“Building Tomorrow’s Energy Partnerships”, Remarks by Thomas J. Donohue President and CEO, U.S. Chamber of Commerce

Palm Beach Strategic Forum’s - Third Annual Conference

West Palm Beach, Florida

Introduction

Thank you very much and good afternoon everyone.

With all this talk of a “Pacific Pivot,” the Chamber has not forgotten that the United States draws strength first and foremost from its allies, neighbors, and friends—and we have many in this hemisphere.

We have an Agenda for the Americas focused on strengthening and deepening our strategic and economic ties. It involves devising a strategy to fully leverage the network of our free trade agreements throughout the hemisphere. It involves tearing down barriers to the movement of people, capital, and ideas—which means encouraging the freer flow of tourists, talent, and labor; respecting the rule of law; and U.S. immigration and visa reform. And it involves hemispheric cooperation on energy, and that’s what I’ve been asked to focus on today.

This is an exciting time for the Americas. If we play our cards right, we are on the verge of becoming the world’s top energy hub. That would mean more jobs, more economic growth, more security, and a higher standard of living for everyone in the hemisphere.

Before I discuss a few steps on how we can help make that a reality, let me briefly describe the renaissance in energy production right here in the United States.

A Renaissance in U.S. Energy

We’re all aware of the tremendous impact of the oil sands in Canada. We’ve read about the huge new deposits of oil off the coast of Brazil. Mexico has long been a significant energy producer. But what’s happening in the United States might be the biggest story of all.

A half-dozen years ago, the U.S. was facing what seemed like ever-rising oil prices and was importing about 60% of its supply. Natural gas inventories were shrinking, and the country was considering importing a liquefied form from the Middle East.

What a difference a few years make. American ingenuity has turned our energy situation upside down, from scarcity to potential abundance.
New technologies and practices have unlocked unprecedented amounts of energy once thought to be economically unrecoverable.

The result is that the United States now has more oil, gas, and coal than any other country. We are the largest single natural gas producer in the world.

The United States is already reaping a host of benefits from this energy boom. Last year shale development generated $237 billion in economic activity, $87 billion in investment, and $62 billion in government revenues, according to the U.S. Chamber’s Institute for 21st Century Energy.  In the last few years it’s created nearly 1.8 million jobs. The abundance of affordable natural gas is attracting good manufacturing jobs back to the United States, particularly in the chemical and steel industries.  Increased oil and natural gas production shaved $70 billion off our trade deficit last year, or about 10%.

Potential in the out years is staggering. In just five years the U.S. may no longer need to import oil from any source but Canada, according to Citigroup. Over the next 20 years, energy can create millions of additional jobs, spread all across this country—and, by our estimation, generate a cumulative $2.5 trillion in government revenues.

Sounds great, doesn’t it? Unfortunately, it won’t happen all by itself. I’ve learned to never underestimate the ability of our government to screw up a good thing!

The government could help us move beyond even these projections by doing some things and by stop doing others. For example, we can create even more jobs, growth, and revenue if the government opened up new land to exploration. We’ve foolishly locked away roughly 80% of our federal energy resources on land and off our coasts. Upgrading our infrastructure will help us to efficiently and affordably deliver all this energy to market. Our nation’s electricity grid, pipelines, and other energy infrastructure require modernization and expansion. We should continue with the next generation of nuclear power plants and develop alternative energy sources such as wind, solar, and geothermal.

Finally, we need to focus on the cleanest, greenest form of energy—which is efficiency.

There are some things the government should stop doing that threaten production potential and all of its benefits. It should stop picking winners and losers. This distorts the market and misallocates capital. It should stop subjecting energy projects to endless and duplicative reviews. Even green projects are getting held up. A predictable and fair regulatory environment would be a tremendous boon to production and the infrastructure needed to sustain it. And it should stop EPA’s crusade to ban the production and use of coal, an essential part of our energy mix.

By fully embracing this country’s energy opportunity, we can accelerate growth, create millions of new jobs, and create huge new revenues for government.

Hemispheric Cooperation

Like the United States, many countries throughout the Americas are working diligently to maximize their energy resources. But if the Americas are to secure their reemergence as the world’s top energy hub, we need to start working together more closely. Having the resources in the ground is a good and fortunate place to start—it sure beats not having them at all! But it is only a start.

There are many more steps in the process of developing a clean, diverse, and reliable supply of fuel and power to use both domestically and regionally and to export globally. And that’s why working together to firmly establish the Americas as a 21st century energy hub is such an extraordinary opportunity for this hemisphere.

To achieve this vision, nations in the Americas must remain open to investment in each other’s energy sectors. Mexico is a case in point. Energy production there has declined due to the lack of investment. We’re pleased that many Mexican leaders are now exploring creative approaches to bring foreign participation into its energy sector.

Once open to investment, it is vital that countries respect the sanctity of contracts by providing due process, accountability, and stability for companies operating in the country. Ecuador is a good example of what happens when these safeguards are not adequately provided—its production is still under 2006 levels.

Once energy is produced, we need to facilitate the smooth flow of energy across borders so that it gets to where it is needed in the most cost-efficient manner possible.

Once produced, we need to facilitate the smooth flow of energy across borders so that it gets to where it is needed in the most cost-efficient manner possible.

Unfortunately, the United States hasn’t always set a positive example in this area.  The administration’s decision to delay the Keystone XL pipeline needlessly halted the creation of 20,000 jobs. It has prompted our Canadian friends to look to the Far East for energy partners when we’d prefer that they look south.

There’s only one reason for the delay—politics. And that reason is unacceptable. Support for Keystone is bipartisan and widespread. A recent Pew Research Center survey found that two-thirds of Americans favor building the pipeline. A majority of U.S. Senators are on record supporting Keystone and the House is fully behind it. Business and labor support it.  The proposed pipeline is perhaps the most studied and reviewed project in recent memory. It has passed every environmental review it’s been subjected to. So there is no excuse for further delays.

For the United States to shun our closest ally and largest national trading partner should be unthinkable. It would also be unthinkable to sacrifice all the jobs and energy security that this pipeline would bring. So we are pulling out all the stops to win the approval that should obviously come.

Others are making better decisions, and more quickly. The Inter-American Development Bank—or IDB—played a useful role in supporting the inter-connection of the Central American electric grid. Colombia, Ecuador, Peru, and Chile are also already studying ways to link their power grids.

How we regulate our energy markets is also important. For the United States—as I said—we need to cut through the absurd red tape that makes building permits so hard to obtain and delays energy projects, including wind and solar projects. Elsewhere in the hemisphere, we see cautionary tales of how strong state intervention in the form of unrealistic energy price controls can lead to underinvestment and energy shortages.

And we’ve seen too many forced localization policies, like “Buy American” or “Buy Brazilian” rules. These may have populist appeal, but they cost consumers dearly, discourage new investment, and cut into our global competitiveness.

The Role of the Private Sector

It’s obvious we can’t always rely on our respective governments to make the right decisions on energy. The private sectors of countries throughout the Americas need to be deeply engaged in public policy matters impacting not only energy, but the economy, jobs, and many other topics.

Other regions of the world are far ahead of ours in organizing their private sectors to provide meaningful input into the economic decision making processes of their governments. That’s why the Chamber has been very supportive of an effort to create a private-sector led hemispheric body like that created in Asia through APEC.

Working with the IDB, government officials, and private sector leaders, the U.S. Chamber is supporting the creation of a sustained high-level dialogue and coordination mechanism for business leaders from the entire region to advance a common social and economic development agenda.
In fact, I will be joining my hemispheric counterparts in Lima on May 7th to advance this important initiative.

The bottom line is that without private sector input, government officials are left to make educated guesses about the priorities of industry. If they guess wrong, business has no one to blame but itself. 

Conclusion

To sum up, our challenge and opportunity on energy is to match resources with capital.

It’s to ensure that energy technologies, talent, and expertise can be shared and move freely around the region in a secure and open environment where the rule of law is strong and where intellectual property is protected. It’s to ensure that once energy is developed it can be moved to market safely and efficiently across a modern infrastructure. It’s to ensure that energy production improves standards of living in this hemisphere. And it’s to ensure that all of this is done while deploying the most sophisticated safeguards to ensure that we protect the environment and do everything humanly possible to limit accidents.

The Chamber is deeply committed to these goals and we look forward to working with our friends and allies to achieve them.

Thank you for having me and for your kind attention. I look forward to your questions and comments.