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Natural Gas 'Renaissance' Overlooked, Says ConocoPhillips CEO

A natural gas "renaissance" is under way, but the federal government appears not to have noticed, ConocoPhillips CEO Jim Mulva said last week.

Mulva, speaking to the Detroit Economic Club last Tuesday, said talk by legislators in Washington, DC, has focused on eliminating fossil fuels and building renewable energy and alternative fuel supplies. However, replacing the energy infrastructure in place could take "decades, perhaps even a century." Meanwhile, natural gas is being overlooked, he said.

Since 2005, estimated recoverable gas resources in the United States "have more than doubled" because of "new technology to produce from shale rock. So Lower 48 supplies are up, and prices are down. And we still have huge resources in Alaska awaiting pipeline construction."

Increasing natural gas use would benefit the environment, said Mulva. "In power applications, gas emits half the CO2 [carbon dioxide] of coal. So we should be relying on gas as a bridging fuel while we build a low-carbon economy. Unfortunately, proposed tax increases and regulations are threatening to marginalize gas. For example, one proposal would impose standards for electricity produced from renewable fuels. It sounds good, but it would likely force greater cutbacks in the use of gas than coal."

The United States already has a "massive, efficient and highly successful energy infrastructure" in place that is based on fossil fuels, Mulva said. "Building it required 150 years, trillions of dollars in investments and generations of work -- by untold millions of people. They drilled wells, and constructed oil and gas pipelines, fleets of tankers, coal mines and electric power plants. Their work transformed society, created affluence and improved our quality of life."

To replace all of the country's energy structure "would take an unimaginable effort," said the CEO. "It could not be done quickly, despite the desire to do so. There simply is not enough investment capital, skilled labor and materials available. And much of the technology needed is still being developed..."

Politicians' "apparent belief that we can choose between renewable energy and fossil fuels is mistaken," Mulva said. He suggested a "path forward" to include five steps:

"With these points, I've just committed blasphemy in some people's minds," Mulva said. "As an oil and gas producer, I've endorsed conservation and supply diversity. I've referred to the 'inconvenient secret' that the U.S. still has a lot of undeveloped oil and gas. I've touched the third rail by suggesting that we will still need imports. And also by acknowledging that climate change is a serious issue."

The government has to address climate change, said the ConocoPhillips chief. "But it should balance its approach with the need for energy supply security" and all sectors of the economy should be treated fairly.

"Under current climate proposals, electricity consumers would have 83% of their carbon costs mitigated. But transportation fuel consumers would bear the full cost on day one. Meanwhile, coal-fired electricity generators would receive free allowances for half of their emissions. But cleaner-burning gas-fired generators would receive no allowances. So use of coal would be encouraged, while gas would be penalized. This is nuts."

Some form of energy and climate policy legislation "seems likely to pass," Mulva said. "The availability of energy at a reasonable cost underpins the U.S. economy. So the decisions made in the months ahead will deeply affect all of us."

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