Social License to Operate

Social License – Dan Brockett – Penn State

Producing, transporting and refining oil and natural gas requires a lot of formal review and agreement. A lease needs to be executed between parties, a permit to drill must be approved, and pipeline right of ways need to be reviewed and accepted. These activities generally require legal and technical compliance, but there’s an informal review and approval that many businesses in the oil and gas industry are striving for as well. It’s called “social license”. Social license is an informal measure of beliefs, perceptions and opinions of a community, and it’s not unique to the petroleum industry. A developer who wants to tear down an old building and build a shopping mall also depends on social license. So, why is social license important?

Well, populations usually find ways to express their views on operations. For example, parts of Europe and a few towns and cities in the US have banned hydraulic fracturing. Without social license, land owners may not be willing to cooperate and local regulations may be passed to severely disrupt plans. Even when local regulations and protests are overcome, the effects are costly in time, money and especially reputation. Social license also applies to regulatory agencies. Without social license, the public may not trust agencies responsible for oil and gas regulatory oversight to protect them. This makes it difficult for regulatory agency personnel to do their job.

Public concerns about an operation affecting social license can be local or global. Local concerns tend to be specific, a project site or a local road. Global concerns tend to be more general, global warming or human health. Using hydraulic fracturing as an example, localized concerns might include noise, lights and traffic. These are issues that can be mitigated or lessened, but not eliminated. Being responsive can go a long way in building local trust and acceptance. For example, it might be helpful to provide a driving tour of reclaimed production sites. Most of the equipment is gone, the grass is growing, and the site sounds and traffic jams affiliated with drilling are now mostly absent. So, locals can see that the after-effects are often quite benign. Other local issues may be about water and air quality. These concerns hinge on science and regulation. But, some water and air issues are perceived, or feared, without any symptoms. Nothing has gone wrong, but people worry about what could go wrong.

Producers and regulatory agencies need to provide information and assurances that agency inspectors are on the job to protect air and water. You know, sometimes there may be false correlations. For example, a farmer goes to her barn one day and finds a dead calf. The farmer notes, “This is the second dead calf since a nearby drilling rig went up.” She thinks the drilling rig may have led to the calf’s death. The operator and regulatory agency investigate, but they can’t find any problems. So, at this point, the operator and regulatory agency might consider the matters closed and they may not give it any more attention. But, seeing a lack of concern for something that’s foremost on her mind, the farmer might conclude that no one cares or even that the regulatory agency is colluding with the operator. Global concerns could be even harder to deal with than local concerns. Some people, even those living hundreds of miles from the closest drilling site, have very strong unwavering opinions about hydraulic fracturing. But many people, even if they’re leaning in one direction or the other, are open to hearing new information.

So, what are some ways producers, contractors, regulatory agencies and others can gain social license? A good place to start is education and engagement. First, make sure all stakeholders understand the scope of the project and their concerns are addressed clearly and respectfully. Promises need to be kept; follow through is critical. One of the best methods of maintaining social license is one-on-one engagement between the project managers and individual stakeholders. Listening to individuals and understanding their concerns is more effective than pointing out flaws in public perceptions. Even if someone is misinformed, they may be acting out of genuine concern. Building personal relationships gives stakeholders a sense of active participation and allows them to put a human face on the project. Ideally, this creates genuine trust and stakeholders being to personally identify with the project.

Social license to operate is intangible and fluid, and is a result of the ever-changing dynamic between individuals, groups and organizations. By being good neighbors, engaged members of the community and committing to outreach, oil and gas companies and regulatory agencies can help ensure operational safety, security and sustainability.

1. The Ethics Centre. (2018, January 23). Ethics Explainer: Social license to operate, Retrieved 1/5/2023 from https://ethics.org.au/ethics-explainer-social-license-to-operate/