Thursday, October 02, 2014

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Drew EGC Report

Survey Research and Shale Gas: 'Tell me how you really feel...'

In attempts to discern how people actually feel about the risks involved with shale gas development, Alan Krupnick, Senior Fellow at Resources for the Future, and Director, Center for Energy Economics and Policy, asked survey participants to “put their money where their heart lies,” i.e. tease out how they really feel about such risks if they had to pay for them.

He explains: “A lot of groups will ask people their attitudes about risks of various sorts, or shale gas development for that matter, but our feeling as economists is, you have to force people to give up something – you really learn their attitudes if you say 'this is going to cost something – do you still have that attitude? Are you willing to pay something to actually bring about reductions in risk?' As opposed to 'How strongly do you think risk reductions should be? How important do you think they are but, by the way, it's no cost to me?'

“So we don't think that's a useful way of asking that question. We ask 'willingness to pay' questions in addition to attitudinal questions,” he explains.

Mr. Krupnick presented the findings of his survey, which was conducted in Texas and Pennsylvania (and whose executive summary is available here), at the recent North American Gas Forum, which took place in Washington, DC.

He explains that his Center for Energy Economics and Policy is a non-profit, non advocacy research organization that has been around for 60 years, whose aims include developing a better understanding of environmental and energy issues, generating new knowledge and taking it to policymakers to improve the way in which society regulates and treats energy and environmental problems.

Eight hundred residents from each state were randomly sampled for the shale gas survey. Mr. Krupnick says that his institute's bias going into the shale gas study was that the Texans would have been skewed towards support for unconventional gas, while the Pennsylvanians might have leaned towards opposition. “Particularly, because the random sample in both of these states means that we're sampling where the people are in proportion to where they live, and since they're mostly in cities in Pennsylvania you're getting people in Philadelphia, which is the largest block. with Pittsburgh as the second largest block.

“People in cities tend to be more liberal and, other things equal, I think would be more opposed to shale gas development than people, let's say, in Texas in cities: Houston, Dallas, which are the energy capitals of the world; the liberals are in Austin, but there's not that many of them,” adds Mr. Krupnick.

According to him, it was surprising to see so much similarity between the two groups, and the fact that overall there was support for shale gas, even in Pennsylvania.

Given the moratorium in New York state and the bans and moratoriums in counties and cities across the US, he offered his perspectives to the industry and policymakers on opposition to unconventional gas.

“Our research would say the industry needs to get a lot better in communicating with the public. The public doesn't trust industry - they can pick out an industry message a mile away and can react negatively to that message. So industry needs to get its act together for better messaging – and that means being transparent, more honest, recognizing that these activists are not crazy; they have a point of view that's aided and abetted by industry's seeming lack of ability to communicate with them,” he explains.

Industry could also work more closely with NGOs, he says.

“The fact is,” says Mr. Krupnick, “there is a lot of uncertainty about what the risks really are. So in an area of extreme uncertainty in certain areas, then people who are naturally disposed of as being against the industry, against big business, capitalism or whatever are going to take one end of that uncertainty spectrum and assume it's true, and people who are more in favor of growth/economic development are going to take the other.”

That's why, he opines, industry needs to help narrow that “band of uncertainty.”

“Even in areas where they don't think there's uncertainty, the public does. Speaking as an unaligned research organization, I think there are major areas where there is uncertainty. Industry and the regulators need to be a lot more transparent about the data they collect, making it available, collecting more than they already do, making it available for analysis to try and reduce those ranges of uncertainty: reduce how far the activists can get off the reservation on one way and the supporters can get off on the other way.”

But is it a matter of the industry just being too reserved or does oil and gas have something to hide?

He explains, “I think big companies in particular don't have stuff to hide. I'm not a big believer in conspiracy theories. We've seen from BP's oil spill that companies can have cultures that do not promote precaution, sustainability in general, transparency. We've seen this with Exxon and the Exxon Valdez, and have seen it with BP. There's a 'fight' rather than a 'switch' or 'talk mentality.' So the companies have definite responsibilities to improve in those regards.”

Mr. Krupnick reports that the message of increased transparency is being heard more and more at industry conferences.

“Even the most ardent community activists want to see greater transparency,” he says. “They think they're going to find all kinds of smoking guns, and to the extent there are not smoking guns it will be hard for industry to convince the activists that there are none.

“That's where institutions like ours come in,” he says of the Center for Energy Economics and Policy, “where people know that we and others like us are not aligned and so 'you can trust us' - some academicians, the Environmental Defense Fund (EDF) and others operating in this space say.” 

Still, he admits that industry probably won't ever trust the Sierra Club, but the Nature Conservancy and EDF are two institutions that have a lot of credibility, both with the public and industry.

As for other bodies who could fulfill the role of “honest broker” between the oil and gas industry and the public, he adds, “It's more than just brokering, which sounds like you're just bringing two groups together on safe territory; it's an ability to analyze on a fair, thorough and state of the art way that's also important.”

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