By Jonathan Wood, Control Risks Unconventional natural gas is often described as game-changing and transformative, a revolution heralding a golden age of cheap, plentiful energy for a resource-constrained world. But, as shown by local bans in the US and Canada, national moratoriums in France and Bulgaria, and tighter regulation in Australia and the UK, the global anti-fracing movement has mounted an effective campaign against the extraction of unconventional gas through hydraulic fracturing. Meanwhile, the oil and gas industry has largely failed to appreciate social and political risks and has repeatedly been caught off guard by the sophistication, speed, and influence of anti-fracing activists. ‘Gasland’ Goes Global The anti-fracing movement did not start with “Gasland” but would not have gone global without it. Armed with a vivid strapline – “Can you light your water on fire?” – the 2010 US documentary crystallized environmental concerns about hydraulic fracturing. More importantly, it provided a shared point of reference for anti-fracing groups worldwide, serving as a ready introduction to the issues and perspectives of the anti-fracing movement. In southern France, for example, anti-fracing collectives routinely launched with a screening of “Gasland,” which was released in French cinemas two months before a national moratorium was adopted in mid-2011. Meanwhile, the first Bulgarian-language subtitles appeared in mid-2011 on video-sharing websites, prefacing the emergence of widespread anti-fracing protests. South African anti-fracing groups screened “Gasland” in Cape Town shortly after the first exploration applications for the Karoo basin were submitted. Even in the US, where environmental groups have opposed hydraulic fracturing since the late 1990s, “Gasland” brought anti-fracing sentiment to the masses. Indeed, according to Google’s analytics, searches for “Gasland” tend to precede rising search activity for “fracing.” The industry argues that environmental concerns are misplaced and based on misperceptions fueled by “Gasland.” Yet simply attempting to discredit the movie has been ineffective for a few key reasons. First, anti-fracing grievances are broader and deeper than water contamination. They also encompass health and safety concerns and issues of economic development, cultural integrity, and political legitimacy, which pertain directly to the question of who wins and who loses from gas development. Secondly – and crucially – companies have lost public trust by discounting the legitimacy of grievances, prioritizing trade secrets over transparency and engaging governments rather than communities. Finally, the industry has underestimated the sophistication, reach, and influence of the anti-fracing movement. It is not simply “NIMBYism” masquerading as environmentalism but a diverse coalition of ideological and vested interests unlikely to be swayed by industry-funded studies or glossy public relations campaigns. The anti-fracing movement points to lingering knowledge gaps about the impact of unconventional gas development – particularly on public health – as justification for a precautionary policy and regulatory stance. It naturally seizes on credible analyses of water contamination, seismic activity, or other issues as critical evidence supporting the need for further research. Two 2011 reports in particular function as key texts in this regard: a US Environmental Protection Agency (EPA) finding of water contamination from a well in Pavillion, Wyo., and the UK Department of Environment and Climate Change’s (DECC) determination that hydraulic fracturing induced minor earthquakes near Blackpool, Lancashire. Further study is always possible. Both the EPA and DECC studies were inconclusive on some points – a simple fact of scientific investigation – and even greater uncertainty surrounds the impact of unconventional gas development on the economy or climate change. The anti-fracing movement routinely rejects, for example, analyses of the economic and employment benefits of unconventional gas development as based on unrealistic assumptions. And the International Energy Agency (IEA) notes that the greenhouse gas impacts of fugitive methane emissions from unconventional gas development – and consequently the “green” credentials of unconventional gas – vary wildly depending on the study. Another problem for the industry is that the anti-fracing movement is skeptical of studies sponsored by or linked – however tenuously – to the gas industry, which is a key source of funding and research into hydraulic fracturing. Several recent university studies in the US, for example, were compromised by undisclosed conflicts of interest between researchers and gas companies. This only underscores the challenge of meeting demands for further research. Research is expensive and time-consuming; without a significant injection of public funding – the US Congress in June 2012 rejected a US $4 million administration proposal to study water quality impacts – significant knowledge gaps seem likely to remain. Calls for further study often go hand-in-hand with temporary moratoriums on unconventional gas development, and companies rightly monitor gas studies as a proxy for political risks to the unconventional gas industry. Pushing for a moratorium – whether to accommodate impact studies, mediate emergent political disputes, or develop regulatory frameworks – can be part of a strategy for halting unconventional gas development while buying time to build political will against the industry. How Can The Industry Respond? Based on our assessment of the global anti-fracing movement, the industry should target four key areas to improve its relations with stakeholders. First and foremost, the industry needs to acknowledge the legitimacy of local grievances. Denying the agency of local communities by blaming “fear” and “hysteria” is winning the industry few friends. Acknowledging grievances would begin to repair its crippling trust deficit with local communities. Movements towards greater transparency and voluntary disclosure, however grudging, are a positive step in this direction and accommodate a major grievance shared by anti-fracing movements worldwide. Meaningful consultations with local stakeholders instead of didactic “information sessions” to market the presumed benefits of drilling would help to identify potential points of tension to be addressed through both outreach and grievance mechanisms. Secondly, the industry needs a broad-spectrum political engagement strategy that is not overly dependent on cozy relationships with regulators, power-brokers, and other narrow points of influence, which are easily tarred by general mistrust of central governments and are a source of political risk. In part, this means laying groundwork at the local level with municipal and provincial officials. Such local lobbying is expensive, but many companies have dedicated teams in the wake of legislative and regulatory changes giving more clout to local authorities. Thirdly, the industry needs to continue to make good faith efforts to reduce adverse impacts across the board. This means not only strengthening compliance, ensuring subcontractor performance, and embracing new technologies, but also making conscientious project decisions regarding the siting of well pads, screening of light and noise, and routing of truckloads. This would entail absorbing increased mitigation costs, which the IEA in its 2012 report on “golden rules” estimates at up to 7%. But it would also reduce nonideological objections to the industry. Finally, in addition to reducing the negative impacts of gas development, companies need to ensure the benefits are both tangible and as widely and fairly distributed as possible. For most communities, this means procuring as much as possible locally, providing jobs and training to local workers, paying required taxes, and – crucially – making long-term investments that deliver a sustained economic boost. The encompassing but diffuse benefits of lower gas prices are one thing; an industrial base that provides high-paying jobs for more than two or three years of drilling is a more concrete way to distribute the benefits of unconventional gas development. Look for an expanded version of this article in the March 2013 issue of E&P.