National Academy of Sciences
Washington, DC
December 1, 2016
Mark K. Boling President
Unconventional Hydrocarbon Development:
Strategies for Managing Risks and Minimizing Negative Legacy Issues
IDENTIFY the risks
1 Implement strategies to
MITIGATE the risks
3 ASSESS
the probability of occurrence and potential
impact of each risk
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1 3 2
Risk Management
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PERCEIVED RISK
ACTUAL RISK RISK INFORMATION
GAP
Assessing Risk
ACTUAL RISK
PERCEIVED RISK
COLLABORATION AND RISK
COMMUNICATION
EFFECTIVE RISK MANAGEMENT
PERCEIVED RISK
ACTUAL RISK
PUBLIC TRUST & ACCEPTANCE
ACTUAL RISK
PERCEIVED RISK
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Mitigating Risk by Influencing Behavior
Regulatory Influencers • Command-and-Control Regulations
- Regulations that dictate specific technologies or practices for conducting operations.
• Performance-Based Regulations - Regulations that establish performance standards and allow
industry some operational flexibility in determining how to meet such standards.
• Incentive-Based Regulations - Regulations that encourage private investment to achieve
public policy objectives unrelated to the risk mitigation goals of regulation.
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Mitigating Risk by Influencing Behavior
Stakeholder Opinions • Investors
- Actions taken by institutional investors, wall street analysts, rating agencies, etc. that influence a company’s behavior (e.g. influencing the public’s desire to own the company’s stock).
• Consumers - Actions taken by consumers of the company’s product that
change the company’s behavior (e.g. exerting their collective purchasing power).
• Public - Actions or opinions expressed by a significant number of
individuals that either directly or indirectly influence a company’s behavior (e.g., concern over losing their social license to operate; changing political pressures)
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Mitigating Risk by Influencing Behavior
Internal Influencers • “Tone-at-the-Top” • Incentive Compensation
- Internal company standards of performance that • Target the specific environmental
and/or social impacts that need changing • Establish appropriate metrics for measuring the
achievement of the performance goals • Provide meaningful incentive compensation for achieving
or surpassing the stated goals
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FRESH WATER AQUIFER ZONE
SHALLOW PRODUCING ZONE
CONDUCTOR PIPE
SURFACE CASING
PRODUCTION CASING
TARGET PRODUCING ZONE
MITIGATING WELL INTEGRITY RISKS
1. Assess adequacy of current well integrity regulations.
2. Incentivize advancements in cement chemistry and cementing practices.
3. Incentivize development of new cement evaluation tools.
Mitigating Water Risks
1. Require Integrated Water Management Plan addressing all water use, recycling, treatment, transportation and disposal issues.
2. Incentivize development of technologies that reduce/eliminate fresh water as the base fluid for hydraulic fracturing.
3. Resolve regulatory barriers to maximizing recycling, on-site treatment and centralized treatment of wastewater.
4. Assess adequacy of regulations designed to mitigate induced seismicity risks.
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