DOT 2011: 'Hidden' risk management issues threaten industry: Hofmeister

Why an extended period of time is required to do what is in the country’s best interest is an inexplicable question, John Hofmeister told the lunch gathering at the Deep Offshore Technology International Conference & Exhibition.

Offshore staff

NEW ORLEANS – Why an extended period of time is required to do what is in the country’s best interest is an inexplicable question, John Hofmeister told the lunch gathering at the Deep Offshore Technology International Conference & Exhibition.

Hofmeister, CEO of Citizens for Affordable Energy and former president of Shell Oil USA, said that delay in permitting is one of several risk management items that do not show up on most company plans.

Looking at the broader arena, he also listed the following threats to continued deepwater oil and gas exploration and development:
1. Obstinacy among elected and appointed federal officials to subjugate their functions to the good of the country
2. Obstruction. Deliberate efforts among elected, appointed, and regulatory officials to make sure things do not happen. Hofmeister noted, for example, that upon arrival at the Gulf Coast following the Macondo incident, Interior Secretary Ken Salazar said he had his “boot on the neck of BP.”
3. Ignorance as to the reality of how important a prosperous and successful oil industry is to the security of the country and its ability to come out of the current economic situation
4. Fantasy that there is something waiting to be found to move the world into a post-hydrocarbon age. Starting in 2009 the country began a journey into fantasy and now is suffering the economic results.
5. Gross stupidity. People cannot “connect the dots and choose to follow the fact” of energy exploration and development but choose to make up their own “facts.”

A successful response to these threats is obvious and simple, Hofmeister said. The problem is that industry does not tell its story and make opportunities to show how technology is applied to support today’s lifestyle.

The risk management response is communication – outreach with transparency in a language everyone can understand. Public acceptance of the industry is required to make regulatory officials to look at companies as having a right to succeed. Without public acceptance, that is not going to happen. Rather the industry will have all three branches of government working against it. The oil and gas industry does not have that public trust and the public is not willing to accept the risks involved in supplying petroleum products.

Hofmeister also said that the industry is a victim of a circumstance over which it has little control. For decades the perversity of partisanship in politics has buffeted the industry both up and down. With two-year cycles driven by elections, long-term planning for energy independence will not exist.

The growth of government control has culminated to date in 13 cabinet positions and 26 Congressional committees having some control over industry operations. This makes the industry victim to competition among elected and appointed officials, and even the judiciary, to secure power to influence operations.

There are, however, three specific things to act upon, Hofmeister said. First, industry must engage the public and explain over and over what the industry is and how it operates. Secondly, the industry needs to organize it messages and methods of engagement. Third, industry must understand what is at risk and reexamine its mode of governance.

Hofmeister said there needs to be an organization the equivalent of the Federal Reserve charged with oil and gas oversight. An independent regulatory framework should be applied to the energy industry to set high-level goals about how much energy should come from what sources over what timeframe.

That organization also would make big technological decisions such as whether to remain with AC electricity delivery or move to DC or even superconductivity. It also would take the environmental oversight out of the EPA and align environmental regulations with energy requirements and direct the energy delivery infrastructure installation and maintenance.


10/12/2011

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