Patience and Discipline Necessary for Shale Gas Industry Development

By Peter Lindfield, published in the Telegraph-Journal 5th June 2012

The views of oil and gas company executives and industry analysts have converged to support the proposition that the extraction of natural gas – both conventional and unconventional – will soon realize an enormous potential. There is also a dawning realization in the industry that this potential will require that a key condition be met – that a significant proportion of the vast resources of unconventional gas can only be developed profitably in a way that is environmentally acceptable. Technological advances have led to an increase in the production of unconventional gas in North America in recent years and these advances hold out the prospect of further increases in production in the U.S. and Canada.

A bright future for unconventional gas is far from certain. Industry needs to do more to project the benefits without minimizing or ignoring the liabilities. Industry needs to face up to the fact that it has been the major obstacle to the acceptance of shale gas drilling. Many hurdles need to be overcome, especially the social and environmental concerns associated with the extraction of shale gas which is the most prominent of unconventional gas resources. Shale gas extraction imposes a significantly more expansive environmental footprint than conventional gas development. Industry admits that a larger number of wells are often needed for extraction to be financially viable for the drilling companies.

Hydraulic fracturing techniques themselves, necessary to boost the flow of gas from the well, remain controversial and opposition to shale gas drilling has not declined. The scale of development has major implications for local communities, land use and water resources. More serious hazards including the potential for air pollution, the contamination of surface and groundwater and the management of greenhouse gas emissions are of major concern to the public. If these concerns are not properly addressed, the development of unconventional resources could be restricted.

Industry experts consistently claim that the technologies and knowledge exist for shale gas to be extracted and processed in a way that meets these challenges. However, there is gathering evidence that both governments and industry will need to dramatically improve their performance if public confidence is to be earned. This will require that governments and industry take two important steps.

First, industry must publicly commit to applying the highest reasonable environmental and social standards at all stages of the development process. The key word that will cause most irritation among concerned parties is “reasonable”. Governments across North America are in the process of creating appropriate regulatory structures based on a foundation of high-integrity science and its corresponding data. Experts are useful at this juncture – the public will want to know the facts and what is possible. But ultimately, the public will make its own decisions about what constitutes what is reasonable. This is something that some industry supporters have had difficulty grasping.

Second, governments will need to hire and train compliance staff in sufficient numbers with authority to provide enforcement based on accepted regulations. Public and ubiquitous access to information will need to be provided.

Full transparency, the measuring and monitoring of environmental impacts and engagement with local communities will be critical to addressing public concerns. Patience and discipline on the part of industry will be necessary even if drilling companies are driven to exasperation by their critics. Governments and industry will need to adopt consistent but flexible responses to social and environmental challenges. Industry will be evaluated based on its actions against agreed-upon environmental and social standards but there will be little tolerance among the public for failing to measure up to those standards.

Confidence building measures will be most critical in those early days as a record is being created and where industry and a skeptical or even cynical public will need to reach an accommodation.  Here, the facts will be less important than the actions of individuals. Industry has an unprecedented opportunity not only to develop confidence but to wield this as an investment to build trust in its communities.

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Filed under Business strategy, Shale Gas

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