Editorial Comment

	Vol. 224 No. 12
PERRY A. FISCHER, EDITOR

 Squandered opportunity. The reality of public perception of the mineral extraction industries, and its effect on politics and resulting business practices, is being felt in every boardroom worldwide. At one extreme, there are the environmentally religious, worshiping Gaia, our Earth goddess, who is dying, and She must be saved at all cost. They befriend eco-terrorists who put the well-being of beaver on an equal footing with humans.

 On the other side, there are the extremists, often within our industry, whose attitude is, “We don’t need no stinko-pinko-bio-enviro-whacko-veggie-greenie-beanie- weenies.” They would rather go broke than spend a penny preserving one species of any kind, or prefer a heart attack to learning how to even spell soy. It’s an ongoing battle where everyone loses.

 For some, the words “sustainable development” are a joke, derided for being vague and meaningless, but mostly for being (at least perceived as) the battle cry for the anti-oilfield crowd, the mean greenies. Some even pretend not to understand what it means. But get real, folks. Two, obvious, self-explanatory words: sustainable development. Which one don’t you understand? The official definition is, “Development that meets the needs of the present generation without compromising the needs of future generations.” This includes economic and social needs as well as environmental conservation. Companies that ignore this obligation – and public perception in general – do so at great risk to themselves and their stakeholders.

 Contrary to popular belief, the oil and gas industry is not a monolith. Some oilfield company managers embrace the reality of sustainable development, occasionally, even despite their own prejudices, because they know it’s good for their long-term corporate interests. Others fund anti-environmental dot-orgs. A few do both: a dangerous game (remember, “You can fool all of the people some of the time.…” Eventually, the public finds out).

 The reality is that our industry has a negative reputation among many people that will take a long-term concerted effort to reverse. It’s like a teenage girl’s reputation: you spend years keeping it intact, but it can be blown in a day. There’s little that our industry can do to change the hearts and minds of the green extreme – they are outside everyone’s reach. 

 And while you can’t win everyone over to the side of reason, the less radical, the moderates and fence sitters, can be convinced. But mere public relations will not do it. That sort of feeble, phony marketing-only approach will not hold up to scrutiny, especially since so many are already convinced that the terms “oil company” and “sustainable development” are mutually exclusive. And the rest are skeptical. Most important, we can and must change attitudes within our industry, and that, of course, begins with corporate leadership.

 A good example of how to do it right: Barrow Island, Australia. Barrow was designated as an ‘A’ Class nature reserve in 1910, denoting its important status as a refuge for rare wildlife species. For nearly 40 years, quarantine procedures have prevented introduction of non-native plants and animals, despite production of 300 million barrels of oil (see World Oil, December 2002). ChevronTexaco will likely continue production for decades to come. An example of how to do it wrong is Lake Maracaibo, Venezuela: It doesn’t get much worse than that.

 What does our industry get for being genuinely pro sustainable development? First, your company gets to be included in the growing number of socially responsible stock funds and indices. Being a part of these might help stock prices; but, while it can’t hurt, don’t put too much faith in that. The evidence is weak, depending on what time period and performance measure is used for stock price comparisons.

 By being sustainable-oriented almost to a fault, a company is sure to earn a good reputation that will pay dividends in terms of being welcomed back for future work. Raising capital should become easier, or at least easier than it would have been if you had a poor reputation. Governmental and international export credit agencies that fund many of the world’s largest projects have been coming under increasing public scrutiny. The US Export-Import bank has a requirement that companies “… contribute to sustainable development and to refrain from seeking or accepting exemptions from environmental, health, safety, labor, taxation and other legislation.” (However, these provisions are not legally enforceable.)

 There are many examples of denial of funding or serious delays from export credit agencies due to inadequate sustainable development issues, such as the recently denied funding of $200 million toward Peru’s Camisea gas development project, “… due to outstanding concerns with social and environmental problems with the project,” and the earlier denial on China’s Three Gorges dam.

 Perhaps most important is access to lands that might otherwise be off-limits to E&P if good-neighbor policies and sustainable development issues are not paid serious attention. Right now, we might be drilling in ANWR and in other restricted areas if not for a crummy legacy, the in-fighting and the foolish belief that ad campaigns alone are enough.

 How long will it be before everyone in management will take the issue of sustainability, in all its forms seriously? This should be viewed as an opportunity. At least by some, it is an opportunity that is still being squandered. And I fear that we will pay for it down the road.  

Comparison of Dow Jones Sustainability Index and MCSI World, in Euros. Different comparisons, e.g., just the energy component of DJSI, would yield different results, and not always in the same direction.