Windfall: The Booming Business of Global Warming (6 page)

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AT THE OBSERVATION POST
later that second day, the
Montreal
appeared in the sound, with the smaller
Moncton
trailing it like a baby elephant. They floated past. We observed them. The Vandoos’ sergeant fiddled with the radio and sang ballads in French-accented English: “Are you lonesome tonight? . . . Are you sorry we drifted apart?” The Inuit stared at him. “Elvees,” he said. “You dunno Elvees?” Later, he led a handful of soldiers on an unsuccessful fishing expedition. When they returned, they stripped and dove into the Arctic Ocean, staying in long enough to wash their hair with a bottle of Pert Plus shampoo.

We combed through the rations—unwanted items got thrown in together in a cardboard box—and I goaded Sergeant Strong about the previous day’s fedora-wearing American, an invader who dared tell Canadians how to treat Canadian soil. The sergeant was too Canadian to enjoy the irony. “That’s okay,” he said. “He was right. We do need to be careful about the environment up here.” His earnestness affected me. Oil tankers were inevitably on their way, and there is no proven method to clean up a spill in ice. Crude gets trapped under it, retention booms are difficult to deploy, and chemical dispersants fail in cold temperatures; one of the most successful methods has been to simply light the oil on fire and watch it burn away.

The radio started working, and from across the sound we heard accounts of what had happened to the other observation posts. The men and women of Observation Post 2 had landed in heavy seas—the navy boatmen had ignored the Rangers’ recommendation to use an easier beach—and two Zodiacs were swamped by waves. The soldiers had to use their helmets to bail out the boats. Some returned to the
Montreal
just to get warm, while the rest made a rough camp at the bottom of a steep slope. In the morning they learned that their goal, an abandoned scientific research station, was still six kilometers away. They had to be flown there in helicopters. They arrived to find one of the air force’s Twin Otters, which was meant to be running support, stuck in the mud of an airstrip. Their satellite phone couldn’t get a signal, and their radio barely worked. At Observation Post 3, troops were almost eaten by a polar bear. Waiting for a helicopter lift, they had taken down their bear fence and removed the ammunition from their shotguns, standard procedure before a flight. The bear was slinking up a ravine, and it was fifty yards away when the helicopter pilot spotted it. He had to dive-bomb it with the chopper to scare it off. Compared with the monotony of Devon Island, this all sounded rather appealing. But it was our job to observe, and that we did. It was our job to be a presence, and that we were.

A fog rolled in again, and the world became spectral and gray. When it had passed, Sergeant Strong and I explored the Mountie outpost together. The front door was coated with faded red paint. Inside we found a sewing machine, a rusted fuel drum, and a wooden table stacked with books:
Two Black Sheep,
The Astounding Crime on Torrington Road,
Buck Rogers in the 25th Century
. On the wall, someone had posted an inventory from the summer of 1945: two dog corrals, one flagpole, one fire shovel, one kitchen table, four kitchen chairs, one coal heater, one forty-five-gallon water barrel, two blubber tanks. The graves of the two Mounties who died here were just up the hill. “If I had a warm cabin to come back to,” the sergeant said, “I could do it. I could do a winter here.”

We had three days to go. We built a fire. We stayed up later and later. The time passed without tick marks. One night, I stood alone outside my tent, looking out at the sun that never set. The two youngest Vandoos—a sixteen-year-old and a seventeen-year-old—had been given the first watch. I saw one take out his video camera and start walking around the tundra, filming very little at all. His partner sat facing the Northwest Passage, raising his rifle and pointing it into space, then lowering it, then raising it, then lowering it.

TWO

SHELL GAMES

WHEN AN OIL COMPANY BELIEVES IN CLIMATE CHANGE

M
ore than thirty years ago, before Royal Dutch Shell became the first of the oil super-majors to take advantage of the melting Arctic Ocean, the founding father of its celebrated team of futurists made a visit to Japan. Pierre Wack was a thin, incense-burning Frenchman and a follower of the bald Greco-Armenian guru Georges Gurdjieff, who taught his pupils how to transcend the hypnotic state of “waking sleep” that he believed most humans occupied for the entirety of their lives. Wack himself spoke mostly in parables, and each year he took a few weeks of vacation from Shell to meditate with a second guru in India. On this trip to Japan, in the science hub of Tsukuba, north of Tokyo, he saw an art exhibit that he considered the perfect metaphor for his work at the oil company. The exhibit’s various video screens simulated how different animals saw the world. The bee saw hundreds of tiny images, the frog a two-dimensional reality with no depth of field. The important one was the horse. Because a horse’s eyes are mounted on the two sides of its head, the video screen showed the opposite of normal human perception. “Humans see peripheral objects, at the corners of our eyes, as blurred and distorted,” explains Wack’s protégé Peter Schwartz in
The Art of the Long View,
his book on the strategic tool Shell calls scenario planning. “We see the center in sharp focus. Horses, at least according to this Japanese representation, see the peripheral as sharp.” The goal of the scenario planner was to be like the horse—looking at reality but looking especially at its fringes, where the surprises emerge.

In its simplest description, a scenario—a tool now adopted by everyone from Disney to the National Intelligence Council that has guided most of Shell’s major decisions for a generation—is a story. Each scenario is a plausible story about a plausible future, researched and told by a futurist like Wack. Because stories are how humans mentally and emotionally understand the world, the act of imagining a scenario is thought to force decision makers to prepare for it. A scenario is not a forecast: Forecasts tend to assume that the future will be a continuation of the present, said Wack, and they are useless just when they are most crucial—when companies need to anticipate “major shifts in the business environment that make whole strategies obsolete.” Wack’s goal was to develop multiple versions of the future—an improvement on the scenario-planning technique he first learned from Herman Kahn, the pear-shaped contemplator of nuclear apocalypse at the Rand Corporation and Hudson Institute and perhaps the first person to call himself a futurist. “Herman Kahn was trying to get the future right—trying to get the one that was close to reality,” Schwartz told me. “Pierre was trying to influence the decisions we make today.” Rather than bet everything on a certain outcome, Wack had his oil company preparing to thrive no matter which version of the future came to pass.

In buttoned-down Shell, a conglomerate of sensible Brits and sensible Dutch who would grow the company to be by some measures the biggest in the world—eighty-seven thousand people in more than seventy countries and territories—the scenario planners were eccentrics who had direct access to top executives. They came up with futures that were simply too heretical for the suits to come up with on their own. “I had the feeling of hunting in a pack of wolves,” Wack told an interviewer before his death in 1997, “being the eyes of the pack, and sending signals back to the rest. Now if you see something serious, and the pack doesn’t notice it, you’d better find out—are you in front?” In Wack’s time, the scenario-planning team foresaw the twin Arab oil shocks of the 1970s—inconceivable to executives because oil prices had been so stable for so long—and Shell thrived when its competitors did not. Historically the least profitable of the Seven Sisters oil companies, it would after a decade become the most profitable, momentarily surpassing even Exxon.

During the later tenure of the bearded, electric Peter Schwartz, a trained aeronautical engineer who had studied Tibetan Buddhism, worked with the “transpersonal psychologist” Willis Harman, and befriended Peter Gabriel and the Grateful Dead, Shell bested all the supposed experts who said collapse of the Soviet Union was impossible.

Oil companies are future oriented by their very nature—it takes decades to conduct seismic surveys, secure leases, drill test wells, hit pay dirt, find partners, erect rigs, start production, and suck a reservoir dry—but at Shell futurism became part of corporate identity. Other scenarios contemplated the rise of Muslim extremism, the world’s growing environmental awareness, and, before the (World Trade Organization) riots in Seattle, a backlash against globalization. The scenarios carried evocative names befitting a good story—the Rapids, Belle Époque, the Greening of Russia, Devolution, People Power, Business Class, Prism—and were characterized, above all, by their openness to ideas that made executives squirm. It is therefore not surprising that Shell faced up to what would seem the most squirm-inducing future of all for an oil company: Along with BP, it was first among the majors to publicly accept the science of climate change.

Schwartz had helped build a large-scale climate model in the late 1970s at his previous job at the Palo Alto think tank SRI International, which had invented not only the computer mouse but also VALS (“values and lifestyles”), a research methodology that advertisers used to target specific segments of the American public. By the time of his arrival at Shell in 1982, climate change and emissions were already part of the oil company’s scenarios, and it seemed inevitable, he told me, “that we would decarbonize over time—for many reasons, climate among them.” This was one reason Shell began moving aggressively into natural gas, which is less carbon intensive than oil.

In 1998, another onetime scenario planner, Jeroen van der Veer, who would soon become CEO, directed a formal, company-wide study of climate change’s impacts on Shell’s global business. The result was an in-house version of the Kyoto Protocol: a goal to reduce the company’s own greenhouse-gas emissions by 10 percent by 2002, an internal cap-and-trade scheme, a shadow carbon price, and a commitment to evaluate projects on the basis of not only the profit they would make but the carbon they would emit. Under the cap-and-trade scheme, individual Shell units were given permits based on their past emissions, then encouraged to reduce those emissions and sell the permits to units that needed them more. The program soon failed because it was voluntary—only those units able to easily cut carbon signed up—and because the few that needed more permits simply went to Shell headquarters and asked for them and headquarters handed them out. But the commitment to calculating internal emissions remains, and the company easily achieved its 10 percent reduction by 2002, largely by stopping some of the methane flaring that has long lit up the skies above its refineries in Nigeria. If you count carbon the way Shell does, looking only at its own operations, it is now no more of an emitter than the Marshall or British Virgin Islands. If you include emissions from the products Shell extracts from the earth and sells to the world, on the other hand, it is more like Germany—responsible for at least 3 percent of humankind’s annual greenhouse gases.

A decade after van der Veer’s first climate study, Shell went a big step further. In 2008, it publicly released two scenarios describing the world up to 2050, Blueprints and Scramble, that explicitly warned of the dangers of climate change. They also foresaw a massive boom in global energy demand. For the first time, Shell declared that it had a preferred scenario: The greener, less emissions-intensive Blueprints offered the brighter future, for the company and the planet. Van der Veer gave interviews: It should be made expensive to emit carbon and other greenhouse gases, he declared. Global cap-and-trade agreements were urgently needed. Efficiency standards should be imposed. All this would require more government regulation. “People always think . . . the market will solve all of it,” he said. “That of course is nonsense.” But as time passed and governments continued to do little to regulate emissions, Shell, following Wack’s prescription, prepared to thrive in whichever version of the future became reality. It would become a test case for how forward-looking businesses might choose to navigate climate change on their own.

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SHELL FIRST ANNOUNCED
Blueprints and Scramble the same week its chief Arctic strategist, Robert Jan Blaauw, was at a conference called Arctic Frontiers in Tromsø, Norway: six days of speeches, coastal cruises, banquets, dance shows, and concerts also attended by the super-majors ConocoPhillips and ExxonMobil and large national companies including Norway’s Statoil, Russia’s Gazprom and Lukoil, Italy’s Eni, and France’s Total. On the first night, the eve of northerly Tromsø’s first sunlight of the year, I watched as hundreds of executives and dignitaries stood together and ate ceremonial
solbolle
pastries—sun balls—and were welcomed by a native Sami performer in a wool sweater. “Are you feeling volfy?” he asked the polyglot crowd, and then he cradled the microphone and began to howl.

The previous summer had shrunk Arctic sea ice by an extra 500,000 square miles, twice the area of Texas, a dramatic record. Carbon emissions, most of them from fossil fuels, were largely to blame. Yet inside the auditorium, the question was not if the Arctic should now be developed but how. Norway’s petroleum and energy minister: “I think it’s important to recognize that this [melt] is also an opportunity.” A fellow at Alaska’s Institute of the North: “Also in the Arctic are 25 percent of the world’s known coal reserves.” A Norwegian social scientist: “The Arctic Climate Impact Assessment looks at how climate change impacts the conditions for oil and gas production, not how oil and gas production impacts global climate change.” A ConocoPhillips executive: “Listing the polar bear under the Endangered Species Act will do nothing to shorten ice retreat.” An author of the new Arctic Council Oil and Gas Assessment: “In general, animals that have feathers and fur have sensitivities to oil spills.” A representative of Sarah Palin’s office whom President Obama would later choose to head the Alaska Gas Pipeline Project: “As a noted historian said, ‘The wealth generated by Prudhoe Bay and the other fields on the North Slope since 1977 is worth more than all the fish ever caught, all the furs ever trapped, all the trees chopped down; throw in all the copper, whalebone, natural gas, tin, silver, platinum, and anything else ever extracted from Alaska, too. The balance sheet of Alaskan history is simple: One Prudhoe Bay is worth more in real dollars than everything that has been dug out, cut down, caught or killed in Alaska since the beginning of time.’ Yes, oil is everything to us.”