Speeches

John Hofmeister's '07 Energy Speech in Nashville

18/01/2007

How the U.S. Can Ensure Energy Supply for the Future. John Hofmeister's remarks to the Nashville Chamber of Commerce in Nashville, Tennessee.

Ladies and gentlemen, it is a pleasure to be back in Nashville. I had the joy of living in this wonderful community in the early 1990s and I can tell you there is a part of Nashville that I shall never forget.

Nashville cured me of the game of golf. I will never forget; it was October1991, and I was playing a round at Richland Country Club with my boss and his boss. And I actually won a hole.

I won the ninth hole, which I thought at the time was good news. But what it meant was that I had to tee-off on the tenth hole. When I tee’d off on the tenth hole, it cured me forever of the game of golf because, as you know, that’s a long par five.

Got out the big ol’ driver; gave it a mighty swing. The ball went right into the golf cart and right into my boss and right into his boss, with one drive. Thank you.

And I said, “Life is too short for me and the game of golf.” It’s not the end of the story because now I am an enthusiastic observer of the game and we get to sponsor the Shell Houston Open in Houston, Texas, every spring.

So I get to see the real golfers play extremely well. But it’s a pleasure to be back here and I’m excited to talk to you about a subject that is near and dear to every one of us in this room. And that subject, ladies and gentlemen, is energy security.

Here’s the situation as we see it. Our lifestyle, that which we have come to enjoy, our mobility, our homes, our schools, the way in which we enjoy the amenities of life, are energy dependence par excellence.

How do we get from “A” to “B”? How do we spend our holidays? How do we spend our time commuting to and from work? The amenities of our lifestyle are predicated on energy. But even more importantly than that, our economic foundation as a nation is energy dependent. And one of the reasons we’re here, ladies and gentlemen, is we had a scare.

We had a very serious scare in the fall of 2005. And I can tell you the story that on the first Friday in October, after Hurricane Rita came tearing up through east Texas and west Louisiana while we were still under horrible operating conditions in Mississippi and Louisiana because of Katrina, that storm Rita actually did serious damage, on top of Katrina, to our daily supply of product.

Such that on the first Friday of October, 2005 I called the Energy Secretary (Secretary Bodman) on Friday evening and said, “Mr. Secretary, if we do not get emergency power hooked up in our Motiva Refinery in Port Arthur, Texas, over the weekend I’m going to call you on Monday to ask you to please ask the President of the United States to declare a Day of National Reflection so nobody drives.

Because, Mr. Secretary, we have the last 300,000 barrels of finished product that we can push into the Colonial and the Plantation pipelines along the entire Gulf Coast and if we don’t push those barrels, we are dry on Monday morning from east Texas all the way to Washington, D.C. And what would happen by noon on Monday is panic buying will set in when people realize the pipeline is dry.

And that panic buying could move across the United States in hours. And the nation goes dry because of panic buying.” Ladies and gentlemen, this is the United States of America, the “land of abundance” and “the land of plenty.” And we’re six hours from a dry pipeline.

That’s how serious the supply-demand relationship became in those days. Since then, very little has changed in terms of the overall supply-demand equation although we are delighted that the 109th Congress on its last day, in its last hours, granted access to eight million acres in the Eastern Gulf of Mexico with the bill that was passed right at the close of Congress.

But that’s the first eight million acres that have been made available for exploration and production in the Gulf of Mexico in 25 years.

So the question of energy security for us as citizens, for us as consumers, takes on an important magnitude when we realize that the “easy days,” the “easy days” of gas and oil, which we enjoyed the last 50 years, are essentially over. And the next 50 years becomes the challenge of today and tomorrow in terms of, “what are we going to do about it?”

And so you may say, “Why is somebody like this guy up there talking about this when he represents a company in an industry, which some would say has zero credibility on the subject?”

Because of our negative perceptions – where we are one of the most despised industries in America – where if we were to get access wherever we wanted it, it would be somewhere past 2012 or 2013 or 2014 before we could actually bring more new product into the marketplace.

Where if we wanted to promote energy conservation through energy efficiency, it would take not just years but decades to make a major impact on the manner in which we use energy. And a person who shows up in Washington on a regular basis with cup in hand saying, “More access, please. More access, please.” Why is somebody like me out here talking about this?

There are two main reasons. One is it’s not just me, ladies and gentlemen. I am the face of more than 25,000 Shell employees and more than 200,000 people who work at Shell stations across the country who are everyday Americans who are really the manifestation of so-called, “Big Oil.” But they are hard-working, everyday people who care about bringing energy to America.

So, that’s the first reason I’m here – is to tell their story about why energy security is important and what they are doing about it.

And, secondly, we have a 100-year old brand in this country that I believe represents the best of what technology – and the best of what American spirit – is all about, and we can bring that brand to life in ways in which help our lifestyle and help our economic well-being. So for those two reasons, I welcome the opportunity to talk about energy security – and here’s where we have some very good news.

The good news is we can have energy security in this country. How do we define that energy security? The definition that works for Shell is: energy security is having available affordable energy in quantities that we need – not just for today; and not just for tomorrow; but for tomorrow’s tomorrow.

In other words, not so that we’re secure (which is important) but that our next generation and the generation of our grandchildren’s grandchildren is also secure. And the good news is we can do that. And the question is: how?

Well, how we can do it is we are clearly invested as a nation today in gas and oil. We’ve been building the gas and oil infrastructure for 100 years. It is part and parcel of what we do.

That 100-year investment doesn’t turn off or doesn’t change quickly and, fortunately, there are plenty of natural resources still available, not only in this country, but around the world that support that gas and oil infrastructure and the demand side, which you represent.

The 100-year supply that we see ahead is easily ahead – both in domestic resources and international resources – if we have access. So, for example, more than 75 billion barrels of oil and gas are available in the Outer Continental Shelf of this country alone and on federal lands to which we are denied access. We can develop those resources with permission of policy-makers.

Seventy-five billion barrels is about 60 years’ worth of heating our homes or gassing our automobiles, which means a very long time to come. But in addition to that (that’s conventional oil and gas) there is unconventional oil and gas buried in the oil sands of Alberta, Canada; buried in the oil shale of Colorado, Utah and Wyoming, which can be developed.

In fact, the Canada oil sands are being developed and we are testing technology in Colorado to develop the oil shale, which, if the tests are successful, could lead to an investment decision perhaps in the early next decade which could lead to the development of the oil shale of Colorado – which is very important to the longer term energy security.

But with conventional oil and gas and with unconventional oil and gas the story gets even better. We have more coal in this country than the whole rest of the world. That coal can be developed in a new way; a cleaner way through what’s called, “IGCC” or “Integrated Gas Combined Cycle” technology, which for those of you who are not engineers or scientists let me explain more simply.

I’m a political scientist so I have to explain it simply. I couldn’t understand the technology of it. It is taking coal and turning it into the consistency of talcum powder. The talcum powder can be introduced into a gasification process and that gasifier explodes that talcum powder into the molecules of the essence of coal.

The good news is it is the most efficient use of coal we can imagine because we get right down to the molecular structure of that coal and we can turn that into efficient energy to make electricity.

In addition, the gasification process is so sophisticated that we can capture the emissions of the coal, such as CO2 or sulfur or mercury, and manage those emissions in ways, which are good for the environment, which is why it’s called, “clean coal.”

So if we chose to sequester the CO2, or chose to use the CO2 in agricultural production, there are ways in which that CO2 can be dealt with. And the coal in this country we know will last for hundreds of years. So, that’s another source of secure energy.

In addition, there’s something called, “liquefied natural gas.” Liquefied natural gas comes about from what are called “stranded gas fields.” These are natural gas fields in remote parts of the world where there’s no market for that natural gas. We can turn that natural gas into liquid, transport it by ship and re-gasify it in a gasification terminal along a coast of a country, including along the United States coast.

So we can bring gas from Australia or gas from Malaysia or gas from Africa or gas from South America to this country through this liquefied natural gas process. Does it work? Yes. Japan has been dependent on liquefied natural gas really since World War II, or shortly after World War II, where the process brought energy to the country.

And we can bring that to this country as a supplement to the natural gas which is produced in this country, which if you look at the supply-demand equation over the next 10 years is going to come under extreme pressure because natural gas is a preferred energy source for electricity generation, because it is so clean.

But if we have liquefied natural gas and we have coal gasification; we have conventional oil and gas and unconventional oil and gas, is that enough? We don’t think so.

We think there’s even more opportunity for energy security by looking at the range of alternatives. And so for the last 10 years, Shell has been thinking of itself as an energy company, not just a gas and oil company. And while gas and oil may be our core business, alternative energies are becoming more opportunistic and more economic and, therefore, we have been investing heavily in alternatives such as biofuels.

Today we are the largest distributor in the world of ethanol. This is a product that has been coming into the market for decades. Ethanol is a welcome additive to the existing fuel supply of gasoline. It serves most often as an oxygenate, which means we get a hotter, cleaner burn when we burn our gasoline.

Ethanol, in some respects, can continue to be an additive to the fuel supply at the 5- or 10-percent level. But when we invest in ethanol, our interest, ladies and gentlemen, is really in what’s called “second generation” ethanol. Second- generation ethanol is cellulosic ethanol, which is ethanol derived from biomass rather than from grain.

There’s nothing wrong with ethanol derived from grain. We’ve drunk it for years as corn alcohol, and it can also become our fuel with certain additives put in it, so we’re not burning spirits in our car.

But we prefer cellulosic ethanol because there’s so much more of it. We can use the straw rather than the wheat; we can use the corn stalk rather than the corn; we can use woodchips; we can actually use paper and cardboard to turn all of the above into ethanol, which is a fuel that can extend our reliance on gas and oil.

Some people say it may replace it. I’m not sure we’re there yet. We still have a lot more to learn about the use of ethanol because ethanol by nature is not as energy concentrated as gasoline.

And people would get fewer miles per gallon if they were using pure ethanol than they would from gasoline; and the cost – the economics of producing ethanol – still have a ways to go until we find the optimum method for production of ethanol.

But in addition to biofuels, there’s also wind. And the good news about this country, ladies and gentlemen, is we do have a lot of wind. And there’s several ways you could interpret that.

But natural wind coming across mountain tops is a wonderful source of electricity, and today Shell will produce several hundred megawatts of electricity in this country through wind farms. From Hawaii to California to West Virginia, we have wind farms dotting the landscape that are producing CO2-free electricity – and we want to do more.

Also, solar energy is another source, which we believe is viable. Shell has moved on from silicone-based photovoltaic cells and is now investing in the next generation of technology, called copper indium diselenide photovoltaic cells, which is a lighter; more energy efficient source of solar electricity, which we believe has a role to play.

And then there’s another form of energy, which is an entirely different innovation and an entirely possible innovation called hydrogen fuel source.

Hydrogen – particularly if we are able to master the electrolysis of water – to take hydrogen from water and use that as fuel for hydrogen fuel cell mobility purposes – we can have hydrogen fuel cell vehicles, which are convenient, comfortable and non-polluting vehicles, sometime over the next couple of decades.

It’s happening today at a Shell station on Benning Road in Washington, D.C. We are putting hydrogen into General Motors’ hydrogen fuel-celled vans, which are taking members of Congress on tours of Washington to show them the viability of hydrogen fuel cell vehicles. It’s happening today.

But to suggest that it is tomorrow’s commercial choice is a step too far. We still are doing the research that would enable us to put more hydrogen in the vehicle to get a sufficiently long drive that you wouldn’t mind refilling it. Today we can only get about 100 miles to the tankful. You would probably not want to refuel your vehicles every 100 miles.

It’s hard enough to do it after 300 miles. It is not a pleasant experience to do the re-fueling in the winter or the summer. So we need about 300 miles’ worth of hydrogen in the vehicle to make it commercial. And, in addition, we have some cost issues with the fuel cell itself to bring down that cost and to make it more commercially viable.

But over the course of the next decades – by 2012 to 2020 – we would expect to see hundreds and hundreds of hydrogen fuel cell vehicles. By 2015, thousands of hydrogen fuel cell vehicles. By 2020, perhaps hundreds of thousands of hydrogen fuel cell vehicles. And that’s an ambitious goal, but it’s also an alternative to augment our gas and oil infrastructure.

So if we do all of that – if we do the conventional oil and gas; the unconventional oil and gas; the liquefied natural gas; the coal gasification; biofuels; hydrogen; wind and solar – is that enough to provide us energy security for the future? Not yet. There are three other topics I would touch on that will ensure energy security going forward.

Among the final three is energy efficiency – the means by which we use energy in our cars, our homes, our schools, our factories, our buildings; we can be more efficient.

The design, the technology, the choices we make to embed in our culture, in our thinking, in our hearts and minds; a culture of conservation can bring new designs and new technology to bear on the more efficient use of energy so that what we have as a finite resource can become an infinite resource over time.

In addition, the second point – we must educate ourselves, starting with our children. We’ve done a survey of school curricula in America and we have yet to find a holistic school curriculum dealing with energy – teaching the young people who will be energy consumers of tomorrow how the nature of energy operates. We teach other things.

We teach history and math and science, but we really don’t teach energy, which is at the heart of our lifestyle and our economic well-being.

But we could. So, Shell has developed a curriculum, which is available on a website for free which can be downloaded by middle school and high school teachers and can be used for free as a teaching curriculum in the schools around the country.

It’s available. It’s simple. It’s easy. And, it is educational. And, it wasn’t developed solely by Shell. It was developed by educators for educators and targeted at middle school and high school children.

And, finally, to be totally responsible – socially responsible – t he third aspect I would touch on is the important issue of greenhouse gas emissions and the impact on our climate and on our environment.

And we do believe that there is a need to address the issue of greenhouse gas emissions as a nation and as a world. There are regulatory frameworks in some parts of the world that are working.

There is an opportunity in this country, we believe, to approach greenhouse gas emissions with a regulatory framework that can be good for our economy and good for our environment.

But we believe that instead of a state-by-state approach, which seems to be happening today – for example, in California and in seven other northeastern states – we believe that a national framework that deals with greenhouse gases is a preferable way to go. Voluntary initiatives are very helpful.

The White House and the Energy Department are promoting a number of voluntary initiatives. But the issue with voluntary is: not everybody does it. And so it’s our view that a framework that creates a level playing field for all – in which we can all follow the policies – makes more sense for the nation as a whole.

So as we think about it, ladies and gentlemen – all of the above. All of the above represents the best case for energy efficiency, energy security for the lifestyle that we have come to enjoy and for the economic prosperity that we all see.

Thank you very much.