BSR Conference 2012: Fast Forward / October 23-26 / New York

Energy’s Newest Frontier…America?!

One-Hour Conversation Session / October 25, 2012

Speakers

  • Susan Christopherson, Professor, Department of City and Regional Planning, Cornell University
  • Niel Golightly, Vice President, Americas Communications, Royal Dutch Shell
  • Michael Oxman, Director, Advisory Services, BSR (Moderator)

Highlights

  • Natural gas discoveries in the United States have arguably changed the trajectory of the national energy agenda. In a matter of years, the country has gone from investing in projects looking to increase gas imports to investing in multi-million-dollar projects allowing for gas export.
  • The issue of hydraulic fracturing is not just a question of extraction but one of community relations. Shell sees natural gas extraction as an opportunity for infrastructure development and a sustained source of jobs, while researchers claim that historic boom and bust cycles show that oil and gas companies have left local communities economically worse-off.
  • A key consensus between industry and academics is that solutions to local extraction issues will only come from partnerships among stakeholders—academics technical experts, communities, regulators, and business leaders.

Memorable Quotes

“At Shell we look not only at the energy equation but also other resources that are stressed, all under a common framework … We call that the stress nexus of energy, water, and food. If you take all those three and look at them, they are all interconnected. If you are going to look at solving one of those challenges, it is probably going to be smart if you look at how to solve all of them.” —Neil Golightly, Shell

“The newest estimates at current rates of consumption are about 100 years of usable gas in the United States and worldwide, 250 years. Can those estimates change? Yes, but we are hopeful that the skeptics are wrong. The best estimates I have seen show a huge opportunity.” —Neil Golightly, Shell

“We are not just talking about a few places out in the West any more. We are now talking about a large portion of the United States that is going to [be affected by] this kind of natural gas extraction. We really need to be thinking about this. If we have a national agenda, we need to be thinking about the significant areas that now need to be protected.” —Susan Christopherson, Cornell University

Overview

Oxman opened by welcoming the attendees to what he considered one of the most hotly debated and controversial subjects of the BSR Conference—whether North America is poised to reverse long-term declines in domestic energy production, easing dependence on energy imports.

Making his opening remarks, Golightly called the phenomenon of natural gas discoveries in the United States nothing less than extraordinary. He contrasted the situation a few years ago, when there were a growing number of projects on how to increase gas imports (based on shortage fears), with today’s multi-million-dollar projects planning to export gas.

Placing this in context, Golightly offered what he called three “unchanging changes”:

  1. There is a continuing increase in the world’s appetite for energy.
  2. Energy continues to get harder and harder to obtain—deeper in the ocean, under intense temperatures, and in rock and shale, sands, and the Arctic.
  3. Society is becoming more and more acutely aware of the environmental and social impacts of consuming and procuring energy, and even more acutely determined to minimize the impacts.

Golightly explained that he sees energy as part of a larger “nexus” of problems, including water and food, that requires a nexus of solutions built through collaboration among business, governments, communities, suppliers, and consumers.

Coming from a different perspective, Christopherson shared the point of view of North American communities affected by extractives companies’ development projects. She has researched the true cost of resource extraction, looking at factor like road damage, administration, emergency response service, and public safety.

Christopherson also set out to understand why communities are taking action against the oil industry. Through more than 60 interviews she learned that communities are not just acting to prevent environmental destruction but also damage to quality of life, increases in crime, traffic, and industrialization, and potential negative impacts in industries in which they work, such as tourism and agriculture. Communities don’t see state government taking action to protect other industries, and they don’t trust the oil and gas industry because of negative past experiences.

Oxman asked Golightly how a company like Shell can address issues of trust, job loss, and the “least common denominator” effect (referring to negative experiences). Golightly replied that the first step to build trust is to go into communities and talk to people to discover their specific issues, worries, and unknowns. The next step is to set standards and work practices to meet them. The final step is to work toward regulation that protects these communities from negative impacts.

As a follow-up, Oxman asked Christopherson how we can build partnerships and systemic solutions. She stressed the importance of first ending the adversarial relationship between companies and communities, exemplified by companies that threaten to bankrupt communities who take legal action. Adding to this, Golightly mentioned that Shell is looking to address systemic solutions by thinking outside of its sector, starting pilot projects on food and water at the local and global level.

Oxman then turned to the audience for questions. Golightly fielded the first question on whether access to more natural gas will simply translate into using more gas, and how we can prevent that situation. He commented that energy companies like Shell need to realize that they are in the business of providing energy solutions. To him, this meant driving efficiency to avoid increased consumption and simultaneously present cost savings to the consumer.

A second question on cost-benefit analysis was directed toward Christopherson, who shared the belief that “there is no free lunch in terms of energy.” She claimed that even wind power has its downsides, causing complaints among communities similar to hydraulic fracturing or shale extraction. These communities don’t see the direct benefits from wind energy installations and are still heating their homes with propane. Christopherson’s opinion was that while a commitment must be made to strategy and efficiency, we need to look at the whole energy system to foster better practices.

Finally, a question asked for beneficial examples of regulation, and Golightly said that a fixed cost on carbon would be a boost for the industry and help create a level playing field. He added that Shell’s onshore gas principles could be a model for national regulation to help oil and gas companies from falling below certain standards.

In summary, this session demonstrated that there are a range of issues, opportunities, and challenges involved in America’s energy future, and more specifically in the practice of hydraulic fracturing. Continued energy availability in the 21st century will call for a higher level of collaboration in order to find solutions.



Thank You, Sponsors

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Convening Media

Bloomberg Business Week Weber Shandwick

Marketing and Media

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