CERA: ChevronTexaco CEO calls for US energy policy

Feb. 15, 2005
David J. O'Reilly, chairman and CEO of ChevronTexaco Corp., called for a new US energy policy in his keynote address at the opening of a weeklong conference of energy executives in Houston, sponsored by Cambridge Energy Research Associates.

Sam Fletcher
Senior Writer

HOUSTON, Feb. 15 -- David J. O'Reilly, chairman and CEO of ChevronTexaco Corp., called for a new US energy policy in his keynote address at the opening of a weeklong conference of energy executives in Houston, sponsored by the Cambridge Energy Research Associates.

O'Reilly listed four reasons why a national energy policy is needed:

-- "The US is becoming more energy interdependent in terms of our dependence on diverse sources of oil and gas, our position as the world's largest consuming nation, and as a significant and often leading investor in international energy ventures," he said.

-- Currently high energy demand is not expected to decrease "any time soon."

-- Reliable energy supplies are "critical" to sustain economic growth.

-- "A constructive national discussion of energy policy would bring about a much better understanding of energy issues among key stakeholders, including the American public," he said.

"A new US energy policy doesn't have to be complex. It simply needs to be driven by two strategic objectives: transparency and alignment," said O'Reilly. "We need to make our policy tradeoffs clear. And we need alignment of energy policy with other policies central to our national interest—environmental, economic, trade, and national security."

O'Reilly cited as an example natural gas, "an environmentally clean fuel" that is in plentiful supply around the globe. "From an energy policy perspective, common sense would suggest that we develop natural gas supplies as quickly as economically feasible," he said. "But US environmental policy makes it difficult to access potentially significant resources in the Rocky Mountains and Alaska, as well as offshore. And at the local and regional levels, regulatory barriers have made investment in vitally needed natural gas infrastructure very difficult."

Alternate fuels
In addition to encouraging development of domestic gas and importation of LNG, he said, US policy also "should consider the role of alternatives to natural gas—coal and nuclear power, for example." Renewable energy resources should be added to the mix, along with improved energy efficiency, O'Reilly said.

"Another example of aligning policies to encourage the development of new energy sources is in the arena of trade and diplomacy," O'Reilly said. "Development of new energy sources will require trillions of dollars of investment, much of it in the developing world. And sustained investment requires markets that honor fundamentals such as sanctity of contracts, rule of law, and transparency."

He said, "Our diplomatic policies should encourage investment in oil and gas production to increase levels of production and improve access to global supplies. For example, despite its own plentiful reserves, Mexico is importing gas and petroleum products from an already stretched US market. Our government should make it a priority to encourage increased investment in new supplies."

Previous US government attempts to encourage investment by US companies in Mexico's oil and gas resources involved efforts to get Mexico to lift its constitutional ban against foreign ownership of those resources. O'Reilly did not indicate if he would expect a new US energy policy to go that far.

However, he said, "Safeguarding America's energy security must become a top priority of American policymaking. Energy security must be on the table when US environmental, trade, and foreign policies are being developed. In short, we should recognize the interdependence of these policies in achieving our country's strategic energy objectives."

O'Reilly pointed to Japan as "a nation that has long recognized its strategic reliance on imported energy." He said, "Japan's goals for national policy are to attain the '3Es' simultaneously: energy security, economic growth, and environmental protection. Japan coordinates its foreign policy, energy policy, and industrial policies to accomplish these goals—by strategically cultivating relationships with oil and gas producers and by diversifying its sources of energy."

O'Reilly called for a US energy policy "that is pragmatic and holistic and which reflects the reality of the world in which we live." And he called on energy industry representatives to educate the US public. "Americans must begin to think about energy in the same way they would think about national security or education or healthcare— as an essential enabler of our quality of life," he said.

Contact Sam Fletcher at [email protected].