EARNING AND MAINTAINING A SOCIAL LICENSE TO OPERATE: AN OPERATOR'S PERSPECTIVE
| Jurisdiction | United States |
EARNING AND MAINTAINING A SOCIAL LICENSE TO OPERATE: AN OPERATOR'S PERSPECTIVE
Lead Counsel - Rockies Anadarko
Petroleum Corporation *
Denver, CO
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JEFFREY R. FISKE is Lead Counsel for Anadarko Petroleum Corporation in Denver, Colorado. Following graduation from the University of Tulsa College of Law in 1981, Jeff began his career with ARCO Oil & Gas Company in Denver including a short stint in Bakersfield, California. He entered private practice in 1987 and spent over 13 years with a mid-sized Denver firm before returning to an in-house position in late 2000 with HS Resources, Inc. HS was later acquired by Kerr-McGee Corporation, which is now a part of Anadarko. Jeff has been an active member and is a former Trustee of the Rocky Mountain Mineral Law Foundation as well as a member of the American, Colorado, and Denver Bar Associations; the American Association of Professional Landmen; Denver Association of Petroleum Landmen; and the Denver Association of Oil and Gas Title Lawyers. Jeff has authored and presented numerous papers for the Rocky Mountain Mineral Law Foundation programs as well as the Colorado Bar Association and various other lease, land, and title organizations.
Introduction. The phrase, "social license to operate" is credited to Jim Cooney, a Canadian mining executive who in 1997 spoke at a meeting of the World Bank about mining operations around the world being shut down by protests and suggested "that there was something out there that wasn't covered by your government permits."1 It has subsequently been defined in various ways including "a community's perceptions of the acceptability of a company and its local operations."2 It also has been modeled graphically (see below), and is frequently is spoken of, in terms such as legitimacy, credibility, trust and social acceptance of a project.
Although born in the context of international mining operations, in a matter of twenty short years, the idea of social license has established a strong foothold, and a place in the lexicon of the oil and gas industry. Not only is social license now a key component of many operators' business strategies, it is also reflected in their organizational structure with the emergence of dedicated stakeholder engagement and community education teams. Some of the reasons for this rapid development of the social license conversation are discussed in more detail below, but they certainly have been influenced by (1) the convergence of increasingly intensive oil and
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gas activities with expanding urban communities and (2) the debate over climate change and the role of hydrocarbon-based fuels in the global energy picture.
Legal License versus Social License. The social license to operate has been described as being intangible, metaphorical, dynamic and non-permanent.3 This contrasts with the properties normally associated with a legal license which are tangible, durationally fixed and imbued with certainty of terms, obligations and requirements. Social and legal licenses can also be contrasted by the process required to secure each. It goes without saying that obtaining a legal license involves a process that the oil and gas industry is much more experienced in navigating with outcomes that are reasonably, or at least cautiously predictable, ultimately manageable, and result in "pieces of paper with signatures". An over-simplification to be sure, but an operator in need of a mere legal license (e.g., special use permit) to drill a well in a particular jurisdiction need only study the local oil and gas ordinance, confer with the necessary planning department officials and your roadmap to permit approval is reliably charted. Sometimes the process involves a virtual "check-the-box" list of requirements, materials and other information to be provided to the local permitting authority whereupon, if fully completed, approval of the application is non-discretionary.
In stark contrast, there is nothing about a social license that is non-discretionary. It is discretionary by definition and is based on requirements that are hard to capture or define, such as trust, credibility and perception; the sort of requirements that bottom-line oriented engineering managers have historically deposited in the "nice to have" rather than the "need to have" bucket. But that has changed dramatically in the past decade or so and ironically it is that very same bottom-line focus that has brought about the change. The need to attain social license has become a critical component of corporate strategy to manage external obstacles that might otherwise inject delay, uncertainty and higher costs into projects. Local community resistance can prevent a project from ever getting out of the starting gate or can lead to debilitating operational limitations, taxes and other constraints which diminish value throughout the project life. But securing a social license to operate, like a legal license, permits not only the commencement of operations but also a set of rules to be followed so that the project can be operated and completed within a range of predictable outcomes with investment expectations intact.
Legitimacy of Purpose. The cornerstone of social license is community belief in the legitimacy of the enterprise or activity; that it has a fundamental right to operate and that it provides inherent value, even if it comes with social costs. "The absence of legitimacy leads to rejection of a project, the presence of legitimacy and credibility leads to acceptance of a project ..."4 Many of the challenges encountered by the oil and gas industry in recent years provide and excellent illustration of this fundamental requirement. Over most of its industrial lifetime,
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there has been relatively widespread acceptance of the fact that the oil and gas industry improves people's lives, provides employment and enables economic growth. Therefore, it has possessed the legitimacy of purpose and the presumption of overall societal benefit that is essential to earning and retaining social license. But the industry has encountered stiff headwinds in recent years relating to this ground floor level requirement. The first such difficulty...
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