The US is making strides toward lowering its reliance on foreign energy sources. Industry leaders underscored this message as they joined Gideon Fidelzeid for this Saxum-hosted roundtable in Oklahoma City.
Dan Harrison, SVP of administrative services and corporate relations, ONEOK
Teresa Henderson, SVP and GM, Dallas, Pierpont Communications
Michael Ming, former Secretary of Energy, state of Oklahoma (he stepped down at the end of May and will assume the role of GM for the GE Oil and Gas Technologies Center)
Mark Palmer, partner, Dallas office, Brunswick
Linda Rozett, VP of communications, American Petroleum Institute
C. Renzi Stone, CEO, Saxum
Kelly Swan, external relations manager, WPX Energy
Evan Tracey, SVP of comms, The American Coalition for Clean Coal Electricity
Facts about fracking
Gideon Fidelzeid (PRWeek): With hydraulic fracturing, you have competing messages of economic benefit and environmental concerns. How do you communicate given the divisive nature of the topic?
C. Renzi Stone (Saxum): Whether it's a producer or a company in the supply chain, it's about communicating what fracking is and what it isn't. Earlier this year, I had the opportunity to go out to a well that Devon was fracking and saw the entire process that takes place. My immediate thought, “What's the big deal?”
The process has become so fine-tuned, regulated, and safe. The industry must do a better job of communicating that. And visuals are a great way to show this message to people on the street. Generally, people are scared of what they do not know. A communicator's job is to take the fear away. We are doing better all the time, but there's a long way to go.
Linda Rozett (American Petroleum Institute [API]): People have concerns and are afraid, but the industry might have fallen behind initially in communicating about fracking because it is an engineering-driven sector. These are people used to making decisions based on facts, but facts do not drive out fears, as most communicators know. You must address people's fears by demonstrating real concern. This industry truly has a passion for doing things safely and in a way that is protective of the environment and the public's health.
Teresa Henderson (Pierpont Communications): I spent a year counseling a consortium of drilling companies in the Barnett [a geological formation in Texas that experts believe has the largest producible reserves of any onshore natural gas field in the US].
My first bit of advice was for them to compile really objective facts and lots of data. We hired a toxicologist. We brought in an independent engineering firm to test and diffuse some of the not-so-independent information that was coming out.
We also suggested town halls, which got extremely emotional and, sometimes, a bit volatile. Over a period of time, however, armed with real facts and compassion, we saw the pendulum swing a bit more in our clients' favor.
Michael Ming (state of Oklahoma): You have to look at fracking in two ways. On the one hand, it's just a catch-all for fossil-fuel development. So is that the debate or are we going to talk about the safety and environmental performance of the operation itself?
Those are two very different things.
On the operation front, it's about how you construct your wells and what you do with the water on the surface. How much do you use and reuse it? Those are very manageable issues. There's also the issue of whether a hydraulic fracture treatment propagates into fresh water zones. In truth, it's a very low probability, if not zero probability. In truth, this entire discussion is probably driven by the debate over fossil-fuel development.
The economic advantages fracking has created are enormous. The rest of the world is closely watching what's happening in the US and wishing it could happen there, mainly because of the economic stimulus. There's a price disconnect between natural gas and oil. In the rest of the world, those two prices are tied together. The economic stimulus just on that price difference in the US probably approaches a billion dollars a day. That's how much our economy is advantaged from natural gas development.
Kelly Swan (WPX Energy): The industry has made strides in demonstrating that what we do is safe. Our challenge is to humanize what we do as much as possible. What we take for granted as knowledge we have inside the company is obviously a vantage point our audiences don't see. As such, we have tried to simplify our messaging, rather than talk about the sophisticated side of the process.
Ming (state of Oklahoma): Sometimes the issues can be simpler than that. In south central New York, for example, it might be an issue of truck congestion. The industry needs to understand those local issues, take them head-on, and say, “If you're concerned about truck traffic, let's work with you to figure out what best to do.”
Fidelzeid (PRWeek): Fracking seems to be a clear path to energy independence and America has already made good strides. How can the US better position its message of energy independence from OPEC nations?
Evan Tracey (The American Coalition for Clean Coal Electricity): In talking about fracking, it doesn't help for the different energy and fuel sources to attack each other. We need to use all our resources. We need to continue to advance on all fronts so that we have a balanced and full portfolio, but the key is education.
If you ask people where electricity comes from, most point to the outlet in the wall. They need to know it's beyond the outlet in the wall. They need to know the tradeoffs, the risks, the rewards. It's telling them about the possibilities and the technology and how it connects to their lives – whether that's jobs, the economy, or low costs. The more people know, the more likely they will buy into the notion of energy independence and what must happen to get there.
Rozett [API]: For the last seven or eight years, the oil and natural gas industries' goal has been to raise energy literacy, to improve people's understanding about where we get energy, how much we use, how much we will use 30 years from now, and so on. An informed electorate on energy issues will be more likely to inform their politicians about their support for policies that promote domestic oil and natural gas. It is also important that Americans understand that future supply depends on fracking.
Mark Palmer (Brunswick): There's another way to tell the story. Many times, when we start talking about energy independence, we start talking about price. The problem is that people realize through price that energy is a fungible global commodity. As communicators, we don't focus on jobs, but that is the great promise of energy independence. It's really manufacturing a renaissance in jobs and economic activity. Those political and jobs-based discussions are much more important and, frankly, much more fruitful than talking about price.
A resonant message
Fidelzeid (PRWeek): For most Americans, the “price” message resonates the most – whether it's at the pump or on their electric bill. That must present a challenge to all other outreach efforts.
Stone (Saxum): Those messages Mark talks about become most successful when you break it down to the local level. It's a lot easier to talk about jobs and where energy comes from in your local community.
Many states are now looking at their renewable portfolio standards and are very excited to participate in related activities. However, the challenge in areas such as the Northeast and California is they don't have the production other states do. Much of the energy production takes place in the middle of the country for fossil fuels. Renewables are a different discussion, but we lack the communications strategies in those communities where there are fewer such jobs and less production.
Rozett (API): There is no silver bullet, but there is no getting around the fact that supply matters. The more energy we produce, the more secure we are, the better for our economy, the better for jobs, all of it.
Henderson (Pierpont): Some industry leaders say the US will be energy independent by 2020, but that almost sounds like campaign rhetoric. For those of us in this room, that's absolutely believable. If I go to my Homeowners Association tonight, though, I don't know that's believable to them.
So how do we make that a believable message and then get people behind it? We have to focus on what's important to the folks in our communities.
Tracey (Clean Coal Electricity): There's this head-and-heart problem. When you ask people about electricity, they value coal and renewables, but price also matters.
I have a friend who owns car dealerships. If his electricity bills go up 20%, that's three people off the floor and one out of the shop because he must light the lot every day. From a communications standpoint, we need to give people realistic expectations. Energy independence can't be just a political slogan. We have to show what it looks like, what it can look like, and here's the plan to get there.
Ming (state of Oklahoma): We already are energy independent for electricity.
We're not energy independent on gasoline, but just the fact that we're closing the gap is a huge psychological advantage to the US.
Dan Harrison (ONEOK): From a jobs standpoint, fracking in combination with horizontal drilling have been game-changers for the industry and have created a lot of jobs. That resonates in communities and in Congress.
I also look at price. Lower natural gas prices and the accompanying natural gas liquids process have been game-changers for the US petrochemical industry, which was on its heels globally until you saw lower prices. Now it is investing money in the US, whereas it was going overseas before.
We spend a lot of time on Capitol Hill talking about master limited partnerships, which is a vehicle we utilize to invest in a lot of these pipelines. Coming out of this economic downturn, the energy industry has created more jobs than other sectors of the economy. That's the message that resonates most vividly with our political leaders.
Swan (WPX): It's very telling that people are no longer asking if we can be energy independent. They're asking when. No one is questioning the supply capacity. The industry has demonstrated it and we're just scratching the surface on what supply ultimately can be.
Palmer (Brunswick): The demand revolution is coming. We're nearing the end of this discovery era in this new supply basin that we have called the United States or North America. The demand revolution is going to totally change the game. As we attract more industry and build incredible natural gas, oil stream byproduct machines, petrochemical plants, and so on – in addition to starting to export natural gas, which is also right around the corner – we'll have so much demand that we will need to develop all these discoveries we've made.
And there's a huge backlog of these opportunities sitting out there that lack two things to get them done – financial capital and human capital. There's a tremendous structure to attract capital and put it in the right place to get product from what's in the ground to where it's needed, but this industry is still a bit overwhelmed about this task at hand in the next 10 to 15 years to truly get this stuff out of the ground to where it will be used.
Ming (state of Oklahoma): The supply curve for natural gas is going to be defined by demand. It's always been defined by resource in the past. And it's happening so fast.
In 2005, Lee Raymond, then chairman of Exxon and arguably one of the most sophisticated oil and gas developers in the world, said the supply of natural gas in the US had peaked. That wasn't very long ago.
Harrison (ONEOK): In 2005, an investment analyst in New York basically told our management team that we were going out of business because imports would displace production here and our assets would be empty. Think how much the world has changed in the last seven or eight years in terms of the opportunity for the energy industry.
I got into this business in 1979 after the Iranian revolution. The question then was how do we reduce foreign dependence? Today, we're talking about when we have energy independence. It's a lot more exciting to be at this end of the pipeline.
Thinking about the environment
Fidelzeid (PRWeek): Can the industry shift focus to its environmental sustainability efforts when the economics of energy are so top of mind for most Americans?
Palmer (Brunswick): The companies that have been out in front of this discussion about the technology or the process also have the best opportunity to talk about what they're doing in these communities and neighborhoods.
Many such companies have done a great job of getting to the most local stakeholders possible because it's really not the company that tells the best story. It's the stakeholder that has experienced those CSR efforts. The greatest opportunity is to get the farmer upon whose land someone is operating to tell the story about how great these companies have been for their community.
Henderson (Pierpont): While the story might not be as exciting, it's better to tell it before you are in a position of remediation. It's just much more believable than when you're telling it as a make-good or a do-over.
Stone (Saxum): When you talk about energy independence, it invariably ties directly back to the price at the pump. If you control the supply and have a government willing to let the private sector invest appropriately, you can better control the costs.
It's a united effort between the trades, the energy companies, and the supply chain to explain that energy independence is the solution to the price-at-the-pump problem.
Rozett (API): Energy independence is really shorthand for energy security. Our goal is to have security of supply. Put supply in the marketplace and you will put downward pressure on price, but it's an international marketplace for the price. We can't disconnect ourselves from the international price of oil. We won't be able to wall off this country.
Tracey (Clean Coal Electricity): For us, it's a technology story. If we don't get serious into the all-of-the-above mode and decide to use everything accordingly and develop the technology, somebody else will. We'll find ourselves exporting coal and importing clean coal technology, and that's a missed opportunity for America when we've got 16 clean coal technologies that have been developed mostly in this country. That could change dramatically if the current trajectory of policy-making continues.
Ming (state of Oklahoma): The rest of the world is going to benefit greatly as the US becomes more energy secure. Geopolitically, it reduces the leverage of the cartel. It reduces the risks of an incident in the Strait of Hormuz. It provides more oil for developing economies elsewhere.
The US, frankly, has been taking a little more than its share of the world's oil, and there's more available for others. This will fundamentally change the military strategy of the US from one of defending shipping lanes such as the Strait of Hormuz. Not that much of US oil flows through there now, maybe 10%, but we pay 98%-plus of the military defense costs of that part of the world, so it forces the rest of the world to step up. That means a good thing for global geopolitical security.
Palmer (Brunswick): Our balance of payments will turn around as a result of this – not just because we will be selling more product into the world, but more companies and governments will invest in the US instead of in our debt. They will be investing in infrastructure in the US, which has a much bigger stabilizing influence as well.
This all sounds like nirvana – and we have to be careful of that, too. We have a responsibility to make sure people understand all the things that go into making this happen in the right way. But that is a tremendous opportunity.
Fidelzeid (PRWeek): It's worth noting how this conversation started with environmental sustainability and quickly turned to energy security. Does that not reinforce the challenge of conveying that message?
Harrison (ONEOK): That message is very important at a local level. If you're building a pipeline or are transporting energy, if you are not doing so in a responsible manner, it becomes a very important issue.
We spend a lot of time on the front end when we're getting ready to build a pipeline. We literally walk the pipeline and talk to everyone so they know who we are and how we operate. If there's an issue, we contact them. But one spill or one bad accident reflects poorly on the entire industry.
CSR is extremely important on the local level because that's how you make or break your reputation in terms of getting the license to operate and build a pipeline. I mean that both politically and regulatorily, but also within the court of public opinion.
Tracey (Clean Coal Electricity): You also must consider consumers' receptivity to the message. “Energy independence” is a great way to get people to at least focus and listen. That said, most folks in this country take our energy for granted. People aren't waiting to be engaged in this conversation. They almost have to be pulled into it.
Swan (WPX): The shift in today's conversation happened because we know from a strategic standpoint, CSR and our commitment to the environment is not something we can message. It's something we have to demonstrate and that happens at a very granular, local level. From a strategy standpoint, jobs and the economy is our strongest messaging. With environmental commitment, anything we do 365 days a year will be overshadowed by one hiccup, incident, error, or failure.
We must continually demonstrate to our closest stakeholders that what we do is safe, but it's something we have to live out on an operations standpoint. It's not something we can message because the public deserves better than just messaging about the environment.
Harrison (ONEOK): Years ago, my company at the time had an operating incident. A plant manager called me to say, “We have a PR problem.” My retort was, “No, we don't. We have an operating problem that has manifested itself. Until we fix the operating problem, we won't be able to address the PR problem.”
It's more about actions than words as it relates to the environmental message.
Palmer (Brunswick): Everybody has an issue with reporting CSR activities. It's really an operating activity that takes place 24/7 and is best told through the people that experience it. I was a VP of corporate communications for three huge companies and have written CSR reports. They are a compilation of activities that people have experienced. Frankly, the reporting should be viewed with a bit of a gimlet eye.
The best media encounters I ever had were taking reporters to the places where we operated so they could talk to the people about how they experience what we do.
Ming (state of Oklahoma): A debate now is over university endowments. Some schools say they're going to divest of any fossil fuel investment and university presidents say, “That's great, but that's where our tuition support comes from for families that otherwise wouldn't be able to send their kids to college.” All of a sudden, you have a real social conundrum.
Rozett (API): The energy industry is providing not just outsized benefits for local communities, states, and the federal government in terms of revenues, jobs, and growth, it's returning tremendous benefit to the owners of 401Ks, mutual funds, and university endowments and the like, essentially hitting above their weight class in every area.
This is another message for which we are trying to improve the public's understanding through energy literacy outreach.
Fidelzeid (PRWeek): Consumer outreach tends to focus on a company's reputation. For shareholders and other key constituencies, reputation is often trumped by bottom-line concerns. Does reputation have a key place in both?
Harrison (ONEOK): From an investment standpoint, we see certain classes of investors, public pension funds primarily, who demand we disclose or report on how we perform from an environmental and safety standpoint. It manifests itself in terms of shareholder proposals, but it's also important to the regular institutional investor because it all speaks to reliability.
If you don't act properly from a safety or an environmental standpoint, you are probably not a good investment because they want your earnings to be consistent and repeatable. If you are always having operating upsets or getting in trouble with regulators, the reliability issue becomes huge for the investment community.
Swan (WPX): The outside world is looking inside the companies to see leadership's decision-making capability and criteria. All that has an impact on your reputation, which factors into – if you're a public company – whether people invest in you.
Harrison (ONEOK): Investors are betting on management teams. The reputation instills confidence for investors, as does transparency.
Stone (Saxum): And it's proven that they'll remove them if they don't have that trust and integrity.
Harrison (ONEOK): Reputation matters, but you also must execute and deliver on your commitments. We could have a great management team in terms of ethics, values, and beliefs, but if we don't deliver what we said we would, that becomes a difficult choice for investors. Of course, even if you're delivering on your commitments financially, but not doing it the right way, that's a short-term strategy.
Henderson (Pierpont): Shareholders have certainly had their eyes open about the value of brand and reputation after Deep Water Horizon.
|Source: Saxum's The United States of Energy report|
A united front
Fidelzeid (PRWeek): Oil, gas, wind, solar, coal, nuclear, hydroelectric – so many different sources of energy. And the US has seemingly made progress toward a very balanced portfolio. Is this message resonating both domestically and globally?
Stone (Saxum): It feels like we're only at the very beginning of this story.
Ming (state of Oklahoma): I'm not sure I'd give us that good of a grade on a balanced portfolio. We were very highly dependent on imported fuels for transportation. We struggled in a lot of areas and invested a lot of federal dollars into all different kinds of technologies. We sought a silver bullet and somewhere along the line we missed, for example, traditional fuels.
There's an opportunity to take what we have and make it better, instead of trying to replace it ideologically with something that doesn't exist at some infinitely high marginal cost. We're fixated on some new fuel of the future, when in reality we throw away 60% of the energy that we use because our system is not very good.
That's where our opportunity is – viewing energy as a system.
Tracey (Clean Coal Electricity): From a policy standpoint, there's also a risk when you start picking winners and losers. Look at the New England states. They have become very reliant on natural gas over the last few years and have seen fluctuations four to eight times just because of supply, just because of temperature changes.
Our utility members would all say they want the diversity of sources, but they also don't want it to come at a mandated price because it made for a good headline or it made for a good political promise. They want it in a way that makes sense so they truly have portfolios of places to get their energy, buy their energy, and produce their energy.
Harold Hamm, CEO of Continental Resources and chairman of the Romney 2012 Energy Policy Advisory Council, spoke to Gideon Fidelzeid about developments in fracking, combatting misperceptions about the energy industry, and his experiences as part of the 2012 election process.
Gideon Fidelzeid (PRWeek): Discuss the evolution of your plan to bring the message of energy independence to the US public and how you became the spokesperson for American Oil.
Harold Hamm (Continental Resources): A few years back, many people were making a lot of disparaging remarks about oil – and doing so because we're in a competitive market. People were after market share. They were pressing down on oil and natural gas for wind and solar, and then eventually had gas competing with oil. So somebody had to step up, as a lot of the remarks being made just weren't factual.
I had to do something about it. So, probably five years ago, I really attempted to change the tide a bit. We've been on top of the learning curve with horizontal drilling, so as the renaissance occurred, I wanted to make sure everybody understood what was happening. I began reaching out to the public in different forms, talking about exactly what was happening with the new renaissance in energy, particularly with natural gas. We've developed a couple hundred years' worth of new gas supplies. We certainly made a lot of progress with oil. We understand what's happening. In fact, about three years ago, we made a declaration that America could be energy independent. Everybody's reaction was, “Wow, I can't believe that.” But we're doing it.
Time went on and fundamentals evolved. In fact, we were using space-age technology to drill down two miles, turn right, go two or three miles further, and developed these huge, vast supplies of natural gas. And as it unfolded, people jumped on board. Now everybody is on the bandwagon realizing what's available to us. People finally are saying, “This is really happening. This energy renaissance is going to change the world.” And it has.
Fidelzeid (PRWeek): Realistically, when can America attain energy independence?
Hamm (Continental): We're saying by 2020. And we think that by 2025, we'll be a net exporter. Certainly, we're ready to export natural gas. We should be exporting natural gas to the rest of the world right now.
Fidelzeid (PRWeek): A 2012 Harris Interactive poll showed that 93% of Americans believe energy independence is an important policy in the US. About 48% feel it's very important. It's hard to get 93% of Americans to agree on anything. What is it about energy independence that has resonated so well with the American public?
Hamm (Continental): We've been under OPEC for 50 years, but Americans are very independent people. We don't like to be under anybody's control. We should strive to be a net exporter that just does it all. And think about the psychological impact of that to our country, what that means in jobs and national security. And those are things the public understands clearly.
Fidelzeid (PRWeek): The environmental lobby has been largely successful in telling its story, but the energy industry has not been as effective in talking about its vast CSR and sustainability work. How can it improve its outreach?
Hamm (Continental): It starts with a concerted effort. The OERB [Oklahoma Energy Resources Board] has been one of those groups leading the charge and they have moved the needle.
I remember when Oklahomans thought the same way most others do about the industry, but after educating folks about what the industry does, how it does it, and how effective it is, perceptions have changed.
There are a few of us who fought very hard for a check-off program nationally, but it didn't go for various reasons. However, a lot of states are doing it and Oklahoma is the model now for many of them. [Editor's note: In Oklahoma's check-off program, oil and gas producers pay a fee based upon output and sales and the subsequent fees fund programs in energy-source education and drill-site restoration.] State by state by state, such programs are changing public opinion. Not everybody's, but many.
Fidelzeid (PRWeek): Fracking can be a complex process for most people to grasp. It also elicits primary thoughts of environmental hazards. It must be hard to get most people to focus on the positives.
Hamm (Continental): Fracking had become a diversion used by people – and I call them “absolutists” – who are absolutely against fossil-fuel use in any form, whether it's coal, gas, oil, and so on. They think everything should be done with solar windmills. And those messages have been very successful. These “absolutists” got a leg up on us, even though a lot of what they were saying wasn't the truth.
Fidelzeid (PRWeek): Please elaborate a bit more on some of the misconceptions about fracking.
Hamm (Continental): First, we don't need to develop everything at once. Let people get a grasp on it. But most of all, fracking is safe and we must make sure the public knows that.
In Oklahoma, there have been 500,000 wells drilled, I believe that's the number Commissioner Bob Anthony [of the Oklahoma Corporation Commission] told me recently. Most of those, 300,000 or so, were fracked. And so far we've had zero incidents of water pollution with that process. So it can be and is being done very safely. And within a controlled environment of a horizontal well, it can be done even more safely than ever before.
Fidelzeid (PRWeek): Oklahoma, Texas, and other broadly recognized energy producing states are obviously receptive to the industry's message, but what about regions that don't produce as much? Or states such as Pennsylvania, which has only in the past decade become a large energy producer, but is still not broadly recognized as such. What is your outreach strategy in those areas?
Hamm (Continental): You need to meet with the top officials in those states and get the message across to them of exactly what to expect and what's going on. It's a political process and the most people will have the most impact.
Recently, for instance, I was part of a group that met at the Syracuse Center of Excellence with a few foundations – the Bloomberg Foundation, the Environmental Defense Fund, and the Mitchell Foundation among them. We basically walked through everything that we do from a fiscal, regulatory, and legal perspective. Oklahoma has been producing oil for over 100 years now, so we have developed a lot of the processes that work most effectively within the regulatory and legal environments in which we operate.
The key for us was making sure that leaders such as Mayor Bloomberg and Governor Cuomo understand all that. Sometimes, the key is simply getting an audience with such leaders.
Fidelzeid (PRWeek): Speaking of leaders, let's discuss President Obama. In his State of Union Address this past February, he clearly outlined the production growth of oil and gas since he took office. How much credit does he deserve for that?
Hamm (Continental): Instead of taking credit, the best thing for America would be for him to embrace it. It's one thing to take credit. It's another to earn it. The policies we were working under had been there for 20 to 30 years and that had set the stage for it.
We finally got out from under OPEC. They didn't have enough production capacity to drive the price of oil down to nothing like they had always done and break us. So that's what happened. Every time we got going, they'd open the taps and drive the price of oil down lower than our cost of production with that. That went on for all those years, but suddenly they didn't have the capacity to do that any longer.
So we got back up on our feet and were able to do some of these things, such as trying these horizontal wells. It was and is a process. It's a lot of trial and error. People start out drilling short laterals just to prove this concept would work. The industry did that over a number of years, so it has taken a long time.
Just breaking the code in the Bakken [a rock formation underlying parts of North Dakota and Montana] took almost 10 years. The area was first mapped in 1996 and we didn't get going there until 2006. The Barnett [a geological formation in Fort Worth, TX] is another good example. That was 16 years in the making. So for somebody to pick up and take credit for all that….
I will say this. The best thing this administration could do is to embrace the fact that we could be energy independent. It should start laying the framework now to leave that legacy for America because it would be one huge legacy for this country to get there. That's what we need to pass along to the administration – and we're trying to do that.
Fidelzeid (PRWeek): What could this administration do that it is currently not doing to lead the US closer to energy independence?
Hamm (Continental): Go ahead and allow the permits to happen where we can start exporting to all of these countries that need it, particularly those that are basically under Soviet control in Europe. They could use gas desperately and we have it. Helping them could help the world economy a lot.
In addition, we are currently under rules that were passed in the 1970s, such as not being able to export crude oil. From some areas, though, we need to be exporting crude oil and to get it to the places where it could be consumed.
Americans are great innovators. We've used rail now in ways that I've never imagined before out in the Bakken. Everybody thought we needed to have pipes to transport, but we don't. We can get crude oil to these premium markets via rail and about 90% of the oil coming out of there now is transported by rail.
Who would have thought it? The oil from the Bakken is the best oil in the world because its consistent all the way across the field and it's buried at such depth that it's the same oil from one side of the field to the other. We are able to put it in a rail car and deliver it to a refinery that is getting a neat barrel of oil that's not blended. This is such a great innovation.
Fidelzeid (PRWeek): What compelled you to get involved in Mitt Romney's 2012 bid for the White House?
Hamm (Continental): I've never been in that political process before, but I thought it was necessary for me to step in. First of all, it elevated some of those issues up to a national level – and they're still elevated to the point where people have to deal with them. If nothing else, I'm glad to see that.
Fidelzeid (PRWeek): Obviously the price of gas is one thing to which every American can relate. It was certainly a key issue in the presidential debates and Romney was quite aggressive in discussing it. He ultimately lost, of course, so is it fair to say he did not tell his energy message effectively enough?
Hamm (Continental): I truly feel his energy policy was one element of his campaign that worked pretty well, even if it didn't sway the election.
Fidelzeid (PRWeek): You have been in the energy industry many years and have seen much change. If you could select a couple of highlights of how the industry has evolved, what would they be?
Hamm (Continental): One great example is the no-spill policy we have today. We don't spill anything and that's just the way it is. That wasn't always the policy of our company or others in the business.
Another interesting fact a lot of people don't realize: 70% of the wells being drilled today in the US are horizontal wells. They cost $7 million, $8 million in most instances. It's not your small operators doing so much of this, it's the larger operators that definitely know the rules and are sticking with them.
Fidelzeid (PRWeek): Given the current status of water policy – not only in Oklahoma, but in the US – what is your position relative to the use of water in the fracking process?
Hamm (Continental): We've had a pretty short supply of water in Oklahoma, so it's very precious and you learn to take care of it. However, in a lot of formations here, we're able to recycle and save that water and use it over and over. And this is happening in other states, too. This is another example of the innovation happening in the energy industry and in this country.
Palmer (Brunswick): It will be interesting to see if our new supply revolution in natural gas translates to transportation fuels. The innovation that will need to happen for that will be financial capital being allocated to the infrastructure it takes to make that work. It's probably going to happen because a market potential exists and someone will fulfill it. That's how we most efficiently pick winners and losers. All that said, it is still important to be researching solar, wind, hydrogen fuel cells, and all the other potential energy sources.
Ming (state of Oklahoma): The government's role is to help us enable options, but I will say this every time – the ballot box is a very inefficient place to allocate capital.
Rozett (API): Energy has become politicized. There are Democratic fuel sources, there are Republican fuel sources, and that is not to the benefit of the fuel sources overall nor to this country overall. Our industry can help by demonstrating to the American public what is an all-of-the-above energy strategy and how that benefits this country.
Fidelzeid (PRWeek): All of the varying energy sources represent different industries – and can be viewed as competitors or colleagues. From a communications standpoint, however, there would seem to be a united message that could be conveyed. Is it being told?
Tracey (Clean Coal Electricity): Any time we look at polling that tries to gain market share at somebody else's expense, you end up losing people you already have. It's a stronger front when it's unified and everybody is in the solutions business. When you avoid pointing out everybody else's problems, you seem to be able to advance the argument and make it less political.
I'm selling something and you're selling something, so of course we compete on some level. From a policy standpoint, though, when you have an EPA that wants to continually move goalposts around and make it hard for utilities – between zoning, permitting, and all the decisions that take such a long time to make – that's not helpful to the larger mix of energy independence.
We all need to take a little bark off our own tree and just find ways to deliver unified solutions to policymakers so we get to more common ground where policy is shaped that makes sense, as opposed to continually getting into food fights over this and that.
Rozett (API): In the energy sector, it's not competitors or colleagues; it's competitors and colleagues. I see that in the API. Natural gas companies are very competitive with each other, but they are also colleagues and work together in certain areas.
Ming (state of Oklahoma): Natural gas and wind power, for example, complement each other very well even if they are also competitors for certain markets. Of course, energy efficiency complements them all.
It's also interesting when you think about, for instance, fuel producers. They can view anything related to energy efficiency as a competitor because the goal there is to use less fuel. But you can flip that around and say energy efficiency leverages the value of all fuels because a car that gets 25 miles per gallon versus one that gets 50 miles per gallon, the latter has now made the oil field twice as valuable.
Swan (WPX): In the eyes of the consumer, there's one bottom line – reliability. They just want the fuel and the lights to turn on when they're supposed to.
Ming (state of Oklahoma): And they want value. A lot of things go into value, one of which is that when you flip the switch, the lights go on.
Swan (WPX): All the fuels complement each other, at least from a reliability standpoint.
The world is watching
Fidelzeid (PRWeek): Is the story of America's energy independence resonating globally?
Ming (state of Oklahoma): As noted earlier, it's not just what you say, but what you do. Look at specific areas around the world. West Africa certainly knows what we're doing because the market for crude into the US for them is dwindling. They have to look elsewhere for places to sell their crude.
Saudi Arabia is looking at the US model and wondering if, maybe, they shouldn't be using a million barrels a day of oil to generate electricity that they could be selling.
A lot of global companies are feeling the impact – positively and negatively – of what's going on in the US right now.
Harrison (ONEOK): The US' quest for energy independence does have an impact globally just in terms of some geopolitical issues. When you depend upon other countries for crude oil to drive your economy, that's a totally different dynamic than if you have more resources at home.
Rozett (API): We also have to recognize, as we communicate about energy issues, particularly oil, that there is a portion of our supply that comes from US companies producing oil here, a portion of our supply from foreign companies producing oil somewhere else, and still another portion of supply that comes from American companies producing oil outside the US. It's not such a clear line between the US and the rest of the world.
Palmer (Brunswick): Any company should be free to allocate their capital wherever they believe they will create the best return for their shareholders. Consequently, they also should be free to pick any partners from around the world to share the risk of their activities here in the US, as long as those partners clear our valid US security concerns.
We have a process called CFIUS [The Committee on Foreign Investment in the US] that vets that and there's been an incredible change in the view of being able to “de-risk” your portfolio with companies and entities from around the world that are clearing CFIUS hurdles now that would have been unheard of in 2005.
I participated in 2005 in the Unocal-CNOOC [China National Offshore Oil Corporation] negotiation and it was red hot politically. From both a financial and media standpoint, we won every battle. People agreed that it made sense to allow this pursuit. Politically, we failed.
In 2011, China's Sinopec bought a big share in Devon. Not a problem. Sailed right through. That is a good thing. We ought to be aware of that, so when we talk about telling the story globally, we have to accept global solutions because that will have a much greater impact on the allocation of capital. The benefit of that movement of capital is in human capital. People will have more opportunities.
Ming (state of Oklahoma): You have to be careful with the term “energy independence.” It doesn't just mean you can have a fence all the way around this country and nothing's flowing in and out.
I look at independence as reducing our vulnerability. We have not had good options in the past. We've been vulnerable and, worst case, something happened. We're a lot less vulnerable now than we were, but we're still at risk.
Harrison (ONEOK): Many probably don't remember this, but in 1973 or 1974, you couldn't buy gas on Sunday because we didn't have enough supply. There was the Arab oil embargo. We were very vulnerable – and that's the key point. We don't necessarily have to be isolationists, but if we can create more supply here in the US, it gives us more options and makes us less vulnerable to others.
Fidelzeid (PRWeek): Identify one message about the energy industry that you hope increases in resonance over the next year or so with your various key constituencies.
Tracey (Clean Coal Electricity): It all comes down to energy IQ and for more people to better understand all that goes into lighting their homes and the like. They would also have a greater appreciation for why fuel diversity is important to the larger goal of energy independence. Public opinion shapes public policy and it's important we have a broad message and let people deal with the facts, as opposed to a lot of rhetoric that comes from every end of this debate.
Henderson (Pierpont): On behalf of our clients, it would be great to start with a deficit of guilt by association for our industry. It would be terrific to get to the point where, reputationally, we could start on a level playing field instead of having to dig out of a hole from the beginning.
It would also be advantageous if we looked at this as more of a North American approach, instead of just a US approach. We can talk about our friends in Canada and the friends we're making in Mexico and how, if we all work together, we have a stronger coalition geographically and geopolitically.
Swan (WPX): Everyone should understand that what we do in the energy sector benefits every person in this country. As a father raising a large family and managing a budget every month, the fact that the supply of natural gas is so plentiful is another benefit to our family. For anybody who cooks, drives, whatever, the energy industry is benefitting you.
It would also be great to see more civility in the communications arena and bring more parties to the table. More civility will advance energy education.
Harrison (ONEOK): We can come up with all sorts of creative messages and cutting- edge ways to deliver them, but they won't resonate if the actions are not behind them. For the energy industry, this is particularly important.
I also believe that communications in the energy industry needs to be a contact sport. You must engage with your stakeholders. You must listen to their concerns and address them. By its very nature, communications only works if there's a sender and a receiver and you can't only engage through cutting-edge technology. You have to get out there and talk to people, too.
Stone (Saxum): There needs to be widespread adoption by the broader energy industry so that all the pressure is not on the big guys to tell the story. The work needs to be done all the way down to the local level, with those people participating in the process.
There needs to be a broader understanding that this industry is good. It's not oil. It's not gas. It's not wind or coal. It's energy and it's a united industry. America can be proud of the innovation that still takes place, the safety record that this industry has. That part of the message should and can become more broadly accepted.
Ming (state of Oklahoma): The physical definition of energy is the capacity to do work, so a key point has to be about resources. It's about technology. It's about the energy system. We are short neither on energy nor resources. And technology is moving really fast right now and we can use it to better extract those resources.
And there are also technologies that we haven't tapped yet that might be even more game-changing than what we already do. If you find a way to economically capture CO2 from coal-fired power plants and use it for enhanced oil recovery, it would be far bigger than anything we do right now in horizontal and fracking technologies. Talk about a complement. That would be enormous.
The potential for enhanced oil recovery with CO2 exceeds all the oil that's been produced in our state's history and the place to get it would be coal-fired power plants. It's just not economical today, but it could be.
Rozett (API): In a year's time or so, it would be great for more people in this country to have a strong recognition that if you are in favor of the safe, environmentally responsible, and protected development of natural gas, then you are standing with the industry. People should really have a better understanding that the energy industry is driving safety, environmental performance, and higher standards.
Palmer (Brunswick): Our industry needs to focus on listening, observing, acting right, and speaking a little more humbly.