ConocoPhillips CEO Jim Mulva said Wednesday shale natural gas, tight oil and oilsands no longer are the “pie-in-the-sky future sources” that they were when he entered the energy workforce 38 years ago. Unconventional resources have changed North America’s energy security and thus the rules also need to be changed, he said.

“We are in fact well into an industrial revolution,” Mulva said in a keynote address at the North America Energy Resources Summit at Rice University’s Baker Institute. “One that represents the biggest oil industry breakthrough since the 1940s, when we first moved offshore into the Gulf of Mexico. A new frontier was awaiting us then. And it provided much of the energy to power the post-World War II economic boom in this country. Today, we are entering other frontiers. And once again our country and North America are benefiting — from a new abundance of energy, job creation and economic stimulation.”

The “speed and extent” in the shale gas transformation has surprised everyone, said Mulva. “Everyone is having to cast aside some old assumptions. Such as the one about domestic fossil fuels being in short supply. They are not. And the one about America being trapped by growing dependence on uncertain sources of energy imports. We now have the resources and technology to change that in a big way.

“An energy bonanza lies within our reach — if we only take full advantage of the unconventional resources right beneath our feet.”

However, “there’s always a catch,” said the CEO. “To capture this potential, we need government to play a constructive role. One that reflects balance between potential energy sources. And balance between energy needs and environmental and climate protection. If we can get that, then a number of goals will be within reach. Among them: national energy security, reduced greenhouse gas emissions, improved balance of trade, job creation and economic growth.”

Past assumptions about gas and oil scarcity now built into business strategic plans, governmental policies and public attitudes need to be cast aside, said Mulva.

“For natural gas, domestic delivery capacity is now more than ample, thanks to new producing fields, pipelines and storage. Wellhead prices have fallen, with no near-term upward pressure on the horizon. Only five years ago, most in the industry thought we’d need growing imports of liquefied natural gas — LNG. Now, instead, many import terminals are sitting idle. But they remain available if needed, which should further assure end-users of supply security.

“In the case of oil, U.S. import dependence could fall at least by half by 2025. This has enormous implications. Among them: less exposure to unfavorable geopolitical events, improvement in the balance of payments and job creation in North America, rather than elsewhere. Further, much of our remaining import needs could be met by secure and friendly Canada, right next door.”

Abundant energy resources gives the United States a “major competitive advantage,” said the CEO. “Very few countries can match our resource base, particularly our low-cost natural gas. This can help give domestic manufacturers a competitive advantage in the fight for global business…Of course, energy production in turn produces government revenue. It yields federal, state and local income taxes, severance taxes, royalties and fees. Generating this revenue requires no government mandates or subsidies, unlike some alternative energy sources. And it typically begins in the near term — not the distant future.”

To maximize the country’s potential from its unconventional resources, changes in government policy are needed, said Mulva. Regulations are needed but they “should be reasonable and ‘smart.’ They should be enacted thoughtfully — after their economic and consumer impacts have been assessed and considered. And new regulations should not duplicate the thousands of federal and state requirements already on the books. Nor should they create conflicting requirements or oversight responsibilities.”

Mulva also called for a tax policy overhaul and said the “government should not single out industries for punitive tax increases.” Energy policies also have to be “fuel neutral” with no “technology winners” picked by the government. “Instead, it should set a performance target, such as for reduced emissions. Then it should let the market determine the best way to meet it.”

It’s up to the industry to do a better job of explaining its importance, said the ConocoPhillips chief.

“The industry has a great deal of work in front of it to enable North America to fully capture its unconventional energy potential. We must continue being a source of technological innovation…We must operate safely. And finally, we must educate the public and policy makers about our production processes and safeguards. Our industry is admittedly complex, and hard for outsiders to understand. So we must do far more to demystify what we do. In short, we had better start telling our story.”

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