What is E4 Carolinas and what has been your professional path to its leadership?
E4 Carolinas is the trade association for Carolina energy companies and organizations. E4 Carolinas’ mission is to promote the increased value and success of its members. We do this through providing business and network development consultation for individual members and the delivery of member collaboration services in the areas of Workforce Development, Economic Development, Innovation and Capital, and Policy and Communications. Serving as President and CEO of E4 Carolinas is a great role for me because it calls on all I have experienced during my nearly 40 years in the energy industry and academia.
My career began when I entered the natural gas industry in 1980. Immediately following natural gas industry deregulation, I served as Director of Strategy for a Kentucky-based interstate natural gas pipeline utility for four years. I then co-founded and led a natural gas marketing and trading company, which over eight years grew to more than a billion dollars in annual sales. When that company matured, we sold it to a large Houston energy company, and for four years I served as CEO of their $2 billion holding company. The holding company owned intrastate pipelines, natural gas gathering, and processing and storage facilities. In addition, it operated natural gas and electric power marketing and trading companies.
I subsequently returned to Kentucky and served as the University of Louisville’s College of Business Bank One Entrepreneur-in-Residence for eight years. During that time, I designed and taught the New Venture Finance course in their MBA programs. At the same time, I served as CEO of an energy information start-up, Genscape, Inc., which we grew to cash-positive, international operation in 30 months.
After consulting for a period of time, I joined Duke University as a Director of its Energy Initiative in 2012. In this role, I gained an understanding of the uniqueness and potency of the Carolina energy economy, which is believed to be the largest and most varied in the eastern United States. In 2014, E4 Carolinas recruited me to serve as its CEO.
What are the most significant changes you have seen in the energy industry over the past four decades of your career, specifically as it relates to crisis readiness?
Forty years ago, the National Environmental Policy Act had been in effect for 8 years, the Natural Gas Policy Act, deregulating the natural gas industry had just been enacted, as had the Public Utility Regulatory Policies Act. The U.S. was a substantial oil importer, natural gas was rationed, coal was the principle power generation fuel, nuclear power was on the rise, and hydro was the only form of renewable energy. The World Wide Web was more than a decade from being publicly available and social media didn’t exist. The energy industry’s “crises” were geo-political, reported on the nightly news or in daily newspapers or weekly magazines that were printed and distributed to subscribers. These crises were managed by federal policy makers, not the energy companies, while the public waited in lines at gasoline stations, during brown-outs and in queue for natural gas connection to their home or business.
Today, all forms of energy are abundant and reasonably priced, and the public is no longer worried that we will run out or because of the risk of being supplied by some foreign power. The focus is now on how energy is generated and delivered, and from what source. Today, the energy industry’s crises center on specific energy companies, are instantly public, and often become personal and dramatic. Many communities now resist energy infrastructure projects. And, where such projects are built or operate, an individual or a small group of people can through the use of social media create sufficient drama that the local, regional, or national media takes up the issue. An energy company misstep or regulatory violation may be recorded using a smart phone, uploaded to the internet, and within minutes adjudicated via social media. There is little time for an energy company to implement its crisis management plan, nor is there due process in determining guilt. Energy company crisis management initiatives now must be many pronged. They must have a culture and process geared toward abiding by “the rules”, being expert in the long-term processes of regulatory compliance. They must be pro-active in the communities in which they operate, continually reinforcing their stature as desirable corporate citizens. They must be vigilant and ready to act in response to the first tweet or other social media content that has the potential to negatively impact their brand equity, reputation, and the bottom line. And, they must at least consider instantly taking responsibility for any corporate misdeed and prescribing the solution before the matter is resolved for them online. Most energy companies find these latter two crisis management initiatives, which are closely related to public perception, difficult to manage, and often the media gets the best of them.
To what degree have energy industry crisis risks increased and how should energy companies prepare to manage those risks and crisis situations?
Forty years ago energy industry operation was simple. Energy production, transmission and operating technology was elemental. Regulation was enforced by agencies; usually conducted in proceedings in state capitals or Washington, D.C. The public learned of accidents or company problems by reading newspapers or matters of consequence on the evening TV news. Energy companies today face huge risks. The technology evolution that made the U.S. energy secure has also presented great risks. Complicated technologies break more frequently, can’t be easily fixed and usually make a big mess. Energy outages and messes are now unacceptable and each one is an instant crisis for the company responsible. Today’s technology complexity presents substantial implementation challenges. Energy companies taking risks in constructing new technologies have experienced some spectacular failures recently, resulting in CEO resignations and FBI investigations. Simply operating sophisticated technology presents great risk. For example, decades ago cyber security was not an issue, but today a “hacked” utility is an immediate public media crisis.
Preparing for such crises is difficult, as they can erupt at anytime and anywhere the energy company operates. Anticipating such crises is even more difficult, as energy companies operate in a compliance and safety culture that implies proper and safe operations instead of crisis. Engaging outside parties such as C4CS® to prepare for the unthinkable has become standard practice in defining the range of possible crises an energy company may face and increasing related readiness. Retaining specialists to augment energy company staff during times of crisis has also become vital, as energy companies’ drive for operating efficiencies has eliminated any flexibility staff and executives previously had to divert their attention from their regular responsibilities. Accessing external specialists skilled in managing the particular media channel in which a crisis is progressing has become key to the energy company taking charge or at least maintaining an equal voice in the matter.
How have energy stakeholder groups changed and how can energy industry players communicate more effectively with stakeholders that put pressure on corporations?
Previously, energy stakeholders were simply an energy company’s customers and shareholders and the focus was providing reasonably priced energy 24/7 and a fair return on investment. Those two stakeholder groups still exist and are still very important to energy companies. But, now stakeholder groups can number in the thousands and be as small as one person. These groups can create a crisis at anytime and anywhere the energy company has an interest – perhaps even thousands of miles from its headquarters or operating facilities. Stakeholders are now more nimble than energy companies and are willing to take substantial risk in promoting their issues. With astute use of social media and other online technologies, stakeholders can appear comparable in stature to the energy company with regard to the specific issue they are pursuing, and often establish a public perception of being on the side of “right” or “good,” while ignoring historic agreements, economics, and operating or technology limitations.
Successfully managing a crisis, while on the other side of the issue from one or more powerful stakeholder groups, is a considerable challenge. In this time of energy abundance, energy companies can no longer rely on the social contract whereby customers allowed them fair returns and reasonable implementation and operating ability in exchange for inexpensive energy available around the clock. Energy companies now must manage crises based on what is appropriate and consistent with the brand. Being unprepared and simply reacting to adversity will not produce success. Energy companies must understand who their stakeholders are and address their needs. Additionally, engaging critical stakeholders is often done with the help of external consultants. Being heard may make the difference between a stakeholder group triggering a crisis or helping avoid one. Monetary contribution was previously the principle means by which energy companies created good will and preempted some crises. Now, that same behavior can draw criticism.
What are some of the key issues and risks energy companies must be better prepared for in terms of public perception and reputation management?
Energy companies presently have many significant issues with which to deal, some of which will serve as platforms for crisis. Large energy infrastructure projects, which previously meant jobs and economic development to communities, are now viewed additionally as community and environmental risks. And, projects are held accountable for everything that happens through all the channels leading to it. Including renewable energy in the U.S. energy portfolio on a commercial basis will remain an industry challenge. Renewable energy, particularly solar, has established itself in the public’s mind as the energy of the future, able to satisfy a majority of future energy needs. Despite providing the majority of the country’s energy now and in the foreseeable future, oil, coal and natural gas are perceived as less valuable than renewables in the long term transition to a low carbon portfolio.
Energy companies operating in oil, coal and natural gas must reestablish public perception of their value. And, transition to a low carbon energy portfolio itself poses challenges to reputation management. Energy companies are now taking immense risk to produce no or low carbon energy. Recently, the nuclear industry experienced a failed $9 billion project in South Carolina, and the coal industry a failed nearly $8 billion coal gasification project in Mississippi. One such unsuccessful project jeopardizes an energy company’s existence and moves its reputation to the “bad” and “wrong” side of the ledger. Perhaps because of energy’s abundance, risks won’t diminish and reputation management will become increasingly important.