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By Root 2165 0

I was told, when New Guinean landowners learned that Chevron was contemplating constructing a road to an oil site, they rushed out and planted coffee trees along the proposed route, so that they could claim damages for each coffee tree uprooted. That’s an argument for keeping forest clearance to a minimum by making roads as narrow as possible, and by accessing drill sites by helicopter whenever possible. But the much bigger risk was that landowners angry at damage to their land might shut down the entire oil project. My informant’s mention of Bougainville refers to what had been Papua New Guinea’s biggest investment and development project, its Bougainville copper mine, which was shut down by landowners angry at environmental damage in 1989, and which has never reopened despite the efforts of the country’s minuscule police force and army that provoked a civil war. The fate of the Bougainville mine warned Chevron of the likely fate of the Kutubu oil field if it too caused environmental damage.

Another warning sign for Chevron was the Point Arguello oil field, discovered by Chevron off the coast of California in 1981, which was estimated to be the largest oil find in the U.S. since the discovery of the Prudhoe Bay field. As a result of public disenchantment with oil companies, local community opposition, and layer after onerous layer of government regulatory delays, oil production could not begin until 10 years later, and Chevron ended up with a large write-down on its investment. The Kutubu oil field gave Chevron the opportunity to refute that disenchantment by showing that it would take excellent care of the environment without being prodded by overly stringent government regulation.

In that respect the Kutubu project illustrates the value of anticipating increasingly rigorous government environmental standards. The trend throughout the world (with obvious exceptions) is for governments, as the years pass, to demand more rather than less rigorous environmental precautions. Even developing countries from which one might not at first have expected environmental concerns are becoming more and more demanding. For example, one Chevron employee working in Bahrain told me that, when he recently drilled another offshore well there, the Bahrain government for the first time required a detailed expensive environmental impact plan that provided for environmental monitoring during drilling, assessment of impacts after drilling, and minimizing effects on dugongs and on a breeding colony of cormorants. Oil companies have learned that it is far cheaper to build a clean facility incorporating environmental precautions at the outset, than to retrofit that facility later when government standards become tightened. The companies have come to expect that, if a country in which they are operating is not environmentally aware now, it is likely to become so within the lifetime of the facility.

Still a further advantage to Chevron’s environmentally clean practices is that the reputation it has thereby gained sometimes gives it a competitive advantage in obtaining contracts. For example, recently the government of Norway, a country whose people and government today are very concerned about environmental issues, solicited bids for development of an oil/gas field in the North Sea. Chevron was among the firms bidding, and it succeeded in winning the contract, probably in part because of its good environmental reputation. If that was indeed the case, then some friends within Chevron suggested to me that the Norwegian contract might have been the biggest single financial benefit to the company from its rigid environmental safeguards in the Kutubu oil fields.

A company’s audience includes not only the public, governments, and local landowners, but also its employees. An oil field poses especially complicated technological, construction, and management problems, and a large fraction of oil company employees have higher education and advanced degrees. They tend to be environmentally aware. It is expensive to train them, and their salaries are high.