The paradox of progress: conflicting priorities at the energy frontier

by Jed Bailey | January 26, 2012   

 

 

Rising global affluence is putting energy producers in a difficult position. Economic growth implies greater energy demand, particularly in those countries that are rapidly industrializing and urbanizing. New energy resources are needed to meet growing demand and replace resources that are depleted. This forces energy suppliers to move into new production frontiers in two ways: geographic—deeper into offshore waters, interior jungles, and closer to population centers and protected spaces—or technological—with ever larger and more efficient machinery, deeper wells, and improved processes and techniques.

As the energy frontier expands to new geographies, the risk of causing environmental damage—whether from daily operations or an accident—as well as the impact of such damage, increases. At the same time, richer societies tend to value the environment more highly. This paradox of rising affluence simultaneously driving greater demands on the environment and greater demands for environmental protection is further complicated by today’s instantaneous communications and the 24-hour news cycle.

Symptoms of this underlying tension can be found throughout the global energy industry. Protests against major hydro projects stretch from Brazil and Chile to Laos and China; hydrocarbon exploration is pushing deeper into the jungle and under the ocean even as companies face massive fines and lawsuits for oil spills from the Gulf of Mexico to Ecuador to Brazil; in the United States, environmental protesters, aiming to limit Canada’s oil sands development, won a temporary delay to the proposed Keystone XL pipeline just two weeks after PetroChina acquired full control of its Mackay River joint venture project, capping nearly $20 billion of Chinese investment in Canada’s oil sands industry.

This report presents an assessment of the environmental tensions facing energy producers today, accompanied by two opposing viewpoints on how energy companies should address the problem: by promoting environmental safeguards beyond the minimum required in order to build stakeholder support and differentiate, or by concentrating on the company’s core businesses within the traditional regulatory structure.

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