Archive for May, 2012

A Tale of Two Counties: Energy Development Helps Counties Go from Bust to Boom

May 31, 2012

By Stateside Associates

What are the biggest issues facing local governments in the Western United States? That was my question when I attended the National Association of Counties (NACo) Western Interstate Region conference in Santa Fe, New Mexico. This annual meeting brings together county officials from Midwestern and Western states to discuss common issues and identify key policy priorities—with a particular focus on agriculture, rural affairs and public lands issues. Attended by approximately 200 officials, this year’s meeting covered these issues, as well as local health care and economic development, but it was energy production (or a lack thereof) that really struck me as the hot topic for local governments throughout the West today.

A look out of a plane window over Western states shows signs of this new energy frontier—drill sites and wind turbines are becoming standard scenery in many areas. In particular, technology advances in oil and gas production have brought new energy projects online and helped drive significant economic growth in many western communities. Highlighting this trend was the news that North Dakota has become the nation’s #2 oil producer, surpassing Alaska nearly a year earlier than anticipated. North Dakota also features the lowest unemployment rate in the country.

Finding the right policies to promote energy development and reap its economic benefits are key issues at the county level. In particular, having both the right zoning and tax policies is critical. Zoning requirements that allow for development but preserve aesthetic and other quality of life factors can be instrumental in creating communities that will be successful in the long-term. Similarly, local sales and real estate transfer taxes that balance revenue generation and economic development can be the difference between energy creating a boom or bringing with it a bust. Adding to this equation are state and federal regulatory issues—in particular an emerging patchwork of environmental requirements—that could slow the development of future projects.

Officials at the meeting also warned of logistical challenges for counties with developing energy industries. Most discussed was the need for infrastructure improvements to support the massive influx of energy sector workers. Citing years of population decline in many rural areas coupled with scarce state and federal funds, county officials noted that roads, schools and sewer systems frequently are inadequate to handle the hundreds of workers that arrive to develop new energy projects. And, many of these individuals are only in the county temporarily—meaning that the infrastructure improvements may not be needed down the road. These difficult governance challenges aside, most that commented saw the benefits of energy development as outweighing the negatives.

Overall, the meeting highlighted the reality that counties are where the “rubber hits the road”—literally in the case of energy development—and that local officials faced with a potential energy rush in their counties can learn from their counterparts across the West about what works and what doesn’t, to ensure their communities maximize the benefit of this economy-driving energy boom.

For those interested in this issue, NACo’s annual meeting July 13-17 in Pittsburgh will take a closer look, with a session dedicated to where the natural gas jobs are today. If you plan to attend, drop me a line. I would love to hear from you about these and other issues you will be closely monitoring.

Shareholder Petitions Threaten SGR

May 3, 2012

By Michael Behm, Senior Vice President

I happened to be visiting a client’s office last month when an email from the general counsel arrived. New internal disclosure rules were being considered by senior management at the request of several vocal shareholders. Money committed to certain advocacy activities and most political spending would now require even further disclosure – and thus additional scrutiny.

Oh, and one more thing: the general counsel wanted to know why budget dollars were being spent on several elected officials Groups. His questions could be summed up as follows: “What are we doing there…what are we getting in return?”

In a climate of unending cost-cutting, continuous program reorganization and scrutiny over political spending and participation in certain Groups of state and local officials – now understood as “increased transparency” – the scenario might hardly be considered unique. But the cumulative effect of these factors is making our Groups investments harder to defend and so the question is: Can you defend your Groups investments?

Let’s consider again why we participate in state and local officials Groups:

  1. Because I always have;
  2. Because that is what everyone else in my industry does during the spring and summer months; or
  3. Because these Groups return some tangible value to my program.

The correct answer is, of course, 3. But I cannot tell you how many times in my career I have heard some combination of the first two answers from industry colleagues and clients. They do it because they have always done it that way. It is business as usual.

These answers are occasionally accompanied by an awkward chuckle, because these professionals know that Groups participation is a critical part of their state and local government relations program. The challenge is articulating why it is critical, how they map these often costly contributions, memberships and sponsorships back to their retail government affairs efforts or how they should quantify its value for the boss. They also know that business is not as usual anymore.

Defending your investments in Groups should not be a difficult exercise – that is, to express what Groups participation returns to your program in terms of value. If you cannot quantify these efforts, then why are you doing it?

One of the very first questions you need to ask yourself is the following: Is there an “internal client” that considers Groups participation a priority?

In the instance of my client’s response to its senior management, the answer was yes, absolutely, without question. We were able to explain that the business units (the internal clients in this case) consider the Groups outreach to be critical in terms of elevating the company profile among elected officials in an otherwise crowded technology market, sustaining their innovation efforts in a changing public policy environment and ensuring a competitive edge for the company.

We went on to explain that the leaders and officials in the Groups are important to the national relationship-building efforts, that these officials have often championed policy on behalf of the client and more than a few of these officials represent areas that neighbor the client’s facilities or they are customers. We described the many policies we have targeted and influenced over the years and subsequently leveraged at both the state and federal levels of government; we also described the occasions in which the Groups forums were utilized to challenge policies adverse to the client.

We provided the right answers to the general counsel and the program continues today.

As you quantify – or have to defend – your own Groups investments, you should consider some of the threshold questions that go straight to the Groups’ value proposition. I pose just a few below:

  • Who participates in these Groups and how are these officials meaningful to your program?
  • Does the Group offer you opportunities to participate in a meaningful way or do you watch from the sidelines?
  • Can my senior management or internal client play a role as an expert or resource to the Group?
  • Does the Group develop policies or does it simply serve a clearinghouse function for its members?
  • Is the Group in which you participate a policy-oriented Group, ideologically-oriented or a politically-focused (527) Group and does that matter to your program or internal client?
  • Do state or local leaders participate in the Group?
  • What is the value of the relationships you develop, or have developed, and what do they mean to your program or internal client?
  • Is there a value to the Group’s policymaking?
  • What is the Group’s influence and reputation and does that matter to your program, the internal client or even company shareholders?

A regular process of quantifying your participation in the Groups and their overall value should be incorporated into your program – and as a program component that is regularly revisited.

All of this can help make defending your Groups investments much easier – and not just when the boss calls.