The election of Arkansas Gov. Bill Clinton as U.S. president might help oil and gas, industry leaders said last week.
But the hope, expressed at the American Petroleum Institute's annual meeting in New York, depends on Clinton's refusal to pursue his campaign energy and environmental promises-or on failure of the resulting policies if he implements them.
API Pres. Charles J. DiBona and Chairman C.J. Silas, chairman and chief executive officer of Phillips Petroleum Co., argued that the Clinton campaign's antioil, interventionist energy prescriptions conflict with its promises for the U.S. economy.
Above everything else, they insisted, economic performance will determine success or failure of the Clinton presidency.
"The proposals in the Clinton campaign's energy platform, if implemented, could substantially raise the cost of doing business and cause the economic situation to worsen significantly," DiBona declared.
Silas said voters gave Clinton a "strong, clear mandate" to "get our economy rolling on the fast track again." Therefore, he said, "There is no reason to overreact to this change of administrations."
DiBona called on industry to emphasize that the U.S. is not running out of oil, antioil energy policies send jobs overseas, and the industry is improving its environmental performance and providing clean burning fuels.
API representatives at the meeting elaborated on DiBona's environmental point with reports on an API initiative called "Strategies for Today's Environmental Partnership" (STEP). Other speakers reported on the status of vehicles powered by fuels other than gasoline.
And two national conservative political figures blunted API's optimism with stern warnings about the coming Clinton administration.
Jeane J. Kirkpatrick, former U.S. ambassador to the United Nations and now a professor at Georgetown University, cited Vice President-elect Albert Gore's book, Earth in the Balance as an expression of "romantic environmentalism," a set of ideas she called "colossally hostile to a market system."
She said last June's Earth Summit in Rio de Janeiro showed that remaining proponents of global socialism have made environmentalism the new vehicle for redistribution of wealth. During that conference, Gore, whose book treats consumption as an addiction and calls U.S. civilization "dysfunctional," strongly criticized U.S. resistance to the extreme proposals that emerged.
"You really need to read this book," Kirkpatrick told API members.
Conservative political commentator John Sununu, former Bush administration White House chief of staff and governor of New Hampshire, said he expects the Clinton administration to raise business costs by increasing regulation.
And he characterized the hopeful tones of Silas' speech on energy and environmental policy prospects as "wistful optimism."
THE MANDATE
DiBona rejected interpretations of the presidential election as a mandate for government interventionism or a preference for economic pump-priming over supply side economics.
"This election was clearly an expression of exasperation and a call for action, not talk, about jobs and economic growth," he said.
Clinton thus will have to avoid initiatives on government spending and taxation that alarm financial markets. And Congress will have to resist anti-growth legislation.
The president-elect's campaign support for big cuts in U.S. consumption of energy, especially oil, clash with those economic imperatives, DiBona said. Furthermore, suggestions that U.S. gas can replace significant volumes of oil in a growing U.S. economy amount to "wishful thinking."
Energy use constraints outlined in the Clinton campaign imply price increases sufficient to preclude economic growth, DiBona said, "That's not what the public voted for."
The API president also challenged environmentalist assertions that energy efficiency mandates have no costs and that environmental regulations create jobs overall.
Unless the economy recovers quickly, he said, Clinton will have to "reevaluate his economic and energy strategies," and the importance of allowing the oil industry to do its job will become clear.
Clinton demonstrated a practical approach to problems such as these in his work as chairman of the Democratic Leadership Council and governor of Arkansas, DiBona said. And in any case he will lose the support of extreme environmental groups, which depend on their criticism of government for fund raising.
INDUSTRY'S MIGRATION
Silas set the energy and economic challenges of the Clinton administration in the context of the oil and gas industry's investment shift away from the U.S.
Rising costs and tightening limits on rewards threaten to make the domestic petroleum industry "an undeclared endangered species," he said, citing leasing problems and the costs of eliminating risks as well as even trace amounts of pollution.
"You don't improve the economy by driving away major sectors of that economy," he said.
He disputed the views that deliberately slow economic growth helps the environment and that the U.S. should quickly convert to unconventional fuels.
"The very magnitude of our dependence on fossil fuels makes nonfossil alternatives very long term options rather than short term solutions."
By moving outside the U.S., Silas said, oil companies are responding to countries that make jobs and economic growth top priorities and therefore encourage oil and gas investment.
"Maybe this lesson will be lost on the Clinton administration," he said. "But maybe not."
STEP INITIATIVES
API is launching a broad environmental initiative to help the industry meet public and political expectations, said Ron W. Haddock, president and chief executive officer of FINA Inc., Dallas.
He noted that a poll conducted for API revealed that 60% of the public disapprove of the job being done by the oil industry, 74% feel companies would rather pay a fine than clean the air, and 76% would not pay attention to industry's point of view.
Further, 64% believe air pollution is an important problem that requires stronger government regulation in spite of air quality improvements achieved in recent years.
Haddock said the industry handles 30-35 million b/d of oil and products and spends about $10 billion/year on environmental, health, and safety programs. The Environmental Protection Agency estimates that spending level will double by 2000.
He said, "We need to make the good better, work to improve the cost effectiveness of environmental regulation, and ensure that the public gets reasonable return on money spent."
The cost of environmental regulation is rising without clear commensurate benefits, and costly regulations tend to divert capital investment to areas where the costs of doing business are lower.
Haddock chairs API's strategic planning oversight group.
Haddock outlined these main components of the STEP program API started in 1990:
- API adopted a set of guiding environmental principles and made their acceptance a condition of membership in the institute.
API Executive Vice Pres. William F. O'Keefe told an API press briefing member companies must certify they comply with principles in API's bylaws. Severe penalties are provided if a member's design or operating procedures are found to be out of compliance.
- API developed a set of management practices that will help focus the management of environmental, health, and safety issues within companies. The practices will serve as a bridge between company actions and these principles. API established a set of management practices for each of seven strategic elements: pollution prevention, operating and process safety, community involvement, crisis readiness, product stewardship, pro-active government interactions, and resource conservation.
- Marine Spill Response Corp. (MSRC), the world's largest spill response organization, is expected to be fully operational by August 1993.
- STEP includes $20 million in auto/oil industry fuels research to determine which combinations of vehicles and fuels will deliver the most affordable environmental benefits.
- API reviewed for environmental compliance more than 400 of its equipment and operating standards and practices that cover all aspects of industry operations and as a result is revising nearly 100 of them and preparing 20 new ones.
- API is developing strategic plans for used motor oil recycling, operating hazards, groundwater protection, and air emissions reduction.
- API plans to issue next month the first in a series of reports that documents and demonstrates the industry's achievements toward bettering the environment.
- API is developing a program to involve people from outside the industry to act as a sounding board and a means of identifying concerns and getting feedback.
FINA's Haddock said API realizes it will take time to make progress, for that progress to be recognized outside the industry, and for public attitudes toward the industry to change.
RECYCLING MOTOR OIL
API has developed a program to make it easier for the public to have used motor oil collected, said Charles Krambuhl, API director of manufacturing.
EPA says 90-95% of the estimated 200 million gal/year of motor oil changed by do-it-yourselfers is dumped in backyards, drains, storm sewers, or other places where it can threaten groundwater.
As much as 70%/gal can be recycled as fuel for power plants, refineries, and factories, lubricants for cars and trucks, and components of asphalt and other products.
API has worked to develop effective state legislation designed to encourage permanent collection of used oil, and 15 major oil companies have voluntarily established about 8,000 used oil collection sites in 48 states and the District of Columbia. There were only about 800 sites in early 1991.
Early programs in six U.S. cities are saving a combined 285,000 gal/year, ranging from 7,000 gal/year in Florence, Ala., to 140,000 gal/year in San Jose, Calif.
Model statutory language developed by API calls for collection to be convenient to the do-it-yourselfer, educates oil changers on recycling, contains management standards for all who handle used oil, and recommends funding mechanisms.
Revenue for recycling programs can come from a state's general fund and sales of recycled oil. Corporate sponsors in Houston paid about $25,000 to outfit six recycling trucks with racks, install a holding tank, and purchase thousands of milk jugs for residents.
Krambuhl said South Carolina, Texas, California, Louisiana, and Florida have legislation similar to API's model bill, and Delaware, Kentucky, Maryland, New Jersey, and Virginia either have programs with major components that API endorsed or are considering adopting the entire model bill.
API distributes generic signs, posters, decals, bumper stickers, and other materials designed to aid municipalities in implementing oil recycling efforts. It also distributes educational and reference materials.
Krambuhl said API has attempted to cooperate with environmental groups on oil recycling but found that some of those groups find it in their interest not to cooperate because their funding depends on conflict.
SPILL RESPONSE PLAN
MSRC, an independent nonprofit corporation, expects to receive its first vessel later this month. Twelve other hulls are in the water.
MSRC will not respond to all oil spills, take business away from commercial cleanup operators, or compete with existing regional cooperatives.
It will maintain a cadre of nearly 400 persons trained in combatting spills.
MSRC's systems approach consisting of rapid response, recommended action, control, removal, temporary storage, sustained logistics, communications, and documentation. Virtually everything on the list is required to successfully prosecute an oil spill response, said Greg Rixon, MSRC director of public affairs.
MSRC is organized in five regions, each with one regional response center:
Region 1, Maine to Oregon Inlet, N.C., four oil spill response vessels; Region 2, North Carolina to Florida Panhandle including the Caribbean, three vessels; Region 3, Alabama to Texas Gulf Coast, four vessels; Region 4, California and Hawaii, three vessels; Region 5, Oregon and Washington, two vessels.
Alyeska Pipeline Service Co. maintains about the same level of equipment in Valdez, Alas., as one of MSRC's regions, and a Cook Inlet cooperative has a large capability there. MSRC is permitted to operate in Alaska but maintains no presence there.
RESPONSE HARDWARE
Another 22 prepositioned sites in the Lower 48 states will have 11 vessels and warehoused equipment. All equipment and material is portable. MSRC will have an extensive database management and a mobile communications system.
MSRC soon will have 16 dedicated oil spill response vessels costing $188 million, the largest commercial shipbuilding contract in the U.S. in more than a decade, Rixon said.
The 210 ft vessels are outwardly similar to workboats but can store and heat more than 4,000 bbl of oil. Designed for a crew of 38, each vessel has a separator to deal with a typical recovered mixture containing 80% water.
Until August 1993, MSRC will respond within the limits of its capability.
MSRC also will operate 14 barges each capable of storing 40,000 bbl of oil, 96 skimming systems, and 300,000 ft of boom. The skimming systems include 16 of the world's largest commercially available skimming systems, only two of which were available at the time of the Alaskan spill.
"We will have a capability in each of these five regions to handle a spill of the magnitude of the Exxon Valdez," Rixon said. "That's 30, 000 tons of oil."
PIPELINE SAFETY PLAN
API also has broadened a pipeline safety public education program developed in the early 1980s in response to the Hazardous Liquid Pipeline Safety Act of 1979.
The program's goal is to make the public, excavation contractors, and government agencies aware of how to recognize and report a pipeline emergency, said Perry A. Smith, public affairs coordinator, Exxon Pipeline Co., Houston.
"The activities that make up the public education program assist pipeline companies in carrying out two of the commitments found in the STEP guiding environmental principles. They are the commitment to recognize and respond to community concerns about our operations and to operate our facilities in a manner that protects the environment and public safety," Smith said.
Early efforts concentrated on print media advertising, but this has been expanded to brochures, television and radio messages, videotapes, and other educational information.
About $200,000-300,000/year comes from an annual solicitation paid by participating pipeline companies. About 60 companies contributed funds used to produce messages broadcast as public service announcements and monitor their use.
The messages ran about 5,400 times on 92 television stations in 86 cities in 42 states and 40,000 times on 650 radio stations in 500 cities in 50 states.
API published two recommended practices in 1991: RP1122, Emergency Preparedness and Response for Hazardous Liquids Pipelines, and RP1123, Development of Public Education Programs by Hazardous Liquids Pipeline Operators.
Future announcements will feature Piper the Owl, a cartoon character developed for public information announcements.
NONOIL AUTO FUELS
Vehicles fueled by electricity and natural gas are making technological progress but remain more expensive than those powered by gasoline.
John R. Dabels, director of market development for General Motors Electric Vehicles, cited surveys showing an important reason people are interested in electric vehicles.
"For some reason, they don't like to go to the gas station," he said.
Electric vehicles are more expensive to buy and operate than gasoline powered vehicles. But economics are improving from technologies such as low rolling resistance tires, regenerative brakes, and improvements in aerodynamics and propulsion efficiencies.
All commercial electric vehicles use lead acid batteries. Research might produce a replacement for the lead acid battery, but Dabels said, "I don't know when that will happen."
At present, batteries last for about 25,000 miles and cost $1,500-2,000 each. Median price for electric vehicles is $15,000-16,000, with an upper limit of about $20,000.
The GM Impact electric car can run about 100 miles before its battery requires recharging. For a spent battery, recharge with 220 volt current takes 23 hr.
Among the advantages of electric vehicles, Dabels said, is the ability of owners to have cars checked and to some extent serviced through chargers in their homes.
Interest is growing in electric vehicles, he said. "Translating that interest into purchase behavior is the trick."
Jeffrey Seisler, executive director of the Natural Gas Vehicle Coalition, said a gas vehicle fleet of 10 million units would represent gas demand of 800 bcf to 1 tcf/year.
At present, there are 30,000 compressed or liquefied gas vehicles in the U.S. and 600,000 worldwide. Half the worldwide gas vehicles are in Italy, where fueling infrastructure has been in place since World War II.
By 2000, the U.S. could have 1-4 million natural gas vehicles in the federal fleet alone and as many as 8 million vehicles total.
At present, the cost of retrofitting a gasoline vehicle to gas fuel costs $1,500-2,000. A new gas vehicle sells at a premium of about $3,000 to its gasoline counterpart. Natural gas sells at a discount to gasoline of about 30%, an advantage Seisler expects it to retain.
The range of commuter natural gas vehicles averages 135 150 miles, although some can travel 200 miles between fuelings.
Seisler said gas vehicles are clearing a marketing hurdle as gas distribution companies learn about fuel retailing and gasoline retailers make room in their service stations and businesses for gas.
Home vehicle fueling equipment is available at $2,000 3,000/unit with installation costs of $800.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
