Stakeholders' Safety Fears Crank Up Pressure on Pipeline Projects
Stakeholders' Safety Fears Crank Up Pressure on Pipeline Projects
With nearly two million miles of built pipelines in the U.S., the normally mundane world of oil and gas pipelines stays out of sight, out of mind and out the headlines.
This year, however, things changed.
Already facing criticism over their role in climate change – largely guilt through association with their customers -- oil and gas transport companies found their practices thrust into the spotlight after a series of incidents plaguing the energy sector in 2010 culminated in the recent natural gas explosion in San Bruno, Calif. If the link between pipelines and climate change is a difficult concept for stakeholders to grasp, concerns over personal health and safety are not.
Adding to the woes of pipeline companies is a rising level of stakeholder resistance to infrastructure projects in general, ranging from offshore wind farms to high-speed rail. In addition, where once government support for infrastructure projects was practically a given, that support can be more difficult to secure where financial or political costs are perceived to be too high.
As a result, new pipeline projects face hurdles and a higher level of scrutiny than ever before. Project managers will have to go beyond the call of duty if they are to overcome stakeholder resistance and avoid the risk of costly delays or the potential of derailment. As two of my colleagues wrote earlier this year, stakeholder collaboration can be a key to avoiding these pitfalls and building required support.
One of the most high-profile pipeline projects is TransCanada's Keystone Gulf Coast Expansion Project, known as the Keystone XL, a 1,600-mile pipeline scheduled for completion in 2013. It will bring semi-refined oil sands crude from Alberta to refineries on the Texas coast.
Another is El Paso's Ruby Pipeline, a nearly 700-mile natural gas pipeline stretching from Wyoming to Oregon that is slated for 2011 completion and will serve Anadarko, BP, Marathon and Shell.
Both projects have faced their share of controversy. The Natural Resources Defense Council (NRDC) challenged the U.S. State Department over the "validity" of Keystone's environmental impact statement.
Similarly, the Sierra Club and other environmental groups recently filed a challenge to the Ruby Pipeline alleging the federal Bureau of Land Management (BLM), the Fish and Wildlife Service and the U.S. Army Corps of Engineers' environmental reviews to be inadequate. The lawsuit came on the heels of a controversial roundup of wild horses conducted by the Bureau of Land Management, during which several died, prompting denials by the agency that the horses were removed to benefit Ruby.
Meanwhile, native groups have suggested they were not adequately consulted regarding Ruby, while Keystone XL stakeholders have expressed a range of concerns, including pipeline and refinery safety, chemical use, pipeline pressure, and what happens to the pipeline at the end of its useful life. TransCanada has apparently threatened to use eminent domain if landowners along the federally approved route do not sign easements, suggesting that compensation issues remain outstanding.
With billions of dollars at stake, it's understandable that TransCanada and El Paso are eager to complete their respective projects on time and within budget. Armed with the authority and legitimacy that legal permits provide, companies often think their 'social license(s) to operate' will be a slam-dunk. However, it's a mistake to assume stakeholders will hew to a construction schedule, rather than their own timetable, when making potentially life-changing decisions. So while both TransCanada and El Paso claim to be engaging proactively with stakeholders, neither can afford the appearance of driving over their concerns with a bulldozer.
Recent accidents involving pipeline companies and their regulators have further eroded stakeholder confidence. Calgary-based Enbridge, which had nearly 20,000 barrels of oil spill from one of its pipelines in Michigan in July, is now facing a lawsuit by the Illinois attorney general over a different spill near Chicago.
And while a power surge or corrosion may be to blame in the PG&E natural gas line explosion in San Bruno, attention has also focused on regulators who apparently did not bother to levy or collect fines for known violations and who are unable to keep track of their own enforcement actions. This prompted former National Transportation Safety Board Chairman Jim Hall to suggest there is "a lack of a strong safety culture in the natural gas industry."
While these incidents are not indicative of TransCanada or El Paso's safety and environmental performance, they no doubt affect stakeholder perceptions and put both companies in the position of having to define themselves in stark contrast to what stakeholders read in the news.
First, both companies must demonstrate how their management practices are really different. Saying your company subscribes to 'high standards' is fine, but actions speak louder than words. This is especially true when it comes to accident prevention and response. Here, it's important for each company to demonstrate where it has innovative or industry leading practices that go well beyond basic legal requirements -- and how each holds itself accountable. This will further their credibility while creating some helpful distance from regulators who appear to be too close to the industry to police it. Where possible, both companies need to look for opportunities to emphasize their particular strengths and expertise (perhaps lending support to Enbridge or PG&E just as ExxonMobil did for BP after the Gulf spill).
Second, like it or not, both TransCanada and El Paso are going to get dragged into the climate change debate. Both companies need to emphasize all they are doing to improve energy efficiency while working to reduce their own environmental impacts and that of their clients. For instance, El Paso is employing construction techniques and operational design initiatives to make the Ruby Pipeline carbon-neutral.
Third, both TransCanada and El Paso need to demonstrate how they are creating community benefits along their respective pipeline corridors. Done right each has the chance to create a lasting and positive legacy instead of future acrimony. For instance, TransCanada commissioned a study (PDF) suggesting the Keystone XL project will create more than 15,000 'high-wage' manufacturing jobs and generate $5.2 billion in property taxes for states along the pipeline route. Sourcing local content, creating jobs, and generating tax revenues will certainly go a long way in earning social license to operate.
Finally, TransCanada CEO Russ Girling recently said he's "prepared for more scrutiny in our business." Good thing, since a Google search for "Keystone XL" yields more than 400,000 results, while "Ruby Pipeline" generates more than 500,000, suggesting both companies are getting exactly that.
Yet given this apparent commitment to transparency and all the interest around these projects, both companies' websites are fairly low-key. While both contain lots of information, neither discloses much detail regarding engagement activities, nor has either addressed head-on any of the recent events by which both are being judged.
Both companies should take Mr. Girling's statement to heart.
Image CC licensed by Flickr user Loozrboy.