Two resource projects in the northern UK highlight the commercial importance for companies of responsibly and proactively managing environmental and stakeholder issues
Critical Resource conducts much of its work in developing countries where complex socio-political currents and far-reaching environmental issues are a particular challenge to extractive industries. However, projects in OECD countries often experience similar if not greater challenges of political opposition and scepticism from environmental groups. Even if the specifics of the issues may differ, navigating them responsibly is no less essential to commercial success
As part of the process of further expanding the LicenseSecure™ database Critical Resource team members recently undertook on the ground research and interviews with stakeholders and executives around two small but significant UK projects – namely Scotgold Resources’ Cononish gold mine in the Loch Lomond and Trossachs national park, and Cuadrilla’s Bowland shale gas project near Preston in Lancashire.
As this was not client work and therefore not confidential, some basic findings are highlighted below. Please note that, as with other Critical Resource news content, this article does not necessarily reflect the views of the Senior Advisory Panel for LicenseSecure and has not been reviewed or approved by the members of the Panel.
Cononish Gold, Tyndrum, Scotland
Scotgold Resources has been trying to obtain planning permission to reopen an old gold and silver mine located within Loch Lomond and the Trossachs national park, Scotland, since 2009. Their proposal was narrowly rejected by the national park board last year, but a revised application has just been approved.
Current stakeholder attitudes
- The mine currently enjoys significant support from local communities, councillors and business-owners hoping for an economic boost in this rural area.
- Regional and national bodies such as Scottish Natural Heritage, the Scottish Environmental Protection Agency and the John Muir Trust, a conservation charity, withdrew objections raised last year and expressed support or neutrality to the new mine design.
- Although some local interest groups, such as the ‘Friends of Loch Lomond and the Trossachs’, as well as Scottish Campaign for National Parks, do not support the mine, there have not been any public protests or campaigns against Scotgold’s plans.
- The national park’s planning authority, probably the most influential stakeholder in this debate, has now also recommended that the mine be allowed to go ahead. The park’s board, which has the final vote on the matter, followed this recommendation.
Potential long term issues
- The mine is located in a highly sensitive and important natural environment, designated a national park and a Site of Special Scientific Interest and protected by Scottish, UK and European regulations. Scotgold will face on-going monitoring of its environmental impacts, and, once the mine closes, will be required to follow through on its well-developed restoration plans. Notwithstanding the current local support, ensuring it meets its commitments and effectively mitigates environmental risks will likely be critical over the long term.
- Another potential challenge is that local communities have very high expectations for the mine’s long term economic impact in terms of employment and tourist revenue for the area. If, over time, they feel those hopes have not been met, some of the local support for Scotgold could potentially erode.
- Last year’s rejection by the national park board came as a surprise to Scotgold, which had assumed that local support for the mine would be taken more into account. Although the company had engaged in consultations with the national park, it had underestimated the importance of environmental and landscaping issues to the park board and appears not to have developed its mitigation strategy in sufficient detail.
- However, following the rejection, Scotgold has been actively engaging with all stakeholders, particularly the national park authority, listening to their concerns and developing ways to address them.
- Its revised proposal detailed a significantly scaled-back design for the mine, minimising visual and environmental impact, and outlining more comprehensive plans for environmental restoration and improvement of the wider Cononish landscape.
- Most stakeholders agree that the revised application represents a significant improvement on last year’s plans. Scotgold’s proactive approach second time around has assuaged the fears of park officials and built greater confidence in its approach.
Critical Resource comment
- Resource firms seeking to exploit reserves in environmentally-sensitive regions naturally face strict environmental demands. In such a context, whether in OECD regions or elsewhere in the world, demonstrating ways not just to minimise negative environmental impacts but to demonstrate a broader ‘net benefit’ for the area in terms of conservation or biodiversity protection can prove a source of competitive advantage.
Bowland Shale Gas, Lancashire, England
UK-based Cuadrilla has been using hydraulic fracturing (or ‘fracking’) to explore for gas in Lancashire’s Bowland Shale. There is still no guarantee that commercial production will be viable, but the company estimates its license area contains 5,660bn cubic metres of gas – a major untapped resource made accessible by technological advances.
Current stakeholder attitudes
- Fracking has revolutionised the gas industry in the USA, attracting billions of dollars of new investment. But it has also led to substantial environmental concerns: critics claim it can cause seismic activity and pollute water; companies argue the process can be undertaken safely.
- Rightly or not, many Lancashire residents and elected representatives are worried Cuadrilla will impact the local environment and rural landscape. They also worry about earthquakes: Cuadrilla has suspended key fracking activities while it investigates tremors near its operations earlier this year.
- Though gas is a less carbon intensive fuel for electricity generation than coal, some environmentalists also argue accessing vast new gas reserves will delay the transition to a low-carbon economy. National climate activists are joining forces with apprehensive locals in an increasingly high-profile campaign.
- So far, such concerns have not undermined national government support. A Commons Select Committee recently found no reason for a moratorium (though it recommended close scrutiny of Cuadrilla’s operations), and fracking currently remains regulated alongside conventional gas extraction.
- The attractions of a major new UK gas industry – both in economic and energy-security terms – holds strong appeal in Westminster and locally (albeit a number of residents view promises of significant job creation with scepticism).
Potential long-term issues
- As a shale-gas pioneer in the UK, Cuadrilla’s future will depend on the outcome of larger debates that concern the entire industry.
- The first is over the safety of fracking. A major study by US regulators is underway; US states have imposed moratoriums; and France has banned most fracking activities. With public distrust of the technology already growing, a single incident could be enough to turn policy-makers in the UK and Brussels against it. Alternatively, with strong efforts and safety systems in place, the industry may still be able to win the argument that fracking can be responsibly and safely deployed.
- The second concerns the UK’s and Europe’s energy mix and greenhouse gas emissions. How shale gas comes to be viewed in this overall context – primarily as a means to strengthen energy security and as a low-carbon ‘bridge’ fuel, or alternatively as holding back the planned transition to cleaner energy sources – may influence regulatory responses to Cuadrilla’s plans specifically.
- Though safety and operational standards have always been a priority, the local and media attention its activities attracted appear to have taken Cuadrilla by surprise. (Many local people say they were not consulted prior to the start of exploration.)
- Reacting to growing external interest and scrutiny, the company is now open with stakeholders and devotes considerable management time to answering their concerns.
- Cuadrilla may nonetheless benefit from a more proactive voice (for example through industry collaboration) in the unresolved debates around safety and environmental issues. It also may be worth exploring additional ways to ensure concerned stakeholders have access to information they understand and trust.
Critical Resource comment
- Against its wishes, Cuadrilla is becoming the poster child for a hotly-debated new industry in the UK. This complicates its own relations with stakeholders; it also means its own safety and environmental performance will likely be heavily scrutinised going forward, with stakeholder perceptions in this respect having potential implications for the industry as a whole.