The oil and gas industry faces an existential crisis caused by Wall Street dissatisfaction and a belief by most teens that the industry does more harm than good, Parsley Energy CEO Matt Gallagher warned on Wednesday at the NAPE Summit in Houston.

Known for embracing social justice causes and fighting pollution that causes climate change, Generation Z is defined by Pew Research as those born between 1997 and 2012. Their views about oil and gas, as well as declining enrollment in university petroleum engineering programs, have placed that generation on a collision course with the industry, Gallagher said.

“If we allow this to continue, we’re writing our death warrant with future generations and leaders,” he said.

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But in introducing the “Shale New Deal,” Gallagher said the oil and gas industry could turn the tide by tackling three issues - perception, pollution and profits.

Changing perception, he said, involves oil and gas companies and employees “telling the story” of the industry and its benefits, including how oil and gas is used to create plastics, clothes, medicines and fertilizers.

Battery-powered vehicles won’t end the world’s dependence on oil, said Gallagher, who admitted that he recently made a down payment on a Ford Mustang Mach E, an electric sports car.

“Even with the aggressive adoption of electric vehicles, the world will need 40 million barrels per day of new oil by 2040,” Gallagher said.

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The industry’s biggest black eye, he said, is flaring, in which excess natural gas is burned off at wells. Oil companies burned a record 752 million cubic feet of natural gas per day in the Permian Basin of West Texas and southeastern New Mexico during the third quarter, according to Norwegian energy research firm Rystad Energy.

The Austin-based Parsley set a goal to keep its flaring levels below 5 percent of the company’s natural gas production. The first test of those goals came after closing a $1.65 billion deal in January to buy Permian Basin competitor Jagged Peak Energy, whose neighboring wells were flaring more than 25 percent of their natural gas production.

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“That’s unacceptable,” Gallagher said. “We’re committed to getting that flaring percentage down to less than 5 percent. Hopefully some of the groups we’re challenging do it even quicker. We must come together on this. We must commit to spending the capital dollars and pouring resources into it.”

After nearly a decade of losses, Gallagher said, the industry is facing pressure from Wall Street investors to make shale production profitable. Part of the solution, he said, is funding new projects with free cash flow, or the money made from operations.

“Our industry is 160 years old,” Gallagher said. “Throughout the decades, we have proven time and time again that we know how to change. Just in the last five years, we’ve truly changed the world. The geopolitical dynamic of the world has been turned on its head thanks to the work of the people in this room.”

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Environmentalists are skeptical about this Shale New Deal.

“Oil and gas has been making the same promises to clean up its act since 2005, yet fifteen years later it's still worsening the climate crisis and plaguing the health of residents next door,” said Sharon Wilson, a Dallas-based organizer with the environmental group Earthworks.

The group, Wilson said, has documented methane and toxic air pollution released into the air from Parsley Energy operations in the Permian Basin.

“Someone should tell its CEO that they don't have a perception problem. Parsley Energy has a pollution problem,” Wilson said.

Luke Metzger, executive director of the Austin-based environmental group Environment Texas, said that hydraulic fracturing is dirty and that the industry faces both public relations and public responsibility problems.

“The industry needs to take major steps to reduce the harm it’s causing to our environment, public health and safety, including reducing flaring and pollution of our waterways,” Metzger said. “Fossil fuels are fundamentally dirty and it’s clear that we need to get off them as quickly as possible.”

The North American Prospect Expo, or NAPE, is a deals-making summit of industry leaders. It continues through Friday in downtown Houston.

sergio.chapa@chron.com

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