How should the government create incentives for energy development? During today's OnPoint, David Holt, president of the Consumer Energy Alliance, discusses differences between the Obama and Romney energy plans and gives his views on what it means to "level the playing field" for energy sources. Holt also weighs in on Royal Dutch Shell PLC's recent decision to delay its Arctic drilling plans.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is David Holt, president of the Consumer Energy Alliance. David, it's good to have you on the show.
David Holt: Thanks, Monica, good to be back.
Monica Trauzzi: David, CEA is set to release a new study on the abundance of U.S. natural resources. It seems both presidential candidates support the expansion and exploration of U.S. homegrown energy. They both use the term energy independence, when you look at it though, how do they differ in the way that they're using that term?
David Holt: Well, you know, it's interesting that they are similar in looking at that all-of-the-above approach. Both candidates are kind of talking about the need for a robust oil and natural gas sector to kind of get the economy going again. I think where the two candidates differ is in the near-term use of alternative and renewables. Yes, we absolutely do need that all-of-the-above approach, but we need to recognize that for the next several decades, oil and natural gas will be the butter on the bread, if you will, to drive the U.S. economy, to create jobs, to create ancillary jobs not only just in the energy sector, but with this new revolution that's occurring in natural gas. We see steel manufacturing plants coming back to the United States. When is the last time we saw steel actually being made here in the United States? But Nucor Steel and U.S. Steel, in Louisiana and Ohio respectively, are building new steel plants. You're seeing the fertilizer industry get reinvigorated in this country. So, there's a lot of good opportunity in the near-term. While, and we agree with the president and the president's plan and both candidate's plan in looking to the long-term energy diversity and diversifying our energy portfolio and meeting our needs with a host of a wide variety of energy resources, solar and wind and nuclear, all that needs to be part of the mix. And it can really make a big difference for this country near term and long term.
Monica Trauzzi: All right, so let's follow the money trail. A big part of this discussion are incentives. So, how should energy development be incentivized by the government?
David Holt: I think government plays a role in research and development and looking at it long term. But you have difficulty when you start kind of picking winners and losers in the energy space, because you run into situations like a Solyndra. Now, I don't want to overplay the Solyndra situation, but we want to make sure that there is a ready market for these energy resources. And if you look over the last several years, you're seeing more wind development and more solar development, more creative ways to improve the technology there. The solar guys are looking at, you know, leasing solar equipment for residential use, rather than just purchasing it from the owner. So there's a lot of good things that are going on in that space. You also have transmission line issues that aren't necessarily solved overnight. You need to make sure that there's ready acceptance among the communities to get the wind and solar generation from where it's occurring to the communities where people live. Those are issues we have to overcome as a society. So, making sure that there is a market for this without necessarily picking winners and losers, I think that is the role that government should play going forward.
Monica Trauzzi: So you addressed renewables here, but what about incentives for natural gas and the oil and gas industry? Should that be taken off the table as well if we're talking about leveling that playing field?
David Holt: I think, well, I think those situations have been overblown a little bit too. I think the oil and natural gas industry is doing a remarkable job at meeting demand, at meeting needs, at developing new technology and coming up with creative ways to -- through hydraulic fracturing, through horizontal drilling, through deep ocean exploration, to looking off the coast of Alaska, finding new forms of energy, new resources for energy all over the country, all over the world. So, making sure that we have those jobs, making sure that that economic opportunity is able to continue in a transparent, open, realistic way where the permitting situation and the permitting process is improved, all those things need to be looked at very carefully. And I think both candidates have addressed them in one way or the other and, you know, we hope to have a good, vigorous debate about what energy means in our daily lives for the rest of this election.
Monica Trauzzi: So, CEA is proposing this North American energy self-sufficiency by 2020. That's eight years away.
David Holt: Yeah, quick.
Monica Trauzzi: So, explain to me how we get there.
David Holt: Well, if you look at North America and it's a pathway toward energy self-sufficiency, we're not saying we will be energy independent. We're not saying we will be energy self-sufficient, but we're heading in that direction. But if you look, just three quick examples, we're not back to where we were in the Gulf of Mexico. We're still 150,000 to 200,000 barrels a day off of where we were in 2010. If you look at the Keystone pipeline, that issue has been discussed on your show numerous times, that's 700,000 barrels a day very quickly. If you look off the coast of the mid-Atlantic states, off the coast of Virginia, where Democratic and Republican governors have repeatedly said, hey, we want to at least understand what's available off our shores. You bring not online, that could be a robust addition to our energy portfolio. You look off the coast of Alaska, the Chukchi Sea and the Beaufort Sea. The Chukchi Sea, by many accounts, could be another Gulf of Mexico which has been producing since the 1940s. The revolution that's occurring clearly in natural gas, all those things added to the mix, you add in energy efficiency, expansion of renewables, all those things in our report, which goes into great detail about where all these energy resources are coming from and what they mean to U.S. demand and supply, we very rapidly get to a place where we've become a pathway toward energy self-sufficiency.
Monica Trauzzi: But all of that can't come online in the next eight years and -- I mean and all of that probably cannot replace all of the energy sources that we have coming from abroad, from the Middle East. I mean are you talking about just stopping shipments from the Middle East come 2020?
David Holt: Well, it's not an abstract thought necessarily. If you look at just the three examples that I lead with, if you look at just the Gulf of Mexico, the Keystone pipeline, and off the coast of Alaska, the combined impact of those three resources could be over 2 million barrels a day for the United States. We import from all the Middle Eastern countries combined about 2 million barrels a day. So you are talking very quickly here, not all these -- you're correct, not all these would come online between now and 2020, but we're heading in that direction. And some of these things like Keystone, Gulf of Mexico, could be brought online tomorrow virtually. But you could get to the situation where we are replacing or displacing a vast majority of what we're importing from the Persian Gulf.
Monica Trauzzi: You mentioned the Arctic, the Chukchi Sea, Shell recently announced that it would delay its plans to drill in the Arctic until next year. They had some issues with a piece of equipment there.
David Holt: Containment equipment.
Monica Trauzzi: The administration supports the plan, but are we looking at a situation where maybe we're putting the cart before the horse and we're trying to push a technology or push a type of exploration that is not fully shovel ready and not fully ready to come online?
David Holt: I don't think so. First, you know, the easy oil is not really there anymore. We're going to be pushing the envelope. Technology and innovation is always going to be a key part in what we do. The piece of equipment you referred to from Shell is a piece of containment equipment that wasn't actually required by any statute or piece of regulation. And because of the long-term labyrinth of permitting and regulatory processes that Shell had to jump through and there was a -- the Department of Interior kind of imposed an arbitrary deadline of next week on Shell to get some things ready, they decided to -- let's just explore the top hole. So they're going to drill, but not to hydrocarbon depth this year, and get things ready for next year. So I think that's a prudent decision on their part. This is a piece of technology that is new and, again, not required by the federal government for anything. Any permitting that the federal government was doing, this was not a required piece of equipment. But they were having some trouble with the containment vessel and the containment equipment, so they, I think, made a prudent decision and said, hey, we'll get to where we can get this year. Ice is going to come in at some point, so let's prepare for next year.
Monica Trauzzi: And important that they get the safety issues figured out there.
David Holt: Absolutely.
Monica Trauzzi: We're going to end it right there on that note. Thank you for coming on the show.
David Holt: Great, thank you, Monica, appreciate it.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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