Mike Sommers and Heather Zichal speak with IHS Markit Vice Chairman Daniel Yergin for a new edition of CERAWeek Conversations – available at https://ondemand.ceraweek.com/cwc
The heads of leading trade associations for both the oil and gas and renewable energy industries assess the significance of recent bipartisan infrastructure legislation, what it means for the future of their industries and for the energy position of the United States in the latest episode of CERAWeek Conversations.
In a conversation with Daniel Yergin, vice chairman, IHS Markit (NYSE: INFO), Mike Sommers, president and CEO of the American Petroleum Institute (API) and Heather Zichal, CEO of the American Clean Power Association (ACP) take stock of the Infrastructure Investment and Jobs Act—the largest infusion of federal investment in the nation’s infrastructure in a generation.
The legislation shows that “at the end of the day, energy can truly be a bipartisan issue and a bipartisan initiative,” Zichal says.
For elected representatives from both parties, the opportunity to deliver long-desired projects to their constituents “really focused the mind for a number of members of Congress and senators to get something big done that will help their individual states,” Sommers adds.
Sommers and Zichal discuss the strong interplay between enhanced infrastructure and energy and what it means for their respective industries.
“One of the most important components of this bill is that there was recognition by passage that oil and gas are going to play a very significant role in the future, and we have to fund infrastructure that supports that oil and gas future that we know is going to be there,” Sommers says.
For Zichal, the investment in renewable energy transmission and the energy grid “to move those electrons around from the windiest and sunniest places in the country to the population centers” stands out.
“This bill represents the largest investment in American history in energy transmission and the grid,” she says.
Ensuring that energy will be able to get from where it is to where it needs to be is a vital, Sommers and Zichal note. Both say that improving the infrastructure permitting process—whether it be for oil and gas pipelines or transmission lines for wind and solar—will be key to meeting the country’s energy needs.
“We need to continue to invest in that infrastructure,” Sommers says. “But increasingly, every pipeline that we try to build or that we try to improve has become a political issue. I do think this is an area where ACP and API can come together to form an alliance because I suspect as you start building out high-powered transmission lines that it’s going to be a huge challenge to get that permitting process done.”
“It’s great that we all think we should triple the deployment of clean energy to meet our climate goals,” Zichal says. “But if we can’t get the permits to do that and we can’t get at a state, federal and regional level the green lights to make these investments, we’re going to hit grid saturation in some portions of the country.”
The complete video is available at: https://ondemand.ceraweek.com/cwc
Interview Recorded Monday, November 29, 2021
(Edited slightly for brevity only)
- On the significance of the bipartisan infrastructure legislation and the keys to its passing:
Heather Zichal: “We have had a time-honored tradition of a conversation about a major investment in infrastructure. Overall, there’s this broad recognition that the U.S. is falling behind in terms of our infrastructure and our investment in our cities and states. It’s a testament to the Biden Administration and the leaders in congress that against the backdrop of so much partisanship they were able to come together and find legislation that was attractive to both Democrats and Republicans and get that legislation across the finish line.
“I am really excited about the provisions included for transmission in the grid. As we think about clean energy, transmission and the grid are really important and often overlooked.”
“Whether it’s grid cyber security, the transmission line pieces, the OCS opportunities – all of these things help remind us that, at the end of the day, energy can truly be a bipartisan issue and a bipartisan initiative.”
Mike Sommers: “I would sum it up in one word: Bridges. The reason why they were able to come together is a bipartisan focus on getting big things done in particular Senate states and particular House congressional districts. Some of these individual projects really focused the mind for a number of members of Congress and senators to get something big done that will help their individual states.”
“The challenge is going to be five years from now when they try to do this again. They’ve really done a lot of the bipartisan things that they thought that they could come to consensus on. The challenge is going to be how you continue to fund these infrastructure improvements without raising the gas tax or finding some other way to fund these kinds of priority programs.”
- On key provisions that support the renewable energy and oil and gas industries:
Heather Zichal: “We’re really excited that deployment of clean energy is happening across all 50 states and at higher levels than at any other point in time in American history. Unfortunately, we also recognize that there’s a potential for an Achilles’ heel if we do not have the clean energy transmission and energy grid to move those electrons around from the windiest and sunniest places of the country to the population centers. This bill represents the largest investment in American history in energy transmission and the grid. There are a handful of provisions that include citing provisions, transmission facilitation programs – a number of ideas that have been contemplated in Congress. The energy grid certainly has bipartisan support, but it’s often that one thing that’s forgotten about. It’s not just about how do you build the transmission line; it’s how do you go through the process to get that sited? How do you make sure the permitting process is working and how do you make sure that we get timely decisions? We’re trying to deploy clean energy as quickly as possible, so we need a set of policies around transmission that are going to allow us to continue to increase deployment of clean energy.”
Mike Sommers: “One of the most important components of this bill is that there was recognition by passage that oil and gas are going to play a very significant role in the future, and we have to fund infrastructure that supports that oil and gas future that we know is going to be there. This [bill] did put forward unprecedented funding towards carbon capture, utilization and storage technologies and other funding that is going to be important to continue to build out oil and gas infrastructure going forward. This bill allowed carbon sequestration derived from natural gas in the OCS and previously that was only allowed for coal. It also funded CCUS demonstration projects and infrastructure that we think are going to be very important as we continue to move towards a lower carbon future going forward. There’s also funding in this program for researching applications for hydrogen derived from natural gas and other feedstocks. This is a pretty exciting new investment in these kinds of things.”
- On shared interests to strengthen infrastructure permitting processes:
Mike Sommers: “One of the concerns that we’ve had for decades is the ability to build pipelines to get energy from where it is to where it needs to be. Increasingly, we’ve had challenges in building out the pipelines in this country. There are already about 530,000 miles of pipelines in the United States. We need to continue to invest in that infrastructure. But increasingly, every pipeline that we try to build or that we try to improve has become a political issue. I do think this is an area where ACP and API can come together to form an alliance because I suspect as you start building out high-powered transmission lines…that it’s going to be a huge challenge to get that permitting process done. I often reflect on the fact that it took 44 months for the U.S. to win World War II from the moment we entered the war after Pearl Harbor to Victory in Japan Day. It’s really incredible that it takes us almost decades to get the permitting in place for some of these high-profile pipeline projects. I do think that’s going to be a challenge for clean power going forward. What we should be doing is really working together on how do you reform these processes so the American people have access to all forms of energy going forward.”
“Sometimes climate goals are actually contradicting climate goals. In the northeast they still get a lot of their energy to heat homes from heating oil. That wouldn’t be the case if we were able to build a pipeline that we can’t get a permit for to the northeast to ensure that they could have access to reliable natural gas. There’s a lot of contradictions right now in some of these permitting discussions when you actually can do something that would markedly improve the environment. But because activists have a certain view of what should be happening with our energy future, we’re not advancing some of those short-term steps. As we have been challenged over the course of the last decade in building out pipeline infrastructure, I think that is going to be the thing that stands in the way of more renewables coming online in the next decade.”
Heather Zichal: “As we are trying to build clean energy projects there are wildlife impacts that we as an industry are constantly trying to manage for. Offshore wind is an example of how government takes way too long to make decisions. I was working on offshore wind permitting in 2002 and we just now have our first federal permit.”
“When it comes to building a transmission line or a solar array, the permitting process is important in that you need to balance environmental versus commercial interests. It’s great that we all think we should triple the deployment of clean energy to meet our climate goals. But if we can’t get the permits to do that and we can’t get at a state, federal and regional level the green lights to make these investments, we’re going to hit grid saturation in some portions of the country.”
“I think about it through the lens of, we’ve got a ticking time bomb with climate. As an industry we want to be responsive to concerns about managing environmental protection. But at the same time, if it takes 10 years to build a transmission line to bring a bunch of clean energy on the grid in the Midwest, that’s not going to help us meet our challenges. There’s a lot of work to be done on how do we get to a place where it’s not impossible to invest in infrastructure and to have that certainty and predictability so that you can put that money into that project or know that you’re not going to have a stranded asset when you build a large solar array in the middle of Nevada.”
“There are some important decisions that can be made at the government level in looking at time-bound decision making; more transparency around the process so people understand what’s in the queue and we’re able to hold government accountable for making those timely decisions. And there are likely some provisions in and around NEPA (National Environmental Policy Act) that are worth a discussion. However, as somebody who is a very strong environmentalist, I care a lot about how we make those decisions and ensure that we are not creating loopholes for industry to drive a truck through.”
- On industry labor shortages:
Mike Sommers: “The big challenge for the oil and gas industry right now is as prices have risen, how do you get workers to come back to work to work on oil and natural gas? If you asked API member companies, the challenges in getting folks to come back to work given vaccine mandates and some of the federal programs that have kept people at home and a trucker shortage that is massive within the industry are probably the biggest challenges that they’re facing right now.”
Heather Zichal: “We’re contemplating standing up offshore wind for the first time in the United States of America. What’s exciting to me is that there’s a lot of overlap between the oil and gas workers and offshore wind. We’re looking at ways to find transferable skills, but we’re also having a lot of conversations about what we need to do to build out the workforce. Wind technicians and solar installers are some of the fastest-growing jobs in the U.S. Continuing to recruit and find workers today for those jobs, but also think about what are the skill sets we’re going to need for those offshore wind projects, those hybrid energy storage projects down the road.”
- On affordable, reliable and predictable energy supplies:
Mike Sommers: “The president made that announcement that they were going to release about 50 million barrels of oil from the SPR. But let’s put that in context. The world currently consumes about 100 million barrels of oil every single day. It really is one half of one day of world demand for oil that they’ve put on the market. This really was just a band-aid, even in coordination with other countries. But one thing that we know is that long-term, oil and gas are still going to play a very significant role in our energy future. I do think we have to be realistic about what the energy future looks like. And that means we have to continue to invest in oil and gas. The U.S. is currently about two million barrels down from where it was pre-pandemic. It is our view that the U.S. continues to produce oil and gas in the most environmentally responsible way. We know that demand is still going to be there. The question is where are we going to get that oil and gas? We think it’s better to get it from the United States because we are subject to strict environmental laws and standards.”
Heather Zichal: “In the U.S. today our climate policies run through the tax code. It’s hard enough to build an industry when your certainty is in one and two-year increments based on whether or not the ITC and PTC extensions happen in congress. The Build Back Better [bill] is a game change in that it will provide a decade of certainty and predictability for clean energy companies, something we’ve never had before. It’s going to be very meaningful in terms of jobs creation, meeting climate targets and putting America back in the pole position. We’ve fallen behind other countries when it comes to the manufacturing and deployment of clean energy and America should clearly be number one.”
Watch the complete video at: https://ondemand.ceraweek.com/cwc
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About CERAWeek Conversations:
CERAWeek Conversations features original interviews and discussion with energy industry leaders, government officials and policymakers, leaders from the technology, financial and industrial communities—and energy technology innovators.
The series is produced by the team responsible for the world’s preeminent energy conference, CERAWeek by IHS Markit.
The complete episode library is available at https://ondemand.ceraweek.com/cwc.
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