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GasMart 2011: Sustain Future with Public's Support, Say Experts

Natural gas producers are developing shale across North America, but if the industry were to lose the public's support, it also could lose its access to the massive reserves, an industry executive said Wednesday.

Speaking at GasMart 2011 in Chicago, industry experts from across the energy sector addressed how to sustain the industry as it deals with oversupply issues and criticism from vocal opponents.

Alcoa Inc.'s Dave Ciarlone, who manages Global Energy Services for the leading aluminum producer, moderated a diverse panel on the opening day of the conference. Also sharing the panel were CenterPoint Energy Services' Dick Snyder, division vice president of Business Development; Schlumberger's Jeff Spath, vice president of industry affairs; John Hanger, special counsel for Eckert Seamans; Terry Engelder, professor of geosciences at Pennsylvania State University; and Financial Dynamics' Chris Tucker, a senior vice president.

"I clearly remember how a promising energy technology, the nuclear industry, lost the confidence of the public and billions of dollars that had been invested were abandoned," Ciarlone said. "It's been 30 years since Three Mile Island, and nuclear is just gaining traction again...

"I'm more concerned, with each adverse study about shale and public reaction...there's just too many times and then you become sort of tone deaf. It's self defeating...Without significant changes, shale gas, like nuclear power, could be more remembered for promises made than hopes realized."

Other speakers also voiced concerns about what has to be done better going forward.

"We probably didn't do ourselves any good by reluctantly admitting to the chemicals" used in hydraulic fracturing, said Schlumberger's Spath. Once asked, the top service providers "released a chemical list of ingredients, not the formula. But we could have done it much earlier in hindsight, and not delay" when asked by the Environmental Protection Agency to disclose the chemicals used (see Daily GPI, Nov. 16, 2010; Nov. 10, 2010).

Ciarlone doesn't think the shale gas industry has "reached a point of no return, like Three Mile Island...It was devastating not only because of the severity of what happened, but because the impact reinforced the public's worst fears before the industry had built a foundation of trust."

The shale gas industry, he said, "seems to be where nuclear was in 1978...and there are still opportunities to make changes to gain the public's trust. For shale gas to continue to grow as envisioned, the industry needs to make changes."

The natural gas industry's shale developments have "the potential to fuel a renaissance in the United States," Ciarlone told the audience. "It's easy for end-users to seek stable prices and predictability for the future, but there also is a growing manufacturing sector created by the middle class...that has created tens of thousands of jobs in the energy sector..."

Better "engagement" with the public is key, he told the audience. "People can have their own set of facts," and when the industry representatives meet with the public, he said the discussions need to be rational, not emotional. "Durable agreements are built upon trust, not data."

Embracing "reasonable regulation" also is important, said the Alcoa executive. The "first step is to openly acknowledge the hazards and reasonable fears" and welcome public input. In addition, the industry must continue to "adopt, promote and share" best practices.

"As an end-user, we can't afford to wait," he said. "Every day we must choose to be transparent and accountable."

Hanger, who is the former secretary of the Pennsylvania Department of Environmental Protection (DEP), said the gas industry has to "protect the brand and understand that it is under assault." The impact on water from drilling wastewater on streams, private water wells and withdrawals "is the No. 1 issue whether it's real or not...When there are operational problems and accidents, the media is all over it...

"I've told people time and time again that drilling is an industrial process. Even when it is done excellently, it's not perfect."

Specific concerns have to be addressed, Hanger noted. In the Marcellus Shale, for instance, the public is concerned about truck traffic and its impacts. The public also favors taxing gas producers for production in the massive shale.

Proper enforcement of drilling regulations by the regulators -- with the support of industry -- "is critical to maintaining public support," said Hanger. The Pennsylvania DEP issued 1,200 violations during 2010. Because the "credibility of regulations and regulators is greatly under siege...I think it's absolutely vital that regulators are independent of all involved...not be a friend or foe to anybody..."

Tucker, who also is spokesman for the national shale gas education initiative known as Energy In Depth, said criticism of operations within the Marcellus Shale has shifted since drilling ramped up considerably in 2008. "Local concerns" such as noise, dust and trucks accounted for 90% of the complaints then while 10% were "ideological concerns" such as water, air and chemical contamination concerns.

Today around 35% of the complaints center are local concerns; 65% are ideological, Tucker said.

Energy In Depth distributes fact sheets, provides an up-to-date library and "holds the opposition to account" by giving interviews that offer the other side of the story. But it's a constant battle, said Tucker.

"It takes six seconds for a complaint versus 16 minutes to refute," he said. "They deal in bumper stickers, we have to explain..."

Tucker was asked if the problems that have occurred in the gas patch were the result of poor technology or the poor use of technology.

"The vast majority" of the accidents that have occurred in shale operations "are human error," he said. "Humans continue to do the job for us..." and the "general public is a new audience...It's not just Wall Street, it's not just regulators..."

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