Oil Change

By Jared Diamond

Illustration by © Guy Billout

Like much of the public, I loved to hate the oil industry, and I deeply suspected the credibility of anyone who dared to report anything positive about the industry’s performance or its contribution to society. My field observations, however, have forced me to think differently. In particular, I’ve turned my attention to the practical question of what changes would be most effective in inducing companies that currently harm the environment to spare it instead.

My first experience in an oil field was on Salawati Island off the coast of Indonesian New Guinea. The purpose of my visit there had nothing to do with oil but was part of a survey of birds on islands of the New Guinea region; it merely happened that much of Salawati had been leased for oil exploration to the Indonesian national oil company, Pertamina. I visited Salawati in 1986 with the permission and as a guest of Pertamina, whose vice president and public relations officer kindly provided me with a vehicle to drive along company roads.

In view of that kindness, I am sorry to report on the conditions that I encountered. From a long distance, the field’s location could be recognized by a flame shooting out of a high tower where natural gas obtained as a byproduct of oil extraction was being burned off, there being nothing else to do with it. To construct access roads through Salawati’s forests, swathes 91 meters wide had been cleared, much too wide for many species of New Guinea rainforest mammals, birds, frogs, and reptiles to cross. There were numerous oil spills on the ground. I encountered only three species of large fruit pigeons, of which 14 have been recorded elsewhere on Salawati and which are among the prime targets of hunters in the New Guinea region because they are large, meaty, and good to eat. A Pertamina employee described to me the location of two pigeon breeding colonies, where he said that he hunted them with his shotgun. I assume that their numbers within the field had been depleted by hunting.

My second experience was of the Kutubu oil field, operated by a subsidiary of the large international oil company Chevron Corporation and located in the Kikori River watershed of Papua New Guinea.1 The environment in the watershed is sensitive and difficult to work in because of frequent landslides, much limestone karst terrain, and one of the highest recorded rainfalls in the world (on the average, 1,092 cm per year and up to 36 cm per day). In 1993, Chevron engaged the World Wildlife Fund (WWF) to prepare a large-scale integrated conservation and development project for the whole watershed. From 1998 to 2003, I made four visits of one month each to the oil fields and watershed as a consultant to WWF. I was allowed freedom to travel throughout the area in a WWF vehicle and to interview Chevron employees privately.

***

As my airplane flight from Papua New Guinea’s capital of Port Moresby droned on toward the field’s main airstrip at Moro, I looked out the airplane window for some signs of the oil field infrastructure that I expected to see looming up. I became increasingly puzzled still to be seeing only an uninterrupted expanse of rainforest stretching between the horizons. Finally, I spotted a road, but it was only a thin cleared line about 9 meters broad through the rainforest, in many places overhung with trees growing on either side—a birdwatcher’s dream.

The main practical difficulty in rainforest bird studies is that it’s hard to see birds inside the forest itself, and the best opportunities to observe them are from narrow trails where one can watch the forest from the side. Here was such a trail over 160 km long, from the highest oil field at an altitude of nearly 1800 meters on Mt. Moran down to the coast.

On the following day, when I began walking along that pencil line of a road during my surveys, I found birds routinely flying across it and mammals, lizards, snakes, and frogs hopping, running, or crawling across it. It turned out that the road had been designed to be just broad enough for two vehicles to pass safely in opposite directions. Initially, the seismic exploration platforms and exploration oil wells had been put in without construction of any access roads at all and had been serviced instead just by helicopter and on foot.

My next surprise came when my plane landed at Chevron’s Moro airstrip and again later when I flew out. Although I had already gone through baggage inspection upon arrival in the country, I had to open all my bags for further inspections on both arrival and departure at Chevron’s airstrip. These inspections were more thorough than on any other occasion I had experienced“except when I flew to Israel’s Tel Aviv airport.

What were those inspectors looking for? On the flight in, the articles absolutely forbidden were firearms or hunting equipment of any sort, drugs, and alcohol; on the flight out, animals or plants or their feathers or parts that might be smuggled. Violation of those rules results in immediate automatic expulsion from company premises, as a WWF secretary innocently but foolishly carrying a package for someone else discovered to her misfortune (because the package turned out to contain drugs).

A further surprise came the next morning, after I had walked out on the road before dawn to bird-watch. The camp safety representative summoned me to his office and told me that I had already been reported for two violations of Chevron regulations, which I was not to repeat. First, I had been noticed stepping out into the roadway to observe a bird. That posed the hazard that a vehicle might hit me or in swerving to avoid hitting me, might crash into an oil pipeline at the side of the road and cause an oil spill. From now on, I should please stay off the road while bird-watching. Second, I had been seen bird-watching while not wearing a protective helmet, but this whole area was a hardhat area. At this point the officer gave me a hardhat which I should henceforth please wear for my own safety while bird-watching, e.g., in case a tree fell.

That was an introduction to Chevron’s extreme concern, constantly instilled in its employees, about safety and environmental protection. I have never observed an oil spill on any of my four visits, but I do read the reports posted each month on Chevron bulletin boards about incidents and near-incidents, which are the concern of the safety representative who travels around by plane or truck to investigate each. Out of interest, I recorded the full list of 14 incidents from March 2003. The most serious near-incidents were that a truck backed into a stop sign, another truck was reported with its emergency brake improperly set, a package of chemicals lacked correct paperwork, and gas was found leaking from a compressor needle valve.

My remaining surprise came in the course of bird-watching. New Guinea has many bird and mammal species whose presence and abundance are sensitive indicators of human disturbance. They include tree kangaroos, cassowaries, hornbills, birds of paradise, and hundreds of species of the forest interior. When I began bird watching in the Kutubu area, I anticipated that my main goal would be to determine how much less numerous these species were inside the area of Chevron’s oil fields, facilities, and pipeline than outside it.

Instead, I discovered to my astonishment that these species are much more numerous inside the Chevron area than anywhere else that I have visited on the island of New Guinea except for a few remote uninhabited areas. The only place that I have seen tree kangaroos in the wild in Papua New Guinea in my 40 years there is within a few kilometers of Chevron camps; elsewhere, they are the first mammal to be decimated by hunters, and those few surviving learn to be active only at night. But I saw them active during the day in the Kutubu area. Pesquet’s Parrot ( Psittrichas fulgidus ), the New Guinea harpy eagle ( Harpyopsis novaeguineae ), birds of paradise, hornbills, and large pigeons are common in the 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 forest is intact. In effect, the Kutubu oil field functions as by far the largest and most rigorously controlled 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 nonprofit 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 policies that ultimately decreased its profits from its oil operations, its shareholders 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 itself 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 happened to be a bird-watcher what had prompted these policies, his short answer was: “Exxon Valdez, Piper Alpha, and Bhopal.”

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 20 to 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.

Oil spills tend to be highly visible, sudden, and obvious. The public can be expected to howl at the kind of big environmental mistake most likely for an oil company.

Chevron had particular cause to worry about its activities in Papua New Guinea. Here, one tribal clan or another claims ownership of every scrap of land in the country, no matter how remote or apparently worthless. At the first sign that someone with deep pockets has trespassed and damaged their land in any conceivable way, New Guineans demand“and often get“exorbitant compensation. 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. For the company, 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 possible.

As one Chevron employee explained to me, “We recognized that in Papua New Guinea no natural resource project could be successful without the support of the local landowners and villagers. They would disrupt the project and shut it down, as they did in Bougainville, if they perceived environmental harm affecting their land and food sources. The central government lacked the ability to prevent disruptions by landowners.”

My informant’s mention of Bougainville refers to what had been Papua New Guinea’s biggest investment 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, discovered 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.

The trend throughout the world (with obvious exceptions) is for governments to demand more- rather than less-rigorous environmental precautions. Even developing countries, from which one might not at first have expected environmental concerns, are becoming more and more demanding. 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 and expensive environmental impact plan that, among other things, called for minimizing effects on dugongs and on a breeding colony of cormorants. 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.

And a clean reputation can sometimes mean a competitive advantage in obtaining contracts. Recently, the government of Norway 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.

***

What it all adds up to is that clean environmental practices can help companies make money and gain long-term access to new oil and gas fields. But I should emphasize that I am not thereby claiming that the oil industry is now uniformly clean, responsible, and admirable in its behavior.

Environmental practices of big businesses are shaped by a fundamental fact that for many of us offends our sense of justice. Depending on the circumstances, a business really may maximize its profits, at least in the short term, by damaging the environment and hurting people. That is still the case today for fishermen in an unmanaged fishery without quotas and for international logging companies with short-term leases on tropical rainforest land in countries with corrupt government officials and unsophisticated landowners. When government regulation is effective and when the public is environmentally aware, environmentally clean big businesses may outcompete dirty ones, but the reverse is likely to be true if government regulation is ineffective and if the public doesn’t care.

It is easy and cheap for the rest of us to blame a business for helping itself by hurting other people. But that blaming alone is unlikely to produce change. It ignores the fact that businesses are not nonprofit charities but profit-making companies and that publicly owned companies with shareholders are under obligation to those shareholders to maximize profits, provided that they do so by legal means. Our laws make a company’s directors legally liable for something termed “breach of fiduciary responsibility” if they knowingly manage a company in a way that reduces profits. The car manufacturer Henry Ford was in fact successfully sued by stockholders in 1919 for raising the minimum wage of his workers to US$5 per day: the courts declared that, while Ford’s humanitarian sentiments about his employees were nice, his business existed to make profits for its stockholders.

Our blaming of businesses also ignores the ultimate responsibility of the public for creating the conditions that let a business profit through hurting the public. In the long run, it is the public, either directly or through its politicians, that has the power to make destructive environmental policies unprofitable and illegal and to make sustainable environmental policies profitable. The public can do that by suing businesses for harming them, as happened after the Exxon Valdez, Piper Alpha, and Bhopal disasters; by buying sustainably harvested products, a preference that caught the attention of Home Depot and Unilever; by making employees of companies with poor track records feel ashamed; by preferring their governments to award valuable contracts to businesses with good environmental track records; and by pressing their governments to pass and enforce environmental laws and regulations.

In turn, big businesses can exert powerful pressure on their suppliers who might ignore public or government pressure. For instance, after the U.S. public became concerned about the spread of mad cow disease and after the U.S. Food and Drug Administration demanded that the meat industry abandon risky practices, meat packers resisted for five years, claiming that the rules would be too expensive to obey. But when McDonald’s then made the same demands after purchases of its hamburgers plummeted, the meat industry complied within weeks “because we have the world’s biggest shopping cart,” as a McDonald’s representative explained. The public’s task is to identify which links in the supply chain are sensitive to public pressure: McDonald’s, Home Depot, and Tiffany but not meat packers, loggers, or gold miners.

Some readers may be disappointed or outraged that I place the ultimate responsibility for business practices harming the public on the public itself. I also assign to the public the added costs of sound environmental practices, which I regard as normal costs of doing business. My views may seem to ignore a moral imperative that businesses should follow virtuous principles regardless of whether it is most profitable for them to do so. I instead prefer to recognize that, throughout human history, in all politically complex human societies, government regulation has arisen precisely because it was found to be necessary for the enforcement of moral principles. Invocation of moral principles is a necessary first step for eliciting virtuous behavior, but that alone is not a sufficient step.

To me, the conclusion that the public has the ultimate responsibility for the behavior of even the biggest businesses is empowering and hopeful rather than disappointing. My conclusion is not a moralistic one about who is right or wrong, admirable or selfish, a good guy or a bad guy. My conclusion is instead a prediction based on what I have seen happening in the past. Businesses have changed when the public came to expect and require different behavior, to reward businesses for behavior that the public wanted, and to make things difficult for businesses practicing behaviors that the public didn’t want. I predict that in the future, just as in the past, changes in public attitudes will be essential for changes in businesses’ environmental practices.

1. I shall refer to the operator for short as “Chevron” in the present tense, but the actual operator was Chevron Niugini Pty. Ltd., a wholly owned subsidiary of Chevron Corporation; the field was a joint venture of six oil companies, including Chevron Niugini Pty. Ltd.; the parent company, Chevron Corporation, merged in 2001 with Texaco to become ChevronTexaco; and in 2003 ChevronTexaco sold its interests to the joint venture, whose operator then became another one of the partners, Oil Search Limited.

About the Author
Jared Diamond is a Pulitzer Prize-winning author and professor of geography at the University of California, Los Angeles. He has written four books and over 200 articles for Discover , Natural History , and Nature , among others.

Adapted from “Big Businesses and the Environment” from Collapse: How Societies Choose to Fail or Succeed by Jared Diamond, copyright © 2005 by Jared Diamond. Used by permission of Viking Penguin, a division of Penguin Group (USA) Inc.

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