John Kerry warns Big Oil. Big Oil pushes back

Source: By E&E News staff • Posted: Wednesday, March 3, 2021

White House climate envoy John Kerry starkly warned the oil and gas industry yesterday that it could be left behind if it doesn’t clean up its products and transition to cleaner forms of energy.

The heads of the top three U.S. oil companies said the administration should tread carefully and argued that the world will rely on fossil fuels for decades.

The back-and-forth occurred virtually during panels at CERAWeek at IHS Markit. Along with his warning to the oil industry, Kerry called for a revamped electric grid and a major push on “green,” or renewable, hydrogen.

“On hydrogen, that’s a jump ball right now. We need to get much more involved in the development of that,” he said.

Kerry pitched the Biden administration’s push to tackle climate change and cautioned that legacy fossil fuel providers could find themselves with stranded assets if they don’t change their business practices.

“The market is changing, people want electric vehicles, they’re looking for solutions,” Kerry said. “If you’re a chieftain of an oil and gas company, you can’t help but read the tea leaves, the spreadsheets of what’s coming in front of you as you look at where the market is going.”

Kerry, who spoke on a panel with Obama-era Energy Secretary Ernest Moniz, outlined a future in which people are buying less gasoline, adding that President Biden intends to build 500,000 EV-charging stations and wants to transform 500,000 school buses to run on electricity.

“Where is the revenue going to come from?” Kerry said of oil and gas companies. He charged that some companies are “obviously fighting to hold off that inevitability, but that fight is useless and you’re going to wind up on the wrong side of this battle.”

As the Biden administration maps out a transition to cleaner energy, Kerry said he is hoping that “many of the folks” at the summit will embrace change.

“What they ought to be figuring out is how do we become not an oil and gas company, but how do we become an energy company,” Kerry said. “How do we reduce the byproduct of oil and gas, which is carbon, which is the problem, and methane, which is a problem. That’s the challenge.”

He noted, but said he would not name, “some companies,” which are moving aggressively to make the transition. But others, he said “continue to fight to hold on to whatever the market share is, which is going to diminish.”

Hydrogen

Oil and gas companies already have pipelines that could be used in an energy transition, Kerry said, citing the potential to transport hydrogen.

“There are huge opportunities here,” he said. “Oil and gas has incredible infrastructure, incredible capacity to move energy from one place to another. What if that happened for hydrogen?”

Gas utilities in multiple states are carrying out pilots on producing green hydrogen — which is produced with renewable electricity, unlike the natural gas-derived kind that’s already abundant — and blending it into natural gas streams. Trade groups have said they see the energy source as part of their future and that the federal government should expand research and commercialization activities for green hydrogen.

But gas interests need to accelerate their efforts, said Kerry. “The fossil fuel industry could do a lot more to transition into being a full-fledged energy company that’s embracing these new technologies.”

Chevron Corp. CEO Mike Wirth, though, pointed out that California already built hydrogen filling stations in the early 2000s, only to see them go unused.

“As an industry, we can’t give the market what it doesn’t want,” he said.

Kerry’s comments also raise questions about the cost of green hydrogen, which is more expensive than standard natural gas.

U.S. utilities are currently testing a low-concentration blend of hydrogen into their gas systems, and researchers say it remains unclear how expensive it would be for hydrogen to become a widely used fuel — or if it would require hard-to-execute retrofits on the appliances being used by customers.

Not every pro-hydrogen policy is likely to find universal support among environmentalists, either. When hydrogen is consumed in a fuel-cell system, like the kind that powers cars and trucks, it gives off no emissions.

But some groups have pointed out that if green hydrogen is combusted directly, it can emit nitrogen oxides, depending on the equipment used in that combustion process.

More broadly, Exxon Mobil Corp. CEO Darren Woods said at CERAWeek that the developing world will need reliable — and cheap — fuel to produce electricity as people move into the middle class.

“As people’s lifestyles improve and they have access to better standards of living — their use of electricity grows,” he said.

CCS, Keystone XL and methane

Oil companies have embraced some of Biden’s proposals, such as reducing methane from the industry, but had warnings yesterday about other administration plans, like a potential ban on leasing from federal land.

Extending the current leasing moratorium on federal land would simply force the U.S. to import oil from other nations with looser environmental rules, ConocoPhillips CEO Ryan Lance said at CERAWeek.

“Some of the lowest GHG production in the world is occurring right here in the U.S.,” Lance said.

Oil executives at the conference also criticized the administration’s decision to cancel a permit for the Keystone XL pipeline, which would carry oil from Canada’s oil sands to U.S. refineries.

Canadian Natural Resources Minister Seamus O’Regan, though, called the decision “an initial hiccup” and said the two countries still share a number of common priorities on energy and climate.

“I think the really good news is that with the Biden administration, their values on combating climate change, the need to do that, the need to make sure that our economies continue to grow and prosper, the need to make sure that everybody is included — these are priorities that are aligned with ours,” O’Regan said yesterday on a panel of international energy ministers.

Other companies said they’re enthusiastic about some of the administration’s plans. Pioneer Natural Resources Co., for instance, has pushed to reduce methane emissions in the Permian Basin and other oil fields, something the Biden administration has talked about.

“We fully support what they’re doing on flaring, venting and so on,” said Scott Sheffield, CEO of the shale driller

And Occidental Petroleum Corp. CEO Vicki Hollub said she sees common ground with the Biden administration on carbon capture. Oxy is planning a plant to capture carbon dioxide directly from the air, which could allow the company to produce “zero-carbon oil” (Energywire, Dec. 11, 2020)

“What we should not be talking about is eliminating fossil fuels, we should be talking about eliminating emissions,” Hollub said. “If we can provide — and we will — net-carbon-zero oil, that is what the world needs. The world cannot achieve the goal of the Paris accord without the oil industry helping in that. We can be the leaders in that.”

Collin Rees, a senior campaigner at Oil Change International, said the industry’s emphasis on technological solutions shouldn’t distract the Biden administration from the broader climate goal of phasing out fossil fuels.

“Emissions are absolutely a problem, and we also know that we need to deal with fossil fuels,” Rees said. “All of the research shows that we have to be doing both at once — we have to be phasing out the extraction of fossil fuels and working to reduce emissions.”

Kerry said time is essential. The world’s governments will have to exceed the reductions they promised as part of the Paris accord to keep the world on a path to keep warming to 1.5 degrees Celsius above preindustrial levels. The U.S. could announce its new emissions reduction goal, known as a nationally determined contribution, at a climate conference later this year in Glasgow, Scotland (Greenwire, March 2).

“There are all kinds of ways to transition and to accelerate this transition, which we need to do” he said. “I don’t think there’s any rocket science in it, but there still is resistance to this transformation and that’s something we really can’t afford any more.”

Grid and Texas

Kerry added that the U.S. needs better electric infrastructure and the ability to transmit energy across the country, citing the collapse of the Texas power system during last month’s snowstorm as a “prime example.”

Texas is largely independent from the rest of the U.S. system, which has grids that serve the East and West coasts, along with a northern line through Chicago and into the Dakotas.

“We have a gaping hole in the middle of our country,” he said. “And you can’t send energy from one place to another. ”

He noted that Moniz had “the scars” from trying to put together the system and facing political opposition.

“We can’t afford that anymore,” he said. “We need to have a smart grid.”

Kerry said the U.S. is working with Canada, as well, to increase the amount of clean energy coming from the country.

“But we’re going to have to get rid of some of our chauvinism and parochial components that resist common sense and the need to move hastily to get this done,” he said.

Reporters Lesley Clark, Mike Lee, David Iaconangelo and Carlos Anchondo contributed.