Social License: Risk Management or Mob Rule?

Below are excerpts taken from an article written by Pat Roche of the Daily Oil Bulletin. The excerpts we're pulled from the article because we feel as though they're the most relevant and important pieces of information; however, the full article is available here: http://www.dailyoilbulletin.com/article/2015/11/26/social-licence-risk-management-or-mob-rule/ 

Excerpt 1

Crowley sees the three top challenges facing Canada’s oil and gas industry as public ignorance about how a natural resource economy works, the rise of the social licence movement, and the growing power and authority of Aboriginal people over decision making in the natural resource economy (see separate story).

He sees ignorance of how a natural resource economy works as by far the biggest challenge: “All the other challenges — things like environmental policy and so on — flow from that ignorance on the part of the public. I’m not blaming the public for being ignorant; it’s industry and governments that have the responsibility to make sure there’s a level of understanding that allows the necessary policies to be put in place.”

A frequent international speaker, Crowley often hears from foreigners how lucky Canada is to have such a rich endowment of natural resources.

But he pointed out many other nations — from Russia to Angola to Indonesia — also enjoy big endowments of natural resources. “If that was a secret to wealth, those countries would be wealthy like Canada. But instead, they’re not. I’ve been to many of those countries and you wouldn’t choose to live there if you had a chance to live in Canada instead.”

“What we have, and what they don’t have, is a natural resource endowment ... nested inside an endowment of institutions [that] created the certainty which unlocks the investment on which the natural resource economy depends,” Crowley argued.

What are “institutional endowments”? Crowley listed several concepts: The rule of law; democracy; judicial independence; robust property rights; respect of contract; speedy, authoritative and non-violent dispute resolution; non-corrupt police and bureaucracy; a stable regulatory and tax burden; a strong work ethic; and, last but not least for his audience of accountants, strong accounting standards.

Excerpt 2

He argued development of the natural resource economy today — particularly the oil and gas economy — is being increasingly obstructed by a movement appealing to the concept of social licence.

“Social licence matters because its rise goes right to the heart of the certainty that I’m arguing needs to characterize the institutional framework for the natural resource economy,” Crowley said.

“It used to be that the framework for the development of our resources looked pretty clear. Provinces generally owned the resources and they set a regulatory and tax framework. Developers who wanted to develop resources knew in advance what the rules were. ... Regulatory proceedings were not intended to be a place for the desirability of development, per se, … to be debated. They were instead an evidence-based technical inquiry about whether the project proponents had satisfied the regulatory requirements.”

All of this occurred in a climate of public opinion that generally held that well-designed and well-run natural resource developments were in the public interest.

“Anyone who follows these things will know that there is increasing evidence that the old political consensus in favour of natural resource development is breaking down ... and with it, the confidence in, and deference towards, our generally excellent regulatory proceedings,” Crowley said.

He blamed this breakdown on vocal minorities trying to stop natural resource development by using emotion and chaos to hijack the very institutions that were created to ensure an orderly and thoughtful approval process.

“One of the greatest challenges that we face is the undermining of the institutions that surround decisions about development,” he said. “As long as we continue to fight a rearguard action in defence of individual projects — as opposed to a defence of the institutions that we have created to make sure they meet the right standards ... I believe we will always be on the defensive, and we’ll increasingly see projects fail as a result.”