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Q&A Part 1: State of American Energy 2015

Hydrocarbon Engineering,

Below are highlights from a press conference held by the API where Jack Gerard answered questions on the 2015 State of American Energy.

Given API’s strong emphasis on improving infrastructure, would API be willing to support an increase in the federal gasoline tax?

“Well, it might surprise a lot of you that in the past, API has not taken a position on the gas tax. In fact, for those who propose increasing it for highway building and funding, et cetera, we’ve never opposed that. We believe it’s a matter of public policy; if the government believes that’s the way to generate revenue to guild the infrastructure that those cars drive on, the bridges they cross, et cetera, we haven’t really entered into that debate. But I think, it raises another point that’s very important. That is when you look at the highway bill, the breadth and scope of it, as a nation, we always focus on that highway bill as a major jobs creator, infrastructure, which it is. But if you look at the potential private investments from the oil and natural gas industry, over the next decade, reports have concluded we could spend as much as US$1.15 trillion in infrastructure. Private sector dollars, capital investment combined with what they’re doing on public projects like infrastructure, highway bills, this is a great opportunity for the country, particularly in these tough economic times.

“So, while we don’t take a position on the gas tax, we do believe we should look at infrastructure beyond the historic ways of viewing it for bridges and roads and say to ourselves, what about pipelines? What about rail build out? What about that other infrastructure necessary to make our market more efficient as an energy producer, an energy superpower?”

You clearly don’t feel that the arguments that exporting crude will increase gas prices. But do you think that argument could stand in the way of Congress lifting the ban or acting going forward?

“All the analysis, if you look at all the analysis to date, governmental analysis, private sector analysis, the best thinkers and minds, regardless of political party, Larry Summers and others, have all concluded that crude export opportunities actually put downward pressure on the price and would benefit the American consumer anywhere from 2 – 10 cents /gall. So, fundamentally, there’s a broad consensus on the fact that crude oil exports are good for American consumers, first point.

“Second point is if elected officials look at the reality and the opportunity for crude exports, it’ll be one of the first things they do to continue to benefit American consumers. As I mentioned earlier, there are some whose minds are still stuck in the old 20th century mindset of scarcity and dependence, which we’ve moved beyond now because of technological advancement to an opportunity of rich abundance. But those who think scarcity go back to when the crude export ban in the 1970s was first imposed and their minds are still there. We need to move those to the new energy reality which says we have adequate resource; we have vast amounts of crude oil in this country; we have the technological advantage to produce it safely, soundly, to transport it by building the infrastructure. It’s a unique American moment that should transcend the old relics of the past, the old philosophies, and get us to a new place as a nation.”

Is there a point at which it will no longer make sense to extract the oil from the oilsands to bring down and therefore limit the benefits?

“The price obviously determined by the marketplace, today we’re at a lower price than we have been for some time. I can’t predict what the price would be; I don’t know what the costs are. Clearly, US producers are competitive with global producers and you see that today as they continue to produce and many continue to drill.”

Obviously Keystone is Congress’ number one oil and gas priority. What do you think the number two priority for them will be and where does the RFS fit into their to do list?

“That’s a good question. I think they focused heavily early on on the Keystone XL pipeline because it’s such low hanging fruit. It’s been around for six years, broad bipartisan support; 72% of the American public support building it. So, in many ways, it’s a no brainer; it’s something they can get to if they can find a quick bipartisan consensus and hopefully move forward. You’ve heard other talk about LNG exports and LNG export bill. That also might be on the horizon. You’ve heard talk about the need to reform the RFS. We strongly support that and would encourage leadership in the Congress to take a close look at it. At the same time, we’re working with the EPA to get those volumes released so we know what the rules of the road are.

“So, I don’t know exactly where it is in the queue. I think you’ve heard from both the House and Senate leadership, and frankly from both political parties in many ways, that energy is going to be a big issue moving forward over the next two years. Oil and gas is a big part of that energy equation. It’s this unique American moment I talked about earlier in my prepared remarks where we as a nation really have to get over that kind of mindset of the past and say to ourselves, how do we work together to realise the potential as a nation, to look at global markets? We look at others who have been major suppliers. Our imports for crude have essentially been cut in half over the last few years. That’s a big development; that’s a big deal for us as a nation. It brings energy security, jobs to all the American people. So, I think there’s real potential there and I think energy’s going to be top of the agenda for some time to come. I can’t predict exactly which issue will roll out when.”

Edited from transcript by Claira Lloyd

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