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ExxonMobil CEO Says Educating Operators, Regulators is Key for Smooth E&P Operations

Adequate state regulatory regimes for oil and natural gas drilling are in place, but it still takes compliant operators -- and knowledgeable regulators -- to ease public concerns about safety and environmental risks, ExxonMobil Corp. CEO Rex Tillerson said last Wednesday.

Several shareholders questioned Tillerson during the company’s annual meeting in Dallas about what more could be done to placate concerns about the impacts from unconventional drilling.

"I think all the elements are being put in place," both through state regimes and through industry group standards, he said. It's more a question of "how do you lift the performance of those that may not be rigidly and rigorously applying the standards that we know. If those standards are followed, you're not going to have any issues and problems. I think that comes with enforcing the regulations," not adding more. If the rules now in place aren't being followed, the state regulators "need to deal with that."

Getting fellow exploration and production companies to follow the rules would "lift the performance of the entire industry," he said. ExxonMobil attempts to do that through partnerships with other operators.

"Within the industry, a lot of us are in joint ventures, where we own a piece of the acreage and someone else owns a piece," Tillerson said. In those situations, whether ExxonMobil is the operator or not, it still is able to hold its partners "accountable" to adhering to the rules.

The supermajor isn't only playing follow the leader; it also is working to ensure individual state regulators understand what drilling is all about. ExxonMobil has partnered with General Electric in a joint $2 million funding program at state universities in Texas, Oklahoma, Colorado and Pennsylvania to train regulators about the drilling process (see Shale Daily, March 9, 2012). Those programs provide a better understanding for the way the industry works, at least the way ExxonMobil wants it to work.

"That is the best way to lift the competitiveness of all the others," said the CEO.

Educating the public and regulators about how important energy is in their lives remains a paramount effort of ExxonMobil.

"A large portion of our efforts over the last two to three years have been to begin to elevate the public's awareness of how important energy is in their daily lives, in order to have them be willing to engage in a next level of conversation about why these things are important and why these issues are important...It is one of our great challenges: how to engage the public broadly in issues that are often times complicated and mysterious to them. I can assure you we do not shrug from that..."

ExxonMobil has a speakers' bureau that goes to local communities to talk with various Kiwanis and Rotary clubs, parent teacher associations and chambers of commerce. The speakers "know the business better than anyone in order to put that face out there to engage with local communities and address the concerns and questions they have. That's an effort we'll continue. But it's something that we just have to continue to work at daily. And it is always a bit of a judgment of where do you want to set the dial on trying to help people understand this."

More still needs to be done to help convey that message of responsibility to the general public. For ExxonMobil, a major initiative is water maintenance. On that front, ExxonMobil engineers have been advancing recycling water levels used in drilling and completion activities in all of the onshore basins.

"That's probably the quickest thing we can do in areas like Pennsylvania, where people's concern is much not so much about the water supply [but] about the water disposal," said Tillerson. Elsewhere, like in drought-plagued Texas, water recycling/reuse has become "keenly important," and major efforts are in place in West Texas, where Permian Basin operations are ongoing, and in the Eagle Ford Shale in South Texas.

ExxonMobil also is working on different types of drilling and completion technologies, particularly for fracturing, that won't require water. "There are a number of processes that we evaluate," but so far, they haven't proved cost effective. "There's more work needed to advance those, and they may yet become more attractive, particularly in areas where water cost are extremely high."

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