Last Friday, I had the opportunity to moderate a panel at the MIT Energy Conference entitled “Fossil Transition – Internal Transformation vs. External Pressure”. The conference almost exclusively highlighted Green energy and this was the only panel to feature oil company executives, specifically Alan Hayward of BP and Vicki Hollub, CEO of Occidental Petroleum.
I have recently written a book entitled “Turning Oil Green”, where I posited that the quickest and most efficient way to move the globe towards renewable energy was with the help of established oil and gas companies. They have the capital resources, own the energy infrastructure and have the singular experience in energy transport and distribution that would otherwise be impossible to recreate. Further, there’s no need to. Oil companies are now falling over themselves to prove their bona fides in transitional and renewable technologies, forced by investors and the public to change their focus from fossil fuels alone – and they are (reluctantly) doing it.
My one primary goal of the panel was to try and educate the participants of the Conference – almost all Green energy advocates and environmentalists – to see the importance of including oil companies, and not merely vilifying them. I understand the natural reaction of the Green community to be suspicious and want to punish oil and gas for their leading role in carbon increases. But I am a 35-year observer of the energy space and also an environmental advocate myself, and I’m telling you, we’re going to need their money and expertise if we’re going to get to a safe and sustainable future as fast as we possibly can.
I did the best I could to make this point during the panel discussion – but was disappointed too. BP spoke about their asset diversification into solar and wind, and their long history of leadership in green energy tech, which is undoubtedly true. (Do you remember the old sunflower BP logo, during the days of Lord John Browne? It wasn’t all green-washing.) OXY, for their part, spoke about their efforts in carbon capture (CCUS) tech, and their delight with the 45Q federal tax credits for carbon capture that were expanded massively in December of 2020.
A little background: Occidental, and specifically Hollub, was the author of perhaps the worst deal in the history of oil: the buyout of Anadarko petroleum in the spring of 2019. Hollub got into a bidding war with Mike Wirth and Chevron just as oil was about to completely collapse for the second time in two years, buying Anadarko shale assets and outbidding Chevron at an insane premium, and further needing Warren Buffett’s money (at an extreme preferential bond rate) to do it. As oil collapsed throughout the rest of 2019 and through the pandemic of 2020, OXY’s stock did too – from nearly $70 a share to single digits in November of last year. How Hollub managed to retain her position is astonishing.
So, it’s with that in mind that you’ll understand OXY’s and Hollub’s glee with 45Q: Besides the PR that can be had by a supposedly ‘Green’ technology of taking CO² out of the air and returning it to the ground, it becomes a very useful and profitable activity specifically for Hollub, trying to make some lemonade from the Anadarko lemons.
You see, what you do with the CO² you’re capturing is transport it and use it in shale wells, injecting it to displace the oil and gas below and bring it to the surface, leaving the gas behind (supposedly) locked underground, a process euphemistically called “Enhanced Oil Recovery” (EOR). The bottom line is, OXY gets more oil out of Anadarko wells, and gets “paid” by the government in green tax credits for doing it. Environmentalists have angrily labeled 45Q as nothing more than another oil subsidy and they have a point that’s hard to dispute. For what it’s worth, I think that carbon capture is going to be another very useful tool in the fight against climate change, and 45Q might ultimately be a decent investment, but let’s be clear: Occidental isn’t planting trees here.
And that was the tone of the conversation I moderated: A lot of self-congratulations and passed around back slapping, particularly between Hollub and former North Dakota Senator Heidi Heidkamp, whose advocacy for the expansion of 45Q goes back to her days in the Senate as ranking member of the Senate Agriculture committee. This is also unremarkable, knowing Heidkamp’s long political career in the big Bakken oil state of North Dakota – but to tell you the truth, as the conversation continued, I started to feel a little sick.
I had little leeway to push back against all of this bonhomie – I was a moderator and my role wasn’t to challenge the panelists, much as the participants at the conference and MIT might have hoped I might. But as the conversation progressed, I felt that the discussion had turned into nothing more than an enormous ad campaign for BP and Occidental, and despite being in a virtual, online setting, I could see the anger of the audience rise in the questions that were showing up on my chat screen. After it was all over, I felt like I had looked like nothing more than a duped oil and gas shill, and wanted for a hot shower.
In concluding the conversation, I asked Senator Heidkamp what she thought was possible from a distinctly partisan Washington in cooperative action that might push the transition towards renewable fuels more quickly forwards. To the question, the Senator opined that I was mistaken if I thought that any leadership role was likely to come from Congress. She said that leadership on any initiatives had to come from other sources; from the public and other advocacy groups, demanding specific action before Congress could be expected to move.
Funny, I thought to myself as I thanked the panel for their time and effort, I don’t remember the raging calls from the public demanding that Congress expand 45Q tax credits in December, although they seemed quite capable of accomplishing THAT.