A Management and Process Look at PEC’s Marcellus Shale Report

The most enlightened policy and well thought out regulations are not worth a tinker’s damn without sound management and work processes and procedures that are faithfully executed. Reading the Pennsylvania Environmental Council (PEC) report “Developing the Marcellus Shale” it occurred to me that there is something I haven’t seen in the ongoing dialog about Marcellus Shale development; the importance of fundamentally sound management and processes on the part of the Commonwealth of Pennsylvania. While there has been no lack of discussion concerning policy and regulation, it is important to understand that good policy that is poorly implemented and managed cannot be expected to produce good outcomes.

There are a number of recommendations in the PEC report that warrant further discussion. However, this article only deals with the ones that recommend a task force to look at industry best practices and best practices employed in other states such as permitting and related processes. Further analysis of other items in the report will be addressed separately as part of this Marcellus Shale series. A look at the management and process aspects first will help put in perspective a critical decision the next Governor of Pennsylvania will have to make concerning the direction we will take in the overall management of Marcellus Shale development.

Among the recommendations called for in the PEC report include the creation of a Marcellus Shale Development Task Force, that would identify best practices in the industry and apply them to Marcellus Shale gas operations in Pennsylvania.

PEC – Developing the Marcellus Shale

Let’s assume for now that this task force is a good idea. If it is constituted by politicians using a business as usual approach the result is likely to be the typical appointment of a collection of the “wrong type of people” and a disappointing outcome. The wrong type of people in my view includes those such as political appointees, closed minded self appointed protectors of the environment, and “authorities” from academia. A typical result is that industry representatives and others that could get something accomplished are greatly outnumbered and out gunned by those wrong types of people.

Since the purpose of the task force recommended in the PEC report would be to identify industry and oversight best practices it would certainly be helpful if task force members had more than a basic buzz word level understanding of the concept. Those who would hold sway within such a task force must be able to recognize a best practice from a management perspective and make sound recommendations. In thinking about how best to explain this I realized that something I had written for a business blog article to expand upon Robert Sutton’s insightful observation “Developing or finding a great idea is useless if you can’t implement it or sell it to someone who believes they can.” (Leading Innovation: 21 Things that Great Bosses Believe and Do) might be just the thing to get the point across. The following is the pertinent excerpt from that article:

… may seem like common sense but otherwise reasonable and practical managers can become enamored with the elegance of an idea and forget that it is worthless if it can’t be implemented effectively in your business. The other thing to keep firmly in mind is that something that worked well in another company or organization may not do the same thing for you. This “mental error” falls under the heading of a poor business practice called “causal benchmarking” that Sutton and Jeffrey Pfeffer described in their book Hard Facts, Dangerous Half Truths, and Total Nonsense; Profiting from Evidence Based Management. Loosely interpreted, casual benchmarking is failing to understand what is actually involved in a “best practice” that works so well for someone else and why it works there before you waste time and money trying to implement it. You discover, too late, that in your circumstances it is a mediocre business practice at best, if not a poor one.

Innovation – little “aha’s” versus a big EUREKA!!!

How does this apply to those “wrong types of people”?

Political appointees – Even if they have a grasp of how to identify a best practice and evaluate its applicability from the perspective described above political appointees may have little interest in doing the real work that would be required of the task force.

Self appointed protectors of the environment – The risk to the task force is that this type of person would be more concerned with their own or their organization’s agenda. If that agenda involved essentially shutting down drilling operations altogether or severely restricting them such persons would be of no use to the task force.

Academics – Academics in general get my vote for most likely to “become enamored with the elegance of an idea and forget that it is worthless if it can’t be implemented effectively” and therefore might be of less use to the task force. That’s not always the case but something that needs to be considered when the objective is identification of processes that actually can and should be implemented.

Adopting a set of best practices from other deep shale gas-producing states, such as Colorado, which require companies to submit more detailed information about their operations, but which also streamline the permitting process.

PEC – Developing the Marcellus Shale

To avoid the mistake of “casual benchmarking” the appropriate guidance to a task force should be to look for best practices that appear to be candidates that might be “adapted” to suit Pennsylvania’s circumstances. If something can be adopted “as is” that’s fine but expect that the more likely situation will involved tailoring or adapting business practices.

Implementing and improving Marcellus Shale business practices in the Pennsylvania Department of Environmental Protection (DEP)

An expected output product of the task force should be a set of candidate business practices. DEP would then need to evaluate the candidate business practices and put them into categories such as (1) those that could be “adapted” to meet their needs, (2) those that could be “adopted” essentially as is, and (3) any candidates that don’t appear to be a good fit for PA DEP. It would be wonderful if a complete set of business practices that DEP would need to manage Marcellus Shale requirements could be put together from a task force candidates list but that is probably not a reasonable expectation. The more likely situation is that there will be gaps and DEP will need to determine how best to close them. Possibilities might include developing new business practices, adapting existing DEP business practices or adapting ones from some other source.

Regardless of what the starting point is for developing processes and procedures for managing Marcellus Shale requirements, the expectation should be that it is just that, a starting point. The Governor, the Legislature, DEP management, gas drilling companies, and all other stakeholders should recognize that whatever policies, processes and procedures DEP begins with will need to be further refined and improved as lessons are learned once they are implemented. Anyone with a notion that it is possible to get it all “right” from the start is not being realistic.

Critical decisions for the next Governor of Pennsylvania

This brings us to one of the most crucial things the next Governor of Pennsylvania will need to do as far as the development of Marcellus Shale is concerned. Put managers in charge of the DEP. That would be real managers, not just your typical political payback or political agenda driven appointees. The development of the Marcellus Shale natural gas resources are too critical to the economic future of Pennsylvania and America to be entrusted to political appointees that have neither the management experience nor the willingness to roll up their sleeves and work the nitty gritty details of Marcellus Shale business process implementation and improvement.

This will not be an easy task for the next Governor. There will be those that will insist on candidates for top DEP positions that can satisfy their checklist of “environmental” credentials. Environmental “credentials” be damned; this is about having the guts to do what is right in terms of developing, implementing and managing rational permitting, verification, and inspection processes that are in the best interest of the environment, landowners, local governments, companies that put their capital at risk to drill for natural gas, and all of the citizens of the Commonwealth of Pennsylvania. These are not decisions to be made by those who “presume” to have some moral or other authority to decide what is in the best interests of all concerned. That would be the duty and responsibility of the next Governor and other elected representatives of the citizens of the Commonwealth of Pennsylvania.

Management of Marcellus Shale development is also about states rights. It’s about our elected state officials standing up to the federal government and the EPA and saying “we will do what is best for the citizens and the management of natural resources in the Commonwealth of Pennsylvania”; don’t call us, we’ll call you if we need something.