Speeches

John Hofmeister’s Energy Speech in Coeur d’Alene

06/05/2008

How the U.S. Can Ensure Energy Supply for the Future. John Hofmeister’s remarks to the National Association of Attorneys General in Coeur d’Alene, ID.

Thank you, General Watson.

I feel like I know many of you because, after the Katrina-Rita disasters of 2005, 48 of you wrote me letters about the price of gasoline. It was difficult to respond to some of those letters because of the incredible supply-demand re-shuffling that was taking place. The good news about that horrible period after those two hurricanes was that essentially anybody in the country who needed gasoline could find it.

They could get it. Yes, it was more expensive, but they could get it, even while 25 percent of the nation’s production capacity was shut in. That was both 25 percent of crude oil and gas also 25 percent of finished product, such as diesel and aviation and gasoline products.

It was a horrible period and probably the low point for me. On the Friday night a week after Rita came through East Texas – and it was seven days after Rita went through in Port Arthur, Texas and did terrible devastation – I called the Energy Secretary, Sam Bodman.

I’d had a review of our supply situation for the coming week and learned that the last 300,000 barrels of finished gasoline product was sitting in a joint venture refinery that Shell half owns. And we had no electricity still a week after Rita to try to move those barrels of finished product into the Plantation and Colonial pipelines.

Now, those of you out here in the West aren’t affected by the Colonial and Plantation pipelines because they go from East Texas all the way to Baltimore.  But, the entire Southeast quadrant of the country is entirely dependent for its gasoline supply on these two pipelines.

And so on that Friday night, we had no electricity and the last 300,000 barrels. I thought I’d better let the energy secretary know what shape we were in. So, I called him. I got him at his daughter’s wedding rehearsal dinner. That’s not a great time to get the energy secretary. And he said, “Why are you calling me?”

And I said, “Well, I just want you to know that we’re going to work through the weekend to get temporary power hooked up, but if I call you on Sunday night, it’s because we failed to get electricity to push these barrels and I would like you to call the President of the United States to please ask for a day of national reflection on Monday so nobody drives because if we can’t push these barrels, there will be instant news up and down the Southeast that we’re literally out of gas.”

And, we would have been, because you can’t take anything out of a pipeline if you’re not pushing something into a pipeline. It’s like a garden hose. And so we were on pins and needles. He said, “I’ll pray for you, John. But, I’ve got to get my daughter married this weekend.”

As it turned out, at five o’clock on Sunday we finally got power and we pushed barrels, so we didn’t have to have a day of national reflection. Here we were facing panic buying in the whole Southeast. The Northeast would have followed that panic-buying model.

And that would have moved to the Upper Midwest, and who knows, with the presence of CNN and Fox and all the instant news stations, we could have easily had panic buying across the nation. That’s how close we were – hours from panic buying.

Ladies and gentlemen, I’d like to talk with you from the perspective of a major oil company looking at the situation we face, recognizing that Shell is a supply-side advocate. Our job is to supply energy to everyone who needs it, everyone who wants it and who can pay for it.

Our job as a supply-side industry is to make sure that we live up to our social responsibilities, our shareholder accountabilities and the consuming needs of the public, whether those are individuals, companies, governments, or our military. We are a supply-side company.

But, I start with the fact that there are three realities that we can’t change. Our legislators can’t change it, the courts can’t change it and the President can’t change it. There is nothing government can do about the three following realities.

Number one, we cannot stop the global demand for more energy. It is continuing and it will continue. When 95 percent of the world’s population looks at five percent of the world’s population using 25 percent of the world’s energy and recognizing what kind of lifestyle that has led to in this country, that 95 percent says, “Hey, what about us?” And so that global demand for energy is unstoppable in anybody’s forward view.

Second, a major source of that energy, which is so-called “conventional oil and gas” is peaking. The ability of the world’s energy companies to continue to grow the supply of what we call “conventional oil and gas” is essentially peaking. We saw a chart this morning that showed how it has already peaked in the United States in terms of domestic production.

But around the world, as we look for more and more deposits of conventional oil and gas, they are simply not there, in terms of meeting the growth demand with that source of supply. Having said that, I’m not a subscriber to peak oil theory at all because there are enormous, vast sources of unconventional oil, which has hardly been tapped at all.

The Canadian oil sands are a good example, the Colorado oil shale is another example and the Venezuelan heavy oil in the Orinoco Basin is another example. So, just in this hemisphere, ladies and gentlemen, if we count up the oil sands of unconventional, the oil shale and the heavy oil, there are more than three trillion identifiable barrels of resource called “unconventional” or “heavy oil.”  We’re not running out of oil – it’s just that the easy, inexpensive, conventional oil is harder and harder to find in ways we can grow the supply.

The third reality is that government can lead, but the carbon constraints necessary to address the issues of global climate change are more than a state legislature or even more than a national legislature can tackle. Shell, as I’ll say later in my remarks, is a very, very strong advocate that the time has come for government to lead on the issue of CO2 management and let societies follow. That leadership should be global.

Lacking global leadership, a country like the United States of America should take the lead with a national solution. We respect the rights of states, but we also, as a company that operates in all 50 states, clearly see that a patchwork quilt of regulations is potentially terribly inefficient and confusing, where a national solution can actually demonstrate to the world at large that the U.S. will take on the mantle of leadership of climate management.

So, these realities are inevitable. Energy demand will grow, the ability to meet that demand with conventional oil and gas is shrinking, and climate management is a must. We need more energy in a carbon-constrained world. That sets the stage.

Let me offer you some rather outrageous opinions. The last time the United States of America had a comprehensive, holistic energy strategy, ladies and gentlemen, was during World War II, when the energy strategy of the nation was to produce everything we could produce and ration it to consumers. That was the last time this country had a coherent, comprehensive national energy strategy. 

Since then, we have been pretending to have periodic energy policy incursions into the world of energy, some of which lasted a very short while and some of which have lasted a little bit longer. In the last three years, we’ve had three energy policies. And this year, in the fourth year, there is an effort to undo some of the energy policies that we put into law just over the last one, two and three years.

Now, you see governors such as the governor of Texas seeking to amend the Energy Independence Act of 2007 with its ethanol mandate, just months after the President signed the Bill.

So, to call these energy policies of the last three years comprehensive solutions to our energy needs is a bit of a stretch. What we need in this country is a comprehensive energy strategy that suits the entire nation and works within the world. I’ll come to that in a moment.

A few more outrageous statements. Some of you think there’s an energy marketplace. Please don’t be naïve. How can we describe an energy marketplace, when the supply of crude is essentially set by an international cartel and the supply of crude in this country is frozen in terms of where we can access crude oil and gas supplies?

In other words, for the last 30 years, there has been a congressional moratorium on the exploration and production of oil and gas in 85 percent of the lower 48 Outer Continental Shelf and on hundreds of millions of acres of federal land. What kind of an energy market is defined by restricting access to 85 percent of what’s possible?

So, when people say, “Well, the energy market,” I don’t know what the energy market is, because the cartel controls much of it globally and the United States prohibits access to its own domestic natural resources.

So, when we talk about the price of crude and when certain politicians vilify big oil for excessive profits at a period in which we are paying $120 for a barrel of crude oil, because supply has been constricted by virtue of an international cartel and laws and regulations in this country that prohibit its access, then no wonder the oil price has skyrocketed.

As demand has continued to increase – not just U.S. demand, but demand from other developed nations and, of course, demand from developing nations such as China and India – the same demands for more energy are being placed on the limited number of resource basins that are providing that energy.

And to vilify five American oil companies for their profitability and recognizing that these five international oil companies represent in total 15 percent of global production, 15 percent of global production comes from Exxon, Shell, BP, Chevron and Conoco Phillips; 85 percent of global production comes from elsewhere.

To vilify the profits of the companies when the supply is constrained – in other words, government policy has established the high price because government policy has not reduced demand – government policy has simply reduced supply, pushing the price to $120 a barrel. To vilify companies for the profitability that they take, let me just look at the first quarter of this year for Shell, We reported $7.8 billion in profit last week on $114 billion in revenue.

I was asked on the John Roberts American Morning Show last week, “How can you justify that kind of profitability?” I said, “John, let’s invert the scale. If we were a company that made $7.8 million in one quarter on $114 million of revenue, would I be on national TV?” He said, “Well no. That’s not much profit.” I said, “Well, just change the scale – $7.8 billion of profit on $114 billion of revenue yields 6.9 percent return on sales.”

Many industries would laugh at 6.9 percent return on sales profitability, such as banks, pharmaceuticals, IT companies, many consumer-based companies that have much higher margins and returns on sales in the 20 percent range, the mid teens or the lows teens. We’re at 6.9 percent. Where’s the excess profit? The numbers are big because the volumes are big.  And, to be vilified over that is, I think, an outrage.

But, on the other hand, let me make another outrageous statement. The vilification of the oil companies is largely because the oil companies have invited it. Over the years, the oil companies have done a very poor job of explaining who they are, what they do, how they do it.

In too many cases across the nation, the effort to get laws passed and regulations established has been done in ways that were perhaps not as transparent as they could have been, not as open to public discourse as could have been. And, over the course of many decades, for the failure to explain, to describe and to engage, the oil companies have to take responsibility for the vilification that is occurring.

Fortunately, that is somewhat changing now, because more oil companies are engaging in the public dialogue, and they are engaging in open, transparent discussion of what they are doing. They are committing to activism when it comes to CO2 management or to social responsibility and corporate responsibility.

Since 1997, Shell, as an example, has been publishing its social report alongside its annual financial report, revealing to the world at large and audited by third parties what we spilled, what we’ve omitted, what we’ve done in terms of the whole health, safety and environmental issues that we face, what we have done about clean-up, what we have done about human rights and business principles, what we have done about bribes and those who take bribes, because we report how many people we fire each year.

So, there is an effort – and we’re not the only company that does that. There is an effort to better engage, to better describe and to better explain what we’re doing.

But, here are a couple of outrageous numbers that we have to contend with.  When we look for solutions, there is a very large body in our population that says, “Let’s move beyond oil and gas. Let’s get rid of oil and gas. Let’s do alternatives.  Let’s do biofuels.”

Here’s the reality: we can’t change very quickly. Every second of every minute of every hour of every day of every week of every month of every year, this nation consumes 10,000 gallons of oil a second – 10,000 gallons a second is a backyard swimming pool full of oil, and that’s every second.

So, where do we get the scale of alternatives to replace those 10,000 gallons of oil a second? In addition to that, every minute of every hour, we consume 20 hundred-ton train carloads of coal. They’re burned and gone forever; every minute, 20 carloads of coal. That’s one every three seconds.

Where do we replace that scale with alternatives in the near term? Every day, we use 60 billion cubic feet of gas in this country. If you stacked those cubic feet on top of each other you could build a bridge from here to the moon 25 times. That’s how much natural gas we use on a cubic-foot basis.

So, when we think about hydrocarbons – and there may be people in this audience who don’t like hydrocarbons – we are where we are: 10,000 gallons a seconds, 20 coal cars a minute, 25 times to the moon and back with cubic feet of natural gas. We don’t turn that off overnight. And every day, 14,000 Shell stations need fuel.

If you went to a Shell station to fill up your car to go home and there was no gas, you wouldn’t blame the station owner, you would blame Shell. So, every day we have to have enough supply to fill up 14,000 Shell stations across the country. And, in order to fill up those Shell stations, we need refineries that have crude oil. And so this goes on every day, day and night. We built a hundred-year infrastructure. And to go a different direction requires another infrastructure.

As we heard this morning, there’s no single solution – but there are multiple solutions. And so we need multiple infrastructures. Dealing with the infrastructure issue, I could make another outrageous statement.

There are a number of elites in this country, there are a number of plaintiff attorneys in this country who need to be re-educated on what this country stands for in terms of social and economic justice, because the very people who cannot afford today’s prices – the very people who are losing their homes because energy costs, food costs and the healthcare costs – are all rising at the same time as the adjustable rate mortgage.

What goes is the adjustable rate mortgage because, on a daily basis, people need food, fuel and healthcare.

And those who resist infrastructure and those who stop the future from unfolding, both in terms of more hydrocarbons in the short term and more alternatives in the long-term, should redefine how they see the American way and the values of this country, because they are getting in the way of the lives of tens of millions of Americans. And, they should be accountable for that.

Let me talk about solutions. There are solutions. Shell has prescribed 12 solutions. And we have set on your chair a report that attempts to explain them.  I’ll be brief.

First of all, we need to approach energy strategy in a comprehensive, holistic and organized way. That means like any strategy in your state, community or in a company, we need a short-term, medium-term and long-term set of solutions because anyone who sets a strategy who thinks you can go from here to the long term, guess again.

You’ve got to build bridges to the long term.  How do you get there? By redefining how we approach energy in this country, by thinking about it in terms of short-term, medium-term and long-term objectives, it makes it much easier to decide what to do.

So in the short term, it is the Shell view that we must increase the supply of conventional oil and gas to meet today’s and tomorrow’s demands. The infrastructure is there, the car fleet and truck fleet are there, and the aviation fleet is there. And they all need fuel every day.

So, in the short term, we have no choice but to continue to supply that. As a nation, we can make a decision. Do we continue to draw on the cartel-controlled imports, or do we begin to relax the 30-year moratorium placed on developing our own domestic natural resources and go after the 100 billion or more barrels of known, conventional easy oil, affordable oil and oil that we could produce for $20 or less in many cases. Or do we continue to pay $120 for imported crude?

I’m a business person and that’s a no-brainer. But yet, we cannot seem to get any action galvanized in this country on relaxing the 30-year moratorium. But at any rate, wherever we get it, we need more conventional oil and gas. Whether that’s offshore Alaska or onshore, whether that’s using enhanced oil recovery, which is a great way to bury CO2 into old reservoirs and produce more energy from old reservoirs.

Second, we need unconventional oil and gas. We should be developing the oil sands of Canada, we should be developing the oil shale of Colorado – and there are means by which we can go about that. But, we need to do it in environmentally-responsible ways, because we will recognize the carbon-constrained world of the future.

So, to go after those heavier oils, we need to find solutions or offsets for the CO2 issues, the water issues and the land management issues, so that we can still obtain energy from those sources.

We heard a lot about coal this morning. Coal remains, and will continue to be, a critical national resource that we should draw upon. Our Shell view is to take the next steps for technology and innovation, and let’s create the environmental and the legal framework in which coal gasification makes sense. Coal gasification represents a complete revolution of the coal technology.

Rather than pulverizing and burning that coal, gasify it. For those of you like me who are not technical, gasification, it looks like this. You reduce the pulverized coal to the consistency of talcum powder. Then introduce that talcum powder-like coal into a huge gasifier.  The gasifier is a structure that operates at greater than 1,000 pounds per square inch inside, and its some 2400 degrees Fahrenheit.

In very technical language, those molecules go “poof” and with the introduction of oxygen, we create syngas. The syngas is then burned in a clean turbine (integrated combined cycle gas turbine) and we make electricity. Because the gasifier holds the content of the explosive process to destroy the molecules, we can then manage the CO2 and manage it through an infrastructure into the ground in geological sequestration.

But all of this requires a framework in which it can be paid for commercially and in which the enabling regulations and permits are able to go forward without endless litigation, which makes the whole process impossible to develop.

Fourth, liquefied natural gas warrants investment. But, we come up against the infrastructure, safety and security issues, which largely, just like in the case of nuclear, is a case of public education around the realities. Yes, it’s true that in heavily-populated areas, it is very hard to site anything of industrial infrastructure. 

But, isn’t that a necessity to maintain the American way that delivers affordable energy to all of America, not just those who have enough that they don’t care about the price of energy?

And so the siting of liquefied natural gas is an important part. Sempra was mentioned this morning. One of the conditions of the Sempra project (in which Shell is a 50 percent participant) is that we first meet Mexico’s needs. So, before any gas comes to Southern California from the Baja, we have first met Mexico’s needs. That was the quid pro quo in establishing the facility in Mexico.

It is a source of new energy for Mexico, and the excess can then be sold across the border in the United States, primarily in California. But, the ability of our nation to get its head around siting of liquefied natural gas is a critical success factor.

Let’s move on to another set of fuels – biofuels. Biofuels have a place, and we should recognize that that place is already occurring and laws have been passed.  While I believe that it was premature in 2006 for the President in his State of the Union address to say we need x amount of biofuel by a certain time frame, predicating it primarily on corn – and it was premature again for the Congress to pass the law they did last December – nonetheless, that’s not my job. That’s their job.

The best I can do is point out the concerns and the issues.  One of the concerns, one of the issues is the use of corn ethanol and the impact on food prices, which we are seeing now in great measure. But, fortunately, Shell believes there are other forms of ethanol that technology and innovation will play out in the biofuel world as well.

And so right here in Idaho, Shell has been working with a company called Iogen. We’re a primary investor in Iogen to lock up straw for future production of ethanol, which comes from material waste and not from food.

In Hawaii, we have algae ponds that are under development to try to produce ethanol from native algae. In California, a company we have invested in called Codexis is working on super-enzymes, which will more quickly degrade and cause the cellulosic fiber of all kinds of plants to degrade quickly, so that it can be turned into ethanol much faster and in larger quantities.

And in Germany, we’re working on moving wood chips and saw dust into ethanol. So, we do believe that there is a biofuel future that could be quite sizable using waste materials and cellulosic ethanol, rather than food-based products, and we will pursue that. 

We’re the world’s largest distributor of ethanol today by volume, and we’re not afraid of ethanol. We’ve been doing it for 30 years, working with Brazil on their whole biofuel conversion. We’re not afraid of it, but we want to make sure that it is done the right way.

We move on to other alternatives that Shell is involved in, such as wind. Wind is, I believe, a viable source of future energy and, as we heard this morning, there are issues with wind farms from Texas to West Virginia. They both happen to be Shell. One is Briscoe County, Texas where we don’t have transmission lines from Briscoe County to get to Dallas or San Antonio.

So we need transmission lines, which a lot of people don’t want in Texas. In West Virginia, we’re in a West Virginia Supreme Court because hunters from Pennsylvania like to hunt deer on the place where we have been building our wind farm and are attempting to stop the wind farm from being constructed, although we’re already into phase two with the encouragement of the whole state government of West Virginia – the legislative and the executive branches.

The judiciary has yet to rule. I hope we don’t have to take down those wind turbines that we worked so hard to put up.  But, we have wind farms in five other states, and we produce about a gigawatt of electricity from wind every day.

Solar is an interesting question. Shell recently sold its silicone-based photovoltaic solar business on the basis that, as we looked at technology, we just did not see silicone as the base on which we wanted to build a commercial business. It’s energy intensive by its physical nature. It is hard to obtain long-term supplies of silicone when you’re competing against every computer manufacturer for silicone at the same time, unless you’re in the silicone business yourself.

And, as we looked ahead into the future and the technology and innovation that are going on in universities, we came quickly to the conclusion that new generations of solar make more sense. And so we sold that business, and we’re investing in thin-film technology.

And, as I’ve traveled the nation and visited six of our major universities, I can tell you that the nanotechnology developments for solar energy production in the future look very promising – but they’re a long way off, which gets back to the short-, medium- and long-term strategy.

And, then there’s hydrogen. It was mentioned that I’m part of a hydrogen technology advisory committee. Some people on the committee itself say hydrogen has great promise and always will. However, some of us have the commercial instinct to say, “How do we get this to market? If we can get this to market, we think it will grab the market and that we can do something with it.”

So Shell, in partnership with General Motors, has been building hydrogen stations in different cities. In Washington, D.C., two-and-a-half miles from the Capitol, we have a hydrogen retail station at a regular Shell station. We went to New York, and we tried to get it at a regular retail station, but the city we were talking to said, “No, we just can’t get there. We don’t want to store hydrogen in the neighborhood.” And so we ended up building an industrial site in New York.

And in Southern California, we hope this year to put in a couple of hydrogen stations at Shell retail sites, because General Motors is bringing along some hydrogen fuel cell equinox vehicles, which are beautiful vehicles, cross-over type cars with all of the get up and go that you would expect from a very high-powered internal combustion engine. The difference, however, is there is no internal combustion engine, or a battery.

This is a hydrogen fuel cell that converts the hydrogen through the fuel cell into instant electricity. The electricity is connected to the front axle, which is a motor, and to two individual motors on the rear wheels. And in terms of mobility, it is hard to replicate the instant mobility you get from touching the accelerator because you’re not cranking a bunch of cylinders, which turn a bunch of shafts, which go through a transmission, which goes back to your rear end, which then starts driving your wheels. So, it’s a much more efficient use of energy.

We think (I think) if hydrogen fuel cell vehicles can be seen and driven, the demand will increase, the likeability will increase. But here we have the issue of infrastructure, which we had with all other energy sources. And that is how do we build an infrastructure of hydrogen storage in neighborhoods that people can accept, so they can buy their fuel locally, instead of going across the railroad tracks and behind a fence to an industrial site to buy their hydrogen.

So, we have hydrogen, solar, wind, biofuels, LNG, coal gasification, unconventional oil and gas, and conventional oil and gas. And that represents a good start on a comprehensive energy strategy. But, that’s not enough. We need more. There are four more elements to the Shell plan.

One is the CO2 management that we talked about. If we don’t come to grips as a nation with this issue, I don’t think the world will come to grips as a global set of governments. And so our encouragement, and the reason Shell joined the United States Climate Action Partnership, the whole purpose of the United States Climate Action Partnership is to advocate a national solution on Capitol Hill.

We propose a cap-and-trade system. Lieberman-Warner is the beginning of a cap-and-trade system. There are holes (as we’ve heard this morning) in the way in which the legislation has been put forward, which need to be filled in.

It’s our goal at Shell (along with the 34 other entities that are part of USCAP) to try to be at the table filling in the holes so we can deal with the issues of allowances and credits, the issues of cost and of what the size of the cap is, and the issue of which industries are impacted and how to be part of the dialogue and discussion to help shape that legislation. But, the nation must come to grips with CO2 management, as part of this comprehensive energy strategy.

Second, it is critically important to address the demand side. We cannot just keep living the life we’ve become accustomed to. But, it’s our view at Shell that changing behavior is a no-go. We’re unlikely to change individual behaviors, because who wants to sit in a mega mansion at 75 degrees when you have enough air conditioning to cool it to 72 or 71 degrees?

We’re not going to change lifestyles very easily in this country, and price won’t do it, which is why we’re not in favor of a carbon tax, because we think the size of a carbon tax would be so huge that no legislature would ever pass it because it would be a whole new legislature the next election.

So, let’s be practical about it. Carbon tax at the size that would change behavior will not get passed, at least in my view. Therefore, the cap-and-trade works.

But, efficiency needs to be addressed through technology and innovation. Let’s use some examples. When you stop and buy a tank of gas, and you spend $60, only $12 you have spent is used for mobility – $48 you’re burning as heat. That’s the nature of the internal combustion engine.

It is 20 percent fuel efficient. So, only 20 percent of your spend actually gives you miles per gallon. The rest is just wasted heat. When you fly, the modern jet engine is an eight-percent-efficient engine – eight percent of the aviation fuel gives you push, and 92 percent of the aviation fuel enters the atmosphere as heat.

The incandescent light bulb uses three percent of the electricity to emit light, and 97 percent is wasted as heat.  We can do better than that. The homes we live in, the buildings we use, all of the efficiency, in my judgment, present a huge opportunity for demand reduction, which has to be part of a comprehensive energy strategy.

Third, we must educate the public. This is not only an oil company responsibility to educate the country about what we do. All of us in leadership positions – from government to corporations to school systems – we have a responsibility to teach the young people of America and the whole citizenry of America that energy is a precious resource like water.

As we heard this morning, that energy is consumable and finite, that energy is the source of our economic value creation in this country, and that energy is the source of the lifestyle we love in this country.

By not teaching our citizens, what do we do? We encourage the abuse of energy, or we encourage them to imagine unsophisticated, simplistic solutions that just don’t work. And whether that extends to the White House, the Congress, the State House or to the Governors mansions, all the leaders of this nation could use a bit of education on the subject of energy, as could heads of corporations and heads of school districts and school buildings.

So, education of the American public is very important, which is one of the reasons Shell visited 50 cities over the last 24 months. And we offer you the copy of our report on that tour.

And finally, from our Shell point of view, we need to respect other sources of energy about which we do not have competence and work in concert with others to see that those sources of energy play out as well, such as nuclear, geothermal and other forms of innovation and technology.

Let me close on this note. Shell takes periodic views of the future – five years, 10 and 15 years, 25 years, 50 years and 100 years. We have published our most recent look at the scenarios that we believe will help define our future. And, I’ll close just describing these two scenarios. They are accessible through the Shell website.

One scenario is called, “Scramble.” This is a scenario in which the sovereign nations of the world pursue their own nationalistic self-interests in terms of meeting their energy needs by whatever means they can as individual nations.

The “Scramble” scenario can lead to all kinds of international tensions, international mischief, all kinds of international “I’ll get mine so you don’t get yours” behavior, all kinds of national efforts that meet the immediate needs of a population that is served in a short period of time. We believe that much of what we’re seeing today is a “Scramble” type of behavior, where each is looking out for its own.

The second scenario that we define is called “Blueprint,” which is an effort by nations, companies and associations to collaborate and cooperate regionally, or even globally, to design systems and methods and to interchange or exchange information in which coalitions of nations, the world as a whole, could look at energy as a finite resource, to look at the atmospheric impact of energy, and find solutions that work together.

And, for the first time in nearly 60 years of our efforts at Shell to look at scenarios, plan scenarios and work our business through those scenarios, Shell has actually recommended that we moved forward on the basis of one of our scenarios.

And so Shell recommends to all of those who seek to read and understand these scenarios, and to all of those who lead nations and lead corporations and lead government and lead associations, work together on coalitions of interested parties. We have selected the “Blueprint” scenario as our preferred scenario. And we think that is what makes the most sense for the world, for the United States of America, or any of the states or subsets within states that care deeply about energy security.

I believe that, as a natural optimist (not as a scientist, other than a political scientist) that we can solve these issues. I applaud you, the attorneys general of this country, for spending this amount of time on energy.

This is part of the public dialogue that needs to take place, where experts and those who administer and enforce the laws of this country come together to make sense out of all of the things that are happening in our society, in a place where you can look at each other and discuss what is and discuss what could be. So, I really do appreciate the invitation to be here.

I applaud you for choosing this subject, which I believe is of such urgency in this nation that during the next president’s term (whoever that person is), the country will either turn and face into the issues that we must face or we will see ever-more manifestations of a serious economic decline and social fraction – fractionation of this country that will be ever harder to remedy.

So, thanks for listening and thanks for inviting me here today.