By Joanne Liou, associate editor
Recognizing the oil and gas industry for its collaborative work with scientists, the government, economists, environmental representatives and labor leaders to develop hydrocarbon resources, William Reilly, administrator of the US Environmental Protection Agency under former President George H. W. Bush, discussed the energy landscape and its potential impact at the IADC Environmental Conference on 8 April in New York City. “We are as successful as we have been in terms of the resources that we have and the prospect to do all sorts of things for the areas in which shale gas is being developed economically, but also for … the reduction of greenhouse gases President Obama committed to – some 17%. We’re already more than half way there, at 10%,” Mr Reilly, who also co-chaired the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, said.
“That is thanks to some degree to the downturn in the economy, but it’s very substantial. and its future will be the consequence of the fact that shale gas, as it begins to replace coal in our power sector, has a much lower emission level of greenhouse gases.”
Mr Reilly described a recent report by the Bipartisan Policy Center that he helped to publish and which included input from the CEOs of Anadarko and DuPont, research from ExxonMobil, and James Jones, the former US National Security Advisor and Supreme Allied Commander Europe. Mr Reilly called the report remarkable in achieving agreement among diverging interests. Among the report’s recommendations was for the Obama Administration to open up development of offshore oil and gas resources in the Eastern Gulf and off the Atlantic Coast, as long as there is clear consultation, approval and interest from relevant governments, he said.
The report also recommends that the US increase its energy efficiency, capturing opportunities for improved energy productivity in the power and end-use sectors and at all levels – federal, state and local. While working on the report, Mr Reilly said, he came across a study by the National Academy of Science asserting that the US can add all the development that it is reasonably expected to add in buildings, homes and the like in the next 25 years without any increase in energy use, due to energy efficiency opportunities. As an example, he alluded to GE’s efforts in managing energy efficiency with a dedicated team that goes from plant to plant, and “according to its leader, never finds a plant that cannot get 20% more efficiency from within nine to 12 months.”
In terms of improving operational integrity, Mr Reilly praised the industry for launching the Center for Sustainable Shale Development (CSSD), led by Chevron and the Environmental Defense Fund. The CSSD serves as a center of excellence for shale gas development and a forum for a diverse group of stakeholders. Initial focus will be on the Marcellus Shale. “Presumably, over time, it will become interested in other areas, and other areas of the industry will welcome it,” Mr Reilly said.
Industry forums such as the CSSD will help the US with the shift to cleaner energy. “Gas is just about a third of our electrical power capacity, and coal, which was 50% as recently as two years ago, is now down to the low 30s,” he noted. The CSSD is self-policing and modeled on the Institute for Nuclear Power Operations, which the US Oil Spill Commission also used as a model for recommending what became the Center for Offshore Safety.
On the regulatory side, Mr Reilly explained that the Bureau of Safety and Environmental Enforcement (BSEE) has not only increased the number of inspections by 15% but also revamped its inspection practices. “The quality of inspections has been transformed. No longer do they drop down from the sky in a helicopter, check boxes and leave. The questions are rigorous (with) understanding of things like negative pressure tests, centralizers and all the rest that we learned from interviews after Macondo,” he said.
Finally, Mr Reilly urged industry to continue its work on safety, even if Wall Street shows little concern with companies’ safety performance. “Failure to maintain a modicum of safety resulted for BP in 50% loss of market capital,” Mr Reilly stated. “One would think that would result in analyst in Wall Street giving much higher priority to it, but you have to care about safety even if the market appears not to … It is only a high-quality response and intensive involvement, in part by the CEO, that will ever transform a company.”