Chairman Wolterman welcomed participants to America’s Energy Future: Houston’s Presidential SummitSM on February 28.
Houston’s Energy Industry Steps Up to Meet Challenges, Energy Summit Opens Dialogue About Solutions
By: Linda Gilchriest
One of the first laws of economics hammered into college business majors is that of supply and demand. A simple interpretation of that law could sum up the U.S. energy situation today — the supply of oil in the world cannot keep up with the demand, and if America does not shore up its agreements with oil-rich countries and actively pursue alternative fuel sources, the nation’s economic and national security may be at risk.
Although this message was repeated by several speakers and panelists at America’s Energy Future: Houston’s Presidential SummitSM, sponsored by the Greater Houston Partnership at the George R. Brown Convention Center in February, there were also overtones of hopefulness about mainstream energy companies stepping up to find alternative fuel sources.
Dana F. Flanders, President of Chevron Technology Ventures; James T. Hackett, Chairman, President and CEO of Anadarko Petroleum Corporation; Thad Hill, Executive Vice President and Regional President, NRG Texas; Aubrey K. McClendon, Chairman of the Board, CEO and Director, Chesapeake Energy Corporation; and Frank C. Steininger, Partner, Assurance Energy, PricewaterhouseCoopers
“There are a plethora of potential supply sources that can bring the non-traditional into play,” said Dana F. Flanders, President of Chevron Technology Ventures. Those include biofuels, unconventional fossil fuels from shale and ultra-deepwater exploration and geothermal resources.
ALTERNATIVE ENERGY
Robert C. Kelly, Ph. D., Founding Partner of DKRW Energy, offered coal as an oil alternative. Kelly said America has 240 years of coal reserves, and while oil has soared above the $100-a-barrel mark this year, coal remains in the $5- to $10-a-barrel range.
The Asian market continues to drive up the cost of oil, and continues to demand and get a large portion of the Middle East's oil supply. Kelly said this situation has the industry concerned about the economic and national security implications.
Aubrey K. McClendon, Chairman of the Board, CEO and Director of the Chesapeake Energy Corporation, told the more than 1,200 conference participants that the brightest spot on the nation’s energy horizon is natural gas. He said natural gas “will come to the rescue” as the most affordable U.S. energy source in the 21st century. McClendon added that the United States has 120 years of gas reserves underground.
Thad Hill, Executive Vice President and Regional President of NRG Texas, said nuclear energy will be “a must for the future.” In September, NRG and the South Texas Project Nuclear Operating Company filed the first application for permission to build at the nuclear plant in almost 30 years. The 12,000-acre site is near Bay City.
OBSTACLES
But James T. Hackett, Chairman, President and CEO of Anadarko Petroleum Corporation, said U.S. energy independence is impossible. “I guess we have to ask ourselves what it [energy independence] is going to cost us to do it,” Hackett said. “It is one thing to say we are going to displace the Middle East; it is another thing to actually do it. . . . But to think that we are somehow going to magically wave a wand and become independent in 10 years is the biggest fiction wasted on the populous of America.” Hackett said he is in favor of minimizing the amount of business America does with unfriendly nations, “but tell us the cost when you tell us the theories.”
McClendon voiced another theme that was repeated throughout the conference. “As long as we continue to demonize big oil companies," he said, "we will have a problem attracting young people to this industry. I think the industry needs to do a better job telling its story. Certainly, it is one of the most technologically advanced, challenging, entrepreneurial and, certainly right now, profitable industries in the world today."The Chesapeake Energy Corporation founder said that most of the environmental improvements made in the past have come from the industry itself. He added that the perceptions provided by politicians and the media have damaged recruiting efforts to attract students to the petroleum engineering field. “We are certainly on the road to ruin when we continue to graduate 45,000 lawyers a year and only 1,000 petroleum engineers,” McClendon said.
Houston Mayor Bill White offered detailed ideas on ways the government can address consumer energy use. He supports a $5,000 tax credit for families who buy vehicles that get more than 40 miles per gallon of gasoline and said that this should jump-start a move toward hybrid vehicles. White, who started his career as a deputy energy secretary in Washington, said Houston continues to encourage fuel-saving ideas, such as the installation of wind turbines atop buildings to reduce utility costs, and retrofitting electrical circuits in older homes to realize 10 to 20 percent reductions in usage during peak hours.
John Richels, President, Devon Energy Corporation; James C. Oberwetter, former Ambassador to Saudi Arabia; Ali Moshiri, President, Chevron Africa and Latin America Exploration & Production Company; H. G. “Buddy” Kleemier, Chairman, Independent Petroleum Producers Association; Mark Finley, General Manager, Global Energy Markets and U.S. Economics, BP America, Inc.; and Clarence P. Cazalot, Jr., President & CEO, Marathon Oil Corporation
NEW APPROACHES
Conference participants realized that this was not their grandpa’s energy conference when a representative from the Sierra Club not only spoke to attendees but also found his message favorably received. Carl Pope, executive director of the environmentally conscious group, said there is a perception in America that gasoline costs too much, “and like some of the other speakers, I am not certain I agree with that.”
Pope quoted former General Electric CEO Jack Welch, who said, “We have a problem in the energy sector. We don’t innovate fast enough.” Pope said the problems of high prices, short supply and environmental consequences are the result of the country's “sluggish rate of innovation.” In his view, government oversight “rewards the sluggish and penalizes the innovators” through a system that takes too long to get new ideas to the marketplace. He said we need to “take a chain saw” to the bureaucracy that stands in the way of such programs as methane gas recovery systems to provide electricity and solar roof panel installations.
Pope enumerated three fundamental perceptions established more than 50 years ago: that fuel was cheap, knowledge was rare and pollution was free. In the 21st century, fuel is expensive, knowledge about high performance is abundant and pollution is a critical problem. “We need to collectively work together to redesign a high-performance energy sector around these new principles, and if we do, we will indeed be able to recognize that hydrocarbon fuels are very valuable. They are a high-value property. We ought to use them that way,” Pope said.
Experts like Clarence P. Cazalot Jr. of Marathon Oil touted the energy efficiency of extra-heavy crude such as the 175-billion-barrel supply found in Canada. To tap into this resource, the industry and government will need to address issues of refinery renovations and pipeline projects to get the fuel from there to here.
EDUCATE THE PUBLIC
H. G. “Buddy” Kleemier, chairman of the Independent Petroleum Producers Association, said 25 percent of crude oil in the United States is produced from the western Gulf Coast, while the eastern seaboard and the western coastline are closed to production. He said politicians should educate the electorate about the need to explore these other energy options.
Kleemier echoed McClendon’s position on how the industry needs to get its message to the public. He said the industry is starting oil and gas academies in Houston-area high schools to get young people interested in a petroleum industry career. He said he wants the media to “paint us as someone who is trying to save this country.”
Representatives for alternative fuel sources such as wind power, solar energy and food-based energy sources like corn-based ethanol garnered some time in the conference spotlight as well. Antonio Martins da Costa, CEO and Chairman of Horizon Wind Energy, said wind is a clean power of energy, while Rhone Resch, president of the Solar Energy Industries Association, said solar power is as strong as the sun. Resch said the potential for solar is enormous and can provide consumers energy cost savings, particularly during peak usage hours. He said the government should provide the same kinds of incentives to the solar industry as it does to clean coal power and nuclear projects.
Former U.S. Secretary of Commerce Robert Mosbacher was the luncheon keynote speaker at America’s Energy Future: Houston’s Presidential SummitSM.
LOOKING AHEAD
Earlier in the day, former U.S. Secretary of Commerce Robert Mosbacher, who served from 1989 to 1992, said that, depending on whom you talked to, the supply of oil has peaked or is peaking, but it “is a finite commodity.” He said the United States would continue to be under political constraints as long as it depends on foreign suppliers. “In America, we are drilling more wells that are much more expensive to drill and have a shorter life span,” Mosbacher said. Strained relationships in the Middle East and with leaders like Venezuelan president Hugo Chavez continue to affect the nation’s ability to control the market, he added. “Constraints like that are bad for our own county and the world." We will still have fossil fuel as an energy source for quite a few years, he said, so “we will have the opportunity to straighten our alliance out.”
At the end of the summit, Senator Hillary Rodham Clinton (D, NY) made a campaign stop to talk about solutions to confront three energy-related challenges: rising gasoline prices that she says are creating a burden on American families, energy security in a world where “we are more dependent on foreign oil today than before 9-11,” and protecting the environment.
At the end of the summit, Senator Hillary Rodham Clinton (D, NY) made a campaign stop to talk about solutions to confront three energy-related challenges.
Clinton also proposed establishing a $50 billion strategic energy fund and transferring some of the existing subsidies for energy to invest more in renewable energy, with a goal of reducing greenhouse gases 80 percent by 2050.
“Just as Texas led the energy revolution of the twentieth century, Texas can lead the energy revolution of the twenty-first century,” Clinton said. “It is time for oil companies to become energy companies, and it is time for America to lead the world in clean, renewable energy.”
When a drilling operation in Beaumont had “a very good day,” it put Houston on the map, she said. “The next energy revolution will not spring from the ground, but from the minds of innovators and visionaries.”
This article can also be found in the May/June 2008 issue of Opportunity Houston: All the World - One Region. For advertising opportunities, contact Mike McKee, Advertising Director at 512-320-6934 or mmckee@texasmonthly.com.
