Public policy is hindering America's ability to ensure its own energy security, and the energy industry must accept a large part of the blame, according to Shell Oil Co. President John Hofmeister.

"There is a public policy deficit in this country when it comes to energy security, where frankly I do not blame the elected officials, I do not blame the American people," Hofmeister said at the LDC Forum Mid-Continent in suburban Chicago last week. "I blame the industry for not having spoken of this issue for so long in a way that's real, in a way that demonstrates that the tipping point has passed and it's time to get that dialogue on national energy security going strongly."

Hofmeister said many of the rules and regulations binding the energy industry for decades have become outdated by recent world events.

"We've been on more than a 50 year journey of admirable, of exciting, of continuous growth because of available and affordable energy. But we've passed a tipping point. In the summer of 2004, in the summer of 2005, we passed a tipping point," Hofmeister said. That tipping point was reflected in rising prices of crude oil and their eventual influence on the price of gasoline and natural gas, he said.

"Available and affordable energy is at the heart of energy security and it is time for this nation to realize that the tipping point has been passed."

The increasing energy prices have less to do with supply shortages than with restrictions on the energy industry's ability to retrieve those supplies, Hofmeister said. "The reality is, it is not the lack of natural resources which is driving these prices. The natural resources are there. The natural resources in this country alone are being undeveloped at an unbelievable rate.

"The integrated oil and gas companies and the independents who explore for oil and gas are only allowed access to 15% of the Outer Continental Shelf...over 100 billion barrels of gas and oil development doesn't take place because it is in the 85% of the Outer Continental Shelf that's off limits or on the federal lands of this country which are also off limits," Hofmeister said.

"There's plenty of natural resource, but public policy doesn't allow it to be developed. We choose instead to import oil from other parts of the world, sometimes from not the most reliable of trading partners."

Newer technologies that could help provide the United States with new energy sources have been stalled by a variety of regulatory roadblocks, Hofmeister said. Overseas sources of gas could be added to the U.S. energy market -- if regasification were palatable to regulators.

"If we can liquefy it, we can bring it to this country and regasify it. Sounds simple enough, right? Try to get the permits to build a regasification terminal along the coast of this country," Hofmeister said.

Hofmeister used as an example the Broadwater Energy LLC liquified natural gas (LNG) project, a partnership of Shell Oil and TransCanada Corp. which is seeking permission from to anchor an LNG facility in the middle of Long Island Sound. The proposed offshore terminal would include a floating storage and regasification unit with an average sendout capacity of 1 Bcf/d and peak sendout of 1.25 Bcf/d.

The Federal Energy Regulatory Commission last year issued Broadwater a favorable draft environmental impact statement, concluding that the proposed $700 million facility would not cause major environmental impacts (see NGI, Nov. 27, 2006), but approvals from New York officials have been harder to obtain. This spring Connecticut Attorney General Richard Blumenthal called on New York state regulators to reject a permit for the controversial deepwater LNG terminal (see NGI, April 30). Blumenthal said Broadwater would pose a "direct and substantial threat" to human health and safety, and to the ecosystem resources in Long Island Sound.

"Liquefied natural gas is a real possibility, but again, public policy prevents the building of regasification terminals," Hofmeister said.

Hofmeister said public policy, much of it written decades ago, prior to technological advances which could make other energy sources -- including coal -- economically and environmentally feasible, continues to stunt the diversification of America's energy sources. The U.S. can meet its national energy security requirements through a revamping of energy regulations, the use of all energy sources -- conventional and unconventional oil and gas, LNG, coal and alternative fuels including ethanol, solar and wind -- and increased efficiency which he said should be achieved through technology, not government regulations.

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