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It’s a Seven Stage Process

It seems like every week as I sit down to write this here blog, I go through my own version of the seven stages of grief. I start off shocked that I have no ideas, gradually get mad, panic a bit, get a little insight and then start writing and see where things take me. Sometimes it’s a dud and sometimes it works. Ironically we are also seeing the seven stages play out in real time through the manic twists and turns of the US post-election period and I can’t help but think that Donald Trump is also likely going through some version of the seven stages. It’s the narcissistic version so it stalls on the second stage (denial) but it’s there.

 

Ironically, this means I have something in common with Donald Trump, at least insofar as we are dealing with our own versions of these seven stages. Of course if you take a minute to look around, you can find these seven stages in pretty much every walk of life, ranging from how we deal with COVID on a day by day basis, the results of a particularly hard fought election, getting your tax bill in the mail and, of course, actual grief.

 

Where am I going with this? Well I work in the energy industry and as many of you know, it has been in a state of “flux” for the better part of, well, the better part of its existence. And, ironically, for an industry that prides itself on innovation, entrepreneurship and inventiveness, there are a whole lot of participants that don’t seem to like change very much.

 

This means that as the industry evolves there is a whole lot of grief that needs to be worked through so I am here today to act as a therapist of sorts to the industry and see if I can’t help some of its most cantankerous and change resistant participants and cheerleaders to work their way through these seven stages and, maybe for some, help them understand which stage they are at and move them further along the path to enlightenment and acceptance.

 

Let me state for the record that I myself passed through these seven stages as it regards the oil and gas industry. I mean really, anyone who has a pulse and has been around since 2019, 2016, late 2014, 2008, 1998 and 1981 has to have experienced what can only be described as the catastrophic reversals that only a true commodity business can deliver. And as each of these soul-crushing downturns passes, the industry and its participants need to work their way through these handy seven stages.

 

To properly recover from grief or think through these stages, we have to understand what we are trying to resolve. In the case of the energy industry, it’s not the “death of fossil fuels” because that’s a nonsensical statement. Rather it’s being able to understand and accept the macro forces that are upending and changing so much of the sector at a seemingly blinding pace, all while a pandemic continues to rage around us.

 

What all this volatility means is that the energy industry is in a constant state of change, or, as I’ll throw out for contemplation, a state of “transition”, which as we know is a word that traditionalists hate, especially because it is used by those who we perceive to want to force change onto us, as opposed to recognizing that there are indeed secular forces that are making such change or transition inevitable.

 

I know, I know. This is a pretty long-winded way to get to a destination, but if you want to solve a problem, whether emotional, psychological, numerical, logical or metaphysical it helps if you are able to identify what that problem actually is.

 

And in the case of the oil and gas industry in general, that problem is the change I referred to above, more specifically the near constant evolution of the energy industry or, as smarter people than me call it – the ongoing Energy Transition and the resultant fear thereof.

 

What do I mean by the energy transition? Some people just say it’s the inevitable transition from fossil fuels to renewable sources of energy, but that is a gross over-simplification

 

To me the energy transition is the chaotic intersection of the oil and gas industry, the evolving power industry, environmental issues and climate change, power politics, social and human rights issues, indigenous rights, prosperity and life. Among others. Complex right?

 

That’s only scratching the surface and pretty hard to contextualize.

 

Try this horrible analogy I like on for size.

 

If you have ever been to Paris, you have likely been to the Arc de Triomphe which is located smack in the middle of probably the most chaotic and busy traffic circles in the civilized world. There are multiple lanes of traffic and 12 exits of various sizes – it’s an analog clock face. This traffic circle is filled at all hours of the day by what are arguably the worst mannered and most unpredictable drivers on the planet – Parisians. For pedestrians, the only access to the Arc is by tunnel, since if you tried to cross, well you’d be run over before you could say baguette.. Where we aspire to be is at the top of the Arc and able to clearly see all the paths available clearly radiating out in true Parisian simple elegance. Where we currently are is in a rental car, stuck in the middle lane, wife yelling, kids crying and hoping we make it out in one piece.

This is the energy transition conundrum. How do we get to where we want to be from this seemingly hopeless spot we are in.

 

That’s where these infamous seven stages come in handy.

 

Shock is the first stage of the grief cycle and as it regards the energy transition, it is shock that an industry like oil and gas that has underpinned economic prosperity around the globe for generations should suddenly find itself under attack by activists, market forces, environmental concerns and varying political interests. After all, the energy industry generates billions of dollars of tax revenue for governments, supports millions of jobs and, in the case of Alberta and Canada, has created one of the wealthiest sub-national and national jurisdictions in the world. What kind of moronic set of nincompoops wants to be the one that throws this cash cow on the proverbial trash heap. Changing and challenging the industry upends our way of life and, to be up front, it is distressing. In the case of Alberta and the energy industry it has been coming for years but it still feels sudden – which is shocking!

 

Shock is quickly followed by Denial. And no, there will be no hokey analogy or bad pun here.

 

Fine, denial is not just a river in Egypt.

 

OK, what I really mean here is the feeling that there is absolutely no way this is happening. The world consumes 100 million barrels of oil a day and a bazillion bcf of natural gas. Oil and gas powers the economy. It is the foundation of modern life and has led to advances in every industry imaginable from agriculture to pharmaceuticals to cosmetics to transportation to medical devices to professional sports to, to, to, well, everything! The industry must continue because it’s just so essential to everything we do as a species. It might just possibly be the SINGLE MOST IMPORTANT INDUSTRY IN THE HISTORY OF THE HUMAN RACE!

 

The preceding statement of course is just an early manifestation of that next stage in the grief process, which is one of the more fun ones because it’s finally an active as opposed to passive stage. I’m referring of course to Anger. I feel like maybe many people in the fossil fuel industry are currently living in this stage – I know I did for a long time. This stage is characterized by laying blame and lashing out at perceived opponents. Whether it’s Trudeau and his inability to support the energy industry in precisely the manner we want him to or the mysterious  and nefarious international cabal of anarcho-syndicalist greenies and their army of environmental NGO’s plotting the demise of our industry, province and livelihood, we are looking to lay blame and exact punishment.

 

Take a step back and it is easy to see this stage in ourselves. As mentioned, I went through it. I have gone back through my blogs and there are some doozies. Unrepentant screeds against various levels of government defending our industry, my industry, from attacks by outsiders and sounding quite set in my ways and change resistant – despite frequent attestations to the contrary. Quite often the anger is expressed politically and divides along party lines. Here in Alberta that anger is manifested in various forms – Wexit, insanely partisan provincial politics, Jason Kenney’s mythical feud with Justin Trudeau, outrage at Eastern bums, Firewall letters, political threats and name calling.

 

Ultimately, none of this is anger and rage is working because the transition is in and of itself inevitable. It is happening. It has happened. It will continue to happen because it is always happening.

 

At some point the anger has to burn itself out because there is less and less oxygen to feed it and when that happens, anger finally gives way to Bargaining, another active phase where you flail around a bit looking for a lifeline and a way out. As the fourth step on our seven step journey, bargaining is also the pivot point where we (hopefully) start to solve our problems instead of just wallowing in them. While much of the bargaining is driven by trying to protect the status quo, it is nonetheless, in our energy transition scenario, a form of validation of reality.

 

The bargaining can either play out in a confrontational or a collaborative way. It can take the form of drawing a line around provincial jurisdiction around resource development or contesting a carbon tax on constitutional grounds – achieving small pyrrhic victories that are still rooted back in the denialist phase. Alternatively, it can take the form of acquiescence. We get the transition is coming, but give us two or three pipelines and couple of megaprojects and we’ll stop resisting. Or, acknowledge that the energy industry is vital to the national interest so give us money. Or fine, we accept the realities of climate change and get that a carbon tax will help address that but we want it to be our tax and we want to set our own rules. Some of these government regulations are clearly anti-development, how about we collaboratively modify them and we can all just get along.

 

But in our energy transition scenario, this bargaining is just different ways to maintain the status quo in the face of secular change. And as with all bargaining sessions, you win some and you lose some.

 

In the energy transition and in the face of rapidly accelerating change, the unfortunate reality is that the old guard is increasingly likely to come out on the short end, having to give up a lot to protect what they still have and perceive to be of the utmost need. All of this hopeless bargaining leads to the next stage, the realization of the inevitable and Depression. Ah sh*t. I guess I can’t stop this after all and I’m going to have to live with it.

 

The best part of this stage of course is, provided you don’t get stuck and wallow, how remarkably cathartic it can be. Probably a combination of relief at not having to fight the battle anymore but also a realization that there is actually nowhere to go but up from here. It is at this stage in our energy transition that things start to get fun again as we start to look for solutions that will allow us to get back on our feet (note to the oil and gas industry – you do this all the time).

 

This is called the Testing phase. For the energy transition, this is where we discuss things like the burgeoning renewables market in Alberta and have conversations about converting some of the tens of thousands of abandoned oil and gas wells in Alberta into a geothermal distributed generation powerhouse, replacing even more coal generation. At this phase we can continue capitalizing on our tremendous resource wealth by doubling down on the current infrastructure boom and keep building processing facilities. Given we now have a much better and evolving understanding of the place of oil and gas in the energy world, we are in a better position to more effectively put forward the comparative advantage of our products versus others. On climate we can emphasize our superior regulation, the creativity and talent of our engineers and scientists who are driving down emissions from energy production through near constant innovation. We can start to have conversations about transformational technologies like hydrogen. We can take our heads out oof the sand and realize that energy is a big tent industry encompassing everything from coal to oil to gas to solar to wind to hydro to biomass to hydrogen to lithium and everything in between – and here in Alberta we have it all in unparalleled abundance.

 

Most importantly, we can move past the anger and frustration we feel at being unable to recreate the past and finally engage in that last phase of which is Acceptance. We all know what this means. Acceptance is finally finding a way forward.

 

It’s accepting that oil and gas can coexist with other forms of energy. It’s not an either/or proposition. Energy consumption grows every year. It’s how it is supplied that changes. Acceptance means understanding that the ascendance of one form of energy doesn’t have to mean the demise of another – it’s just different growth rates. Plenty of industries have transformed and transitioned. Remember what a cell phone looked like in the 1980s? Anyone else have an Emerson 21 inch cabinet style sitting in their basement with a hi fidelity system – black and white? The rules of the game change every day. Companies adapt, people adapt, eventually even politicians adapt.

 

What’s important here is that having moved safely through these seven stages we come out the other side, and have rational conversations about the way forward and work collaboratively on realistic solutions that are rooted in an understanding of the energy transition instead of a deep-seated distrust and fear of it.

 

That’s it, All I’ve got.

 

Hope everyone feels better.

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