ASSOCIATION ISSUES ITS 2019 STATE OF AMERICAN ENERGY REPORT

By Jeff Cox, Pennsylvania Legislative Services | January 8, 2019

 

The American Petroleum Institute (API) today released its 2019 State of American Energy Report. Prior to report’s release, API President and Chief Executive Office Mike Sommers held a media conference call to preview the report. He told reporters, “Every generation has its own defining challenges and its own defining accomplishments. We call this one ‘America’s Generation Energy’ because of a remarkable dual achievement: meeting record world energy demand while driving record CO2 emissions reductions.”

 

Sommers highlighted record US energy production and CO2 emissions reductions to their lowest levels in a generation. According to Sommers, “net oil imports this year are set to fall to their lowest levels since 1958.” He noted, “On some days, we actually export more oil than some OPEC nations produce.” Sommers asserted, “That is a monumental shift in the global balance of energy power, and it is paying off in communities across the nation; cutting family budgets and bringing manufacturing jobs back.” He described the United States as “the world’s gold standard when it comes to safe, responsible energy development.”

 

Sommers responded to questions from the news media.

 

A report issued this morning indicated that in 2018 emissions rose 3.4 percent and this is the second highest increase in more than 20 years, and a large part of that is due to the growth of natural gas. What are your thoughts on that trend and the overall CO2 trend in the United States?

I think it is first of all important that we recognize the broader trend here. This report that was used cites an EIA (Energy Information Administration) Report. That same report by EIA projects CO2 emissions will continue to trend downward in 2019 even as our industry continues to meet record consumer demand and deliver for American families. This industry takes the climate change issue seriously. We believe the risks of climate change are real. Industrial activity around the globe impacts the climate and we also believe this industry is meeting the climate challenge head-on. A lot of this is related to the question of consumer demand. In our view, consumers are really demanding two big things. First of all, they are demanding reliable and affordable energy, but second of all, they are demanding energy that is produced in environmentally-safe methods. We are accomplishing both as an industry and that is something this country and this industry should be proud of.

 

How is your industry dealing with the government shutdown and what are your concerns with the proposed “Green New Deal”?

On the shutdown, to this point we have not seen any major effects of the shutdown on our industry. As you may know many of the things we deal with are fee-based and they continue to go on as planned as the shutdown has continued. So we have not seen any real effects to this point, but we would encourage the negotiators who are in the room discussing how to reopen the government to continue those discussions and get the government open as quickly as possible. Obviously, it is not good for this shutdown to continue long term. We are looking forward to working with the Trump administration and the Congress on getting that accomplished soon. On the “Green New Deal”, I know this has been in the news a lot lately. Look, our goal has to be to balance record consumer demand, environmental protection and affordability for every American family. Right now, from what we have seen of the “Green New Deal,” it is really just a plan to have a plan. What I think what has been really radical over the course of the last ten years has been the US has driven emissions down to a 25-year low, while at the same time we have become the global leader in natural gas and oil production. We will evaluate any effort that comes out of these discussions and we will make sure we are doing that in a way that balances environmental progress with keeping energy costs low for American families.

 

Do you have an official position on a carbon tax and do you have any specific policy requests that you hope to accomplish with Congress in the next two years?

I want to make a couple of things very clear. As I said earlier, we know that the risks of climate change are real. We also know that this industry is stepping up to meet the climate challenge head-on. As Congress reviews the various proposals, whether it is in new select committees or the existing committees’ jurisdictions, we will evaluate every proposal that comes up that would affect the issue of climate change. We are looking forward to working with the new Congress. As I indicated previously, we believe that energy and safe and reliable energy is an important issue for consumers, but it is also a bipartisan issue. I am personally looking forward to working with the new Democratic majority in the House and the leaders in the Senate and in the administration to make sure that energy is a top priority going forward. Regarding a carbon tax, we will review any proposal that comes up from Congress and we are looking forward to working with Congress on that important issue. 

 

I will say this, the three big priorities the association and I have over the next year are first of all trade. We want to make sure there is product and that there is a market for that product. The US-Mexico-Canada Agreement (USMCA) is an important priority of ours. We will work to see it accomplished within the first session of this Congress. It is very important for us to get this done, Canada and Mexico continue to be our number one trade partner in energy and we need to make sure this rapidly gets done in this Congress. Second of all is infrastructure. We need to make sure that the infrastructure is in place so we can actually transport this product to market. Because of a lot of bureaucratic barriers that are in place, such as permitting issues in the states, we can’t transport all the energy we are able to produce and that creates bottlenecks. We need to make sure that we have the infrastructure in place to transport this important product for the American economy. Third, on the regulatory side we need to make sure we have smart regulations in place. Our industry’s focus is not just [to] meet government regulatory standards but to exceed them, but we need to have a smart regulatory structure in place that ensures that we [are] both able to continue to be the world’s largest oil and natural gas producer, but do it in a way that is environmentally safe and safe for American workers.

 

What do you folks think about the new select committee that the House Democrats put together on climate change and how do you plan to engage with that select committee?

We do not take a position on how Congress organizes itself. We are looking forward to working on a bipartisan basis with members of the House and Senate on making sure this industry has the right legislative and regulatory framework in place to continue to succeed. This industry has been an American success story over the course of the last 100 years and we are looking forward to continuing that success. We will work with any member of Congress. We will work with any administration official and we will work with state legislators to make sure that we have the right framework in place to make sure this industry continues to succeed and meet those dual challenges of increasing consumer demand and in an environmentally safe way.

 

Do you support any direct regulation of greenhouse gases or do you think the voluntary progress you talked about is enough?

Regarding the voluntary progress, API started a program a year ago called the Environmental Partnership. This program was initially focused on reducing methane and other emissions. The Environmental Partnership includes more than 50 natural gas and oil companies who produce more than one-third of America’s natural gas production. These participating companies recently began implementing the voluntary program in January 2018. In the first year, the program has more than doubled in size. We are very excited about this program. We are excited that we have the opportunity to work with our producers on making sure that what they are doing is done in an environmentally safe way. But I will make another point about methane in particular. The truth of the matter is no one wants to be flaring in an oil field. We want to make sure that product is actually getting to market. That is our product and it is a valuable product for our producers. The main reason we have to flare in oil fields is because we do not have the infrastructure in place to get it to market. Getting the infrastructure in place also produces an environmental benefit to the United States and to the world, and we are looking forward to working with the new Congress on a bipartisan basis to get infrastructure in place that makes sense for this industry and other industries that depend so much on it. Regarding direct regulation of greenhouse emissions, we want to make sure we are supporting efforts that support innovation within this industry. It is really innovation that is really going to drive down greenhouse gas emissions in this country. This industry for many, many years has been at the forefront of developing technologies to ensure we are producing in an environmentally safe way and the record tells the tale. We will be supporting both efforts in the Congress and in the regulatory agencies that support that continued innovation to support the environmental needs that consumers are demanding.

 

What has been the impact of the US/China “trade spat” on your industry and is there anything producers can do to protect themselves?

First of all, I want to say that I am encouraged by the reports out today from Ambassador Lighthizer that these talks between the United States and China are going well. We want this dispute to end quickly. We of course want to make sure that US intellectual property is protected, but at the same time we need to do it in a way that doesn’t affect American economic leadership that is driven by American energy leadership. We need to make sure that the retaliatory tariffs that have been put in effect in China don’t continue and certainly don’t expand. We believe we should settle this trade dispute quickly with China and we are encouraged by reports out of Ambassador Lighthizer that those discussions are going well.

 

In 2017, the Labor Department said that African Americans had only nine percent of the jobs in the oil and gas extraction industry and blacks have never made up more than one tenth of the country’s oil and gas workforce, and they tended to be paid on average 23 percent less than their white counterparts. With all of the outreach you are doing, what else could be done to mitigate this?

One of the things we know is that this workforce is only going to grow because of the American energy revolution, and we expect almost a million jobs are going to be needed in this industry by 2030. Many of those are going to be filled with minorities and women. We are excited about that opportunity. This association, in particular, has a long history of working within these communities and I am very excited to help lead that effort as it goes forward. We have also, in the course of the last few years, we have sponsored an effort called the Energy Research Collaborative which is an effort to make sure we have women and minorities represented within these energy companies, and I know our companies are focused on this as well. This is an important priority of this association and our member partners.

 

What has been the impact of the steel tariffs and how will you address the Renewable Fuel Standards (RFS) with a divided Congress?

Steel is a very important issue for us. Tariffs on steel and definitely quotas on steel are a major issue for us. Because of these policies there is a company in Midland, Texas that cannot complete a pipeline to deliver energy to consumers because they cannot get the steel that they need to complete the pipeline. So, this is a major issue for us. We are working closely with the administration to clear this matter up, particularly as we lead up to advocacy for the USMCA, and we are working with Congress as well if those efforts within the administration don’t prove fruitful. The Trump administration has been a reliable partner so far on a lot of these issues and we will continue to engage them as this issue continues. It is not good for business and we are going to continue to talk with everyone within the administration that have any authority over any of this that can get these quotas lifted in a way that makes sense for America’s energy producers.

 

Regarding the RFS, we believe the RFS policy that was put into place ten-plus years ago is failed policy. We want to make sure as Congress reviews this policy that they are actually looking at the needs of energy today and not the needs of energy yesterday. The RFS policy was put into place in an era where we were dealing with energy scarcity and now we are the number one producer of natural gas and oil in the world. Continuing a RFS program that has not met the goals it set out to achieve which was to create energy independence in this country which has not been achieved through the RFS policy but through innovation by this industry. We have to make sure it is reformed in a way that continues to make sense for American producers. So we are going to be working with the new Congress on developing a new plan that continues to be based in reality and not policies that were put into place over a decade ago. We know it is a tough issue that Congress has to deal with but we are looking forward to working with the new Congress ensuring we have a policy in place that makes sense for the future.

 

What other effects are you seeing if the government shutdown drags on for a longer period of time?

A longer shutdown certainly isn’t good for this industry. We want to make sure that the efforts to put in place smarter regulations continue. We are going to continue to work with both the Congress and with the Trump administration to make sure that these issues get solved quickly. We hope the shutdown ends quickly.

 

Regarding methane regulation, there seems to be a division between industry members supporting such regulations and some opposing. How is API dealing with the issue?

Our industry is one of the most highly regulated in the world. We do support regulatory frameworks for this industry that make sense for the industry as a whole. We will be working with the Trump administration as they continue to develop these regulations. I know that for most of our industry they really invest for the long term, so we need a smart regulatory framework in place so they can continue to invest in the United States and in United States production. We will work with the administration. Our members continue to work with us in developing and helping to develop a regulatory framework that makes sense for all of our producers. The other point I would make is we have in place the Environmental Partnership with over 50 of our companies and non-member companies that are working to voluntarily reduce methane emissions and we are looking forward to engaging with all of you as that progress continues.

 

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