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What is my ROI? Assigning Value to the Invaluable?

  June 2018 / Vol 8 Issue 4

What is my ROI? Assigning Value to the Invaluable?
By: Teresa Irvin McCurdy, President of TD Connections, Inc.

 

In conducting business development in the natural gas industry for the past seven years, it is easier to sell a tangible product or service where you see an immediate value. Selling wastewater treatment services can be both difficult and easy.  When an operator needs to dispose of produced fluids, the primary factor in where to dispose of the fluids is price. It becomes more difficult if the disposal price is close with a competitor’s. An operator may consider environmental risks, loyalty, customer service and operating record. However, sometimes trying to convince an operator that some of the secondary items have value as well is much more difficult as there is no immediate dollar value assigned to those intangible items.

For example, an operator may decide to truck water five hours away to save $0.50 per barrel, which if trucking thousands of barrels those numbers can add up. But let’s say one of those trucks is in an accident and even though the title should transfer to the trucking company while it is on the road, the news reporters don’t focus on the trucking company, rather they focus on the operator as the company responsible for brine that was spilled and ran into the creek. What cost do you assign to negative press? What about the clean-up costs, if you are responsible?

Customer service is even more difficult to assign a dollar value when answering to the higher ups about numbers. The CFO doesn’t want to hear how valuable the customer service is if you spent more money to achieve the same goal. The staff would need to explain why the customer service is valuable, such as receiving monthly reports for use in DEP reporting; the acceptance of an unusual load of water/mud; flexible terms for guaranteed disposal; their knowledge of the regulations and help in answering questions. Why? Because it may be difficult to put a dollar value on these items.

Convincing someone that investing in ongoing government and regulatory representation will result in either cost savings or cost avoidance can be even more difficult. Typically, lobbyists are hired when there is a specific need such as to change the law or get a permit. Some companies operate with blinders on just
dealing with regulatory changes as it hits them. Others use trade associations to get limited generic information on what is happening in state government. However, for those who see the value in staying ahead of the proverbial curve, they engage in representation constantly to monitor and gain insight into what is happening in the state where they are operating. Personally, I would rather see a train coming, try to do something to avoid the wreck than to wait, get hit and then deal with the consequences.

Most people hear the word “lobbyist” and immediately think of special interest and slap a bad image on the entire system. I prefer to think of myself and my fellow lobbyists as “educators.” It is our job to educate our clients, elected officials and regulators whom we interact with. With so many complex issues, no one can know everything about every issue. Therefore, lobbyist play an important role in crafting legislation and regulations, whether they represent individual companies, associations or environmental groups. Without “special interest groups,” where would legislators and regulators get their information? Google? Facebook? Newspapers? TV?

I am not putting any of those sources down, but let’s face it, how well do any of them know about the operations of any industry to provide detailed information? And none of them are going to advocate on your behalf when legislation or regulations are introduced. Even associations only lobby for what the board approves and not
for an individual member.

Did you know the PA Dept. of Environmental Protection (DEP) is working on the following issues?
1. Expanding its ePermitting system;
2. Post Construction Storm Water Management Plan;
3. Seeking an increase in Fee Packages for Oil & Gas and Air, which includes exploring options on how to fund its programs differently such as annual well fees or water withdrawal fees;
4. Multi-Well Permit Fee concept;
5. Requiring that certain high-profile pipelines and injection wells have a public hearing via the Environmental Hearing Justice Board;
6. Updating the ESCGP-2 to ESCGP-3 before the end of 2018;
7. Air issues such as GP-5/5A, Methane Initiative, and CTG RACT rules for existing sources;
8. Induced Seismicity Workgroup and UIC Permits review process;
9. Wellbore Deviation Workgroup;
10. Coal/Gas Coordinating Guidelines;
11. Area of Review Technical Guidance Document;
12. Well Plugging and how to fund plugging of abandoned wells;
13. Spill Policy review;
14. Radiation Action Plans for operators;
15. Underground pipelines for transporting freshwater and brine; and
16. Storage of Mine Influenced Water in impoundments.

On the legislative front, there are too many to name, but for certain the debate continues whether to adopt a severance tax, how to regulate the conventional industry, regulatory reform, and other tax legislation.

These are just a few topics I have highlighted, but there is so much more. Some of those issues can have major operating and economic consequences for an operator if enacted or finalized. But since they are unknowns until they become finalized it is difficult to assign a value on the unknown.

Let’s look at this from a different viewpoint. If you knew in advance that the concept of a regulation was coming that could cause you hundreds of thousands of dollars to operate, wouldn’t it be worth a fraction of those dollars to invest in making your voice heard at the beginning stages of drafting a regulation rather than wait until it becomes final?

One person told me that their leaderships’ philosophy was to “just deal with it.” While another person who was waiting on a permit said “well, I guess we’ll get the permit when we get it.” I find it funny that some companies take that approach when it comes to regulatory and legislative affairs, but if I sold them frac sand and told them that they would get it when they get it, they would never tolerate that.

Knowledge is power, but only if you use it. Having relationships within state government is power too. Investing in public affairs to gain access to those who regulate to utilize your knowledge, can lead to a significant return on your investment when successful at making changes to potentially damaging proposed regulations or laws.

Update on PA’s Gubernatorial Race:

In the Primary race, Senator Scott Wagner won the Republican Gubernatorial nomination to run against the Democratic incumbent Gov. Tom Wolf in this year’s General Election in November. Shortly after the primary victory, Senator Wagner resigned from his Senate seat to focus his efforts on the election with his teammate Jeff Bartos, who won the Republican Lt. Gov. nomination. Governor Wolf will be running with a new teammate as John Fetterman defeated sitting Lt. Gov. Mike Stack.

With the Governor’s race in full swing, be sure to stay abreast on what is happening in state government as the sitting Governor and legislators running for re-election will want to fulfill some of their campaign promises to appease their electorate. So, stay informed and then let them know how the issues they are considering will impact your company, your job, and most importantly your life.

 

 


Want more information or have a question, contact Teresa at 717-329-6402 or Teresa@TDConnections.com or learn more about TD Connections at https://bit.ly/2JE3fbM.

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