and government actions or assurances. As indicated during several presentations, there is a current need for additional science-based health data and research, which should address long-term operations as well as drilling and completion activity.

Land Acquisition and Involuntary Resettlement
Access and resettlement are almost always looked at as early-development-phase issues, but there are important long-term elements as well. In North America, actual resettlement is rare, but long-term land-use impacts from energy development on population and wildlife habits are common. Public safety, education, transportation infrastructure, and ecosystems are all affected by any wide-spread industrial development, even if long-term facilities are of modest size. Early communication, consultation, and life-cycle impact mitigation are equally important in addressing land-use impacts and in maintaining community consent for responsible oil and gas development.

Industry Relationships with Indigenous Peoples
Relationships with local residents, regardless of their heritage, are both the oldest and the newest societal responsibility factors. Whether projects are located around subsistence or suburban communities, maintaining a positive local relationship is arguably the single most important external factor in life-cycle project success, beyond wellhead prices. As in the case of land use and impacts, there are opportunities for life-cycle local partnerships, including public safety, education, infrastructure, and ecosystems. These can enhance relationships and mitigate long-term ignorance, dependency, or animosity.

Stakeholder Engagement
This subject was fitting as the final one in the Banff workshop because engagement with local communities and the full range of stakeholders is critical and must be contemporaneous with any new project, from preleasing to plugging and abandonment. The needs, messages, and issues will vary, and any industrial project of scale will have local impacts. It may be not be possible for to leave a clean slate, but it is possible for tight-rock projects to leave a positive social, economic, and environmental legacy behind.

Read more about the 2015 SPE E&P Health, Safety, Security, and Environmental Conference—Americas here.

Torys via Mondaq | 28 January 2015

Column: Relationship Building With Aboriginal Communities Will Come Into Focus for Resource Players

The Supreme Court of Canada has released two recent seminal decisions that will significantly impact resource development projects where Aboriginal interests might be affected. As mergers and acquisitions activity in the infrastructure, oil and gas, and mining sectors unfolds in 2015, we expect buyers of and investors in Canadian targets involved in resource development to pay increasing attention to whether appropriate consultation and accommodation have occurred with local Aboriginal communities, particularly those with existing or potential title claims.

While the practical effect of these decisions will principally be driven by the circumstances of each resource development project, we anticipate due diligence reviews in the transaction process to become more focused on ascertaining potential risks and liabilities associated with possible infringement on Aboriginal title.

Read the full column here.

Denver Business Journal | 15 January 2015

Colorado Makes It Easier To File Complaints About Oil and Gas Activities

The Colorado Oil and Gas Conservation Commission (COGCC), the state agency that oversees the multibilllion-dollar industry, launched a “new, more streamlined process” for filing and handling complaints about oil and gas operations.

COGCC’s complaint website makes it easier to file complaints and also makes it easier to track the agency’s process for addressing, closing, and communicating about the complaints, the agency said.

The process has a new, dedicated webpage for filing complaints.

Saxe Law Office via Mondaq | 11 December 2014

Lawsuit Raises Question: What is Public Interest?

The Canadian Bar Association (CBA) has been engaged in a fierce internal debate over the association’s decision, now revoked, to intervene in Chevron’s appeal to the Supreme Court. The Ecuadorian plaintiffs in the case are seeking to enforce a USD 9.5 billion judgment obtained in Ecuador for terrible oil pollution and health damages allegedly caused by Texaco and others. Chevron (the corporate successor of Texaco) has no direct assets in Canada but does have an indirect Canadian subsidiary with substantial assets. Chevron has obtained a US court decision that the Ecuador judgment was obtained by fraud and argues that it cannot and should not be enforced in Canada.

The CBA originally decided to intervene to support a traditional pillar of Canadian corporate law—that, for most purposes (barring fraud), each corporation is a separate legal person, liable for its own obligations but not for those of their parent and subsidiary companies. This provoked a furious debate. Which side of this difficult case is in “the public interest?”

The CBA explained its initial decision to intervene as “based on our desire to contribute to a debate where fundamental and foundational principles of business law will be argued.” As set out in the CBA’s Public Interest Intervention Policy, the association can intervene where the case involves “a matter of compelling public interest which the Board of Directors then adopts as policy of the association” (or where there is matter of special significance to the legal profession or consistent with a previously adopted CBA policy, neither of which is applicable in this case).

But what is the public interest? As noted by several members of the Supreme Court in R. v. Zundel, a survey of federal statutes alone reveals that the term “public interest” is mentioned 224 times in 84 federal statutes. The term appears in comparable numbers in provincial statutes. The term does not and cannot have a uniform meaning in each statute. It must be interpreted in light of the legislative history of the particular provision in which it appears and the legislative and social context in which it is used.

Despite lawyers’ prolific use of the term “public interest,” it is very hard to define. Only one Canadian statute currently in force attempts to provide a definition. Manitoba’s Engineering and Geoscientific Professions Act states that “public interest” means the “well-being, convenience, and concern of the public at large.” What does that mean? Who is the “public at large?” Does the “public” include people in other countries? What are “well-being,” “convenience,” and “concern?” How does one weigh one public interest against another?

JPT | 2 December 2014

Stakeholder Issues Play Key Role in Shale Future

As the shale revolution changes the map of oil and natural gas development and shifts the balance of production between regions, public acceptance is an increasing challenge. The unconventional resource boom has brought intensive drilling and production operations to areas often unaccustomed to these activities and frequently more populous than traditional petroleum development areas.

A variety of public concerns have assumed a high profile, including the environmental issues of water use; perceived risk to groundwater aquifers; waste disposal; truck traffic, dust, and noise; and emissions.

While the success of production from shales and other tight-rock formations draws attention nationally and globally, its future depends much on the attention and reception it receives locally. As shale drilling has surged, public eyes may be more focused on the community impacts of oil and gas operations than ever before.

Shale Energy Insider | 1 December 2014

Tasmanian Landowners Seek Extra Protection During Hydraulic Fracturing Review

Shale exploration is currently under review by state officials in Tasmania, with land owners and environmental law experts pressing to secure landowners’ rights, particularly for farmers.

Jan Davis from the Tasmanian Farmers and Graziers Association has said that those in the review process should “make sure they look at the science and cut through some of the understandable but hard to manage emotions around this issue.”

State law currently offers some legislative protection to those who object to companies using their land; however, these rights are limited to the exploration phase. “Landowner consent is required at the exploration stage. It’s not required at the production stage,” said Jess Feehely of the Environmental Defender’s Office.

JPT | 15 October 2014

Engaging a Community To Gain Public Support

Colorado recently has been at the epicenter of the energy debate. The oil and natural gas industry has been facing unrelenting scrutiny from activist groups and concerns from stakeholders about operations in an urban environment. The Wattenberg field, located 25 miles northeast of Denver, has been an active field for more than 50 years and has more than 15,000 vertical wells. But the increased visibility associated with recent horizontal well activity, combined with the area becoming more densely populated, put the operations in the spotlight.

The industry has traditionally done a poor job of communicating information in a meaningful way that resonates with stakeholders. As engineers, we like to use science, data, and charts to explain things to people, but in this case it was not working. There was a need to enhance and re-engineer communications and engagement with all stakeholders.

Anadarko Petroleum recognized this need to change how the industry has traditionally interacted with the public, including the Colorado communities where it operates. Beginning in 2012, using its five core values as a guide, Anadarko began an initiative to create ambassadors out of its most valuable asset: its employees. The five core values are:

  • Integrity and trust
  • Servant leadership
  • People and passion
  • Commercial focus
  • Open communication

Shale Energy Insider | 30 September 2014

Ineos Plans To Give 6% of Shale Gas Revenue to Local UK Communities

Ineos has announced plans to give 6% of its shale gas revenues to homeowners, landowners, and communities who live above its shale gas operations.

Ineos anticipates being a major player in the shale gas industry and said it believes it will give away more than GBP 2.5 billion over the life of its business.

The news comes as the Department of Energy and Climate Change gives the go ahead to Ineos to take a majority share in an onshore oil and gas licence block in Scotland by taking over BG’s interest (51%).

The UK’s Department of Energy and Climate Change recently announced new rules to help the country explore shale gas resources.

The sharing of shale gas profits is commonplace in the United States, and Ineos said it believes this will encourage communities to support shale gas production in their neighborhoods.

Jim Ratcliffe, Ineos founder and chairman, said, “We think this is a game changer for Britain. Giving 6% of the revenues to those living above our shale gas operations will give them a real stake in the success of the venture and encourage the development of the whole shale gas industry.”

Bloomberg Businessweek | 2 September 2014

Colorado Drillers Tread Lightly Amid Rising Tide of Resentment

A fight over hydraulic fracturing is looming in Texas. Another stand-off is shaping up in Colorado. Yet drillers’ reactions couldn’t be more different.

In Texas, drillers are doing their noisy in-your-face fracturing as usual. Meanwhile, on a small farm about an hour from the Colorado Rocky Mountains, the oil industry is giving hydraulic fracturing a makeover, cutting back on rumbling trucks and tamping down on pollution.

Oil companies in Colorado are responding to a rising tide of resentment as local communities and environmental activists vie to impose measures to ban fracking or restrict drilling. A series of ballot initiatives and other grass roots opposition around the country is seen as threatening the booming shale industry, even in oil-friendly Texas, where the US energy renaissance began.

Last December, Anadarko named Alex Hohmann, an engineer who previously helped complete wells, to lead a new team dealing with community relations. Now, Hohmann, 31, spends his time visiting potential sites and neighborhoods, sometimes going door-to-door, acting as a kind of oil-drilling diplomat.

“When your oilfield is intermingled with 250,000 people, it’s increasingly important to take into account the neighborhood, the church, and the school,” Hohmann said on a recent tour of several Anadarko drilling sites. “We have to demystify it, to help people see it as compatible with their lives. That’s our industry’s challenge.”

He and his three-person team answer a hotline, send notices to homes and neighborhood associations and organize community meetings. Hohmann even hired security guards to monitor a wellsite near a playground 24 hours a day for more than a week while work was done, ensuring that no children came to harm, he said.

Rice University | 2 September 2014

Rice University Scientists Seek Long-Term Answers To Stem Increase of Water Use at Wells

Rice University scientists have performed a detailed analysis of water produced by hydraulic fracturing of three gas reservoirs and suggested environmentally friendly remedies are needed to treat and reuse it.

Fig. 1—Amounts of total carbon (TC), nonpurgeable organic carbon (NPOC), and total inorganic carbon (TIC) in the samples. Image courtesy of the Barron Research Group.

Rice University researchers performed a detailed analysis of produced water from three underground shale gas formations subject to hydraulic fracturing. Fig. 1 shows the amounts of total carbon (TC), nonpurgeable organic carbon (NPOC) and total inorganic carbon (TIC) in the samples.

More advanced recycling rather than disposal of produced water pumped back out of wells could calm fears of accidental spillage and save millions of gallons of fresh water a year, said Rice chemist Andrew Barron. He led the study that appeared this week in the Royal Society of Chemistry journal Environmental Science: Processes and Impacts.

The amount of water used by Texas drillers for hydraulic fracturing may only be 1.5% of that used by farming and municipalities, but it still amounts to as much as 5.6 million gallons a year for the Texas portion of the Haynesville formation and 2.8 million gallons for Eagle Ford. That, Barron said, can place a considerable burden on nearby communities.

Barron noted that shale gas wells, the focus of the new study, make most of their water within the first few weeks of production. After that, a few barrels a day are commonly produced.

Drilling Contractor | 11 August 2014

Social Media Survey Shows Lopsided Reporting on Fracturing

Approximately 57% of US consumers believe that fracturing is one of the three most important environmental issues today, a new report shows. The study, conducted by communications consultancy Makovsky, also found that 71% of respondents say they hear about the issue at least weekly and 79% say they hear about it primarily from social media. The survey was conducted between June and July 2014 via social media; there were 1,600 respondents.

With social media becoming one of the top sources of public information on fracturing, Makovsky found that most of the social conversation is taking place on Twitter from antifracturing activists and groups. Analyzing 1.3 million Twitter mentions of fracturing from January through July 2014, the group found that anti-fracturing advocates are generating 2,000% more impressions than those supportive of the issue.

For companies in the oil and gas industry trying to maintain its license to operate—reflecting the local community’s acceptance or approval of a project or presence—effective use of social media is emerging as a critical success factor for resource development.

Bloomberg | 14 July 2014

Hydraulic Fracturing Guidelines Issued by API To Ease Community Fears

The oil industry’s largest lobbying group began a new effort to ease public fears about hydraulic fracturing after a legal setback in New York state and a voter push in Colorado to ban the drilling practice.

The American Petroleum Institute (API), a Washington-based group that includes Exxon Mobil and Chevron, released guidelines for improving community relations as hydraulic fracturing extends to more towns, raising concerns about pollution risks.

The suggestions will help “raise the bar for the industry,” David Miller, director of standards for the group that has guided the industry on well design and preventing spills since 1924, said. The effort will help oil and gas companies develop “lasting relationships” with communities where drilling occurs, he said.