Former Shell Oil President John Hofmeister Weighs In On Rollback Of Emissions Rules

Aug 29, 2019
Originally published on August 29, 2019 7:14 pm
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AILSA CHANG, HOST:

OK, now we're going to hear from a former oil industry executive who is skeptical of the rollback. John Hofmeister was president of Shell Oil Company, and he's now the founder and CEO of Citizens for Affordable Energy.

Welcome.

JOHN HOFMEISTER: Thank you.

CHANG: So your former company, Shell, along with BP America and Exxon, they all want to continue to see the federal government regulate methane emissions. Can you explain to me why oil companies like them would want more regulation?

HOFMEISTER: Well, there are two reasons. The first reason is, why waste methane? Why allow fugitive methane to go into the atmosphere when you can capture it and sell it as natural gas?

CHANG: Methane is money.

HOFMEISTER: Methane is money. It's - and so you capture and you take to market what you have produced. The idea of having a completely closed production system to capture the methane, to take it to the marketplace, that just makes perfect business sense. That's No. 1.

CHANG: OK.

HOFMEISTER: No. 2 is, in the future, the ability to operate in the fossil fuel industry is going to demand an environmental performance where the public believes that you are protecting the land, the water and the air. So regulations that protect the water, the land and the air, which enable the industry to continue to do what it does, are essential for the industry to be successful down the road. That's changed in the last 20 years. And so it's necessary for the industry to recognize that this is the way it's going to be, and it is the way it should be.

CHANG: This is the reality. You might as well resign yourselves to it.

HOFMEISTER: Exactly.

CHANG: Now, I gather the producers who do want these regulations removed are the smaller producers, right?

HOFMEISTER: Yes.

CHANG: Why would they, more than the larger companies, want these regulations to go away?

HOFMEISTER: Well, there are thousands of independent operators who produce oil and gas in the U.S., and they operate with much lower volumes of oil and gas. They might have one or two drilling rigs. They might have a half-a-dozen employees. So these are folks that watch where every nickel and dime is spent, and for them and their operating model, it becomes more expensive than they would like to pay for to have these regulations because they would rather just emit a certain amount of fugitive methane, give it up in the marketplace, but not have to pay the costs of engineering and putting in place a completely closed production system which captures the methane.

And so it's really a cost factor. It's like, not everybody could be a McDonald's franchise owner because there's a certain cost associated, but somebody could have a hot dog stand at the end of the street and operate with a much lower cost basis. So that's the kind of principle we're talking about here.

CHANG: But long term, as a strategy, letting their operating model govern what's happening with methane emissions is not a good strategy, is where you're coming from.

HOFMEISTER: It's not good for the public and the environment, and it's not good for the industry because it is really going on the cheap, and there is enough money in the industry to not have to go on the cheap. Consumers pay a good, healthy cost for the oil and gas that they consume, and that money has to pay for all the bills of the producing companies. And like any other industry, if people can't afford to be in the industry, they need to go do something else. And so I'm not afraid of the costs of doing business under the regulatory environment that we currently have had. And so while I'm in favor of regulatory rollback in areas where it's really necessary, this isn't necessary, in my view.

CHANG: So supporters of the rollback say that the industry can just regulate itself. Why is that not enough?

HOFMEISTER: I don't think it's enough for the industry to regulate itself because what you need to come to is an even playing field and an even level of operations. And the public has a right to expect - whether it's federal, whether it's state, whether it's local - a certain uniformity by which the industry operates. And what the regulations do is they require uniformity because the industry knows what compliance is all about, and the industry is basically a compliant industry. You tell them what to do; they're going to do it.

CHANG: John Hofmeister was president of Shell Oil Company. He's now the CEO of Citizens for Affordable Energy.

Thank you very much for joining us today.

HOFMEISTER: Thank you.

(SOUNDBITE OF VAMPIRE WEEKEND SONG, "WHITE SKY") Transcript provided by NPR, Copyright NPR.

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