Social License to Operate

Deep Water Horizon April 20, 2010 rig exploded eventually leaking; September 19 well capped off 4.9 Million bbls crude oil released 800,000 bbls oil captured 1100 miles shore line affected encompassing 3 states $105 Billion Market Capital eroded from BP between April & June April 2016 before all litigation concluded 89.1 Billion Dollars spent in clean up/fines/lost revenue/settling claims

Pegasus Pipeline Burst in Mayflower AR on March 29, 2013 spilling about 3,190 barrels heavy Canadian bitumen Exxon’s repurposed 65 year old pipeline burst at a seam after Exxon failed to establish 5 years assessment program ExxonMobil settled charges State and Civil penalties totaling approximately $12 million Exxon did not admit liability

Aliso Canyon Gas Leak The second largest gas storage facility in the United States The Aliso Canyon natural gas storage facility contains 115 wells tapping a reservoir that holds up to 86 billion cubic feet of natural gas for distribution October 23, 2015 SoCalGas discovered gas escaping a well in the underground storage facility near Porter Ranch, Los Angeles The source of the leak was a piece of 7-inch (180 mm) casing in an injection well As of January 7, 2016, 2,824 households or about 11,296 people had been temporarily relocated Two schools were permanently relocated February 18, 2016 the well was permanently plugged Over 1100 lawsuits were filed. At this point approx. $1 Billion has been spent on remediation and relocation efforts. This does not include penalties and fines being assessed. Regulations limit the facility to 28% of capacity now, however this has let to a shortage of natural gas in the area…

Patterson UTI Rig #219 Explosion Pittsburg County, OK January 22, 2018 the rig exploded due to an uncontrolled gas release 16 persons escaped without injury; 1 worker was airlifted to a hospital, 5 persons died The single deadliest event in the industry in years…

How is it that we get to continue to do what we do? Leasing Land – sometimes from the same person/family… Drilling wells in people’s back yards… Get drilling permits from government regulators… Producing wells sometimes for 30 + years Gates Livestock Do you wave? How fast are you driving?

You become part of the community where your projects are located. Others become stakeholders… Stakeholders allow you to operate… Stakeholders withhold approval…

Stakeholders: “Community” in which you operate. Who are they? Landowners, their families and their friends…. Government regulators…. All vendors you do business with, their families and their friends…. Your employees, their families and their friends….

Even a small operation has a multiplier effect. You operate one well and you come into contact with many stakeholders. Our company operates 300 wells. “others are affected” and “others are watching” Take it for granted and the deterioration begins Take it serious and the value added is realized With the slightest of effort, you can change your trajectory to one of the extinction or one of prosperity…

Gaining the License: Usually granted on a site-specific basis License is granted by “the community” or “stakeholders”. Those that have something to gain or lose. A landowner can gain or lose from their association with you…. A vendor can gain or lose from their association… An employee can gain or lose from their association… Royalty owners can gain or lose from their association…

Can one lose something and another gain something……not really! If you work for a company and they pay you a salary and provide benefits, but don’t treat their landowners or royalty owners right, then in time that employee will also lose…

The project must be seen as legitimate before credibility is of value and both must be in place before meaningful trust can develop.

Conclusion How do you know if you have a Social License or not? Can you have a SLO and not know it? Can you be profitable and not have a SLO? Thank you…