Politics will have a huge influence on U.S. energy issues over the coming year, according to John Hofmeister, the former president of Shell Oil USA.
Hofmeister, who formed Citizens for Affordable Energy after he retired from the U.S.-based arm of Royal Dutch Shell plc, spoke to delegates at the World Energy Congress in Houston last week. He said the presidential election in 2012 will get in the middle of many energy issues over the next year, including whether to regulate hydraulic fracturing (fracking) in shale plays and whether to allow TransCanada Corp.’s Keystone XL oil pipeline to carry crude from Canada to the Gulf Coast.
A big issue will be partisanship and its effect on the electorate, he said. “Political time trumps energy time and has a huge influence on near-term outcomes.”
The former Shell executive said “what business people like is growth and an expanded revenue base. Think of the trillions of dollars in cash sitting idle in bank accounts of corporations…The business community around the world actually is in very good shape financially. Obviously, there are debt issues riddling parts of the Euro zone and that has to be worrying.
“But there is so much money wanting to be spent in energy on investments in infrastructure. I approach this, so to speak, about what’s an opportunity, not what’s a pitfall. There will always be pitfalls, always be uncertainties. We’re looking at a 12,000-point Dow [market], yet it’s volatile. But the trend is obvious. Let’s go spend our money. And that’s what I’d rely on in 2012 and 2013.”
For the United States, Hofmeister said, one of the biggest unknowns is whether the public will accept fracking in the Marcellus and the Utica shales. “I’m not worried about Texas or Arkansas or the Bakken Formation as much as I am in the Big East, and it’s where there is the greatest need for jobs and energy infrastructure. Whether it happens or not, industry has a responsibility here to do more than it has done historically.”
The energy industry, he said, “does not have a strong track record of public relations. It’s missed opportunities, to be kind, by ignoring the public interests of many companies in terms of doing what they do without regard to community and public awareness.” And now it’s come down to “two key states, Pennsylvania and Ohio. There’s not a lot of votes in western Pennsylvania, most of them are in eastern Pennsylvania and most of the opposition is in the southeast.
“When you have a president determined to be reelected, he will do anything to make that happen.” Hofmeister said the White House can “hold up shale gas” by allowing the Environmental Protection Agency and the Department of Energy to both complete fracking studies. And the deadline for “late 2012 or early 2013” fits perfectly with the presidential election.
The White House would “prefer the scenario of campaigning against the ‘irresponsible’ activity of companies. In two key states it could lead to a lot of headlines…”
Also a concern going into 2012 is the outcome of drilling in the Arctic, said Hofmeister.
“I think 2012 will be a critical year. The efforts by Canada and Russia and by other state-owned oil companies hold continuing uncertainties for the role of the United States,” he said. “There are huge opportunities for the United States but we can’t seem to get past near-term politics.” He pointed to the lease award to his former company to drill in the Arctic, which once again is being challenged in the Ninth Circuit Court of Appeals in San Francisco.
“And we’re right back where we started in 2005,” he said of the continuing fight to explore offshore Alaska. “The Ninth Circuit in San Francisco decides all about what happens in the offshore of Alaska.” Those opposed choose to sue the government over the oil companies because “the government doesn’t have a success rate.”
And that concern is coupled with the escalating protests against TransCanada’s Keystone pipeline, which as proposed would carry crude oil from northern Alberta’s oilsands to Gulf Coast refineries.
“Frankly, I’m not optimistic that a Keystone decision will be made within the time frame suggested,” said Hofmeister. He said different groups “are circling the wagons to sue to protest before a decision is made on the basis that if nothing else, it slows down the decision to be made. I have to believe that with our near-term politics — I call them political-time dynamics — that the last thing the president wants to do is make a Keystone decision between now and November 2012. If there are good reasons not to have to make decisions, such as contested legal cases, it’s a cop-out for sure, but a way to avoid the issue.
“We are at the point when Canada says ‘push the oil west or south…west to China or south to the Gulf of Mexico.’ The fact that celebrities are willing to get arrested in front of the White House and the EPA is challenging the State Department process…It’s a huge, huge endeavor and they are drawing a line in the sand that is ecologically based on the hypocrisy of the goodness of getting off hydrocarbons versus the impoverishment of the national economy. Those mindless celebrities out there think nothing of writing big checks…and they are stopping the American economy of what it’s been historically. It’s utter nonsense.”
Again, pointing a finger at the energy industry, Hofmeister said what’s not been publicized are the efficiencies made by Canada and the oil companies to reduce the footprint of oilsands production.
“There have been incredible efforts over the last decade to dramatically reduce the carbon footprint of oilsands…The big lakes, water restoration, land restoration is hardly reported. The entirety of what has happened in the Athabasca oilsands and the efforts to improve the land and water…is largely underreported.”
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