Collapse: How Societies Choose to Fail or Succeed (82 page)

immediate vicinity of the oil camps, and I have seen Pesquet's Parrots perching on the camp communications towers. That's because there is an absolute prohibition against Chevron employees and contractors hunting
any animal or fishing by any means in the project area, and because the for
est is intact. The birds and animals sense that and become tame. In effect,
the Kutubu oil field functions as by far the largest and most rigorously con
trolled national park in Papua New Guinea.

For months, I was greatly puzzled by these conditions in the Kutubu oil
field. After all, Chevron is neither a non-profit environmental organization,
nor a National Park Service. Instead, it is a for-profit oil company, owned by
its shareholders. If Chevron were to spend money on environmental poli
cies that ultimately decreased its profits from its oil operations, its share
holders would and should sue it. The company evidently decided that those policies would ultimately help it make more money from its oil operations.
How do they help?

Chevron company publications refer to concern for the environment it
self as a motivating factor. That is undoubtedly true. However, in conversations over the last six years with dozens of lower-level as well as senior Chevron employees, employees of other oil companies, and people outside the oil industry, I have come to realize that many other factors as well have
contributed to these environmental policies.

One such factor is the importance of avoiding very expensive environmental disasters. When I asked a Chevron safety representative who hap
pened to be a bird-watcher what had prompted these policies, his short
answer was:
"Exxon Valdez,
Piper Alpha, and Bhopal." He was referring to
the huge oil spill from the running aground off Alaska of Exxon's oil tanker
the
Exxon Valdez
in 1989, the 1988 fire on Occidental Petroleum's Piper Al
pha oil platform in the North Sea that killed 167 people (Plate 33), and the
1984 escape of chemicals at Union Carbide's Bhopal chemical plant in India that killed 4,000 people and injured 200,000 (Plate 34). These were three of
the most notorious, best-publicized, and most expensive industrial acci
dents of recent times. Each of them cost the company responsible billions of dollars, and the Bhopal accident ultimately cost Union Carbide its existence
as an independent company. My informant could also have mentioned the blowout and catastrophic oil spill at Union Oil's Platform A in the Santa
Barbara Channel off Los Angeles in 1969, serving already then as a wake-up
call for the oil industry. Chevron and some of the other large international

oil companies thereby realized that, by spending each year an extra few mil
lion dollars on a project, or even a few tens of millions of dollars, they
would save money in the long run by minimizing the risk of losing billions
of dollars in such an accident, or of having an entire project closed down and losing its whole investment. One Chevron manager explained to me
that he had learned the economic value of clean environmental policies
when he was responsible for cleaning up oil pits in a Texas oil field and
found that the cleanup cost for even a small pit averaged $100,000. That is,
cleaning up pollution is usually far more expensive than preventing pollution, just as doctors usually find it far more expensive and less effective to
try to cure already sick patients than to prevent diseases in the first place by
cheap, simple public health measures.

In prospecting for oil and then building an oil field, an oil company
makes a large initial investment in a field that remains a producing asset for between 20 and 50 years. If your environmental and safety policies reduced
your risk of a big oil spill to "only" once every decade on the average, that would not be nearly good enough, because you would then have to expect
between two and five big oil spills in your 20 to 50 years of operations. It's essential to be more rigorous. I first encountered this long-range outlook of
oil companies when I was contacted by the director of a London office of
Royal Dutch Shell Oil Company. That office's job is to try to predict likely
alternative scenarios for the state of the world 30 years from now. The direc
tor explained to me that Shell operates that office because it expects a typi
cal oil field to be operated for several decades, and it needs to understand
the likely shape of the world several decades in the future if it is to be able to
invest intelligently.

A related factor is public expectations. Unlike the toxic mine runoffs to
be discussed below, oil spills tend to be highly visible, and often their occur
rences are sudden and obvious (as when a pipeline, platform, or tanker
breaks or blows out). The impact of the spill is also usually obvious, for in
stance in the form of oil-coated dead birds whose pictures saturate tele
vision screens and newspapers. Hence the public can be expected to howl at
the kind of big environmental mistake most likely for an oil company.

Those considerations of public expectations and minimizing environ
mental damage were especially important in Papua New Guinea, a decen
tralized democracy with a relatively weak central government, weak police
force and army, and strong voice of local communities. Because local
landowners at the Kutubu oil fields relied on gardens, forests, and rivers
for their subsistence, an oil spill there would impact their lives much more

seriously than oil-coated seabirds impact the lives of American television
viewers. As one Chevron employee explained it to me, "We recognized that
in Papua New Guinea no natural resource project could be successful in the
long run without the support of the local landowners and villagers. They
would disrupt the project and shut it down, as they did in Bougainville [see
below for explanation], if they perceived environmental harm affecting their land and food sources. The central government lacked the ability to
prevent disruptions by landowners, so we needed to take prudent steps to
minimize harm and maintain a good relationship with the local people."
Another Chevron employee expressed a similar idea in different words: "We
were adamant at the outset that the success of the Kutubu project would de
pend on our ability to work with the local landowner communities, to the
extent that they would believe they are better off with us there than they
would be if we were gone."

A minor aspect of that constant scrutiny of Chevron's operations by lo
cal New Guineans is that they understand the money that can be made by pressuring entities with deep pockets, like big oil companies. They count
the number of trees cut down during construction of a road, placing par
ticular value on trees in which birds of paradise display, and then they pre
sent a bill for damages. In one case of which 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 possi
ble. 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 invest
ment 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, dis
covered 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 anticipat
ing 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 pre
cautions. Even developing countries from which one might not at first have
expected environmental concerns are becoming more and more demand
ing. 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, assess
ment 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 be
come 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 com
plicated technological, construction, and management problems, and a
large fraction of oil company employees have higher education and ad
vanced degrees. They tend to be environmentally aware. It is expensive to
train them, and their salaries are high. While most employees of the Kutubu

project are resident citizens of Papua New Guinea, others are Americans or Australians who are flown out to Papua New Guinea to work there for five
weeks, then are flown back home to spend five weeks with their family, and
those airplane fares are also expensive. All those employees see for them
selves the state of the environment in the oil fields, and they see the
company's commitment to clean environmental policies. Many Chevron
employees told me that that issue of employee morale and environmental views was both a benefit of their company's visibly clean environmental
policies and also a driving force behind the adoption of those policies in the
first place.

In particular, environmental concern has been one criterion used to se
lect company executives, and Chevron's two most recent CEOs, first Ken
Derr and then David O'Reilly, have both been personally concerned about environmental issues. Chevron employees in several countries told me in
dependently that every month they and every other Chevron employee
around the world receive from the CEO an e-mail about the state of affairs
in the company. The e-mails often talk about environment and safety issues
and speak of them as being number-one priorities, and as making good
economic sense for the company. Thus, employees see that environmental
matters are taken seriously, and are not just window-dressing that is for
public display but that is ignored within the company itself. This observa
tion corresponds to a conclusion that Thomas Peters and Robert Water
man Jr. drew in their best-selling book on business management
In Search
of Excellence: Lessons from America's Best-Run Companies.
The authors
found that if managers want their employees to behave in a certain way, the
most effective motivation is for the employees to see the managers them
selves behaving in that way.

Finally, new technology has made it easier for oil companies to operate
more cleanly now than in the past. For instance, several horizontal or diago
nal wells can now be drilled from a single surface location, whereas for
merly each well had to be drilled vertically from a separate surface location,
each causing environmental impacts. The rock debris (the so-called cut
tings) that is ground up as a well is drilled can now be pumped into an iso
lated underground formation containing no producible oil, instead of (as
before) dumping the rocks into a pit or into the ocean. Natural gas obtained
as a by-product of oil extraction is now either reinjected into an underground reservoir (the procedure used in the Kutubu Project), or (in some
other oil fields) shipped out by pipeline or else liquefied for storage and
transport by ship and then sold, instead of burning it off ("flaring" it). In