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ConocoPhillips Exec to Congress: Don't Play Favorites with Fuels

ConocoPhillips CEO James Mulva last Tuesday called on Congress to pass a comprehensive energy bill that deals with all sources of energy, not just the politically popular alternative energy and renewable fuels.

"There have been a number of constructive energy bills passed by Congress over the years, but when taken collectively they did not ultimately solve the country's energy dilemma," he said at the National Press Club in Washington, DC.

"The problem is that none of the bills dealt comprehensively with all the issues surrounding energy uses and sources. They never covered all forms of energy. [They] never took the opportunity to accept and inspire increased supply. Instead, they chose winners and losers," Mulva told a packed crowd of energy association officials and executives.

Congress "focused on the supply sources that seemed to be the most popular at that point in time." He noted that currently the politically popular energy sources are alternative energy and renewable fuels. "Well, what about all the other sources that actually make up the bulk of our supply? Given our past history, it's clear that we need a different approach."

A comprehensive energy policy should incorporate four basic principles: broad supply diversity, energy efficiency, technology innovation and sound environmental stewardship, he said.

It's an "inconvenient truth" that the country also needs more fossil fuels -- oil, natural gas and coal, Mulva said. "Alternative energy cannot come on-line fast enough at the scale required to replace these sources, not for decades to come."

So the United States "must encourage more domestic oil and natural gas development. It could easily do so by opening for exploration some of the promising areas that are now off-limits," Mulva said. "Although the 27-year-old offshore moratorium has expired, there are still needless restrictions. And some in Congress even want to reimpose the ban. This would be, in our opinion, a mistake of historic proportions."

The central and western parts of the Gulf of Mexico currently account for 25% of the domestic production of oil and gas, Mulva said, adding that there is also "substantial potential" for oil and gas in the eastern Gulf and off the Atlantic and Pacific Coasts. "It's time for us to find out just what may be there."

He said he doesn't know whether the Obama administration and/or Congress will try to reinstate the expired moratorium off the Atlantic and Pacific coasts (see related story). But he hopes industry leaders, Obama representatives and Capitol Hill lawmakers will "really sit down and talk this through because it's so important to our energy security."

Mulva said he was "relieved" that President-elect Obama no longer supports imposing a windfall profits tax on producers. Federal lawmakers should "not single out the oil and gas industry," or any other industry for that matter, to pay for alternative energy and carbon-reduction programs, he said.

He forewarned about ConocoPhillips' budget cuts for 2009, which were officially announced Friday. The oil major's capital expenditures will total around $12.5 billion this year, well below the $20 billion budget in 2008. The company also is cutting its workforce by 4% because of the steep decline in commodity prices.

While oil and gas prices have dropped significantly since mid-2008, Mulva expects them to be "somewhat higher" in the months ahead, but "not a lot better."

Asked about the future of an Alaska gas pipeline, he said it "is something that our country needs," and he believes it will eventually be built. He said he doesn't think Gazprom, Russia's state-run natural gas monopoly, will be involved in the project.

On the issue of climate change policy, Mulva doesn't believe the public will support initiatives aimed at reducing carbon emissions if they force prices up too far and too fast. Unlike ExxonMobil CEO Rex Tillerson, Mulva supports a cap-and-trade system to help reduce heat-trapping greenhouse gas (GHG) emissions, rather than a straight carbon tax (see NGI, Jan. 12).

"Either one will work...the devil's in the details," but Mulva believes that a cap-and-trade program has a "higher probability of acceptance" by the Obama administration and Congress.

The U.S. Climate Action Partnership, a coalition of industry and environmental leaders of which ConocoPhillips is a member, last Thursday released a blueprint for federal legislation to significantly reduce GHG emissions (see related story). Mulva said he expects the climate protection initiatives to be "widely communicated" with the Obama administration and members of Congress.

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