SHALE-GAS EXPLORATION IN QUEBEC: A QUEST FOR LEGITIMACY

Suzanne Beaulieu, PH.D.

Professor
University of Sherbrooke
Faculty of Administration
Department of accounting and tax

Address:
2500 boul. Université,
Sherbrooke,
J1G 4E9

Office telephone: 1-819-821-8000, ext.62309

E-mail: suzanne.beaulieu@usherbrooke.ca
Abstract

Purpose: This study investigated a real-world development conflict—whether to expand energy

development (natural gas) in Quebec— in its natural and complex environment.
Design / methodology / approach: The empirical data are based on a qualitative case study with data
taken from various sources: public meetings (recorded data), the Internet, the press, audio/video
interviews, and newspapers. This is a large public development project, with a great deal of media and
public attention.
Findings: The study shows that legitimacy is essential in pursuing a project, and how legitimacy is built
or lost in a project–stakeholder relationship. Two major dimensions of legitimacy are at stake in this
project. The study shows the importance of communication, competence, integrity, and working towards
reaching project milestones and establishing common goals.
Research limitations: Future research should investigate other scenarios, types of projects, cultures, and
countries, so that these findings may be generalized.
Practical implications: Sustainable development is an increasingly important issue, in which
organizations must engage multiple stakeholders and consider their objectives when deciding on
organizational actions. Research provides little guidance as to how managers could measure stakeholder
reactions and use information to facilitate decision-making.
Originality/value: Organizational legitimacy is studied here in a sociopolitical context with a great
variety of stakeholders and in a very sensitive area. The project has been halted, so from the point of view
of proponents, their strategic errors can have dramatic consequences.
Keywords - Legitimacy, governance, stakeholder analysis, project management, trust

Introduction

Quebec has been actively working to achieve energy independence for a number of years. Despite the fact
that Quebec has a high-quality hydroelectric system providing affordable electricity, the province imports
a non-negligible amount of natural gas from Western Canada.1 Now the potential for natural gas has been
discovered in the St. Lawrence Lowlands. The deposits consist of shale gas that can be extracted by
hydraulic fracturing, a recent technological advancement.

Indeed, since 2008, oil and gas companies conducting exploration in Quebec have discovered Utica Shale
in the St. Lawrence Lowlands. Initial estimates placed the commercial potential at from 8,750 to 40,750
billion cubic feet. Based on current rates of consumption in Quebec, this represents from 40 to 190 years
of reserves, if the initial estimates hold true.

The development of shale gas is relatively new in the world, relying on a new technique known as
horizontal drilling. Yet this type of drilling and extraction involves a number of environmental risks and
social impacts. In 2010, talk started going around about development on a larger scale: not only would
Quebec be able to meet its own natural-gas needs for several generations, but there would possibly be
enough for exports. The project’s two main proponents _the provincial government and gas companies
_tried to promote the validity of natural -gas exploration and development in Quebec. Their efforts,
however, were vehemently decried by various groups. The debate is now in the public arena. The project

1
Quebec's energy portfolio contains various forms of energy. Petroleum products such as gasoline, diesel, and heating oil
account for 38% of Quebec's total energy consumption. Natural gas has been estimated at 14% of the overall energy portfolio.
has come under enormous social pressure influenced by rather negative media coverage and the strategic
errors committed by project proponents.

Opposition to the project was so intense from June to December 2010 that the Quebec government had no
choice but to mandate the Bureau d’audiences publiques sur l’environnement (Office of public hearings
on the environment, hereafter BAPE) to shed light on the project by inviting all interested parties to take
part. Indeed, the government had constantly objected to taking this action, but had to yield to public
pressure and the insistent demands of stakeholders. The BAPE report, published in March 2011, made a
number of recommendations, including that an in-depth study be conducted by a select group of experts
to better assess the project's impacts and benefits. For many people, that was tantamount to a moratorium,
with all exploration work suspended. People on the ground are saying that the project lacks social
acceptance. We believe that what is at play is a lack of organizational legitimacy.

So our basic premise about this project was that forcing an ongoing project to a halt, as has been done in
this case, brings into question the legitimacy of the project itself.

Many issues must be considered. This project affects the entire population, meaning the involvement of a
large number of stakeholders. The landowners where drilling has started or where the gas reserves are
located, are extremely worried, as are the targeted municipalities. In addition, there is the media scrutiny
as well as the work of environmental groups and newly formed social groups; the apparent lack of
leadership in facing the crisis; and a major lack of trust in the industry (the companies involved in
exploration) and the government (who grants permits to proceed).

This article breaks down as follows. The next section presents the theoretical research framework. Section
2 describes the methodology and provides samples of the data collected. Section 3 proposes an analysis of
key events and makes connections with the theories presented. Section 4 states our conclusions and
suggestions for future research.

Theoretical background

Against a backdrop of sustainability and corporate social responsibility (CSR), we will examine: the
legitimacy theory (and, implicitly, legitimization strategies), we also need insights from the stakeholder
theory since legitimacy is obtained through stakeholder tacit approval. Two other paradigms interest us
alongside these two theories, namely, the media-agenda-setting theory and the concept of trust.
First of all, we need to briefly place ourselves within the context of sustainable development and social
responsibility, which are two requisites for developing an industry like shale gas.

Sustainability

Sustainable development seems to be a topic in all kinds of forums these days. In his classical definition,
Bruntland (1987) stated that "sustainable development is development that meets the needs of the present
without compromising the ability of future generations to meet their own needs."

Yet applying this rather broad definition is fraught with challenges. Several authors complained about the
lack of clarity around the needs and, reported that the economic growth model continues to follow
traditional market mechanisms while trying to increase the importance of environmental issues. Shale-gas
development within a context of sustainable development poses many dilemmas: Should we move ahead,
given the economic benefits? What are the environmental impacts for today and tomorrow? Are we
respecting the social dimensions?
Social responsibility (CSR)

Corporate social responsibility has been largely dealt with in the literature and by investigators for several
years. It constitutes a core concept in developing a gas resource. We should point out several elements in
this concept of shale gas

CSR represents, for Huang (2010), the obligation for firms to be responsible for the environment and for
their stakeholders in a manner that goes beyond financial goals. For Pasquero (2004), showing social
responsibility means taking into account society’s sociopolitical and ethical ideals when making business
decisions.

In a study dealing with the theoretical basis of CSR, Gond and Mullenbach-Servayre (2004) catalogued
theoretical trends related to the concept, we have retained three:
• CSR is the corollary of good management, that is, management that is both strategic and ethical,
recognizing the needs of all stakeholders with an interest in the organization and assessing the
consequences of its acts (a stakeholder-oriented view).
• Since CSR is linked to a tacit agreement between the business and society, the company has a duty to
fulfill the social functions society assigns to it under the penalty of losing its legitimacy and running
the risk of having its power (social-contract view).
• CSR consists in implementing the practices decided by the environment in order to obtain its support
(neoinstitutional view).
These three trends raise warning flags with respect to the case presented in this article. The concept of
governance, which is inherent in any dynamic system, must be introduced in order to have a
comprehensive perspective.

Governance and corporate social responsibility

Huang (2010) clearly describes the new corporate environment: ―Today’s corporations operate in an
environment of intense public, investor, regulatory and media scrutiny…increasing public and
stakeholder concern about the social and environmental impacts of business practices is forcing
companies to come to terms with a broader set of interests and expectations.‖ Huang claims, and rightly
so, that corporations must be proactive legally, socially, and environmentally. They must also manage
their reputation capital. Moreover, they must maintain good relationships with their stakeholders in order
to acquire their "social license to operate." ―Companies with good corporate governance usually consider
the maintenance of stakeholders, customers, and society’s trust to be of vital importance in ensuring
mutual sustained development.‖

For Pasquero (2004), ―governance is the set of mechanisms by which a society tries to get its
organizations to comply optimally with the different elements of social demand. Three mechanisms
ensure the coordination between social demand and the organization:
• The market: provides an essential part of social demands (needs, distribution of goods and
services). Yet he identified two market constraints: technology and profitability (a good or service
can only be available on the market if they are technological feasible and profitable).
• Social control: There are two main social forces—the government and pressure groups—that will
attempt to constrain corporations to adopt behaviors more in line with their wishes.
– The government has many tools to bring businesses around to incorporating
socioeconomic objectives in their decision-making through regulations, grants, prohibitive
costs, and so on.
– Pressure groups detect and publicize areas of public dissatisfaction with the negative
effects of corporate activities. The negative tactics consist in attacking corporate images by
dramatizing the problems in the media. Positive tactics come down to working with
 businesses by negotiating solutions with them. Their effectiveness as pointed out by the
author, their effectiveness depends primarily on their ability to mobilize and popularize the
causes that they champion. That is exactly what happened in this case in which
mobilization—with media assistance—was highly successful.
• The values shared by the organization and the surrounding society. In this regard, the author is
addressing member ethics and convictions as well as the value system of each stakeholder, which,
of course, plays a role in the debates and in changes in mind-set. Self-regulation (businesses
applying the rules governing sociopolitical behavior) also falls within this category and stands out
as a hybrid form of social control and collective responsibility.

For an organization, CSR means to integrate these three mechanisms in its decision-making system, and
to adjust their behavior accordingly to ensure long-term legitimacy (Pasquero, 2004). In our case study,
these three mechanisms appear clearly, and there are gaps at each level.

The concept of legitimacy

An organization is said to be legitimate to the extent that its means and ends appear to conform with
social norms, values, and expectations (Dowling & Pfeffer, 1975). Palazzo & Scherer (2006) push this a
bit further: legitimacy is vital for organizational survival as it is a precondition for the continuous flow of
resources and the sustained support of the organization’s constituents (citing Parsons, 1960; Hybels,
1995; Ashforth & Gibbs, 1990; Pfeffer & Salancik, 1978). Legitimacy brings to a firm the support of its
stakeholders. It facilitates its steady access to the resources that it deems vital. Organizational legitimacy
is therefore an intangible asset that the firm must constantly secure through the careful management of the
relations it maintains with its stakeholders.

Legitimacy grants privileges to a firm in exchange for a number of obligations. When the organization
does not live up to these obligations, stakeholders will call the existence of these privileges into question,
and, in so doing, question the firm’s legitimacy. When stakeholders withdraw their support, the
organization encounters difficulties and survival could be in jeopardy. (Beaulieu & Pasquero, 2004).

For Hybels (1995), the legitimization process starts with identifying the critical actors—both internal and
external—whose approval is necessary to fulfill an organization's functions. For Massey (2001),
legitimacy is successfully managed when organizational actions are perceived as consistent with
stakeholder expectations. It involves constant communication between the organization and its
stakeholders.

In a prior empirical research conducted in a professional corporate setting, Beaulieu (2001) studied how
an organization’s legitimacy is built and secured over time (through various strategies), demonstrating the
importance of this asset. An integrative model (called the ―synthetic model of legitimacy; see Table 1)
was conceptualized and contains three submodels:
The ―Legitimacy Model‖ describes the various dimensions of organizational legitimacy, as it can be
construed once institutionalized.
The ―Legitimization Model‖ deals with managing legitimacy over time. The model identifies five
different legitimization ―modes‖ (strategies).
The ―Relational Model‖ discusses the interactions between the dimensions of legitimacy and the
various modes of legitimization.

Table 1. Synthetic Model of Legitimacy

Legitimacy Model (1) Legitimization Model (2) Relational Model (3)
Includes six dimensions: Includes five strategic modes: Shows interdependence between (1) and (2)
Identity Initial construction How the organization builds its initial
Technical Preservation legitimacy
 Moral Legal Reinforcement How the organization restores its
Perceptual Restoration (2) legitimacy when it is attacked and
Institutional Enlargement damaged
How the organization renews its
legitimacy to fit new social demands and
expectations

This study focuses mostly on the dimensions of legitimacy. The following table gives a brief description
of the dimensions, which we believe can be applied to different settings. In our case study, the project was
at the initial construction phase. The proponents failed to preserve it.

Table 2. Six Dimensions of Legitimacy

Dimensions
Identity legitimacy
Technical legitimacy
Moral legitimacy
Legal legitimacy
Perceptual legitimacy
Institutional legitimacy
Empirical Indicators
Who are we and what is our purpose?
Organizational identity, role and prerogatives.
Is our competence adequate?
Competencies suit requirements.
What do we believe in?
The values of the organization.
What is our legal status?
Legal obligations and prerogative boundaries.
How are we perceived?
Multiple stakeholders and multiple perceptions.
Where does our independence come from?
Recognition acquired and ultimately taken for granted.

In our case study, the main dimensions at stake appear clearly: the moral and perceptual, and in second,
technical and identity (contested prerogatives). The legal dimension is not at stake since the industry
followed the prescribed rules; it is the rules themselves who are challenged by proponents. The
institutional dimension is not at stake neither, since it is not even present (too early in the process).
Legitimacy is an intangible asset, though difficult to measure. We believe that in using a categorization of
various components, it can help managers to better orient their effort.

Legitimacy is not static: it could be enhanced or lost. It must be continuously developed and protected.
Therefore, adopting relevant strategies of legitimization is a must, and communication is an essential
component. Ashforth and Gibbs (1990) introduced symbolic management and the importance of social
communication. Déjean & Oxibar (2010), on the other hand, emphasized social communication as a
legitimization process. In a study conducted on the case of the Arthur Andersen accounting firm
(Beaulieu & Pasquero, 2004), the authors demonstrated that the firm's legitimacy had been completely
destroyed. Moreover, its destruction arose out of stakeholder perception. The question then is how to
foster positive perception.

In cases such as gas development, which affect the entire population and involve significant
environmental risks, communication stands out as a key element that proponents would want to seize on
to foster positive perceptions, create trust, and nurture this trust. This leads us to introduce two concepts
that we feel are complementary to the theories presented:

Media-agenda theory

The news media stand out as a factor that has been suggested as being particularly influential in creating
legitimacy gaps for an organization. Building on a belief that the media is an important factor in shaping
community concerns and expectations a number of researchers developed a theory known as media
agenda setting theory- to further explain the potential of the media to influence community expectations
(Islam& Deegan, 2010). This theory is not at the heart of our study, but it is obvious that the media had a
huge impact on the perception of many stakeholders and the population in general.

Concept of trust

This concept, which appears with increasing frequency in management literature, has many ties with the
concept of organizational legitimacy. For Poppo and Schepker (2010) state that ―public trust in an
organization is critical to ensuring legitimacy and firm survival.‖ In their study of a case similar to ours,
Palazzo and Scherer (2006) indicated that, in recent years, many corporations have been involved in
conflicts with civil society, resulting in their legitimacy being challenged, particularly because of
environmental impacts that give rise to critical questions on the social role of businesses. Citing
Sethi(2002), in Poppo et al.(2010), they say that public trust in corporate morality is waning and business
activities are intensively scrutinized by NGOs. Their study was based on the types of legitimacy defined
by Suchman (1995) and, more specifically, ―moral legitimacy.‖ Palazzo and Scherer appear to deem
this dominant, stating that ―the focus on moral legitimacy will alter the standards of organizational
legitimacy, since it involves organizations in more and more processes of active justification vis-à-vis
society through communicative engagement in public deliberation.‖ When opposition to a project
gains strength, leadership is increasingly contested, trust diminishes, and the risk of losing
stakeholder support of stakeholders grows. This jeopardizes legitimacy and, consequently, access
to resources becomes problematic.

Are there links between trust and legitimacy? Indeed there are. According to Harris and Wicks (2010),
"trust is a multidimensional construct that includes the competence and ethics (~ moral and technical
legitimacy)." They also cited Pirson and Malhotra (2007), who identified 6 different factors of trust:
benevolence, integrity, managerial competence, technical competence, transparency and value
congruence. Consequently, these items overlap the legitimacy presented herein.

Stakeholder theory

The scope of the shale-gas project and its characteristics demand particular attention. Such projects
involve many stakeholders, of which the three main ones are the government, gas companies (including
many represented by an association acting as spokesperson), and members of the general public directly
concerned. Stakeholder issues are many and often contradictory. This kind of project presupposes in-
depth reflection on the concept of social responsibility by all the authorities involved.

We have retained two definitions of stakeholder. First, Freeman's classical definition (1984), which states:
that a stakeholder is "any group or individual who can affect or is affected by the achievement of the
organization’s objectives," and a somewhat more explicit one by Post, Preston, and Sachs (2002), who
define stakeholders as "all individuals and constituent elements which contribute deliberately or otherwise
to the firm’s capacity to create value, who are its main beneficiaries and/or bear its risks."

The theory provides guidelines that help us to answer the following questions:
• Who are the stakeholders and what are the issues?
• How can all the demands and needs of the various stakeholders be answered?
o There is no simple or single answer.
o The weight of the actors varies.
o Some capture more media attention.
o Beware of the Internet and social networks.
o Plurality of actors or groups (different sizes and power).
o Alliances can be forged in debate.
• Who and what should be prioritized?
 • How can we reconcile protagonist issues while taking into account the essential notion of
social responsibility?
• What is the government's social responsibility given that its component institutions have
missions that occasionally appear to be contradictory?

These guidelines, including those proposed by Mitchell et al. (1997), are useful, but are they sufficient in
a highly politicized issue and for a project affecting a large proportion of the population? What is the
government's social responsibility given that its component institutions have missions that occasionally
appear to be contradictory?

Methodology

Case study
We decided to study this particular case because it inherently offers a rich field of investigation. The
project is, in itself, rather unique, because it extends beyond the reality of a single organization that must
deal with its stakeholders. In this instance, a government and gas companies are the project proponents,
whereas the other parties are either tagging along behind these two players or are opponents. Moreover,
the government and its various departments occasionally have conflicting roles. On one hand, it strives to
increase its economic wealth; on the other, it has an obligation to safeguard the public and the
environment. Moreover, the government has its own ramifications, such as the municipal system, which
is a major player.

Data
Our data are of a secondary nature. The period targeted by our study essentially covers from summer
2010 to spring 2011. More than 100 press items from a variety of media (newspapers, periodicals, Web
sites) were examined, along with BAPE documents and several reports from independent experts. We
also looked at various Web sites and cross-referenced our data from various sources. During the study
period, the issues were broadly debated in a variety of forums: radio, television, Internet, newspapers, and
trade journals.

Moreover, when the government finally decided to give the go-ahead to a board of inquiry under the
auspices of the BAPE, it constituted a unique opportunity to obtain or validate a wealth of nearly basic
relevant information through hearings with select representatives dealing with every aspect of the project,
whether it be economic, environmental, or social. Both the public and media were in attendance. The
BAPE acted as the authority to which the summoned stakeholders (government, industry, and experts)
had to provide the information requested. All of the information collected was available to the general
public, including the minutes from BAPE sessions. We attended two BAPE sessions to see how the
meetings were conducted and get a sense of the prevailing atmosphere.

Setting
Energy development in Quebec fuels passionate debates about the trade-offs of energy versus related
environmental concerns. The St. Lawrence Lowlands region is wide open with many farms and people. It
borders on urban areas and the beautiful, broad St. Lawrence River. Quebec produces little natural gas,
importing nearly all of its needs from Alberta. The shale-gas project has been halted for two years to
allow an expert group to further study the implications, potential, the costs, environmental impacts, and so
on. For the moment, developers are restricted to conducting some tests on existing wells.

Many parties are involved in this sustainability issue. The primary decision-makers are the Quebec
government (natural resources come under provincial jurisdiction) and the energy companies. The
government must decide whether to proceed with the project, exploration, and development, or else to
impose a moratorium. The government is faced with balancing provincial needs for gas exploration and
production with those of the various stakeholders, including local communities, farms, conservation
groups, and energy companies. The energy companies must decide where they stand with respect to
sustainable operations management. Can they proceed with more restrictions? Can they explore but with
much fewer wells and will this be financially viable? How can they work with much greener ways? How
can stakeholder expectations be balanced?

The following summarizes the case study’s specificities:

• Natural gas is a common resource.
• Underground resources fall under government jurisdiction and responsibility.
• The government grants licenses and receives compensation for doing so.
• Landowners are compensated for the right of way.
• Private companies develop the resource and pay royalties to the government.

Some statistics from the BAPE report:

• 3 administrative regions; 33,000 km2 of land; 2 million inhabitants
• Potential reserves: 120 TCF, of which 9 to 40 are recoverable (1 TCF = 1,000 billion cubic feet)
• The Utica shale is considered clean: methane 98%.
• Oct. 2010: 121 permits were issued to 12 companies, affecting 21,000 km2, 93.3% of which was
private property.
• To date, 29 wells have been drilled by 5 different operators.

Quebec’s task is to quantify the resource and validate its economic potential. In February 2010,
Talisman Co. reported that one well would bring in an average of 6 million cubic feet per day for a
month, indicating real potential. So, Quebec stands poised at the outset of development. In comparison,
Barnett Shale in Texas has 14,574 developed wells (as opposed to explored) on the same date, while
Marcellus Shale in Pennsylvania has 1,000 wells in development (BAPE report, p. 35).

Data analysis

Identification of the stakeholders and their issues

There are many stakeholders and stakeholder groups involved in this case, with various demands and
needs. The government is faced with the challenges of looking for profitable projects that would add to
public coffers while safeguarding the environment and health, and responding to pressure from
municipalities or other institutions.

In Quebec, ownership of oil and gas resources vest with the government and the government grants
exploration and development permits. This explains why the elected government must play different
roles. First of all, it must ensure that a fair share of the exploration revenue finds its way into government
coffers. Second, it must provide a framework for this development in order to minimize impact on the
environment. Lastly, it plays a very important role with respect to citizens, both protecting them and
defending their interests. Simply seen from the government's point of view, promoting this kind of project
entails many questions: is economic development its prime role?

Table 3. Identification of proponents and opponents

Proponents Opponents or undecided
Québec Government: two main ministries involved: Citizens directly concerned
Natural Resource Ministry & Citizens indirectly concerned
Sustainability Ministry
Other ministries involved:
Ministry of Finance
Ministry of Economic Development
Ministry of Health and Social Services
 Ministry of Public Security
Ministry of Transport
Associations (grouping together 27 companies and other Municipalities and RMCs
gas companies)
Chambers of Commerce NGO Groups: AQLPA, Greenpeace, Equiterre,
various citizen groups
Related businesses Watershed organizations
Opposition parties
INSPQ
Experts

Overall, after having revised the collected data, we can summarize the main arguments of the parties, as
follows:

Arguments in favor of the project

- Quebec could achieve natural-gas self-sufficiency and no longer import 100% of its needs from
Western Canada (thereby reducing costs).
- Quebec would receive significant royalties from gas companies for the gas tapped (between $1.4
billion and $5.4 billion during the production period).2
- Anticipated investments in Quebec by the gas industry would amount to several billion dollars.
- Thousands of jobs would be created (5,000 to 19,000 jobs per year).
- Quebec would become a natural-gas exporter.
- Natural gas is cleaner energy than coal or petroleum, because it gives off less greenhouse gas.

Arguments against the project

- The drilling process uses very large quantities of drinking water, which must be decontaminated
after the process.
- Quebec's current water purification and filtration plants are unable to handle such a large volume
of contaminated water.
- While the industry has provided assurances about well safety, hydraulic fracturing entails inherent
risks, including contamination of soil and groundwater by the gas itself and the chemicals used in
the process. In addition, there is a risk of well explosion.
- Transportation of hazardous materials through urban areas, the complexity of precautions to be
taken, and the lack of an emergency plan.
- Use of productive farmland in Quebec (loss of arable land).
- A great deal of noise and truck traffic through areas with ongoing drilling operations (could last
several months).
- Potential loss of property value.

Some core–stakeholder issues are provided below.

Citizen issues

For citizens directly concerned, the main issues are:

• Risk of drinking-water contamination
• Maintaining a peaceful place of residence (industrial vs. agricultural)
• Risk of loss of property value
• No desire to have a well too close to home
• A safe environment and adequate management by the government

2
(Data provided on the QOGA Web site. Study conducted by SECOR using two scenarios: 150 wells and 600 wells)
 • Preventing industry and government from proceeding precipitously and putting the environment
and public at risk
For citizens not directly involved, the issues may vary:
• Mainly concern with the environment
• Safety for everyone
• Is the project financially profitable and will it benefit everyone?
• Is the government actually managing the project and getting a decent profit, or is the industry in
control?

Industry issues

The gas companies formed an association—the Quebec Oil and Gas Association—to encourage dialogue
in Quebec about the potential of the province’s emerging gas industry. A few of them did not join.
The main issues are:
• Obtain landowner approval for drilling on their properties.
• Obtain the required permits from the government and municipalities.
• Convince all the bodies involved about the general safety of their facilities and their desire to
have a minimal environmental footprint.
• Respect the legislation and regulations of all levels of government.
• Maintain their exploration and development rights.
• Manage to make the operation profitable under the conditions imposed.

Government issues (2 central ministries)

Ministry of Sustainable Development3

Its mission: protect the environment and natural ecosystems for the benefit of current and future
generations. Its leading role is to promote sustainable development; it aims to keep the environment
healthy within the confines of economic development and social progress.
Roles:
• Establish standards for the exploration and development process.
• Establish a limit on greenhouse-gas emissions.
• Establish standards on minimum distances between residences and the sites operated.
• Establish a number of wells that can be drilled up at the same time.
• Control the use of drinking water and its subsequent decontamination.

Ministry of Natural Resources4

Its mission: foster the development, preservation, and production of information concerning, land
and natural resources in Quebec with a view to achieving sustainable development and integrated
management.
Roles:
• Implement the Mining Act and its regulations.
• Provide and manage oil and gas rights.
• Develop and implement plans and programs for developing and using oil and gas resources.
• Acquire, interpret, and disseminate geoscientific knowledge.
• Ensure the maintenance of oil and gas supplies.
•

3
Ministry of Sustainable Development
4
Ministry of Natural Resources and Wildlife
Major environmental-group issues

L’Association québécoise de lutte contre la pollution atmosphérique.5_ This group had a major impact on
the project. They were the first to use mass media to challenge the project, inform the public about the
risks, and confront the government and industry spokespersons.

Its mission: to help protect the air and atmosphere, for both human and ecosystem health.
Roles:
• Provides strategic surveillance on issues related to air quality, climate change, and air pollutants.
• Educates and informs stakeholders relative to wrongdoing.
• Mobilizes stakeholders around common projects promoting cooperation and constructive
exchanges.
• Represents and promotes the interests, choices, concerns, and positions of stakeholders to
decision-makers.
• Collaborates on common agreements and actively participates in any mandate from the various
levels of government.

Building on Freeman's adapted model (2003) in Fassin (2009), we have devised an organizational chart of
stakeholders (Figure 1). Several of the slots could be broken down into many subgroups because the
situation is rather complex: many parties, overlapping relationships, divergent objectives, and
multiple/varied expectations. This makes it possible to see right off the complexity of interrelationships
between the various stakeholders and the importance of building targeted, effective strategies.

Figure 1. Shale-gas project stakeholders

Citizens direct Environmental General Public

concerned & social groups

Government Industry
(ministries (Companies &
involved) association)
BAPE (Govt Media
Agency)

Shale-Gas Project

Opposition indirect busi-

parties Municipalities nesses,experts
& Federation of

5
Quebec association against atmospheric pollution
The chart is a static representation of stakeholders; some have a primary relationship, others a secondary
one. The BAPE6 and the means occupy a specific place. The BAPE has nearly judicial power. It must
advise the government with full knowledge of the facts and, at the same time, inform the public about
every aspect of the project. Clearly, it has a major role. Its report, published in April 2011, it brought the
project to a standstill so that another feasibility study could be conducted.

The media also figure prominently in this issue as supposedly neutral purveyors of information. They
have a wide audience and the power to influence public opinion by their tone, reporting frequency, and
the people targeted in their reports. This accounts for their position in the organizational chart. Indeed,
since most people rely solely on the media to stay informed, the information provided by the media is
therefore of prime importance. Our observations lead us to believe that the media presented significantly
more negative arguments than positive ones. On the other hand, we also noticed that the project advocates
were not very proactive in terms of communication.

Observations

The analysis of our data identified stakeholders and their issues. It also made it possible to grasp of the
project's complexity and the challenges faced by the managers of the organizations involved. The
literature deals with the importance of adequately managing stakeholder demands. The data reveal
significant flaws in the strategies adopted by the government and the industry, who were two of the
project's main advocates.

While the government advocates sustainable development, what does that concept mean specifically to
the Ministry of Natural Resources and the Ministry of Sustainable Development, Environment, and
Parks? Moreover, should they give precedence to their particular agendas or defend Cabinet's position?
Many parties have decried the lack of independence between the government and industry, in particular
proximity between government members and the management of gas companies. On one hand, the
government must work with the industry because industry develops the resource (they are partners). On
the other hand, it must demonstrate to the general public that it is the guardian of their interests, because it
must watch over their actions and impose strict constraints and procedures. This is particularly sensitive,
undermining confidence in the government. As for the companies, they all have Web sites testifying to
their concern for acting responsibly and from the viewpoint of sustainable development. Yet the facts do
not appear to substantiate what their statements broadly portray.

On the government side, we have discovered the following shortcomings: a lack of cohesion between
government management units (particularly between the various ministries), a flagrant lack of scientific
knowledge, a lack of transparency, deficient public relations (not only in providing reassurances, but also
in convincingly arguing that the project is valid), apparent lack of independence from the industry, and
deficiencies/inconsistencies in supervising work in the field. On the industry side, efforts have been
inadequate (not proactive) in leading the stakeholders and general public to consider that the project
would have potential benefits for everyone, while respecting the social-responsibility issues held by the
organizations.

6
BAPE (Bureau d'audiences publiques sur l'environnement (or office of public hearings on the environment) is
an independent advisory agency reporting to the Minister of Sustainable Development, Environment, and Parks. Its
mission is to enlighten government decision-making in a sustainable-development perspective.
Its basic mission with respect to shale gas consists in proposing a framework for shale-gas exploration and development;
proposing directions for legal and regulatory guidelines [...] for the industry that respect sustainable development; and calling on
scientific experts, who will assess all issues related to this mandate.
In conclusion, as time passes, neither the government nor the industry has succeeded in establishing
public trust. Indeed, the general public has become increasingly put off by the project. Many parties have
called into question the project's validity with increasing vehemence. It has become clear that the project's
social acceptance (for us, legitimacy) is far from being established. As cited by Professor Faucher in the
daily Le Soleil (January 31, 2011): "trust is essential in the life of a society because mistrust paralyzes
institutions and undermines the relationships between individuals."

Stakeholder management is a priority. Our methodology did not allow us to investigate the adopted
positions and strategies in greater depth. It would be interesting to conduct semi-structured interviews
with senior management of gas companies, several government representatives, and other parties central
to the project in a subsequent study. That would provide for gaining a better understanding of the
management challenges and better defining the appropriate strategies (if the project's feasibility is
ultimately demonstrated). As mentioned in the introduction, the study attempted to propose pathways for
improving decision-making.

In this regard, we came across an interesting study dealing with the development of nuclear energy in
France. Banerjee & Bonnefous (2010) studied stakeholder dynamics in a particularly sensitive sustainable
area (the nuclear industry in France), and tried to determine if it were possible to reconcile economic
growth with environmental protection. In this case study, the leaders adopted a strategy for sustainable
growth created through its interaction with a diverse group of external and internal stakeholders. They
identified 3 stakeholder groups differing in their power, and received various degrees of attention from
corporate managers:
• Reinforcement strategy for supportive stakeholders
• Containment strategy for obstructive stakeholders
• Stabilization strategy for passive stakeholders
•

Figure 2. Banerjee and Bonnefous model (2010)

Researchers’ observations: ―The strategy was designed to please all stakeholders...because the corporation
was aware of the potential for public opinion to shift‖ (p. 137). Lastly, it seems that this opens an
interesting avenue because we believe it is essential that the strategies be tailored to specific stakeholders.
There is no ―one-size-fits-all‖ strategy.
Is mandating BAPE a legitimization strategy from the government’s point of view?
(Its mandate: propose a framework to promote harmonious coexistence and propose an efficient legal
structure in a secured environment).

While mandating BAPE—a very well-known agency—the government tempers opposition and saves
time. Nonetheless, skepticism has prevailed since the beginning of the mandate. Opponents claim that the
mandate is too narrow and the time frame too short, and deplore its role as consultant and its ties to
government.

While the board’s worked, tension dropped; all parties were in watchful-waiting mode. The board’s
mandate would take five months. A week before the report was filed, strong opposition from the same
critics reappeared: trust had not been gained! Then, the report was submitted to the government, which
had two months before publishing it. Fortunately, the government (Minister of Sustainability), published
it 10 days after reception. Reactions have been divergent, but generally every party agrees that an
apparent compromise has been reached. Development has once again been postponed.

Reactions from various stakeholders

Quebec group against atmospheric pollution: favorable, but…

• Still requires a moratorium (sustainability precaution principle not respected).
• The problems with the existing wells must be solved first.
• Necessity to examine alternative-energy solutions.

Companies and their association: favorable, ―process of reflection and prudence to reassure the
community.
‖
• Highlights the benefits of acquiring more knowledge.
• Regrets, however, the delays due to this decision (and the permits granted require exploration
within a specified time).
• Need to deepen the economic record of the expected development.
• Need to move quickly so as not to flee the capital, also considering the expertise that Quebec
lacks.

Federation of municipalities: ―the report is disappointing for the

industry‖.
• The government imposes a de facto moratorium…long and costly study…
• The BAPE goes too far on the issue of giving more power to local authorities.
• Postpone indefinitely the implementation of legislative and regulatory framework.
• Sad that Quebec is missing an attractive opportunity for wealth creation.

The BAPE main recommendations and links with our legitimacy model

In this section, we provide the main recommendations of the BAPE, which have been finally accepted by
the stakeholders. As a result, the project has come to a temporary halt while a group of selected experts
conduct a more thorough study. For each of the five major recommendations, we have identified some
relationships with the dimensions of legitimacy presented in Table 2:

- A strategic environmental assessment (the report’s main recommendation) would be beneficial, since
scientific knowledge is clearly lacking.
 2 dimensions of legitimacy affected: technical (competencies) and perceptual

- No hydraulic fracturing would be allowed during the strategic environmental assessment.

  3 dimensions affected: technical, moral (ethical), and perceptual

- A consultative committee on industry activities would be created.

 2 dimensions affected: moral and perceptual

- The involvement of municipal authorities for integrated management of their territory would be
considered (in support of government policy).
 3 dimensions affected: identity, institutional, and perceptual

- Legislative or regulatory changes

 4 dimensions affected: legal, identity, institutional, and perceptual

The BAPE took into consideration the various criticisms and examined them one by one, which helped
build project legitimacy. Efforts were made to involve the parties in the decision-making in order to win
back the trust of social groups and the general public. Nevertheless, this project bears watching and we
shall be looking at the strategies that the project proponents adopt to rally the parties (a ―negotiated
order‖) and, in the end, to enable the project to achieve a level of legitimacy that will let it move forward.

Conclusion

In our view, as we stated in the introduction, the shale-gas project suffers from a legitimacy gap. Some
would call it a lack of social acceptance for all sorts of reasons (the term ―legitimacy‖ is, in our
view, much more integrative). In any event, the development (continuance) of the project has been
postponed while the expert committee does its work. Depending on its conclusions, development could be
reinstated. What is clear, however, is that it won’t be ―business as usual,‖ especially in the area of
developing natural resources, with corporations arriving on the scene with big money and starting
operations. The public and advocacy groups are no longer silent, especially when a common resource is at
stake. Many of the parties are more aware of the issues, and ask questions about the pros and cons of
projects that affect them. Moreover, they expect social responsibility and accountability from the
companies developing resources. Businesses cannot afford to ignore the fact that communication
means are ubiquitous. Indeed, such intangibles need to be strategically managed and monitored,
because prevention is more cost effective than repairing.

This project constitutes an interesting case study showing a complex situation involving multiple actors,
with varied levels of power and demands. The literature often shows one corporation dealing with its
stakeholders. In this case study, we have several corporations, several groups, the general public, and the
government and all its components involved in a central and complex environmental issue.

Moreover, the different levels of discourses and debates entail social, economical, and political issues and
representatives. In addition, there is a very strong context of sustainability and CSR. This debate is
occurring elsewhere, and other jurisdictions facing the same reality. How do they managing their similar
situations? Are there cultural differences? Shedding light on these questions would be beneficial in
gaining greater understanding.

Our study had two weaknesses. One related to the triangulation of data, which would be completed
through interviews. The other concerned the unique character of the study and the lack of generalization.
This is innate in case studies. Nevertheless, it made it possible to take an in-depth look at the specific
problems and to either validate theories or take them a few steps further. As stated by Yin (2009), "our
goal is to expand and generalize theories and not to enumerate frequencies."
The legitimacy concept should be revisited. We concur with Palazzo & Scherer (2006) that ―while
theories of organizational legitimacy normally refer to the compliance with some taken-for-granted
societal background rules, we argue that the idea of public acceptance can no longer be decoupled from
public discourse.‖ Using Suchman’s framework in their paper, they also argued that ―there is a shift to
moral legitimacy, an input related and discursive concept of legitimacy, which involves organizations in
processes of active justification vis-à-vis society rather than simply responding to the demands of
powerful groups.‖ We totally agree and we would like to investigate their assumptions further.

It would be interesting to investigate as well the impact of pervasive media and social networks on
managing such projects. We agree with Palazzo & Scherer (2006), who noted in their research that the
role of the mass media and the Internet in a deliberative theory of organizational legitimacy has to be
conceptualized in more detail. So, the media-agenda-setting theory would be a good start place for
examining such social issues and better understanding stakeholder reactions in a politicized context.
Second, we need to explore the concept of trust and its links to the concept of legitimacy in greater depth,
and develop ways of measuring those intangible assets.

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Sources for Data Collection

www.bape.gouv.qc.ca/sections/mandats/Gaz_de_schiste/Index.htm
www.mrnf.gouv.qc.ca/ministere/mission/index.jsp
www.mddep.gouv.qc.ca/ministere/inter.htm#mission
www.finances.gouv.qc.ca/fr/page.asp?sectn=2
www.msss.gouv.qc.ca/ministere/mission.php
www.quebecmunicipal.qc.ca/liens/index.asp?LienID=16
www.radio-canada.ca/nouvelles/Politique/2010/09/07/003-BAPE-debut-mandat.shtml
www.canadianquantum.co m/common/content/third-party-reports/Strategy_Utica_072208r.pdf
www.apgq-qoga.com
www.equiterre.org/communique/revue-de-lannee-2010-dequiterre
lesamisdurichelieu.blogspot.com/2010/04/danger-gaz-de-schiste.html
www.aqlpa.com/extraction-du-gaz-de-schiste-dans-la-vallee-du-saint-laurent.htm
www.greenpeace.org/canada/fr/
www.cyberpresse.ca
www.canoe.ca
Newspapers: La Presse, Le Soleil, Le Devoir, Les Affaires, Actualité
Audio and video reports

Annex

Data: A few excerpts from various media, reflecting preoccupations and increase of distrust
towards government and industry leaders
June 5, 2010: Shale gas creates significant concerns
For the industry: it generates major investments & jobs…
Ecologists warn against impacts of exploitation…
Local population & environmentalists demand a moratorium…
Natural Resource Minister declines… it is a new opportunity of collective wealth (an occasion that
Québec cannot turn down).
August 23, 2010. Shale Gas: The Fédération des municipalités requests a public debate… its president
denounces the major lack of information and inadequate legislation for its exploitation...
August 24, 2010: Municipalities denounces improvisation…
August 29, 2010: le BAPE (Environmental Public Consulting Agency) is mandated to hold hearings
(meaning suspension of all exploration)
September 15, 2010: A Public Meeting is organised by the industry. The president is badly received…
September 17, 2010: Many ac t or s quest i on BAPE’ s i ndepe ndence …
January, 2011: Provincial inspectors find leaks in several gas wells…
January 22, 2011: (After several problems detected and largely publicised in the media…)_ The Ministry
of Environment for the first time demonstrates concerns…
And so on …