05
June 2024
Past Event
Strategic Energy 2024: A Dialogue on Challenges and Solutions

Event will also air live on this page.

 

Inquiries: daltman@hudson.org

Strategic Energy 2024: A Dialogue on Challenges and Solutions

Past Event
Hudson Institute
June 05, 2024
Strategic Energy 2024: A Dialogue on Challenges and Solutions
Caption
Seagrass on the beach frames an offshore gas rig on May 10, 2024, near Fort Morgan, Alabama. (Photo by J. David Ake/Getty Images)
05
June 2024
Past Event

Event will also air live on this page.

 

Inquiries: daltman@hudson.org

Speakers:
Adair
Sarah Adair

Managing Director of Public Policy, Duke Energy Corporation

 President and CEO, at the Permitting Institute
Alexander Herrgott

President and CEO, The Permitting Institute

Jennifer Linker
Jennifer Linker

Cofounder and Partner, Second Curve Strategies

Managing Director of Research, ClearView Energy and Senior Adviser, Energy Security and Climate Change Program, Center for Strategic and International Studies (CSIS)
Kevin Book

Managing Director of Research, ClearView Energy and Senior Adviser, Energy Security and Climate Change Program, Center for Strategic and International Studies (CSIS)

thomas_duesterberg
Thomas J. Duesterberg

Senior Fellow

Everly
Steven Everley

Senior Managing Director, FTI Consulting

Lead Representative for Federal Government and Public Affairs at Cheniere Energy
Vince Erfe

Lead Representative, Federal Government and Public Affairs, Cheniere Energy

Moderator:
Brigham McCown
Brigham McCown

Senior Fellow and Director, Initiative on American Energy Security

Listen to Event Audio

In an era of rising geopolitical instability, energy is an increasingly valuable tool to promote peace and economic stability as authoritarian regimes seek to undermine freedom and the United States–led world order.

Join Hudson Institute for a two-part event on how the US can effectively wield its natural resources to achieve energy independence and aid its allies.

Agenda

8:30 a.m. | Coffee Reception

9:00 a.m. | Welcome Remarks

  • Brigham McCown, Senior Fellow and Director of the Initiative on Energy Security, Hudson Institute

9:10 a.m. | Panel 1. Electrons and Molecules in an Era of Energy Transition or Energy Expansion?

The world has never used more energy than it does today. A panel of experts will discuss the challenges and opportunities of America’s future energy mix and the Biden administration’s approach to energy policy.

Panelists

  • Sarah Adair, Managing Director of Public Policy, Duke Energy Corporation
  • Alexander Herrgott, President and CEO, The Permitting Institute
  • Jennifer Linker, Cofounder and Partner, Second Curve Strategies

Moderator

  • Brigham McCown, Senior Fellow and Director of the Initiative on Energy Security, Hudson Institute

10:30 a.m.  | Panel 2. Friends and Allies: Energy Security

America has proven itself as a stable supplier of energy to friends and allies for over a century. How is this paradigm being challenged today, and what should the next administration do to leverage American natural resources more effectively?

Panelists

  • Kevin Book, Managing Director of Research, ClearView Energy and Senior Adviser, Energy Security and Climate Change Program, Center for Strategic and International Studies (CSIS)
  • Thomas Duesterberg, Senior Fellow, Hudson Institute
  • Steven Everley, Senior Managing Director, FTI Consulting
  • Vince Erfe, Lead Representative for Federal Government and Public Affairs, Cheniere Energy

Moderator

  • Brigham McCown, Senior Fellow and Director of the Initiative on Energy Security, Hudson Institute

11:55 a.m. | Closing Remarks

Event Transcript

This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.

Brigham McCown:

Testing. There we are. Good morning ladies and gentlemen. Thank you for your patience and welcome to Hudson Institute, and our next session on energy here. 2024 Strategic Energy Event: A Dialogue on Challenges and Solutions. I’d like to thank those of you who are with us in the audience, as well as all those online who are listening. In an era of increasing geopolitical instability, energy has emerged as that one topic that transcends the planet. Regardless of where we are, it is something that we need, something that is not optional, something that is required. And at times, during abundance, helps propel the economy and promote national defense and energy security. And at times a crisis, can be used as both a geopolitical weapon and an economic tool as well. Just last year, we came through the 50th anniversary, if you remember this, of the 1973 Arab Oil Embargo.

A lot has changed since then. Sorry, I’m going to get this . . . No, I’m not. A lot has changed since then, yet a lot still remains. We’re in an era of transition and by some accounts, and energy expansion is also underway. Today’s panels will take a look at these topics and more. We invite your questions and hope to have a robust, honest, open discussion. I’m Brigham McCown, senior fellow at the Hudson Institute and director of the Initiative on American Energy Security.

I’d like to call up front our first panel. So let’s start with Ms. Sarah Adair. Sarah is the managing director of public policy at Duke Energy. She oversees the company’s federal policy strategy and engagement to support the company’s clean energy transition while balancing reliability and affordability. We’ll have you right there. Sarah, thank you so much for joining us. Before she joined Duke Energy, you’re a graduate of Duke University as well, and a native North Car . . . Do you say North Carolinian?

Sarah Adair:

They do say North Carolinian. I’m not native though. I just spent about a decade there.

Brigham McCown:

Oh, that’s right. You’re from up north.

Sarah Adair:

I’m all up and down the East Cost.

Brigham McCown:

Coast. Up and down the East Coast. Thank you very much for joining us today. Next, we have Alex Herrgott, who is of the Permitting Institute, who just called and said, “I’m really coming, but I’m a couple of minutes delayed.” So when he gets here, we will have him come to stage. But for our purposes of staying on track, Alex is the president and CEO of the Permitting Institute. He’s a nationally recognized infrastructure policy expert and project delivery expert with experience that spans a broad range of industries. He actually created the Permitting Institute in 2021 after two decades of creating bipartisanship and common sense reforms in Congress. So Alex will be joining us momentarily.

And then I’d also like to invite to the stage Jen Linker we’re honored to have with us today. Jen has over two decades of public and government affairs experience. A lot of that is at ExxonMobil Corporation and she developed a deep policy expertise across a wide range of issues including energy, climate and in the industrial space.

She’s advocated before governmental bodies here in Washington DC and, I think, two tours in Brussels. Right? One tour in Brussels and understands how policy and politics intersect at the national, local and global levels. All right. Oh, and prior to ExxonMobil, you worked for Kevin By, Senator. Yeah, Evan By. Thank you. Sorry, I’m having a tough morning getting started obviously, but without any further ado, let’s get into it. And then what I’ve asked the panelists to do is to set the scene to give a five to 10 minute, your choice, opening, and then we’ll just go in order and have Alex join us when he gets here. So Sarah, the floor is yours.

Sarah Adair:

Well, thank you. And first thank you for the invitation and the opportunity to be here today. It’s certainly a timely conversation and I’m looking forward to the discussion. I thought I’d start with the obligatory, just really quick flyover. If you don’t know Duke Energy, we’re one of the largest electric and gas holding companies here in the US. We’ve got about 28,000 employees operate in seven states, regulated electric utilities in six states, so that’s the Carolinas, Florida, Indiana, Ohio, and Kentucky, as well as gas distribution companies in Tennessee, the Carolinas, and the Midwest. And by virtue of that size and that scope, we’re leading one of the nation’s largest energy transitions. Certainly an exciting time to be part of the industry. By way of table setting, I know folks have been reading a lot about growth and AI and data centers.

I thought I would start with a little bit of view into what we’re seeing on the ground in the states that we operate in. Spoiler alert, Duke Energy is experiencing a level of growth that we haven’t seen in decades. If we had been sitting here June 5th, 2023, we would not be having the same conversation. This is really something that has evolved and come onto the scene in a big way over the last year. AI data center is certainly a big part of that story, but the growth is coming from diverse sectors. So we’re seeing semiconductor manufacturing. We’re seeing EV and EV supply chain. We’re seeing battery manufacturing, pharmaceuticals and some of the jurisdictions that we serve, and that’s complimented by continued migration into some of the states that we serve. So the Carolinas and Florida both saw about two and a half percent growth, just under two and a half percent growth year over year in 2023. So customers continuing to move into those states where the economies are really dynamic.

Of course, this all comes on the heels of policies like the Chips and Science Act, the Infrastructure Investment in Jobs Act and the clean energy tax incentives and the IRA that are creating incentives to onshore, reshore some of those supply chains. So we’re seeing that show up on the ground.

To give you a sense of what that looks like, this year in 2024, we’re expecting a thousand to 2000 gigawatt hours of new generation for economic development projects coming online. So I looked this up this morning. One gigawatt hour can serve about 876,000 homes for a year. So we’re not talking about one, we’re not talking about 10, we’re not talking about a hundred, a thousand to 2000 gigawatt hours of new demand coming online by the end of this year.

As we look to 2028, we’re preparing for about 10,000 to 18,000 gigawatt hours with economic development projects coming online. So those are big numbers and it’s important context to recognize that we’re taking a conservative approach to those forecasts. When we cite those numbers, those are projects that are in advanced stages. There’s an agreement that’s signed. They’re starting construction, and so the pipeline of projects where more uncertainty is much larger.

So we’re seeing a really dynamic and exciting opportunity as those resources are coming into our territory. It also creates some new hurdles as we think about how we continue to meet demand.

So at the same time that we’re seeing the significant growth, we’re continuing to transition out of coal. We have a goal to exit coal by 2035, subject, of course, to regulatory approval to having replacement generation in place for those resources. We won’t get ahead of our states and our regulators on that, but it’s something that we’re working towards. And that’s another 16 gigawatts of capacity on the system that we would see leaving the system by 2035. So that’s a big delta when we think about meeting that demand. So all of that is to say that we’re in a period, and I’ll look forward to Alex joining us in a little bit, where we need to build a lot of stuff.

And what does that look like for Duke Energy? We have in all of the above generation strategy that we believe will help us continue to make progress on the clean energy transition and to serve customers reliably and affordably. What’s all of the above? That means significant investments in renewable energy. So we’re looking to triple renewables by 2030. We’ve got about nine gigawatts on our assistant today. Expect that to be about 30 gigawatts by the end of the decade. For comparison, our entire system today is about 55 gigawatts. So these are big numbers.

Similarly, energy storage will play a big role that’s more nascent. We have about 90 megawatts of grid tide storage today, 65 megawatts under construction. That’s as of about two months ago. But we plan to have more than 10 gigawatts on the system by 2035, and we’re projecting about 30 gigawatts by 2050. Obviously, as you start getting out to 2050, those numbers will likely evolve.

And natural gas continues to play an essential role in that transition. We sit here today, it is the only resource that we have that can be deployed in the next couple of years that’s capable of reliably meeting demand 24/7 8760. And so continues to play an important role complimenting renewables and battery storage, other resources on the grid.

We’re also looking to some emerging technologies, new nuclear, something that we have in our Carolinas carbon plan. If you’re not familiar, duke Energy is the largest regulated nuclear operator in the US. We are exploring early site permits that for new nuclear that we could see coming into the picture in the 2030s in the Carolinas. And we announced just last week, and we can talk more about this as we get into conversation, an MOU with several large customers where we would be exploring tariffs rate structures, new designs that could help them meet their sustainability goals, their goals for clean energy, help us unlock resources like new nuclear, like long duration storage, help de-risk and reduce the cost of some of those emerging technologies. So a lot of exciting and innovative work across the board and across the range of technologies that are going to play an important role.

What I’d say in closing as we get into the conversation here, we’re obviously navigating a period of both transition and growth, and it’s an exciting time. What it brings to mind for me and reminds me, again, recognizing we would not be having the same conversation if we had been here a year ago, is the importance of flexibility as we’re thinking about policies, as we’re thinking about navigating the path forward, being ready to check and adjust as the global landscape, as the landscape on the ground continues to evolve. So I’ll leave it there and look forward to the conversation. A lot to dig into, a lot to talk about.

Brigham McCown:

Wonderful. And Jen, right before I go to you, Alex is going to make his grand entrance right now now. But Alex, we’ll have you go after Jen so you can get situated there. Thank you so much for joining us this morning. Jen, please.

Jennifer Linker:

Yes, hi. Hi everyone. Thank you Brigham. Thank you to the Hudson Institute for inviting me to speak on this panel. As you heard in Brigham’s intro, I had been at ExxonMobil for over 16 years working in a variety of capacities in their Republican government affairs department with a tour DC, Brussels, Houston and then the last six years back in DC.

In December, I left ExxonMobil and, about seven weeks ago, launched a new government relations consulting strategy group called Second Curve Strategies. I’m joined in the audience with my partner, there’s two of us. So all of Second Curve Strategies is here and excited to engage on the topic. And so my comments are going to broaden the scope a little bit based on having worked in a corporation that is global in nature, looks at energy in a wide variety of scenarios and in sectors, and give you just a little bit of context about why both energy expansion and energy transition exist at the same time.

And my message to take home to all of you is that energy transition will have to mean, if we want to meet global targets for reducing greenhouse gas emissions, energy transition will have to mean that all energy sources transition.

So why do I say that? Let’s first start with energy demand. Energy demand is probably best understood at a global scale because it’s so tremendous and significant. I think it’s almost impossible to get your mind around, but I’ll give you some statistics in numbers. Energy demand is largely driven by population and economic growth. So let’s take population. Estimates are that the world will increase to 9.7 billion people on the planet by 2050. We are around 8 billion people today on the planet. So if you think about population, that means you’re adding the population of China, which is around 1.4 billion, and the population of the United States at 333 million in 25 years to the planet.

That’s a lot of people. The EIA looks at, what does global energy demand then look like? And they base it on the fact that while a lot of this population growth is in non OECD areas, they’re looking at how those areas are really where the rapid economic development is going to be. They’re looking to have higher standards of living, more economic development. And so the EIA estimates that the non-OECD GDP is expected to double by 2050.

So for energy demand, the EIAs reference case scenario for global energy demand expects a nearly 50 percent increase by 2050 as compared to 2020. That’s a lot of energy and all energy sources are going to be needed and used. That will also accompany increase in energy related CO2 emissions. So again, that estimate is going to vary depending on energy sources, depending how well we decarbonize across all energy sources. But the EI estimates about a 15 percent increase in energy related CO2 emissions.

Sarah pointed out that that’s just base growth expectations. Sarah pointed out to new sectoral demand. I think she made the point about AI. I haven’t read a newspaper or heard a congressional hearing that isn’t focused on the power generation demand that will come from tech companies setting up their data centers in the United States that will require energy on a 24/7 basis. So we know we’re going to have more energy needs, we’re going to need both electrons and molecules to meet that energy need since they’re coming from all sectors. And.

I guess the question is, well, does that expansion then hurt or somehow cripple our need to transition to lower carbon energy sources? And I’d point out that first. I don’t think it has to. I think that energy has always been in transition. If you look at the last 150 years or more, we went from a society that was primarily using renewable sources like wood and dung to increasingly sophisticated sources. Coal, oil and gas, nuclear biofuels, wind and solar. And that happened as energy demand grew, economic growth grew, and we needed different energy sources to further our economic standard of living. So energy isn’t static. The transition here though is about lowering carbon emissions. And the world has committed to this. The world has largely committed to reducing CO2 emissions across the board.

My second point is how then does policy encourage this transition and apply it to all energy sources? Here’s where I want to refer to what . . . In the US, I think a lot of discussion around energy transition focuses on the words green energy. And you can decide for yourselves what green energy means. But I think it leaves the impression semantically that you’re not talking about traditional energy sources. And that’s not the case. If you look at what the IRA, the Inflation Reduction Act energy tax credit policies did, there are actually great examples of where they were encouraging, they are encouraging decarbonization across value chains of traditional energy sources.

So great example of that is in the agricultural industry. Agriculture is going to be part of the energy transition. It looks to use the 45Z tax credit, that’s the clean production tax credit. And agriculture has some unique abilities to decarbonize across its value chain. Better farming practices, more sustainable fuels manufacturing, including things like CCS. And that would also apply to the 45Q tax credit, CCS. So that tax credit, I mean, you’ve got more feedstock flexibility than ever before for lower carbon feedstock such as corn and sugarcane for ethanol, oil seeds for biodiesel, and then waste for renewable diesel. And more and more, we are seeing a convergence amongst the petroleum, the traditional petroleum refining industry and the biofuel industry coming together because they want to provide and will need to provide lower carbon emission fuels for transportation and other sectors. So 45Z, great policy initiative that is actually taking current energy sources and looking to reduce carbon even further.

Another one is 45V. I don’t know how many of you are tax experts. If all of the 45s confuse you, believe me, you’re not alone. 45 is the tax credit that is for hydrogen. And I worked on 45V quite a lot in my time at ExxonMobil because it actually is meant to take a technology neutral approach, meaning that the feedstock can come from anywhere. It’s the carbon intensity of that feedstock that’s really important. And so in 45V’s case, you can make hydrogen from natural gas. In fact, ExxonMobil had certainly, it has investment plans to build the largest hydrogen facility in the world. And that will be using natural gas feed stock from the Permian Basin from one part of Texas and bringing it down to the Gulf Coast part of Texas.

And all along that value chain, they will look to decarbonize and look for better ways of producing natural gas with lower carbon intensity. And then in producing the hydrogen, they will use carbon capture and sequestration to actually decarbonize the natural gas, leaving you with a cleaner burning fuel. And that is absolutely enabled by the tier system in 45V that came out in the Inflation Rejection Act.

So policies must drive a transition to a lower carbon world for sure. And I think the policy question, and for those who go up to the hill, it’s really how are the agencies, how is the Biden administration going to implement those laws?

My last point is on international markets. I do think US policy makers can, at times, be a little myopic to the importance of international markets and what the energy transition will mean in a global context. Remember, to reduce energy related emissions and to hopefully have a chance against climate change, this has to happen on a global scale. It can’t just be individual countries doing their small part. So I mentioned that economic development population growth is mostly in the non-OECD. So that is where, in the international forum, you’re going to see a lot of energy demand. And for lower carbon energy sources, you’re going to see that demand coming from everywhere in the world. So these markets are going to be very important for American companies that want to compete.

They will need these export markets in order to actually produce the product. So for example, for hydrogen, you need a demand center. You can’t just produce hydrogen and not have anywhere to actually sell it to. That’s not a sustainable economic business model. And so global markets are going to be important there, and you can convert hydrogen into ammonia and ship it.

Probably the most natural when we think about these days is natural gas and LNG. So I know we have some LNG experts in the room, but anytime you’re looking at exporting LNG, you’re enabling, you’re using the US LNG as a powerful tool to decarbonize across the world, right? And you’re going to displace higher intensity carbon products. So politics and policy needs to drive these things forward, not stifle them. And I look forward to the discussion.

Brigham McCown:

Great. Thank you very much, Jen, for your setting of the scene. And Sarah, you too. So Alex, what we’ve heard is we need a lot more energy. No problem. You’ve got the answer on how to get everything permitted because energy infrastructure . . . Well, infrastructure in general, right? Not controversial at all. So how are we going to do this?

Alexander Herrgott:

Well, the first thing I say is this issue, unlike September 11th or World War I, when we have discussions about black swans and complicated problems, we’ve known this is a problem for 20 years. We just couldn’t all get in the same room and agree that this is what we actually needed because there was a fight over energy sources.

I talk fast and I’m going to make permitting quite interesting, but I’m going to send the slides for a lot of the stats to bring them. So don’t worry about writing them down, but I always like to start, does anyone know what the unit of measure is for natural gas in Washington, DC and Virginia? Does anyone know what the unit cost is per MCF or a thousand cubic feet of natural gas is? Does anyone know what the gas tax is in DC or Virginia? Last question. Anyone know what the kilowatt per hour cost is, DC and Virginia? It’s 13, 14 cents. Gas tax, 26 cents, which doesn’t even include the 18-cent federal gas tax and the state gas tax on top. And we’re about $13 per MCF, all of which is about 30 percent more expensive than it was five, six years ago.

Those same questions I asked in front of 4,000 state legislators five weeks ago at the National Conference of state legislators for the people that are in charge of the energy committees, which in many cases own the assets and make many of the decisions. Sarah and others know, we talk a lot about what can be done in dc, but many of the assets are owned by state and local folks.

The federal government doesn’t own any infrastructure except for TVA and the Southwest Power Authority and Bonneville Dam and Park Roads. Unless the free market, unless the private sector puts capital at risk to build, we don’t build. So we try non-market solutions like 45V and 40Z and IRA and IJA. But what we’re actually seeing is that all of this federal funding has actually created a substitution effect where the feds have taken the place of what otherwise would’ve been state and local funding.

The problem that we have is that nobody knows what energy costs, and as a result, we’re unable to ascertain in our collective conscience how much of that is attributable to avoidable delays that are bureaucratic in nature that have nothing to do with displacing protections for natural, historic and cultural resources. So permitting is not about fixing the National Environmental Policy Act or delisting species on the Endangered Species Act, or figuring out how to address the whiplash of every administration, changing the Clean Water Act to define very, very arcane laws and change definitions.

Because keep in mind, most of the permitting laws that govern infrastructure are more than 90 years old. The Rivers and Harbors Act of 1880, the Clean Water Act, the Endangered Species Act, all done in the seventies. Most of the environmental laws that we work on today were created and have not been significantly amended 50 years before the internet built on a legacy paper-based system. And we have not moved past that. So when the debates happen in Congress and we talk about permitting and we’re unable to build, the reality here is that it has been this third rail that we don’t talk about because the perception has always been that the faster we build, the less protections for the environment.

And Ray, I’m not sure if you gave my background, but I started as a staff assistant on the Environment Public Works Committee in 2004, hired by former EPA administrator, Andrew Wheeler. And I worked on the Environment and Public Works Committee as a staffer and eventually the staff director for 17 years passing infrastructure bills, water Resource Development Act bureaus, making sure that we could actually export natural gas in 2013. In 2015, we were able to initialize export of oil, protecting the fracking revolution, which ultimately was the enemy but now it’s the solution to making sure we meet 2030, 2040 climate targets, because the reality is that base load renewable, now it’s fact, it’s not theory. It’s just not going to be there.

And I say these things because Duke, for instance, is on the cutting edge of battery storage. They can get eight hours of lithium battery storage. That’s really the max where it is. And they’re on the cutting edge of utility actually trying to fix the problem. But the reality here is utilities have become the enemy because they’re the ones that send you the bill, but they’re the ones that built out rural America and have all the legacy debt that have built out the electrification of entire communities, and now are now being asked to do more at the same time that they’re canceling projects like Atlanta Coast Pipeline and others that ultimately win in court two years after the project has been abandoned.

This is no longer a Republican, a Democrat issue. It is an existential decision-making process problem that we have not been able to get out of our own way on. And the reality here is that someone that was giving permitting as an issue in 2005, later in 2017 when I ran the Council of Environmental Quality Infrastructure Office and tried to change the culture and behavior of the way in which we make decisions in this country, because many of the decisions that are made on multi-billion dollar projects are made by the average age of 31 year olds that are inside agencies that have non-technical engineering degrees. That was fine five, 10 years ago. Keystone Pipeline, $2.9 billion, pales in comparison to the average size of the $4.6 billion on projects that are being funded by IRA and IJA.

And we’re funneling through them a system with woefully unprepared staff and we complain about bureaucrats, but they really are the unsung heroes. And they have 30 projects where they used to have two, and they’re looking at 2000-page documents, and we can write all the new laws that we want on page limits and things, but then it just skirts down to the appendices. And I’m a nerd. I know permitting, I can tell you from shoveling the ground to the 63 different steps across 13 agencies, the state and local county laws, there’s about six of me in the country that can do that. There’s technical practitioners, there’s third party practitioners. I’m never going to get a date. I got married two years ago because I talk about permitting quite too often.

But we are at this watershed moment because the projects that are being held back now are not oil and gas projects. They’re predominantly wind, solar, hydrogen, and carbon sequestration projects. Green hydrogen, not blue hydrogen from natural gas, although natural gas can be renewable. And so now we’re at a moment where there’s a confrontation between traditional ideology on the sides on this issue and what we’re actually going to do to fix it, and the race here is how can we incrementally change these laws, change the culture and behavior in the agencies of which they move the projects to the process and do it in a bipartisan fashion where we can take this issue outside of what has traditionally been campaign politics. As someone that worked for Trump for four years who called me Allen, or the guy that knows a lot about roads and bridges.

In 2015, we created the Federal Permitting Improvement Steering Council in the FAST Act when I was staff director for Senator Inhofe on the Hill. But one of the things that made us so successful for our 16, 17 years on the Hill was Senator Inhofe, a right-leaning, snowball throwing, climate change denying, God gazing, guns Republican and Barbara Boxer, the leftist leaning liberal, together for 12 years, teamed up, overrode presidential vetoes on water bills. Senator Inhofe and our staff were the first ones in Flint, Michigan, dealing with water issues working with Senator Stabenow, is that this no longer needs to be an issue where people are fighting with each other, at least on the infrastructure side, because we all know the market has already told us that we’re not going to be burning coal 10 years from now.

The coal versus natural gas versus wind and solar fights, they just don’t really matter anymore because the reality here is, as we’ve talked about, load growth, is that we need everything at this point. We need everything. And the fact remains that the average size billion and a half wind project that could do maybe like 800 megawatts, which we just took a little bit less than a new plant, or all of the different facilities that are going to be needed for the data centers. They still take about 10 years to build from concept to completion. We haven’t made any incremental changes to that. So I end with this, which is because I want to get to questions, because I could talk about this all day and go in a bunch of different directions. 186 new laws out of OMB that impact infrastructure in the last four years.

Former President Trump wins, all of those will be taken down and rewritten, which will take two years for them to be implemented and then two years for the courts to figure it out. Two years after that, let’s say another president wins, all of those regs will be torn down and then rewritten like we’ve already done on NEPA and Clean Water Act. That whiplash is driving the debt and equity markets insane. The insurance markets are getting very close to no longer underwriting many of the large-scale infrastructure projects in this country. And we are reaching a crisis point where regardless of the non-market subsidies that we can do at the federal level, the market is just not bearing out. It’s just not bearing out. And utilities are continuing to be suppressed and are all vulnerable for Wall Street takeover, because people that used to invest in utilities are looking at them now going, they’re on the front lines and are being asked to do things without the appropriate capital and they’re boxed in because they can’t go to the rate payers and ask for more money.

But I will say, we built 15 data centers all along 66 in the last year and a half. Each one of those data centers pulls as much electricity as 100,000 households. There’s 300,000 households in DC. All of the electricity is being done behind the meter. It’s not even really included in the overall, and as regulated/deregulated markets, we could get talking to that all day. The load growth issue has emerged in the last 15 months. This is something that we’re fully not prepared to address and it’s something that’s going to become a crisis point in the next four or five months. Boom.

Brigham McCown:

You finished faster than I could turn my mic back on.

Alexander Herrgott:

I get paid by the word, Brigham.

Brigham McCown:

Alex, thank you very much. Well, this is exciting scene-setting. And we’ve got, I would call this a hot panel. We have a live hot panel that is ready to go. Sarah, let me come back to you for a second. So you heard what Alex said about, it takes 10 years to develop a project. Alex, check me on this, but I think NEPA, the National Environmental Policy Act, is closer in time to World War II than it is today, if you do the math. Think about that for a second. So how are companies like Duke going to build out the infrastructure that is needed both for base load as well as dispatchable power? And the infrastructure, the transmission, the distribution, how are we going to do this?

Sarah Adair:

I don’t know if I would say it’s going to be a crisis in four months, but absolutely we need state and local and federal policy makers, we need to come together to get projects approved and allow infrastructure to move forward. Duke doesn’t operate in the western United States. I know NEPA is a bigger issue, and so we don’t face some of the same problems with federal lands.

Brigham McCown:

Yeah, explain that in case people don’t recognize the difference of a federal action versus not. So why is NEPA a bigger deal out west than it is out east?

Sarah Adair:

It just doesn’t affect as many of our projects.

Brigham McCown:

Because you’re not on federal land, so there’s no federal action for it.

Sarah Adair:

Right.

Brigham McCown:

Okay. All right.

Sarah Adair:

I think that’s something to keep in mind as we think about the landscape and the challenges that projects face. They’re not one size fits all. And so as we come to these conversations and we think about what can be done at the federal level, what can be done at the state level, what can be done at the local level, we’ve got to keep the local context in mind. We have different electricity markets in different parts of the country, different solutions that’ll be appropriate in different places. In the Carolinas, for instance, where Duke operates, we’ve made a lot of progress in the last couple of years with queue reform, getting projects faster through the solar interconnection queue and getting projects online. We’ve made improvements to our transmission planning process and we’re proactively making investments in what we call red zones. And FERC just released a new order that we think has a lot to unpack, has a lot to be implemented, but adds and builds on those existing permitting processes, planning processes around transmission.

So it can be done. Certainly there are opportunities. I think we’ve always anticipated that with the clean energy transition, eventually the conversation would become about, how do we build things and how do we do it faster? How do we make sure that everyone has a voice, but that there can be certainty for projects? So I think it’s the right conversation to be having at this moment, but I think we have line of sight to a path to be able to continue to meet our customer needs, make progress on the clean energy transition. And we should be concerned and focused and having these conversations, but I’m not hitting the panic button yet.

Brigham McCown:

Okay. And Jen, you talked about the fact that throughout human history, I’m summarizing, tell me if I get this off, we’ve really never used less energy, only more, driven by population growth and economic growth. But yet we’ve never transitioned from an energy source . . . Well, our transitions have always been to higher density energy. And so with renewables, we’re experiencing some transition to less dense energy, and from a cost standpoint at least currently they’re more expensive. So even if the United States, and we’ll throw our European friends in as well, could completely decarbonize, when we look at CO2 emissions and we look at China in particular and we look at India, who’s now overtaken the Eurozone in CO2 emissions, can we really get from point A to B in the next 10, 20 years, or is there something else we need to do?

Jennifer Linker:

Well, how are you defining point B? Because that’s really the question.

Brigham McCown:

Sure. Well, you could use the 1.5 or 2 degrees Celsius, Paris Climate Change, because right now we’re nowhere near on track. And we have some adversaries in China who say all the right things, but they control the supply chain, the distribution, the value chain network. So how do we really move forward other than doing, I guess, the common good for ourselves? Because pollution doesn’t stay in one place around the world, right?

Jennifer Linker:

Right. I think understanding that this is a global problem in terms of climate change, global warming, how do we reduce carbon emissions, I go back to my fundamental point. You have to do that with all energy sources. I don’t think there’s one energy source that’s going to meet every need. And I think there’s a resistance to that, because people believe you can electrify everything and that will somehow solve all of your carbon emission problems. I think that is fundamentally untrue. And while you have energy efficiency that happens as your economy grows and you get better at using energy, even if it’s less densely sourced, the fact is, from a net perspective we’re constantly using more and more energy. So I do believe that policy has a role and we’re seeing that, but ultimately the free market is going to have to bear this out. Ultimately people are going to bear a cost to cleaner energy.

And what we don’t want to do is make it so prohibitive that no one winds up actually buying cleaner energy. And we certainly don’t want to, let’s say, just decarbonize the United States or the Eurozone and have China and India and the rest of the world continue emitting with high carbon intensive products. So the solution is somewhere in the middle. You’ve got to continue to understand the need for traditional energy sources and look for ways to decarbonize those traditional energy sources along the way. Technology is our friend in this. Technology has driven a lot of the changes that we see in energy, primary energy sources. So I think it’s keeping focus on, you have policy drivers for now that are going to have to get us to that next stage. The free market is then going to have to continue, and the world is going to have to operate in concert to get this accomplished to point B.

Brigham McCown:

Okay, great. Thank you for that. And here’s a question for everybody following up on this, talking about electrification. So we have the tailpipe emission rule, which some people call it the internal combustion engine elimination rule, electrification of somewhere between 50 percent and 66 percent of all new car sales by 2032. We’ve heard from Alex that the infrastructure is the infrastructure and it takes about 10 years to permit something. So is this an achievable goal? I’ll leave aside whether it shouldn’t be or shouldn’t be, but the infrastructure we have outside today, isn’t that the same infrastructure we’re going to have in the next five to 10 years? So how is this going to work, or can it? Who wants to take that loaded question on board?

Alexander Herrgott:

Just a couple points. One is, electric vehicles and the incubation rate in California, for instance, is up about 50 percent over the last two years because they’re retired SONGS and Diablo nuke plants, the power is coming from Powder River Basin Coal and from Idaho Power. So we’re turning Powder River Basin sub-bituminous coal into electricity and putting it in EVs at the moment in California. Coal power is about 78 percent of the EVs in California. And so the reality is that electricity is not a public good, right? People turn on the lights and they don’t realize how it gets there. And the fundamental problem is that renewables have a technology problem and natural gas and coal have a clean problem. We have overestimated the forecast of the technological feasibility of renewables’ ability to contribute to the grid by about 10 years. And the dislocation of where generation is and where population centers is has completely gone upside down.

And so we can’t get the electricity that’s generated at these new sources that are largely renewable to where the people are fast enough. And it is complicated on the regulated states where, in particular with Duke because they made significant investments in nuclear and hydro a long time ago, and that was very smart. It was very smart. But at the end of the day, when I talk about the permitting issues, it’s not just NEPA. It is new environmental justice rules that are not, I’m not saying anything good or bad about them, I’m just saying it’s a new process. It’s going to take four or five years. We have right of first refusal laws and things that are happening in the states that are making it very complicated for boards and publicly traded companies to put capital at risk for infrastructure. We have coal-fired power plants that are withholding capacity in signing additional contracts.

Same thing on the natural gas side, especially in Texas and ERCOT and out in the West, because they want to drive up the cost of electricity because they’re being told they need to produce more, but they’re going to be out of business in five years. And we have five or six different hugely impactful Supreme Court decisions, Chevron deference, major doctrines on the power plant rule, whatever’s going to happen with NEPA, several other things that are making it nearly impossible for us to actually tackle this problem. And so there’s no clear runway for what we’re going to do. I will say this. Carbon sequestration is going to outpace our ability to create battery storage, that’s going to be significant for base load renewables to play a significant role in our electricity transition for the next 10 years. Sequestration is actually working now in the voluntary credit markets, and CARB, which is out in California, are actually permitting projects quite faster. And the technology there, which I didn’t think was going to exist five years ago, is actually real. And the CORC market, which is the carbon offset credits you get, is actually quite expansive.

Brigham McCown:

How is that going to work against . So we have several CCS projects under way in the Midwest. Both have faced some levels of opposition from local landowners, from people suggesting it’s not pure enough. Are we going to be able to deliver on those projects and deliver on the infrastructure needed to take carbon to injection sites?

Alexander Herrgott:

So those projects, and including in the Kansas site, were ethanol based projects. And so it ran right into the old strife of, is ethanol good or bad? And there were a couple issues there. The important thing is that the CCUS projects are actually being built now out in the West that are from coal-fired and enhanced oil recovery, Denberry, Riley Ridge project, and several others. Those folks are in it to win it, because they have so much capital at risk that it may cost them an extra $30 million, but they have to do it. Duke Energy, for instance, the reason why natural gas is so expensive is the joint venture between Dominion and Duke, they abandoned that a year and a half ago. Won in court, but that project would reduce natural gas prices in the mid-Atlantic by about 20 percent to 30 percent.

So we complain about our inability to meet our natural gas targets, but now we have to burn more coal because we shut down that project and then we delayed Mountain Valley pipeline, which is another project, Penn East, and I can go down the list of all these projects, and there’s never been any consequences for it. So the CCUS projects are actually for the first time ever being subsidized to an extent where they might be able to overcome the challenges that will allow them to actually be economically viable. And the class 6 well injection, well certifications, EPA is actually moving them forward because this administration is extremely motivated to make sure as many credits go out the door as possible before they’re taken away, which is a very interesting situation that we’re in, where the definition of what is good and bad as far as what contributes to climate reductions has changed dramatically.

Brigham McCown:

Well, Sarah, did you want to say something?

Sarah Adair:

Well, I want to say something about CCUS, but I’ll start maybe jump back to the point on electrification and EV growth. And obviously we support our customers’ ability to transition to EVs. And as an electric provider, our focus is on ensuring that they have that option and we’re there to serve them. Setting aside the bigger picture around load growth and the need for more generation and transmission and distribution and everything else, EVs are actually pretty efficient. So when we think about our load forecasting and where the big growth is coming from, it’s not by and large at the bulk level that EV demand that we’re worried about. But when we think about electrification and EVs, where you really need to have a focus on planning is at the distribution level. And the example I like to point to is an airport. So if you picture yourself on a plane landing somewhere tropical with palm trees, you’re looking out the window, you probably also see a lot of distribution centers, warehouses, and rental car lots.

And those are areas where the distribution grid wasn’t built for the kind of loads that you would see as those fleets start to electrify. And so that’s an area that’s much more localized but needs some forethought and some planning. And how do we make investments in those areas in a sequential way that doesn’t have us rebuilding the same substation over and over again because five different customers decided to electrify on different timelines? So that’s one thing that we’re thinking about at a very localized level. CCS is something that we’ve also been thinking about and looking at, and obviously the EPA regulations shine a spotlight on that. One of the things that really keeps me up at night, because where we operate by and large, we’re not sitting on top of the best sequestration.

Alexander Herrgott:

It’s where to put it. You can capture it, but where do you put it? Yeah.

Sarah Adair:

Right. And so it gets back to this question of linear infrastructure and how are we going, whether it’s CO2 pipelines, whether it’s hydrogen pipelines, how are we accessing the geological conditions that are going to enable those resources? And I think that’s an important issue that we need to be solving today, at the same time that we have pilot projects, demonstration projects moving forward in places that do have that local geology.

Jennifer Linker:

Brigham, I would just say, so I’m going to be the molecule supporter in the room, I guess. Molecules aren’t going anywhere. They’re not disappearing from our energy sources. They are too abundant, they’re too efficient, and they are too easy to transport for them to go anywhere. What did they say, something your nose to spite your face? There are no substitutions today, and based on everything Alex said about permitting in the near term, to solve for that. So looking at electrification as one element of decarbonization and of the energy transition is great, but if we choose to just ignore and think that that’s the only part that needs to decarbonize, we’re wrong. And again, the rest of the world is going to develop and they’re not going to rely solely on renewable energy to do that.

So I do think that we need to focus on, how do you look at energy sources and their carbon intensity? How do you evaluate their carbon intensity across their life cycle, put them on a competitive basis, and let the best energy source and technology win? And I think that is going to get us further. I think that’s far more realistic when you look at actual energy demand. I think it’s more realistic knowing how many permitting challenges we have, and frankly, it’s going to be private sector that’s going to figure that out. They are the ones who are going to say, “Ah, there’s best geological sequestration in these rocks offshore in the Gulf of Mexico than anywhere else. Let’s use that.” And as long as permitting doesn’t get in the way or the federal government doesn’t get in the way, or local governments, then I think we’ll be on our way in terms of an energy transition.

Brigham McCown:

So we do have a administration and a federal government now that is using a whole of government approach when it comes to climate change. Without being political, does that top-down approach work? Versus, and sometimes I’ll hear, “Well, the markets are already heading that way.” Well, maybe. Consumers remain unconvinced in certain aspects where money is really important. I use the example of, my mother would drive 30 miles to save three cents a gallon on gasoline, right? They’re just focused on that. And with today’s rising inflation rates, other pressures, cost of energy, very important. Can we really get there? Because traditionally government intervenes into a market, it doesn’t always work out very well. So instead of saying, is it right or wrong, what would each of you suggest to the federal government as a way to unleash American innovation, to set the stage for a regulatory framework where we reduce risk, and Alex, to your point, allow investors to invest that capital? Because the risk profile, I think if I’m hearing you correctly, it’s just too high right now with all the whiplash. What can we do?

Alexander Herrgott:

Well, I may not have mentioned this, but when I left the administration, I started a nonprofit called the Permitting Institute. And our members are made up of some of the largest oil and gas, wind, renewable energy, and transmission companies in the country and the world. We’re reaching a project abandonment rate on large-scale projects at about 30 percent, largely offshore wind and a couple others. But what I would say is, we need to live in the world that we actually are in, not the one we want it to be, and we can’t create long-term targets and then also not support it with the requisite glide path to how to get there.

I mentioned the 180 new rules that came out of OMB, Migratory Bird Treaty Act, Endangered Species. Those are rules that were dislocated from the policymakers at the White House. And at the end of the day, they’re significantly impacting the very projects they at least want to impact. And so I would say that we have to be realistic about what we need to fuel this machine called America for the next five to 10 years and actually create, not a steer, but a realistic path to transition so that the market can actually plan accordingly.

Brigham McCown:

Okay. And that transition, let me follow up on that. Because I know some say, “Well, we still need hydrocarbons for a few more years.” What’s the real . . .

Alexander Herrgott:

If you were debating between shutting down a dual-fired or building capacity on a dual-fired natural gas power plant or extending your coal facility another five years, you’d at least like to know that if you make those capital investments to absorb the regulatory costs and put in the technology necessary, we can reduce the emissions on coal and gas to a place that we never thought we could. Even without sequestration, just with efficiencies. And so the reality is that nobody is going to make investments in those legacy plants if they’re being told that five years from now they have to shut them down, but we need you for the next couple of years. You can’t do that to the market. It doesn’t work that way.

And ultimately the people that are going to bear the cost of that are going to be the rate payers, and maybe they don’t pay in rates because there’s controls, but they’re going to pay in the form of taxes. And so we have taken advantage of the consumer’s lack of knowledge about where electricity comes from and how much it costs. And it is going to be my goal to drive that truth out into the front.

Brigham McCown:

Okay. And keeping with that theme, Sarah, how’s the EPA 111 rule going?

Sarah Adair:

Yeah, I think it’s probably widely known at this point Duke and others have expressed disappointment in where that rule landed, and the decision will be with the courts. I think we see both legal and practical flaws associated with what was finalized. I’m not a lawyer and I play one on TV at my own peril, so I’ll leave it there with respect to that. But I think it goes to the point of, carbon capture, which was at the heart of that rule, is an important technology. I think we’re hopeful that it will play a big role in the energy transition. It hasn’t been demonstrated at scale for natural gas plants. And it goes back to, what keeps me up at night is that supporting infrastructure. And so as we think about what we need from a policy perspective, I think energy markets in all of their forms are highly regulated and policy is critical.

It’s going to be critical to navigating the energy transition. It’s going to remain essential to markets that operate efficient and effectively and allow us to meet demand and everything else that we’re trying to accomplish. And that’s a great thing because it’s good job security, that policy is, to our business models in the energy sector. But the pragmatism and the realism and the ability to roll up our sleeves and say, “Here’s where we want to go and here are the tools that we need in the toolbox and here are the steps it’s going to take to get there,” I think is what’s really important to continuing to move forward on shared priorities. And that comes to really boring, practical things like how do we permit projects, and gets into a lot of weedy issues that only nerdy people want to work on. But it is really important, and I think that’s where this comes back to.

Brigham McCown:

Okay.

Jennifer Linker:

I would just say, you mentioned the all of government approach. There’s a difference between setting your sights on how to allow policy to enable a transition or change versus choosing winners and losers in that change. And unfortunately, the Biden administration has not shown great willingness to be neutral in that game. I don’t know, might be an election year maybe? So I think that’s really the problem at the heart of this. You’re going to need all energy. You have far more demand than we know what . . . We just don’t have enough. We barely have enough for the sectors here. And that policy has to enable them all to compete. Again, I think focusing on, what does that life cycle carbon intensity look like? Allow companies to use their technology and their innovation to get to lower carbon intensity values, and then focus on the fact that the international markets are going to play a role in this energy transition, and we have to be cognizant of that.

Alexander Herrgott:

And Brigham, I just want to say one thing, 10 seconds. Keystone pipeline, Dakota access pipeline, Penn East, all those things that weren’t done under the last administration, more wind and solar was permitted under the last president than this president per megawatt. Desert, Gemini, I can go down, Borderlands, I can go down the list. What does that tell you?

Brigham McCown:

Okay.

Sarah Adair:

Just while we’re being Debbie Downers here, I think we should recognize that we have done some pretty impressive things in the last several years with the infrastructure law, with CHIPS and Science, with the clean energy tax credits that were part of the IRA. I know that was passed on a partisan basis, but those really do provide some tailwinds as we’re moving forward. The tax credits in particular provide significant cost savings to our customers as a regulated utility. That’s a pass-through savings, which is really important in this period of inflationary pressure. And as we’re, I, think Alex said earlier we’re sending the bills to . . .

Alexander Herrgott:

You’re the bad guy, yeah.

Sarah Adair:

I think we’ve got to keep in mind that we’ve done a lot and we’ve made a lot of progress and we need to be thoughtful about our approaches moving forward.

Alexander Herrgott:

To say that, and Debbie Downer, and when I say that we have a watershed moment, we just can’t squander this. And if I hear once-in-a-generation funding ever again, I’m going to lose my mind. But the reality is we do have a tremendous opportunity here.

Sarah Adair:

Yeah.

Brigham McCown:

Yeah, an opportunity, and it’s important to get it right. And before we open it up to questions, because I definitely want to do that, and on an up note, tell us about the MOU that Duke just entered into.

Sarah Adair:

Yeah, thank you. And focus on the news last week, if I can keep my days straight, we announced an MOU with a handful of large customers, tech customers, Nucor Steel, which really commits our companies to working together to think about new tariffs, new rate structures, exploring ways that we can propose to our regulators, so this will still have to go through a process and be approved, but thinking about how we can come together around emerging technologies like new nuclear, like long duration storage, and how do we bring those customers together in this moment when we have significant load growth and significant opportunities in our jurisdictions.

And as we’re thinking about how do we accelerate those resources, how do we unlock, how do we address the risk, how do we start to move projects forward? Recognizing that we’re not going to get an SMR online in three to five years, and so we’re still going to need that pragmatic approach, natural gas paired with renewables and energy storage to get us through this next phase of the transition. But it’s a moment where I think that is spurring some creativity and some innovation in the collaboration that’s really going to help us get where we’re going as we bring different companies together to think about, how do you share risk and lower costs and get things moving.

Brigham McCown:

Okay, wonderful. How about questions from the audience? Who has something that they would like to ask our panel? And I don’t know if we have a microphone somewhere. Oh, there’s a microphone. Right over here, please.

Gregory Viotrick:

Thank you. Could you talk a little bit more about Duke Energy’s investment in batteries and what their future role is in the energy transition?

Brigham McCown:

And I’m sorry, can you say who you are and who you’re with, please? I forgot to mention that. Yes.

Gregory Viotrick:

Gregory Viotrick, Department of Treasury.

Brigham McCown:

Thank you, sir.

Sarah Adair:

Sure. Storage is a big part of our energy transition. I think I mentioned earlier we’re projecting about 10 gigawatts by 2035, and we’ve got less than a gigawatt on the system today, so that’s a big opportunity. Duke has been proactive on battery storage, as Alex mentioned, for a long time. We’ve got a site down in Charlotte near headquarters, the Mount Holly Emerging Technology Center, where we’ve been testing different battery chemistries, different technologies for a long time. So this is an area where we really have been proactive on technology and are working to deploy what’s now primarily lithium-ion, but working towards other longer duration technologies.

I’d also throw in there, I think I mentioned pumped storage earlier. We have a large facility down in South Carolina, part of our IRP and carbon plan, looks at doubling the capacity of that facility. So adding a second powerhouse, it would take it from 24 hours of storage to 12 hours of storage, but with twice as much capacity, which could be really powerful for us as we’re integrating solar in the region. So really critical, important resource. It’s just, as Jen and others have said really eloquently, it’s not the silver bullet. We need a diverse mix and we’re going to need, I would agree, molecules at least for the foreseeable future, along with electrons in order to balance the system.

Brigham McCown:

Okay, thank you. Let’s go to Tom here in the front, Carson, since you’re over there, and then we’ll come over to the other side.

Thomas Duesterberg:

Tom Duesterberg at Hudson. Speaking of technological solutions, is there anything going on in the world of transmission technology that could enhance the efficiency of the way we get electricity to market or in terms of siting of facilities so that the transmission problem is less severe?

Alexander Herrgott:

I would say that we talk about transmission a lot. Transmission by nature is not tremendously expensive to build. You might need a tremendous amount of structures, MET Towers and others, but the permitting and other issues are largely local in nature like Dominion, Jamestown and several others that are acetic and fire risk and a couple others. But we used to rely on 115, 230 lines, and now we’re getting to high-voltage lines that are changing the game, step up, step down between regions, and substations and others that are allowing for significant efficiency. For instance, in California and the rest, most of the transmission is linear and it’s not circular. And once that base load goes out, it’s done. Right now we’re creating different redundancies, but the reality here is it’s all going to be about battery storage at the end of the day, because once you make those electrons, you got to be able to put them somewhere if you’re not going to use them.

And that’s the long and short of it. And so transmission is helpful. It’s not the largest issue right now, although we make it about permitting on the transmission. The issue about transmission is the business case for transmission. About how we treat utilities, new entrants to the market that are piggybacking off of the rate payers of utilities. And that’s a whole different discussion that gets convoluted with the overall permitting issues. If we reduce the 20 to 30 percent it takes for developers to build a project that’s a trivial overhead cost. It’s completely avoidable. They’d be able to spend more money on their R&D. We’re wasting, we’re pouring water into a bathtub that has a hole in it, essentially with funding.

Sarah Adair:

I’d just add in, absolutely from a grid perspective, there’s innovation around reconductoring and guard enhancing technologies and a lot of things that are being done to make use of the infrastructure that we have today that doesn’t obviate the need for more generation, more transmission, more infrastructure as we’re working to meet future demand and transition the system.

Brigham McCown:

Okay, thank you for that. Over here, sir.

Doug Hengel:

Doug Hengel with LNG Allies at the trade organization of US LNG Industry. But my question is not about LNG. It was a continuation of this one on electricity. So FERC Order 1920, is that right? Does that help? Does it make a difference? Things we’re talking about here.

Alexander Herrgott:

Who wants to take that one? Are you thinking as far as, are you talking about on the cost allocation pieces or are you talking about on—

From a voice of developers from whether it’s Copenhagen Infrastructure Partners to Orsted to EQT to others, predictability in the landscape is all they’re asking for. We’ll pay the overhead costs, we just need to know what the rules of the road are. If we’re going to spend 4 billion dollars on a liquefaction export facility, and then we’re going to import natural gas up in the Northeast, but we’re going to ban LNG exports down in the Gulf coast. And how is that not being communicated to larger public as a whole? And the fact that we can export LNG but at the same time has no real impact on industrial manufacturer cost in the US because we don’t have the pipes to get it to where we need to get it is.

So I think that FERC is under a lot of pressure because it’s a politically induced, not technologically inspired group. And that goes from Dan Lee to Chatterjee to Willie to I can go down all the commissioners I know them all well, is that we throw this football out, make this order, and then we never do a look back on what happened two years from the decision that we made. And there’s no accountability there because the commissioners that made that decision are not there. So I give a two-year lead time on every FERC decision before it’s reversed and then we start all over again.

Brigham McCown:

Okay. I have time for one more.

Alexander Herrgott:

Is that a Debbie Downer response? I apologize, but.

Sarah Adair:

I include myself in that.

Alexander Herrgott:

I’m not big on FERC right now, right?

Sarah Adair:

Yeah, I would say, I think I said this earlier, but just to put a point on it with 1920, I think Alex said, well, there’s a lot to be done still in terms of implementation, but I think it builds on effective existing processes is we think could be complementary to some of the long-term planning that we’ve started in the Carolinas. So there’s a path forward to implementing it, but a lot of work to be done with stakeholders.

Alexander Herrgott:

The one thing I’ll say 10 sides is that FERC order, the one thing it did is it prevented the patchwork in the states of all the different states that we were creating their own different laws that would make long linear interstate transmission nearly impossible.

Brigham McCown:

Okay. Jonathan, we’ll go to you.

Jonathan McCollum:

Jonathan McCollum with Davidoff Hutcher and Citron. We work with a number of large construction engineering architecture firms in New York and in the Northeast, one of the problems that they’ve talked about has been the lack of qualified staff and a lot of the procurement and permitting offices at the local level. And I’m just wondering what can be done to try and incentivize and maybe take a model that is working at local governments and try and implement that and other local governments around the country.

Alexander Herrgott:

I feel like I’m sucking all the oxygen out of the room. That was a key part of what the Perm Institute did. We put out a report about four months ago. We think AI and a couple others can work some efficiencies with the bottom line as we have 6000 vacancies for qualified program managers across all 13 agencies. It goes from GS13 above, hydrologists, environmental specialists, geologists, petroleum engineers, you name it. I keyed on it earlier. If kids would graduate and go work at the Forest Service rather than TikTok Academy, maybe we could backfill the retiring fleet of qualified professionals that are in these roles. Folks do not have project management experience but are being put as authorized officers on major, major impactful projects. And then we point fingers at each other and go, “Why can’t we build this thing?” Because the signature that’s needed is by someone that is woefully under qualified, but it’s not their fault.

It’s because we have a recruitment and retention issue that’s inside the federal agencies. And so we’re going to have to, and this will be a bipartisan issue on, I wouldn’t call it outsourcing, but it would be just at the point that we get somebody very good at DOE or at FERC, they get scooped up by Parsons or one of the other companies on the outside. It is a very real issue. We don’t have real counterparties inside the agencies. And previous to this year it was republicans saying less bureaucrats and Democrats saying, “We need more money for the regulatory agencies.” The swords have been put away and now we’re actually trying to fix the problem. And I think that because that’s been identified as a focus, now we can actually pull back the layers of ideology and actually get to the work. I’m very confident about that one, at least that piece of the permitting puzzle.

Brigham McCown:

Okay. Well our time has all but expired, but I’d like to give you all just a quick notion.

Alexander Herrgott:

I got enough.

Brigham McCown:

30, 60 second recap. Anything you want to get out that we didn’t quite get to. Go. Sarah’s up first.

Sarah Adair:

I’ll just sum it up. I think a period of transition and growth or addition was a really great tagline and summary for the moment that we’re in. And I think having more conversations like these bringing minds together to think about how do we roll up our sleeves and meet the moment is what we need to be doing right now.

Brigham McCown:

Great.

Alexander Herrgott:

There are more investors in renewable energy that are traditional fossil fuel companies than there are renewable companies that only do renewable at the point. The players have changed, and I don’t think the hill has gotten the memo. And it changed the way we think about this whole discussion.

Brigham McCown:

Okay.

Jennifer Linker:

Just sum up and say all energy sources are going to be necessary as energy demand continues to grow globally as sectoral demand continues to grow in the United States, and the policy that we should be looking towards should seek to enable the lower carbon energy sources to compete. That’s going to fuel your transition. And I’ll plug, I know you have another panel on our allies and energy security, but I’ll plug that we shouldn’t-energy has always been global. It will remain global. It is so important that we don’t see international markets as the enemy, as if they’re taking away from the United States and somehow.

Brigham McCown:

Absolutely. Okay. Well to our first panel, thank you all so much for accepting the invitation and coming and for this robust discussion. Many thanks.

Okay.

Alexander Herrgott:

Went to school in Baltimore the year after that.

Brigham McCown:

My family, we discovered Newport relatively late. All right, ladies and gentlemen, we’ve now reset for our second panel. I’ll go ahead and get you started. Again, Brigham McCown with the Hudson Institute. Our second panel today we’re very welcome or we’d like to welcome and we’re honored to have, Kevin Book with us. Kevin heads the research team at Clearview Energy Partners, which is an independent research firm that serves institutional investors and corporate strategists. His primary coverage areas include the molecules and energy geopolitics. And Kevin, I like the fact that your company says that spreadsheets and the data are just the beginning. So thank you so much for being with us today.

To your right, his left is Tom Duesterberg, senior fellow at the Hudson Institute. He’s an expert on trade, manufacturing, economics and foreign policy. Duesterberg leads project work on trade with Europe and China, a reform of the WTO global competition and advanced technology such as 5G and the strength of the United States manufacturing sector.

Previous to that, Dr. Duesterberg was Executive Director of the Manufacturing Society in the 21st century program at the Aspen Institute. He’s been the CEO of the Manufacturers Alliance and also at the US Department of Commerce. So Tom, thank you for joining us today.

Next we have Steve Everly. Steve Everly is a Senior Managing Director at FTI. Oh no, we’re out of order. Well, I’m going to go with Steven since I already started. I’m so sorry, Vince. We’ll get back.

Vince Erfe:

Pretend I’m over there.

Brigham McCown:

Steven Everly is a Senior Managing Director at FTI Consulting’s Energy and Natural Resources Sector. He has more than 15 years of experience working in the energy industry and helping clients navigate the risks and opportunities of the energy transition. And Steve focuses on issues such as fracking, residential natural gas, LNG exports, CCS, nuclear power, pipelines and energy infrastructure. And Vince last but certainly not least, has served as the leading representative for the federal government and public affairs at Chenier Energy since October 2018. Prior to Chenier, Vince worked at the American Petroleum Institute handling energy exports and infrastructure issues. And you also previously served as the legislative director for Congressman, Michael Turner and a senior LA to the House Rules Committee Chairman David Dreier. Thank you all so much for coming today. And with that, let’s get started.

Kevin, let me please start with you, sir, if you would like to give an opening against this landscape that we are discussing, friends and allies, energy security and something about LNG.

Kevin Book:

Little, something about LNG. Thank you very much for having me here, Brigham. It’s great to be here. This is my first time speaking here at the Hudson Institute. Hopefully it won’t be my last. I guess that depends on what I’m about to say. There are five tensions I want to lay out in the global landscape that pertain also in some ways to what’s going on here at home. First greening up quickly conflicts with supply security. That’s pretty well understood. The fastest path to decarbonization would to globally source. Unfortunately de-globalization is likely to slow that process down for those who would transition.

The second is that de-carbonization and de-globalization are likely to both be inflationary. Replacing paid for capital stock with anything new is going to be expensive, even with very generous incentives from the federal government. Even if those sources on a variable basis are cheaper. Paid for is generally still cheaper than new. Moving from global sourcing, global sourcing on a just-in-time basis to domestic production of green goods on a just-in-case basis is likely also to add significant capital expenditures at the manufacturing side and initially probably create a spike in energy demand as industries move home. But if you look at the out years, you probably see a below-trend growth because of overcapacity with all these industries, all these industrial sectors. So energy demand pop and then maybe flatter trend.

Third, taking the two together, a fragmented world, which is I think safe to say, Brigham, we find ourselves in a fragmenting world. Whether it truly is a fragmented one is yet to be determined. But it goes from an origin-agnostic sourcing, the one that Jennifer was talking about in the previous panel to one that’s essentially values-based economics, which is an unusual idea. And it could put really significant strain on western economies, net importers, the EU 60/65 percent of domestic consumption on a net basis is imports. Korea, Japan, more than 90 percent. These are going to be challenging.

Ironically, the number four point I would make is that liberty can present obstacles to transition to market democracies, provide economic and individual freedom, which makes it easy for end users to voice their opposition to economic challenges. Or to put it a different way, high prices tend to usher out existing politicians faster than they usher in new technologies.

Fifth, climate policy does chafe a little bit against demand reality. We’re looking at an 80 percent fossil-fueled world still in spite of very significant development of resources. And the question is why? Why do all these clean resources not lower the overall percentage? And part of it’s that it’s going to new demand. A lot of the new demand on the electric side, the first panel talked about some of this. I can put into four categories. One would be, I think safe to say, you could call it EVs, transportation. The second one you could call refrigeration or AC. So AC is probably bigger still than AI, which I guess call computation. And there was a period of time in the US when people were talking about grow farms, putting demand on the grid in certain states. So I guess intoxication as well.

But in any case, the point is that the green wave deserves a lot of our attention, but it sits on top of an 80 percent fossil-energy ocean. And without that ocean, it amounts to a little more than a puddle. We can’t ignore the existing demand needs of the world still in the absence of reliable substitutes. And that’s what brings me to the net energy exporter picture in this world. So the US, along with Australia and Canada sits among Western countries, market democracies that can generate benefits at home while contributing to economic and political stability overseas.

And LNG may be the most disruptive of the tools in this western energy arsenal. The 2/3s of net oil consumption travels across borders. Only about 30 percent of gas consumption does. And of that 30 percent, really it’s only about half at most, and maybe even a little less than that, travels as LNG. But the difference here, what makes it disruptive is that there’s so much flexibility that it brings. And in this case, much like oil, you put the investment, very significant investment that might otherwise go to pipeline infrastructure front and the back of the value chain. And then the ships use the sea lines of communication rather than pipelines to navigate the molecules from destination to destination.

So I do not want to diminish the importance of endogenous generation within national borders as an energy security imperative, generation of renewable power as an alternative to globally sourced variable costs from fossil fuels. But it does create introduces, at least right now, globally sourced fixed cost risks. And so you go from one form of risk to another. So as a western world to close, G7 led Western world, faces off increasingly against a Shanghai cooperation organization/BRICS Plus organized bifurcation. The question is, what will trade flows look like? What will we see? What tools will be brought to bear to enable the flexibility that markets have always had and whether that will still persist.

And in a context where you have new sources, fueling demand and allies looking very much for energy security, those G7 net exporter producers are going to play a very significant role, not just in the economics and politics, but the geopolitics. And with that, I’ll hand it off.

Brigham McCown:

Okay, thank you. Tom?

Thomas Duesterberg:

Okay. I don’t think we can have an energy conference without a few slides, a few statistics so I’m going to so that I can see my slides. I’m going to speak from this podium. I want to follow up on Kevin’s remarks, and I’m going to focus on the geopolitical angle of this. And I have several points. We are in a transition period for energy, but in a larger context, as Kevin alluded to, there’s a strategic system-changing competition going on. There is the western system that was set up after the second World War, increasingly challenged both in terms of politics and economics by China. But China now is accreting supporters in the global competition. Kevin mentioned BRICS, Shanghai Cooperation council. But more importantly, there are two hot wars going on and a Cold War with China. And China is working very cooperatively and closely economically and politically with Russia, Venezuela, Iran and North Korea. And in the context of this competition, energy is a major question.

My point that I’m going to try to argue is that the US especially has been stepping up to the plate since the onset of the Ukrainian war especially, but even before that to backfill for the supplies that were previously given to the world or sold to the world by the Russians and the Iranians. US policy currently should encourage production and exports because of this geopolitical situation. But also, I want to argue because it’s environmentally beneficial. And the other point that I want to make is that the current policy that we have, which is discouraging domestic production, but allowing production from Russia, the axis of Russia, Iran, Venezuela, and China has implications for our industrial sector as well.

So let’s go to the first slide. I think you all know that the US is now the leading exporter of LNG. We stepped up to the plate, as I will repeat in February of 2022, and were able to increase our production and our exports to our European friends. That is a major you’re able to substitute for the Russian supplies that were cut off. Now that the Biden administration has taken the position, there’s going to be a freeze on LNG facilities, which I’m sure my fellow panelists will talk more in depth about. I think this is an increasing problem because we need to be the supplier of last resort for our friends and allies around the world. So let’s go to the next slide.

This just is an indication of how much we’ve increased our natural gas exports, and we’re at about 13.6 billion cubic feet a day at the end of last year. We’ve increased exports by 33 percent since February of 2022. Okay. Now, the larger geopolitical situation, I want to turn to that. The consequence of the war, the price cap on oil was that there was a lot of oil and gas floating around the world that is now being picked up at reduced costs by especially the Chinese, but also by India. We did some a look at Chinese customs data and in terms of you can see how much they import from Russia and you can see how much they paid and the price discount that they’ve received. And Alex, you can go to the next slide has varied from single digits to as high as 20 percent based on this calculation. Bloomberg and others have calculated much higher discounts up to 30 percent.

So let’s go to the next slide. One of the things that is happening is that China is enhancing its industrial capacity. They’ve slowly increased their oil refinery capacity even though they import most of the oil that goes into those refineries. India is also increasing refining and exports of refined petroleum products. China is increasing its exports to a certain extent of refined oil, but not as much as India. This is competing directly with the United States.

Let’s go to the next slide. These are our exports. US exports have finished petroleum products over the last dozen years or so. More recently because of the competition, partly because of the competition from India especially, but also from China who are using lower priced oil, not only from Russia, but also from Iran and Venezuela that the United States is not using sanctions to try to effectively limit. So this is having an impact on our ability of our sector to participate in third markets for refined oil products.

Just to give one example, let’s go to the next slide. Amongst other energy-intensive industries, I’ve looked at a little bit more closely at the chemicals industry, the development of the chemicals industry in China. And they have been slowly building up their capacity. And now it’s been supercharged by the fact that they’re able to get access to lower-priced feedstocks, namely oil and natural gas. Natural gas, I didn’t put any data up here, but natural gas that China gets from Russia especially is much lower than the global markets.

So in terms of the chemicals industry, the feedstock for China, 15 percent of their crude oil imports goes into this industry. 7 percent of the gas, their total gas usage goes into the chemicals industry. But interestingly enough, 5 percent of their total coal consumption, which is 180 million metric tons every year, goes into their chemicals industry. So they are slowly developing global market. Their global market presence in chemicals. This is organic and inorganic chemicals, exports from the United States and from China. And you can see China’s sprinting ahead of us, which was traditionally one of the strengths of the US economy.

A dozen years ago, the German and other European chemical makers were all coming to the United States building plants here. Now they’re building plants in China. BASF, the major German chemical maker, invested nearly 15 billion dollars in China. And at least cutting back the growth here in the United States. There are other energy intensive heavy industries that China benefits also from their access to lower price, oil and gas. Let’s go to the next slide.

So one of the consequences of this increase in refining and the use of oil and gas in China, and with the consequence of the inability or the unwillingness of the United States to limit, through sanctions, oil exports and gas exports to places like China or the rest of the world, in terms of their environmental performance, the axis, if you will, of China, Iran, North Korea, Russia, is much more environmentally destructive than production in the United States. So I looked first at methane emissions over time, and China, of course is the champion there. It’s not just industry, but it’s agriculture. But Russia is also a major source of methane, especially from their energy industry, whereas the United States and the Europeans for that matter, the Australians are much better in terms of methane emissions.

Let’s go to the next slide. We calculated the intensity of methane usage in four major areas, and this is in terms of emissions of methane per million dollars of economic output. This chart is a little hard to read because of the scale, but just in terms of the intensity, the United States has about 35 tons of methane emission per million dollars of GDP. The numbers for Russia, 404, so 10 times out of the United States. Iran is over 700 tons of methane per million dollars of economic output. Venezuela 1,864 for comparison. Saudi Arabia is 137.

Okay, let’s go to the next slide. CO2, we all know that China is the champion there, too. And their emissions are, as we all know, more than that of the United States, Europe, and Japan combined. In terms of, let’s go to the next slide, carbon intensity by country, again, the United States and Europe for that matter, are much better at limiting carbon emissions. And again, this is per million dollars of GDP. The US is about 225 tons, EU, much better, 174, China, 750. That’s three times that of the United States. Russia, over 1,000, Iran, 2,160, Venezuela, 1,700. So by allowing production and exports of oil and gas from Russia, Iran, Venezuela, especially to China, it’s extremely damaging from an environmental perspective. So that’s why I would argue that we need to continue to encourage production in the United States, encourage exports both from a geopolitical and economic level, but also from an environmental perspective. So let me stop there.

Brigham McCown:

Okay. Tom, thank you very much. I think one of the things we tend to forget about as we are focusing on CO2, is that there are seven GHG gases, emissions that sometimes get left behind when we talk about the total GHG footprint.

Thomas Duesterberg:

Correct.

Brigham McCown:

And certainly, those are great slides. Events, Cheniere energy, the savior of Europe 2022. What are your opening thoughts on?

Vince Erfe:

Sure. Well, thanks Brigham, and I certainly appreciate the opportunity to be here with you all. I thought I’d just lead off by just providing a little additional context. Just about Cheniere, where we’ve started, how the company operates and whatnot, to give you context for the rest of the discussion as you go on with questions or whatnot. So as some of you probably know, Cheniere is headquartered in Houston, Texas. Our export facilities are located in Southwest Louisiana and in Corpus Christi, Texas. We were the first company to export US LNG from the lower 48 states beginning in February, 2016. And to date, we’ve shipped more than 3,400 cargoes to 39 markets around the world.

What folks may also know is that we were originally built to be an import facility. Certainly, this was before the energy revolution, and that dynamic certainly changed the whole thing, where at the time the US was expected to have a shortfall of natural gas. We were going to import it from all places around the world. And all of a sudden, the fracking revolution happens, the business model is turned upside down, and then people are left with looking at this gigantic facility and what to do with it. So the leadership of the company at the time made the decision to convert to exports. And again, we were the first to reserve our permits and then we started exporting it at that point.

The basis for our business is built on selling LNG over the long term. So we purchase natural gas pretty much anywhere east of the Rockies. We bring it down to our facilities through various different pipelines, and then we have long-term contracts with 30+ credit worthy counterparties. We sell directly to energy companies in various countries. We also sell it to trading houses who will buy and sell for their own purposes. And we also have long-term agreements with upstream natural gas producers to sell their natural gas overseas and give them exposure to international markets.

The average length of our contract is roughly 17 years, and typically it’s indexed to the price of Henry Hub plus fees for liquefaction and shipping when applicable, and I can sort of mention that in a second, oh, or I’ll say it now. But basically, the customer has the option to either use their own vessels to pick up the LNG or they can use vessels that we charter. We don’t own any of our own vessels. We charter roughly 35.

And then, one of the things that I think Cheniere really helped and really pioneered in the industry is that we’ve got destination flexibility in our contracts. That means that if a customer is picking up a cargo and it’s destined for whatever place around the world, if they decide, “You know what? For whatever reason right now, we don’t necessarily need it, or there’s another market that’s more in demand for it.” Then it can simply shift that way. So it’s one of the ways, and I’ll get to you in a second about what you mentioned before, Brigham, about Europe and whatnot, that really aided Europe when Russia reduced and cut off its natural gas supplies to the continent.

One other point that I think I wanted to really emphasize is that I mentioned that we started exporting in February, 2016. The industry in the US is really, it’s less than 10 years old. And you think about that comparatively to a lot of the other segments in the industry: upstream, downstream, pipelines, refineries, and whatnot, which have decades and decades and decades of experience not only operating and maturing its industries, but also working cooperatively with the regulators in terms and those regulators having decades and decades of experience understanding how to regulate the industry. That’s something that certainly I’ll touch on in a moment about where we see policy-wise, but I just wanted to really make note of that, to make folks realize that in the short course of eight years, we at Cheniere have been very proud that we’ve been able to contribute the US going from essentially no LNG exports to being now the number one exporter in the world total.

And just some figures also to throw out, Cheniere constitutes roughly 50 percent, probably more, of total US LNG exports. We represent probably roughly 11 percent of total global LNG trade. And specifically about Europe, before the Russian invasion of Ukraine, probably 40 percent of our cargoes were heading to Europe. After that, the last several years, it’s been 70+ percent of our cargoes have shifted there. And part of that dynamic, again going back is the destination flexibility. While our long-term customers certainly benefited from the reliance and asurity, knowing our cargoes were going to go there, the destination flexibility meant that other folks who were buying it and saw demand in the market, they were able to shift the cargoes to Europe in that way. So I think that’s kind of where I wanted to start out in terms of laying out where Cheniere is coming from.

To touch briefly, I think, on just policy priorities and especially to the theme of the panel talking about what sort of structure is needed out there to ensure continued growth in the industry and reliance on the industry, I’d probably put it down to two buckets. One is on the permitting side of it; certainly it’s cliche to say, but it’s true, we all do need certainty in the system. And so, for example, on the permitting side of it, as some of you may know, just yesterday the Senate Energy and Natural Resources Committee just approved the three nominees for FERC on bipartisan votes. Certainly, that’s important in terms of avoiding a lack of quorum at FERC, which is responsible for citing construction of LNG facilities.

Certainly, the DUE is another important part of it in terms of getting the export authorization to send to non-free trade agreement countries. Certainly, the administration has announced a pause on considering applications while they look to update the economic and environmental studies on that. We are confident in our ability to be able to meet anything that the government will put out in requirements. It does though, and as our CEO has stated on calls, it does add a bit of uncertainty into the market. And so, it is something that we’re just going to have to wait until probably sometime next year, as the administration has stated several times on that.

The second bucket on the policy side of it, I’d say, is really on the operation side of it. So certainly, while FERC, DUE on the permitting side of it is incredibly important, it’s something we focus a lot of time on, the operation side is also very important. And again, I go back to my remarks before about the industry is less than 10 years old. So one of the things that we found is that we have worked cooperatively with legislators, folks on the Hill and our regulators, to see how we can continue to enhance the safe operation of our facilities. And we’ve done so in a way that’s been bipartisan.

So case in point, every several years, Congress looks to reauthorize programs that are run by the Pipeline and Hazardous Safety Materials Administration, which Brigham actually worked at previously also. Our viewpoint, and we’re glad that we received bipartisan and support from both Republicans and Democrats on this, is that they wanted to put in place measures to modernize the way that LNG facilities are regulated. Now, we see ourselves more looking like a refinery rather than some kind of massive gathering mining system, because essentially we’re taking in a product, we’re subjecting it to various processes to cool it down to negative 260 degrees Fahrenheit, and then putting it on a vessel.

So we were glad that in 2020 the Congress approved the 2020 Pipes Act, which requires FEMSA to modernize LNG safety regs using principles from something called Process Safety Management, which is something that’s born out of the 1990 Clean Air Act Amendments, and it really looks to regulate and govern large scale LNG export facilities using really a better fit for purpose standpoint. We’re still waiting for those regs to come out, but we’re eagerly awaiting that to happen.

The second portion of that is that that law also created, established the LNG Center of Excellence, which apparently will be located in Louisiana. Again, it’s another body that really is mandated to seek, to bring together operators, regulators, folks, and other stakeholders to see how best to work together. Because again, the industry is less than 10 years old. People are still trying to figure out how exactly this is all working.

A second issue that I’ll throw out there also is the issue of how do we continue to safely regulate marine traffic of what we’re doing? So as you may know, the Coast Guard conducts various inspections for vessels. There have been two recent reports from the Government Accountability Office as well as the National Academies of Sciences that have found that the Coast Guard faces a deficit of marine vessel inspectors. This potentially will cause issues in terms of do they have the necessary resources and capabilities to be able to inspect these vessels to make sure that they are getting the ones that are really problematic.

Now, the LNG vessels on the market are very, very brand new. Probably 70 percent, 80 percent of the, no, I’m sorry. It’s 90 percent of the vessels that we use currently now are new, are post-2020. And so, they have a very, very stellar track record. Again, we’re glad that the folks in Congress, right now in the House, they’ve passed a Coast Guard Authorization Bill that allows the Coast Guard to use a risk-based approach to conduct the inspections so they can really focus their limited manpower on those vessels that really need the assistance.

And then finally, I’d say going back to the still going on, on the theme of the novelty of the industry is that we find that we’ve gotten a number of different regulators whether or not you’re talking about FERC, FEMSA, Coast Guard. And each of them to a certain degree have similar requirements regarding enforcement or reporting or inspections or whatnot. And so, one of the things that we know that we have been working on in talking with the regulators and folks in Congress, is about how do these regulators talk better and cooperate better together?

Part of the inspiration for what we’ve looked at is that there was an MOU in 2018 between FEMSA and FERC about some citing issues. And it basically delineated how better they can work together to delineate responsibilities or whatnot. And again, there’s a bipartisan proposal in this year’s 2024 Pipeline Safety Authorization Bill that essentially would require additional MOUs or interation agreements on a variety of different subjects to enhance the cooperation between the various different agencies. But anyway, I think I’ll leave it at that.

Brigham McCown:

I think that’s great. And the FEMSA reauthorization is slowly making its way through Congress. You’ve got two separate bills in the House that have passed, none yet in the Senate. We’ll see if we get a bill by the end of the year. But it’s interesting, when I was at FMSA, we had an MOU with EPA too, and it didn’t really make it any better, to be honest with you. So I think FEMSA has a better working relationship with FERC though, so I hope that continues. Steve, a lot of moving parts. Bring us home and then we’ll start the debate.

Steven Everley:

Sure, and I’ll try to keep this kind of quick and high level. Those of you who know me know that I share a lot of my thoughts on social media, so if you really care what I think, you can go and look on there. But two kind of high level points, and along the way I make no apology for the not so subtle flag waving I may do here.

The first is that, and this picks up from what Vince was saying here. In 2004, Time Magazine had an article and then the headline was “Why the US is Running Out of Gas.” And it was all about exactly what you were touching on. We were going to have to import massive new quantities of natural gas, oil as well. Companies were racing to build LNG import facilities. Manufacturing was going to be moving overseas. It was going to be moving to the Middle East. It was not a very good picture for the United States.

Twenty years later, which is just nothing in the grand scheme of things, 20 years later, we have become the largest LNG exporter in the world. We lifted a ban on crude oil exports. We became a net energy exporter. And along the way, natural gas became the largest source of power generation, all in the span of 20 years. And really, most of that was in the span of only about 15 years.

I looked back and tried to find another example of that rapid of a change, just given the volume and couldn’t find anything, could not find anything. It’s an unprecedented change in energy systems and evolution. And obviously, it has significance for us as a country, but it has significance for the world. And I think we’re going to talk about that in terms of how the capacity now that the United States has to influence global markets and talk about things even on the national security front that we would not have been able to talk about just a few years ago. So that’s exciting. That’s the first point.

The second one is a little bit more nostalgic. I majored in US History, so I tend to think of these things through a little bit of an emotional lens. But I think it was two days ago, Emmanuel Macron tweeted a video of US soldiers arriving in France just a few days ago to commemorate the 80th anniversary of D-Day. And it just says, “Welcome back, heroes.” It’s like a 90-second long video. I encourage you all to watch it. Unless you’re a robot, you’ll probably get goosebumps like I did. Also recently, I watched the show Franklin on Apple TV. If you’ve not seen this, Michael Douglas as Ben Franklin, and it’s all about the role that France played in the US in the American Revolution, and the critical role that France played in helping us secure victory. And I also looked March, 2024, France was the largest destination for US LNG.

And I think back to the Russian invasion of Ukraine and how Europe obviously needed help. And I don’t say this as the United States saying, “You’re welcome.” I bring up all of that to say what motivates me on energy, it’s because of this international impact and the role that the United States can play and frankly, the role that it can play in whether you want to call it repairing or just strengthening alliances with countries around the world, even as what Kevin was talking about, we look at an era now where deglobalization seems to be the talk of the town and setting up walls and barriers to trade.

I think there’s an interesting opportunity to continue to talk about the importance of international markets. Jennifer was talking about how energy will always be global. How the US role in all of this can help us recognize the value of ourselves as an international community, maybe rather than trying to pull back from some of these things, which would erode so much of what we’ve been able to achieve in terms of alliances, in terms of being able to help our friends and allies around the world. So with that.

Brigham McCown:

Thank you very much. So at a 30,000 foot view, and we talk about energy security as being that uninterruptible availability of energy and an affordable price. Now, some have tried to add to the definition, it has to be the correct kind of energy. But if we get rid of that acceptable part and just lock into energy security. It’s so important, right? And we’ve learned that through, as I mentioned earlier on, after 50 years of relying on Middle Eastern oil, we look at not just our friends and allies in Europe, but in Asia that lack certain raw materials. Where’s the administration gone wrong on this point? Why are we not opening the floodgates to American LNG to anybody who wants to buy it, with it also being a byproduct of displacing coal and other higher carbon emitting fuel sources? What am I not getting? Who wants to take that very loaded question?

Kevin Book:

Very loaded. I suppose you’re going to have to go in order here, so perhaps I’ll . . . I’m not sure I would say the administration has gone wrong so much as I would say they’ve taken a choice. They’ve taken a decision to accelerate a clean energy transition without an explicit price on carbon, without using the market mechanism that’s the most readily available to do it. And that has produced a series of major interventions. What we’ve seen is an age of intervention, the Inflation Reduction Act being the third of three major industrial policy laws that really are about moving away from markets and starting to get to sort of a, not quite dirigiste, but definitely muscular government control over markets and capital allocation, capital formation.

The issue with that is, is that it takes a lot of money to get energy out the ground, and most of the money you’re going to need for that is private capital. And the challenge is whether you can mobilize the capital and bring it in with the policy structure you’ve got, whether you’re having the effect of crowding it out. And investment uncertainties have a tendency to freeze capital. And it’s precisely at the point where you’re describing these, leaving aside the regulatory picture, and I’ll get to that in a second. Just the concept of introducing that uncertainty is not necessarily auspicious for a lot of the investments that haven’t been undertaken yet. Now, market forces will overtake that if there is a call from the market and private accuracy, a reason to take a risk on a final investment decision in the single to low double-digit billions of dollars. They might do it, but right now with that uncertainty, they might be less inclined to take it on.

The goal of securing supply for allies though became vital to the administration, and they found that they had no choice but to try to mobilize as much LNG as they could possibly mobilize. The problem is that the acute perils of the moment seem to have abated a little bit. And we have a tendency, not only recency bias, but risk normalization as a species. We become very comfortable with a high level of risk and maybe underappreciated.

So the way I would put it is this: doing less with less is austerity. And doing more with less is efficiency. And confusing the first one for the second one is complacency. And so, as Europe looks to preserve its industrial capacity, as the war continues, I think there are some questions about whether or not the pausing is really a good idea. Now, just say yes is very close to what the Section 3 of the Natural Gas Act actually says. It basically says that unless you find a reason that it’s not consistent with the public interest, then exports to non-free trade agreement countries should be approved and done so quickly.

This is a time where I think the underlying issue at a policy level is discomfort with the intensity, the carbon intensity, or failure to feel comfortable with the reduction in emissions to date. And so, Brigham, if you were to, again looking at this neutrally, we’re entering into a measurement-informed, border-adjusted world. That’s kind of where we’re going. And this is the Biden administration saying, “Hey, we want to look because we don’t trust that industry is actually cleaning things up.” But as you’ve seen, that cleaning up is not only happening, but it’s in the industry’s interest to capture molecules to sell them and they’re doing it.

Brigham McCown:

Yeah. Okay. Anyone else want to weigh in on that one?

Vince Erfe:

I would actually add on to Kevin’s point about what the industry is doing in terms of our responsibility to have as clean a system as possible. So at Cheniere, we have our own peer-reviewed life cycle analysis, which is out there. It is public, and it’s out there. And we use also that to help inform us about providing our commitment for data transparency to our customers.

So for example, beginning in 2022, we started issuing something called CE tags, or carbon emission tags for each cargo for all of our customers. And what that is, is that it’s an estimate of the GHG emissions from the wellhead to the point of delivery for our customers.

Now, we see these, and the other examples I’ll bring up at a second, as competitive commercial advantages in the marketplace. Because as we compete against other folks out there, especially those who are of other, let’s say nation states or whatnot, we want to be able to say, “Here’s something that we’re going to provide transparency-wise to you as a customer or a potential customer. Go see if the other competitors are going to do something similar to that. What are they going to show you?”

Similar to that, years ago we started a QMRV program, quantification measurement reporting and verification, where we worked with various specific upstream producers in several different basins. We worked with our pipeline companies. We also with the shipping vessels and looking at the fence line of our own specific facilities really to get a handle on understanding, “What is the actual emissions profile of our supply chain?” And again, it’s all made in the notion of, “How can we better identify where those potential leaks are?” Because again, as Kevin just said, it doesn’t do us any good to have leaks because that just means it’s less product for us to be able to sell, which again, is another competitive advantage that we feel like we and the US will have overall.

And then, thirdly, we also support efforts in academia to really better understand, “How do we interpret the data?” With our QMRV program, certainly there are, and various other studies that are out there, have found that taking readings even within the same basin sometimes yields different estimates of what the emissions profile is. And sometimes it’s based on difference between technologies or anything else. And so, one of the things that we support at UT Austin is the Energy Emissions Management and Data Lab, where they are working at ways to better understand and how to interpret all the various different points of data so that way people can really understand what those emission profiles are.

Brigham McCown:

Do you think that the LNG export pause, which has been announced, and to be fair, let me see if I have this right, does not affect projects that have already been permitted/approved. But those permits run out in a number of years, and if you don’t get it built, you have to go back through the cycle. Right? And it doesn’t apply to free trade partners, which is something the administration touts, and that it’s temporary until we study. But hasn’t the DOE already studied this before? So is this political? Is this election year stuff? Or can we expect this to continue should the Biden administration be reelected? What’s really driving this?

Vince Erfe:

Kevin, over to you.

Kevin Book:

I think it’s impossible to overlook the politics behind it. But I think that the basis, again, the argument is that they want to have an understanding of what the gas we are selling looks like in the market. Now, the politics is probably the more important part of the two. And if you ask, “Why pause when you study, when you didn’t pause to study last time?” The answer that came from the administration in congressional testimony recently was that, “Well, if we don’t pause, then maybe we won’t have something that is legally valid because we haven’t . . . We’ll maybe say yes on an order without really knowing what we’re talking about yet.”

But the pause itself may not be the end of the story. The pause is to understand the parameters of exports from a climate and economic perspective. It may come with recommendations or it may come with conclusions that lead to questions about how DOE makes its own decisions. They don’t currently have a notice and comment rulemaking in place for the decision process. It’s relatively ad hoc. And the pause could be followed by what we’d call a process rule to establish that, so that if they wanted to set quantitative limits or conceptual parameters that don’t currently exist in the approval decision, they could do that. So that would be a second term Biden administration’s option, not necessarily obligation. But if they wanted to in some way constrain in the face of a law that says, “Just say yes,” that would be a way that they could pursue it.

Brigham McCown:

But the law says, you mentioned it earlier, basically says, “Just say yes.” Right?

Kevin Book:

The definition of public interest gets very important here. It can be defined in new ways. There are new artifacts that are introduced into regulatory policy all the time. The use of a social cost of carbon or social cost of greenhouse gases is an artifact that dates back 15 years or so, but it’s now established. And so, there could be new protocols brought to bear on how you make a public interest decision. But again, to do that in a way that would be legally defensible might take a rulemaking.

Brigham McCown:

Okay. And then, I brought up the notion of those countries that we have a free trade agreement with because the administration has relied on that saying, “Well, not everything stops. Our free trading partners don’t.” But we have 20 of those. And I looked some up because I was curious. Australia, okay, check. Canada, check. Mexico, check. Bahrain, Chile, Columbia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, okay. Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. How many of those are your . . . Is the vast majority . . . How much do you sell to all those folks?

Vince Erfe:

Historically, going back to when we first exported, South Korea is the biggest destination for us.

Brigham McCown:

Okay.

Vince Erfe:

And that is a free trading agreement country. So certainly, of the list that you reeled off, the vast majority of those, it’s South Korea is really where it’s going.

Thomas Duesterberg:

Well, the lack, where we don’t have free trade agreements is the important point.

Brigham McCown:

That’s what I’m saying. Right.

Thomas Duesterberg:

And Japan, they have to import every molecule of energy they use practically. We don’t have a free trade agreement with Europe or individual European countries, so that’s a problem.

Brigham McCown:

Okay. Steve, you want to comment?

Steven Everley:

It underscores the political element of all of this, too. I think back to a few weeks ago when the Biden administration announced that it was going to be imposing tariffs on Chinese Evs. We don’t import a lot of EVs directly from China, it’s largely through Mexico. And that’s what set off this whole Trump/Biden, who is going to out-tariff each other on a variety of different things. But in an election year, it sounds good, and it’s a signal to certain members of the base.

One thing I wanted to touch on though is specifically with the pause and the stated underpinnings of it were around two broad categories; one is assess the climate impacts, and one is the price impact. On the price side, I think what’s interesting about now, as opposed to 2012, 2013 when we weren’t exporting anything from the lower 48, critics had the ability to say, “This is going to raise prices.” And they did. And they said it over and over and over again. We started exporting LNG in 2016 from the lower 48. The annual natural gas price in the US in 2016 is exactly the same as it was in 2023, and we went from nothing to the largest in the world. So we have data now to basically show that’s not really a concern here. The climate side is interesting, but it’s also, you’ve got pretty entrenched camps there. If you’re opposed to exports for climate reasons, you’re probably not going to be convinced by an argument that says, natural gas is actually helpful for meeting climate targets. But I will say that the study that was presumably used as an underpinning for this, the author of that study has updated that study three separate times. Changing the numbers up and down, in terms of the relative impact of natural gas, mostly quietly, without much fanfare, and it still has not been peer reviewed.

Brigham McCown:

Yeah.

Steven Everley:

So again, the political backdrop, and I think this is well known though, I don’t think anyone’s really like, “Oh gosh, this is actually . . .” We can walk and chew gum at the same time, we know how to update these kinds of things. But just a further backdrop there.

Brigham McCown:

Kevin, one of the things that you mentioned to me in passing, while we were talking, is the difference of implementing policies under an authoritarian regime versus under a democratic regime. What are the pros and cons? And what are we-

Kevin Book:

Well-

Brigham McCown:

Constrained by?

Kevin Book:

And again, it’s an irony of liberty, the freedom to speak and oppose, is powerful here. And it gets to, sort of the political constituency, that was perhaps one of the key drivers in the pause. Not the only one, but youth voters, who were concerned about climate risk. But there’s a separate segment, so Steve’s mentioning the economic concerns, the questions about cost. It’s true, supply curves don’t usually slope downward, part of what’s happening here is, associated gas is coming out with oil, and so it isn’t really just an LNG story. To make the economics work as well as they have, it’s really a free trade story and having oil going to markets overseas, that is helping to bring gas out. But the issues here are that end-user costs are a very big deal, the perception of risk. This did start with industrial producers talking about their fears, that they would be priced out of chemistry, out of chlorine chemistry, relative to NAFTA’s overseas and, above $7 per million BTU would be end of the story for the US industry.

And now, we’re hearing more about end-users and end-user cost concerns. And that political pressure, most acutely fell at the pump and on the road, it’s not really gas. Gas is a much smaller part of the energy wallet than . . . Two thirds of it is gasoline, natural gas is 10 or 15 percent in most states, but it is nonetheless a concern. And so I think what you’re finding is that if an authoritarian regime just wants to transition or they want to change policies, they can change policies. It’s a lot harder to do things here, and so not to say that this isn’t political, but the politics reflect the underlying economic sensitivities, of a free populace saying, we’re worried. And so history and data can go a long way towards assuaging those concerns.

Brigham McCown:

Okay.

Steven Everley:

I would also say-

Brigham McCown:

Can-

Steven Everley:

I’m sorry, Brigham. But the role of transparency in all of this and the ability to create trust, if you’ve got authoritarian regimes that are exporting a certain product and you ask, “Okay, what’s the environmental impact?” You have to take what they say with a pretty big grain of salt, because they have a vested interest as a country in giving you the best possible profile. And we know that there are things that, the numbers are fudged a little bit. I think here, in the United States, because you don’t have state owned oil companies, because you have an industry that’s private sector and you’ve got a regulator that is, I don’t mean this in the worst sense of, but antagonistic towards that, in terms of putting that. You have a much better picture of what emissions and environmental impacts really are.

And I also go back to the study that LNG Allies put out just a few weeks ago, where we actually will acknowledge when other countries have a better environmental profile. And looking at US LNG for example, compared to Norwegian Pipeline Gas or even LNG from certain areas and certain circumstances-

Brigham McCown:

Yeah.

Steven Everley:

How that does have a favorable profile. I think that transparency bit, is very important in creating that trust and creating those long-term partnerships with countries.

Brigham McCown:

Yeah, I think that’s a very valid point that while we like to, because we have two oceans, we like to talk about America over here. But there are other allies and partners that also do a very good job of producing energy with lower carbon footprints. And Tom, you wanted to talk, so I wanted to go to you, and I was going to ask you about, ultimately, also, how do you see the data that you’ve uncovered? The fact that if we give our energy or anybody gives energy to certain countries, their pollution, their GHG emissions are far, far higher, thus negating sort of any benefit? How does that fit into the bigger picture?

Thomas Duesterberg:

Well, I mean, the point I was trying to make is that, going back to authoritarian regimes, just to comment on that as well. I mean, they don’t have to pay attention to public opinion and they don’t. I mean, China certainly doesn’t, Russia certainly doesn’t, Iran pretty much doesn’t, and so their environmental profiles are pretty weak. So part of the problem is, in my view, and assuming that some of the data that I showed is more or less in the ballpark and is likely to continue, if we don’t take advantage of the natural resources that we are endowed with and work with some of our allies like Canada and Australia. Who are equally endowed and generally, environmentally conscious, then the gap that has to be filled, among our friends, especially, I keep going back to Japan and the Pacific Rim, but also Europe, where are they going to get their energy?

So in this great competition that we have now, with the axis of authoritarian powers, and pardon me for oversimplifying here, but there is some reality to that. We lose the ability to be attractive in helping the economies of our friends, especially those who are energy deprived. And so that’s a major argument, I think, in favor of a pro-production profile here, in the United States. And we have, at the moment, exactly the opposite.

Brigham McCown:

Yeah.

Thomas Duesterberg:

And we are not even using the tools that are on the books to sanction, for instance, the Iranians, we just look the other way. We look the other way on Venezuelan oil as well, and we encourage production in Russia through a price cap that’s ineffectively enforced. And so they happily jump into the fray and fill the gap that is left by what we could be doing to help our friends and allies.

Brigham McCown:

Okay. Those are great comments. And if you look at, I think the refined product coming out of India, it’s much greater now, than it was pre-2022. And you have to go, “Oh gee, where did that oil come from?” And then it’s being freely sold as refined product wherever. And so there are a lot of folks, both here and in Europe, sort of looking the other way as things are filtered through a third party country. And the shadow fleets that have bulked back up, have really helped others, frankly, at sometimes, Europe’s, I think, own cost. They’ve, in fact, subsidized cheaper products for others.

But Vince, moving forward, and as you know, I spent a few years in Alaska, Alaskans love to talk about all the LNG that we have up there and our natural gas, and there’s a lot of it, it’s just constrained. Do you see a scenario, moving forward, where the world will continue to use more natural gas, LNG? And that, maybe places like Alaska, can finally be competitive or can finally get additional projects? After all, Anchorage is closer to Tokyo than it is to Washington, D.C.

Vince Erfe:

Yeah, well, Brigham, I think that, we, certainly at Cheniere and various other folks, have forecast that we see continued growth in the industry and need for LNG globally, around the world. Certainly, per the discussion of the previous panel, where they talked a lot about the energy mix, utilities, renewables and whatnot. Certainly, we see a continued use of natural gas, LNG, as a compliment to renewables as it continues to grow. And certainly, while right now, Europe is a huge market for us, given the current dynamics of what’s happening, we also see Asia as an enormous area of growth. Well, that’ll continue to happen, as their economies continue to develop, as they see cleaner energy sources for them to use, certainly, from the aspect of displacing all their fuels, let’s say like coal or whatnot. So we do think that there will be continued need for natural gas, LNG, around the world.

Steven Everley:

And I mean-

Brigham McCown:

Yeah.

Steven Everley:

The question is not whether the world’s going to use more natural gas, I mean that’s pretty well, and it’s going to be a lot more. I think Goldman Sachs just put out a report that said, in the next five years the global gas market is going to expand by 50 percent. Now even if it’s half that, like even if that’s just a directional indicator, anything in the double digits, is huge when you think about global gas. So the question becomes, who is going to meet that demand? Who’s going to produce those molecules and meet it? It’s not as if we restrict things here that it’s not going to be met and it’s not going to happen, which is often what underpins some of these thoughts, that if we restrict, then no one’s going to use it. It just means that it’s going to go to others who will happily supply that. And LNG, in particular, is going to see something that has a lot more investment, mentioned India and the growth there and how that’s going to be a big deal.

I think I saw that their LNG imports are going to average about a 5 percent growth rate per year, over the next few decades. Which is, again, just enormous, in the grand scheme of everything. And who’s going to meet that supply, who is going to step up and supply that?

Vince Erfe:

Actually, and to that point, I think it’s important to note, and going back to sort of the discussion about the Pars business and whatnot. Because certainly, folks in the administration have testified, Kevin, as you mentioned, various times before Congress, about the issue. And one of the lines that we know, or one of the things they’ve stated is that, “Well, look in the next several years,” which is accurate, “That there are various projects that are under construction or will be coming online, closer to the end of the decade and so you’re going to see more supply coming online.” To your point, what happens after that? Because there is continued growth and need for natural gas globally, and so who is going to be competing for that? Is it going to be us? Is it going to be the Qataris? Is it going to be the Russians? I mean, I think that around the time when the Pars was announced, that there was a big announcement about the Qataris, that they were building a massive expansion of their facility. So is it going to be us or is it going to be someone else?

Brigham McCown:

Yeah.

Thomas Duesterberg:

Can I-

Steven Everley:

85 percent expansion is what Qatar-

Vince Erfe:

Yeah.

Steven Everley:

Qatar was supposed to have.

Brigham McCown:

Okay.

Thomas Duesterberg:

85 percent, is that what you said?

Steven Everley:

Yeah, that’s what Qatar said they’re going to expand.

Thomas Duesterberg:

Yeah. Just an anecdote, a couple of years ago I was at a conference on this general topic in Germany and leading, unnamed Qatari political official was there. And I asked him whether or not they were going to expand their production, they had pretty much frozen. And he said, “No, there’s no way, we can’t get the long-term contracts.” So the Pars comes in here, the Europeans start signing contracts with them, and so it’s 80 percent plus plan, at least for increasing their capacity.

Brigham McCown:

And do you think part of that is because it’s fairly safe to say that even if the war in Europe resolves itself, Russia is less than a reliable supplier? We will not be going back to the way things were, at least not for the foreseeable future, in addition to this expansion?

Kevin Book:

I mean, our policy didn’t happen by accident, proximity is a factor, just as it is with Alaska. And so the default expectation might be that there would be some return to Russia, I don’t think anyone should rule that out. A lot comes from the terms of the settlement, though, Brigham, like what is the end of the war? And particularly if Russia’s response to the taking of reparations before the war has ended, is that they want to establish some sort of different commercial terms when it’s time to contract. The price matters, proximity matters, and the terms of the settlement matter.

Brigham McCown:

Okay. That’s really good, and speaking of the Qataris’ right across the bay, so to speak, from them, are the Iranians, who share the largest reserve of natural gas, North Dome, Pars area, right. So have they expressed interest in replacing whomever, for LNG exports? Or do you see that as a possibility or not?

Kevin Book:

Anecdotally, and talking to people in the industry over the last few years, it seems that the Chinese are very interested in working with the Iranians to develop those resources. I am not aware of any concrete plans, but I think one of the reasons for a number of things the Chinese are doing, including the BRICS grouping. But also the Chinese effort to get their currency accepted as a mode of transaction. So Iran is accumulating a lot of Chinese currency, because they’re selling them a lot of oil under the, I mean, it’s pretty open now. What are they going to use that currency for? My guess is, they’re going to use it, in part, to help develop, further, their oil and gas industries.

Brigham McCown:

Okay.

Kevin Book:

That’s purely speculative, but.

Brigham McCown:

Well, these are all great aspects. And Kevin, you talking about the cost, location, geographic proximity, of course, very important as well. Let us, with about 15 minutes left, go ahead and open it, if we may, to questions from the audience. Who has a question for . . . Yes sir.

Doug Hengel:

Maybe more of a comment than a question. So Doug Hengel, with LNG Allies, but I’m also a former state department official, so I think about these things in kind of this global context. So I think the issue that the Biden administration has not really come to grips with is, we are an energy superpower now. Some call us, the reluctant energy superpower, we’re a net exporter. European Commission Vice President, Šefčovič, who was here not long ago, talks about us as being the guarantor for global energy security. I don’t think the Biden administration is really comfortable with that framing of the issue, so what happens if there’s Biden 2.0? I think that’s unclear, there are going to be conflicts about, are we really going to try to use our energy abundance to advance our national security interests or not?

If it’s Trump 2.0, I mean, we’re going to be talking about energy dominance, again, whatever that means, and there’ll be more thinking about, I think, trying to do that. But at the same time, America first, could mean keeping those resources here. We talked, Steve and I, a little bit about the price issue, beforehand. No, there hasn’t been an impact yet, but now we’re hearing about AI and data centers and all that thing. We may need a lot more natural gas here and-

Brigham McCown:

Yeah.

Doug Hengel:

Maybe we will be reluctant to export too much of it, so America first. So I think we’re still coming to grips with this and I think it’s going to be a while. So where does that leave the rest of the world? I’m not so sure, I mean, we always talk about diversity, we need diversity of supply. So we’re now, at the top of the heap again, but not clear how we’re going to deal with that.

Brigham McCown:

That’s a good point.

Steven Everley:

On that point, there’s kind of a, I don’t know if it’s bipolar or schizophrenia or whatever the word is. But on one hand you have the administration putting forward the pause and all of the signal that that sends to the market. And yet you still have folks within State department and other agencies, kind of quietly going around the world and actually saying like, “More US LNG.” They just don’t want to say it publicly, and maybe it’s an election year thing.

There was a story in the New York Times, just a few days ago, about Greece and the role that they’re going to play in terms of European energy security and wanting to kind of serve as an LNG hub. And the former ambassador to Greece, is quoted in there, as basically saying, “We want the United States to be the LNG champion and want it to be that guarantor of energy security.” So there’s that kind of element. And by the way, that happened just a few days after Politico reported that, essentially, the administration is still going around to Europe saying, “We’re going to send you gas, don’t worry.” Four months after the pause, they still haven’t quite convinced them-

Brigham McCown:

Yeah.

Steven Everley:

That there’s not going to be a disruption there, so.

Brigham McCown:

So do you think that’s because, for those of us who have served in the administration, we realize it’s not monolithic.

Steven Everley:

Yeah.

Brigham McCown:

Right, there’s not one voice and there are factions and it’s tribal and people are fighting. And we see that in this administration, the DOE folks versus the EPA, versus the White House sometimes, versus the operating administrations, who are like, “Hey, we’re just the safety agency. Leave us out of this.” Yeah, do you think that’s part of it? The administration itself doesn’t really speak with a coherent, single voice, because they’re at loggerheads with each other on some of these policies.

Steven Everley:

And that was reported early on, even before they actually officially announced the pause, that there were folks inside, the state department types, the diplomats, the sort of global energy security kind of people, the national security folks, were very much against a pause. Because they knew the signal it would send to the allies and everything, and just the general disruption. Even if the actual, “Oh, it’s only going to last 12 months and the projects will get back online and whatever else.” The damage that it can do diplomatically, and frankly, the extra work they were going to have to do to fly over there and kind of reassure people.

Brigham McCown:

Yeah.

Steven Everley:

And yeah, and on the environmental side, they’re talking to a different constituency that we talked about earlier, that’s younger, that is caring more about climate and wants to see a transition away from fossil fuels.

Brigham McCown:

Okay. Any other questions from the audience? Wow.

Steven Everley:

Nailed it.

Brigham McCown:

I guess, you’ve all answered. Let’s take the last five minutes just—oh, we have one.

Steven Everley:

May I-

Brigham McCown:

Carson Keller, go ahead, sir.

Carson Keller:

Hi, I’m Carson Keller, I’m actually Brigham’s intern here, at Hudson. I do most of my work remotely, and I just figured to fill the space with a question of my own. This is a bit of a more particular, focused question, having to do with the topic of America being one of the, I guess, the democratic block, if I’m going to call it that, LNG security guarantor. Even though we are currently in the situation we’re in right now. My question is with regards to our LNG exports to Asia, I know that we are a very high exporter of LNGs to both South Korea and Japan. My question is actually on the Philippines, specifically because their main gas field, the Malampaya gas field is about to run out. That supplies about 20 percent of the total energy to the Philippines as a whole, and their grid as it stands, currently, is already not that great. It’s in desperate need of an infrastructure overhaul. The trilateral talks, actually, were fantastic for guaranteeing a lot of the funds necessary to develop that. But I was wondering, if there was a possible market in the Philippines for American LNG?

Vince Erfe:

Well, I mean, I’ll say that certainly, I’m not on the international side of our folks, but I know that certainly, the Philippines is one of the countries in the region that certainly is being looked at as a potential need. My parents are originally from the Philippines, so I actually was just there visiting my mother in January, and so I tried to ask some of my relatives questions about some of that. But as far as I know, not being on the marketing team or international team, yes, certainly the Philippines is one of the markets that certainly, is being eyed and looked at as a potential place to send LNG.

Steven Everley:

They have made some investments too, recently. I know, in terms of LNG, and again, that’s the question of the pause, in the long term. Like folks are basically saying, “Please send us gas,” and this is not just the Philippines, it’s all over the world. They’re like, “We’re going to build the infrastructure, please send it.” Another interesting thing, this has mostly been around oil and particularly, natural gas, but I have seen some stuff in the Philippines discussions early on, whether it actually happens is another story, around nuclear. And that’s something that we could probably have our own different panel on in terms of the role that can play and the tailwinds behind that technology globally. And how that may be able to solve certain things relative to certainly, emissions, but also supplier agreements and everything else. So again, probably another topic for another time, but.

Brigham McCown:

Well, Steve, let’s keep with you, down at the end of the panel, closing thoughts. Then we’ll bring it back this way.

Steven Everley:

Well, I kind of made my opening comments, my closing thoughts. I wanted to kind of end with a flag wave there about how the United States, as being the guarantor of energy security or national security even and security around the world. We’ve talked a lot about global demand for gas and just global demand for energy. And I think that we are starting to come to grips and other people have said this too, in the previous panel in here. Just the realities of energy demand and the scale and the volume of energy needed to meet, not just the current system, but the growth.

Talking about adding the population of China and the United States to the world, every one of them is going to want to have the western way of life, right. All of the amenities, and that requires energy, so I think as we come to grips with that, we’re realizing that, as we talk about transition, it’s going to have to involve way more than just one or two technologies. Because we’re also going to have to talk about reliability, affordability, and we’re not going to get that by limiting the options that we have.

Brigham McCown:

Yeah, well said. Okay.

Vince Erfe:

I think I would also associate my thoughts with your comments, and certainly, the main theme that’s come across from both panels and Jennifer, your comments about the whole thing about reliability, do consumers really know what they’re getting? Do they understand that when you turn the lights on, where that’s really coming from, what’s necessary? And I think, certainly, unfortunate, tragic events like what’s happened in Europe, certainly brings more of a light on what the reality is. And certainly, there’s nothing like that kind of situation to really make people aware of it. I’ll say anecdotally, I was at a wedding last summer, where one of the bride’s relatives lives in Germany, married to a German woman and just people were just making chitchat or whatever. And I was like, “Oh, I work for this LNG company.” And he immediately said to me, he was like, “Oh my God, thank you for helping us keep the lights on. And we were being told to keep the temperature down to a certain portion.”

And I usually don’t, at these social events, try to talk about this stuff too much. But it was interesting to sort of hear that directly from someone who is sort of living in the experience over there. So anyway, I guess I would just wrap up to say that I think that, certainly, we, at Cheniere, are proud of our role to be able to provide a clean and reliable source of energy to friends and eyes on their world. And certainly, as also a continued driver for domestic natural gas production, which benefits American families and consumers and companies here. Because we are a big source of demand for them to keep turning the drill bit to be able to do what they do, so.

Brigham McCown:

Yeah, yeah, thank you, Vince.

Thomas Duesterberg:

I think I’ve been associated with the Hudson Institute for longer than anybody in this room. And I’d like to just go back a few years, the early days of the Hudson Institute, and this was when I first started becoming conscious of the debates that we’re having now. This was like the 19, late sixties into the seventies, there was this thing called the Club of Rome. And the Club of Rome thought, and their big report was about 1970, I can’t remember exactly when, but, “We’re running out of everything. We’re running out of oil. We’re running out of gas. We’re running out of minerals. And in 10 years we’re not going to be able to provide these things and we’re going to have to do something serious in terms of austerity.”

Well, early days of the Hudson Institute, the days of Herman Kahn, we had a guy named Julian Simon, who was, like Kahn, sort of went against the grain and was pro-growth. So he made a bet with Paul Ehrlich and some of those folks, about whether or not in 10 years the price of 10 different minerals and I think including oil, would be lower in 10 years than it was then, when we were supposedly running out of this stuff. Well, he won the bet, but think back, we thought peak oil was going to arrive in 1973, we started talking about that, stories about peak gas now. I think we ought to just remember those debates and in a free market system, if we, more or less, allow it to operate freely, we can probably solve some of these problems. We can sell gas to Japan and the Philippines without unduly raising the price of it domestically. So that’s my closing thought.

Brigham McCown:

Okay. Kevin, last word.

Kevin Book:

Well, I think we find ourselves in a situation where we can see that economics, wins out in the long term, it always does. But in politics, particularly in US presidential politics, there is no long term. So what you get is a conflict and it can create disruptive ripples. The other thing that’s going on, just to position this, the idea that you’re going to take a crisis and use the time when you are starving to project forward and say, “Well, okay, we’ve been able to tighten our belts for the war in Europe. We’ve been able to tighten our belts for the great recession.” And then expect that you’re going to be able to keep with that, when your appetite for energy rebounds as soon as the opportunity avails, it’s a very bad way to set projections.

So as much as there may be aspirational talks about some of the gas demand that could go away as soon as, in the next decade. The International Energy Agency projecting plateaus and declines, history suggests otherwise. And again, partly, with Steve’s point, about everybody wanting a western lifestyle. But also that, actually starving isn’t that much fun, if you want to lose weight, it’s a better idea to try to work out with investment and build economic muscle.

Brigham McCown:

Great, fantastic. Well, on that note, I would like to end this panel and thank all of our panel members for coming. I’ve learned a lot here, just with this panel and our first panel as well. And last but not least, I’d like to give a nod to the staff at Hudson who make all of this possible. There are a lot of people behind the scenes, behind the door over there, in the back of the room, that none of this would be possible without all those folks. And thank you also to, both you, here with us physically today and those watching online. We really appreciate it. And with that, we will be adjourned and thank you.

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