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think global. CRITICAL THINKING AT THE CRITICAL TIME. Public Policy and PR Impacts of Water Management DPEC Meeting February 14, 2014

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Page 1: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

think global.

CR

ITICA

L THIN

KIN

G A

T THE

CR

ITICA

L TIME

.

Public Policy and PR Impacts of Water Management DPEC Meeting

February 14, 2014

Page 2: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

BEHIND THE HEADLINES. The company

Page 3: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate
Page 4: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Advising Across a Global Economy

Page 5: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Offering a Distinct Risk-Management Platform

Our distinctive risk-management platform is comprised of focused business

segments that work together seamlessly to deliver solutions for complex

challenges and opportunities.

PUBLIC AFFAIRS

Crisis Communications

Issues Management

Media Relations / Training

Governmental Relations

Stakeholder Engagement

Public Opinion Research

Advocacy Campaigns

CORPORATE

COMMUINICATIONS

Employee Engagement

Change Management

Corporate Branding

Corporate Social

Responsibility

Digital & Social Media

FINANCIAL

COMMUNICATIONS

IPO / M&A

Investor Relations

Activists Defense

Page 6: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

End of Commercial Let’s talk about something else

Page 7: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

The Bad News:

Oct. 3 - The $700 billion bailout bill for the US

financial system is signed by President George

W. Bush.

Oct . 6 - The Dow Jones industrial average falls

by as much as 800.06 points, its biggest

intraday drop on record; the Dow closed below

the 10,000 mark for the first time since October

26, 2004.

Oct. 24 - "Bloody Friday" saw many of the

world's stock exchanges experienced the worst

declines in their history, with drops of around

10% in most indices.

The Good News:

Petrohawk completes the first successful well in

the Eagle Ford Shale, the STS #241-1H

October 2008

Page 8: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

The Next Four Years

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

1 2 3 4

US GDP Growth Rate:

Texas GDP GrowthRate:

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

1 2 3 4

US UnemploymentRate:

Texas UnemploymentRate:

2009 2010 2011 2012 2009 2010 2011 2012

US v TX GDP Growth US v Texas Unemployment

Note: From July 2009 through June 2011, Texas created 49% of US new jobs

Page 9: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Texas Daily Oil Production

Page 10: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Weekly US Crude Oil Production

Page 11: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Net Petroleum Imports: Share of US Consumption

Page 12: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

In mid-2009, Texas produced < 20% of US total Crude

Today it produces > 35% of US Crude, and 30% of US Natural Gas

If Texas were a country, it would be the 9th-largest oil producing nation on earth

If Texas were a country, it would be the 3rd-largest natural gas producer on earth

48% of all US drilling rigs were in Texas in December

25% of all rigs on earth were in Texas

Texas Budget has moved from chronic structural deficits to

large ongoing surpluses

Fun Texas Factoids

Page 13: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Answer: Technology

Horizontal Drilling

Multi-stage frac jobs

Why has all this happened?

Thank you, George Mitchell

Page 14: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

This all great stuff… But what are the constraints to growth?

• Traffic and road impacts • A qualified and trained workforce • Housing and other critical infrastructure

..and most importantly…

•Water

Page 15: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Some big shale plays underlie water-poor, arid regions

- Eagle Ford

- Bakken

- Permian Basin

- DJ Basin

Some of these same areas in long-term droughts

Industry operations are very visible – lines of big trucks rolling down highways, through small

towns

In many areas – especially new shale plays – industry is the “last user in”

Water – why the industry gets the blame

Page 16: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

A Texan tragedy: ample oil, no water Fracking boom sucks away precious water from beneath the ground,

leaving cattle dead, farms bone-dry and people thirsty

30,000 Facebook shares

2,000 Tweets

Houston Chronicle Editorial

Dozens of Repetitions in Other Media Outlets

UK Guardian Article

Page 17: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Barnhardt is in the Middle of the West Texas desert – Water shortages there are an historic

way of life

Really did not run out of water – the pump broke, not once but twice

Texas is in the fifth year of what could ultimately become the Drought of Record, surpassing

the historic drought of the 1950s

West Texas is now more than a decade removed from the last flooding rains from a Tropical

Storm

Most producers in the area aren’t even taking their water from the shallow drinking water

aquifers

Texas Water Development Board admits that oil and gas accounts for only about 1% of the

state’s water usage

Best news: Barnhardt recent recipient of a $350k grant from Texas Dept. of Agriculture to

drill a new, deeper water well

Yet, the industry takes the full blame in this recent series of media articles

What’s the Truth?

Page 18: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

The answer today is the same as it has been for the last 160+ years:

Technology

This must change, but how?

Page 19: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Shale plays: R&D Laboratories in the field for water treatment and recycling technologies:

- Fountain Quail

- PureStream

- Aquatech

- Energy Water Solutions

- many others…

Water Solutions – What’s happening

Page 20: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Disclosure Issue: Industry solved it by supporting legislation

Frac Water Issue: Industry is solving it by moving away from fresh water

This is critical because it takes the industry out of competition with drinking water and

agricultural uses

Once this is achieved, public concern will diminish rapidly

Water is an emotional issue – this takes the emotion out of the equation

Industry MUST get better at telling its own story, because

no one in the media is going to do it for them

Key to Winning the Future: Getting Off Fresh Water

Page 21: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

2013 Legislative Session:

Lots of hearings, discussion around funding state water plan

Effort succeeded via one-time allocation of $2.2 billion from Rainy Day Fund – voters

approved via November ballot initiative

Plan focuses on new dams, surface reservoirs, municipal infrastructure, conservation

and recycling projects – all good stuff

Virtually no discussion around use of underground brackish water

Reality: Beneath the Texas surface lie v

irtually inexhaustible supplies of brackish water

Especially abundant in West Texas,

and along the Gulf Coast

Best Kept Secret in Texas: Brackish Water

Page 22: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Halliburton – H2OforwardSM – successful test

using frac fluids with water TDS of up to 285,000

ppm

Other service companies working on their own

proprietary technologies

Apache Corp. now using brackish/recycled water for

all fracs in one West TX production area

Energy Water Solutions/EP Energy

Recycling in Eagle Ford Shale

Propane Fracs

Butane Fracs

The Move is Already Underway

Halliburton’s Global Strategic Business Manager of Water Management

Solutions, refers to H2OForwardSM as “…a paradigm shift that negates the use

of fresh water and meets the supply chain needs of the customer.”

All designed to

reduce fresh water

use

Page 23: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

Public Perception, largely impacted by media coverage, and largely based on emotion

rather than reality, matters.

It can impact your bottom line

It can impact your workers’ ability to get their jobs done

It can impact your company’s reputation

And it can threaten your license to operate

Bottom Line for the Industry:

Page 24: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

THANK YOU.

Page 25: Our Perspective on Digital Communication · Stakeholder Engagement Public Opinion Research Advocacy Campaigns CORPORATE COMMUINICATIONS Employee Engagement Change Management Corporate

About

David Blackmon

Managing Director, Energy and Natural Resources

Strategic Communications

1001 Fannin Street, Suite 1400 Houston, TX 77002

Tel: (832) 667.5158, Fax: (713) 353-5459

[email protected]

David Blackmon is a managing director in the FTI Consulting Strategic Communications practice and is based in Houston, Texas.

Throughout his 33-year career in the oil and natural gas industry, David has led industry-wide efforts to develop and implement

strategies to address key issues at the local, state and federal level.

Prior to joining FTI Consulting in 2012, David served for five years as Director of Government Affairs for EP Energy, LLC. Prior to joining

El Paso, David was Manager for Shell E&P North America's internal and external communications. Before Shell, he was at Burlington

Resources for 18 years where he became their Senior Manager of Corporate Affairs. He has also had previous stops at companies like

Tesoro Petroleum, Hughes Texas Petroleum Ltd, and Coastal States Oil and Gas Co.

From April 2010 through June 2012, David served as the Texas State Lead for America’s Natural Gas Alliance, where he played a key

role in the passage of two major pieces of legislation during the 2011 session of the Texas Legislature. He is past Chairman of

Department of Interior’s Royalty Policy Committee, and a long-time Vice Chair of IPAA’s Land and Royalty Committee. He chaired the

Access and Environmental Subcommittee for the National Petroleum Council’s 2003 North American Natural Gas Study, and served

as industry representative on two negotiated rule-making committees created through the Department of Interior. David has testified

before various congressional and legislative committees on topics such as oil and gas valuation for federal and Indian royalties,

producer obligations to fee royalty owners and on energy education.

David attended Texas A&I University and The University of Texas, earning a B.A. in accounting.

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