135th Meeting of the National Petroleum Council

Okay. Thanks Alan. Thanks everyone for being here. That's really the biggest part of my message. I look around this room at just tremendous leaders from across the space of energy. You've all come here. I know how much you're getting paid and thank you for doing that. What I see in this room is service. I see people who care about the energy system which means you care about Americans. You care about the world. So thank you for that. To my colleagues at in the front and everyone in the room, thank you. As probably most of you have heard many times from me, energy matters. It just matters massively. I always say to people, I can say without a doubt, it's the most important industry in the world by far because every other industry wouldn't be remotely close to what it is today without energy. Affordable, reliable, secure energy literally makes the world go round, allows us to live long, healthy, opportunity rich lives. I've been frustrated most of my career to see politics and just not looking at math and numbers seep into energy at just tremendous destruction to the human quality of life. I didn't lobby for or plan to have the job or role I have today. I'm incredibly honored to do it. I'm thrilled to be here, but it wasn't in the plans. It just happened. I could say a lot of things in my life. I didn't have a great master plan. Things just happened. But what we're here for today is to try to address some of the concerns and challenges. Americans, we had a shale revolution that exploded American oil and gas production, drove down the price of oil globally, not just in the United States, plummeted the price of natural gas in the United States, which also had cascading effects around the world and lowered the price of natural gas. It wasn't celebrated all that much, but I think just over a trillion dollars of benefit to the world every year from that new supply means lower prices. Then the last few years, we've seen a lot of push in the opposite direction. In the last five years, we've seen almost a 30% rise on average of electricity. How did that happen? Why did that happen? The input fuels for our biggest sources of electricity have gone down, but the price of electricity's gone up. Not uniformly across the country. When you look at it more carefully, the states with the fastest rise in the price of electricity, think California, New York, Massachusetts, Connecticut, Maryland, it wasn't bad luck. Those states have seen huge rise in electricity prices. And they've also seen the reason for those rises in electricity prices is they produced less electricity in 2024 than they did in 2019. Decline in demand or decline in production. But if you make something expensive and less reliable, guess what? People will buy less of it. Then we've seen states on the other extreme. North Dakota's seen by far the fastest growth in the production of electricity. 35% more electricity produced in 2024 than in 2019. And guess what happened to price when you produce more? The price of electricity in nominal terms, not inflation, in nominal terms went down. So if you look at electricity, places where you produced more, Texas and Nebraska are in there, they produce 15-17% more electricity, price rose in nominal terms, but in real terms it went down. If you had declining production, your prices went up. This energy system is supposed to deliver more energy, more affordability means more opportunity. Usually when I talk about energy, I always downplay electricity because I think people talk about electricity too much and they think it's the global energy system. It's just one slice of the global energy system. The most important piece of the global energy system is what supplies manufacturing, because we can't have an electricity grid or an internet or an airplane or a car or a beautiful building without energy to produce materials. The most important piece of that energy is process heat. This never gets discussed. When I make that comment, if you wrap the entire planet in a solar panel, which of course is ridiculously impractical, you'd capture a lot of energy from the sun but you would deliver electrical energy. That's a slice of the global energy system, but you couldn't even maintain or produce those solar panels without huge amounts of process heat. So I always think we got to think about the broader energy portfolio. I think by making it hard to do big things in our country, we pushed offshore too much manufacturing globally. A little more than 40% of total energy consumption is manufacturing to make things. In the United States, that's only 25%. So we still manufacture a lot of stuff here, but our slice of energy consumption is actually skewed away from manufacturing compared to the world. But the last 20 years we've just pushed energy-intensive manufacturing mostly to Asia. Europe has done it of course even to a worse extent. In Europe and in the US a little bit, it's often been done in the name of climate change. How nutty is that? The United Kingdom and Germany, industrial powerhouses of the world, made electricity and their energy systems so expensive, you couldn't afford to make anything in the birthplace of the industrial revolution. So instead of being built in a modern factory in the UK, it's built in a coal-fired, if it's solar panels with slave labor in Xinjiang and then loaded on a diesel powered ship and shipped back and somehow called green or climate friendly. That's mind-boggling. So our goal I think for this team and in our administration is just to go back to basics. What is energy about? I say we think of energy, we should think of two things. Humans, the only reason we all produce energy and we care about humans is to make people's lives better, to expand the opportunities. Cleaning the environment is a huge part of that. If you look at the rich world, the United States, where I've grown up my entire life, the air quality's improved, the water quality's improved. I'm an outdoor mountain adventurer, climber, mountain biker, explorer. When I was a kid, I never saw moose. I never saw bear. I never saw a mountain lion in my life till about 20 years ago. Now I'm worried about running into bear and moose and mountain lions. That's a good problem to have and that's an advantage of a well-energized healthy society. We can have these wonderful luxuries but all of these depend upon our government and our industries doing rational things that are going to better people's lives. So I say energy is about humans and about math. The math must work. That's what this study is about. I'm going to shut up here in a bit because I want to hear about this study and work. But why I opened with electricity prices is in manufacturing of materials. This great energy scholar Vaclav Smil called them the four pillars of the modern world: steel, cement, plastics, and fertilizer. 20% of global energy, about the same amount as a percent of global energy that's delivered via electricity wires. The entire global electric grid delivers roughly the same amount of energy as the world uses just to produce cement, steel, plastics, and fertilizer. We use over 40% to produce all materials. But 20% of global energy is used to produce four things. Where those materials are made is where a lot of energy is consumed. There's a fifth, I think, very energy-intensive manufacturing industry that's rapidly emerging and we don't want to make the same mistake of offshoring this industry. When you offshore an industry, you offshore the jobs and economic opportunity. You also offshore the environmental impacts of making whatever those materials are. We don't want to offshore those things anymore. When you do, what do you offshore? You offshore blue-collar jobs. You offshore opportunity for rural people or people that grew up in different circumstances than we all did. We shouldn't do that. President Trump got elected to bring back jobs and opportunity for people that weren't born so fortunate, weren't so lucky, as I would say honestly is representative of the people in this room. That new emerging industry you may have heard about since it's talked about endlessly: artificial intelligence. This awesome thing takes one particular form of energy, electricity, as the input to make intelligence. We can take energy and get out of it insight, intelligence. Think of it as leveraging the power of the human mind, the human skill set, the human capabilities. I think its impact on our world is going to be transformative. Yes, negative and scary things will happen if you create a powerful new tool. There will be bad things that'll be done with it and we're going to learn about those as we go. But I think the upsides are going to be massively larger than the downsides. I'm going somewhere, so hang in there. Right now you see hundreds of billions of dollars of investment, capital investment to build intelligence factories or data centers in the United States. The hyperscalers that are building them are building them for commercial reasons. It's fantastic that private industry and private capital is the dominant driver here to deliver business services, consumer services, efficiency. They have a great commercial model to do it. But those same tools done differently, you need different AI models, different data sets, different learning to apply them to scientific discovery. Imagine if we can figure out how proteins fold. Nobel Prize last year for AlphaFold using essentially artificial intelligence to understand material behavior down to the molecular scale. This will be transformative for human health. Imagine if you can use artificial intelligence to control in real time an active plasma in a tokamak reactor. Fusion energy. We're trying to replicate the center of the sun on Earth. Turns out that's difficult. But we've made progress. With this extra tool, and I'd love to go into it, but I won't, with this extra tool, we're going to cross a threshold where we actually can control that burning plasma. This is going to bring a tremendous additional new energy source. Our electricity grid is a very complicated network. The closer you look at it, you're like, really? We don't have a thing that does this. That line rating stays the same because it's going to overheat. It's spec'd for the hottest temperature it could possibly get to with no wind. What percent of the time do you think we're at maximum temperature and no wind? Turns out it's not year round. But those lines can't carry different amounts of electricity because we don't have that data and we don't have that decision. So there's so much upside in so many things we do if we can apply more science to it. So we launched, President Trump signed last Monday an executive order launching what we called the Genesis mission. It is led by the Department of Energy, led by our government. It will be our biggest scientific project of this administration and it's to leverage the power of AI to drive scientific discovery, to drive innovation, and to drive innovation in our national defense systems. Our adversaries are growing their capabilities, growing their offensive and defensive capabilities. We need to do the same. We need to do that enhanced by artificial intelligence. In our model at the Department of Energy, because the 17 national labs are part of the Department of Energy, our model is we've gone to commercial players and said, hey, you're having trouble getting a data center permitted. You're having trouble finding energy. Let us help. We got lots of land. We'll permit your data center on our land. We'll work with you to get you energy today and to build some energy infrastructure so you can grow the size of that data center and grow the available energy going forward. 500 hands went in the air immediately. We have two large projects underway now that are going to build huge compute with commercial money and then the national labs are going to get a slice of that computing power to advance scientific discovery in our country, to speed up the pace of innovation, to speed up our capabilities in national defense, to speed up our capabilities in energy discovery and energy management. Super excited about that. But what does all of this depend on? This depends on us getting out of this slump we've been in of 25 years of not growing our electricity production very much. Maybe 1% a year. Does that sound American? 1% a year growth in electricity. And it's electricity that's going to drive artificial intelligence. So that's the study we're going to hear about today, to say how do we fix that problem? How do we build the infrastructure to move energy around, to move electricity around, to move natural gas, to move oil around so that we can have a fully energized country that can both drive down prices. Americans are frustrated with this rise in electricity prices. I mentioned that they went up a lot. They shouldn't have gone up. By far our biggest source of electricity is natural gas. What's the price of natural gas done over the last 20 years? It's dropped like a stone. Next biggest source of electricity is nuclear. What's the price of uranium done? It's gone down. What's the price of coal done? It's gone down. So we should not have an increase in electricity prices because of political decisions, policy decisions. It was a choice, not an unfortunate or scarcity thing. It was political choices that drove the price of electricity up. We want to make political choices and political policies and implementations to build that infrastructure to grow opportunity. Shouldn't Massachusetts be able to build data centers? But to do it, it needs to make it so that its electricity system when it gets cold out is not burning mostly fuel oil. Just a little bit more infrastructure to deliver a more economically efficient system to produce electricity. We can do that. But we need to learn from the study we're going to hear about about how we produce, how we build infrastructure that enables us to deliver more plentiful, more affordable, more secure energy sources across our country. I'll end before the Q&A, maybe the important part of this thing, with some comments about the US energy system. Until the late 1800s, so in 100 plus years of American history, what was the biggest source of energy in the United States? Wood. Globally, wood was the biggest source of energy on the planet throughout all of human history until about 1900. In the US, it was a little earlier than 1900 where coal passed wood. We had coal as the largest source of industry for several decades, probably through World War II. Then coal got passed by oil. Oil has been the largest source of energy in the United States and globally for many decades. In the world, I think it will be for many decades more. But in the United States, oil is going to be passed by natural gas as the biggest source of primary energy in the United States. Together today, oil and natural gas are about 72% of total US primary energy, the highest percentage ever. Five years ago, I was telling people they're 69% of US energy, the highest ever. Yet the whole country, nobody wants to go study petroleum engineering because they're going away, they're going out of business. They're at record high in quantity and in market share and both are growing. So maybe they're not going away. When I talk to our European counterparts, I got to give them a nod. In Germany, oil and natural gas are about 74% of energy. The United Kingdom, 75% of energy from oil and natural gas. Italy is at the top of the heap at 76% of their energy from oil and natural gas. They don't tout those facts very much, but those are the numbers. For them, there's a little bit of unfairness because their energy policies, I would say, have been so poor that they've driven up the cost that their total energy consumption has declined and they've offshored so much. Their energy pie has actually shrunk. But again, I'm just being realistic. The National Petroleum Council matters. Oil and natural gas are what power the world together with coal. If we talk about the whole planet, I love coal. It's the largest source of global electricity since the data started around 1900. It's 125 years at the top of the heap. For decades more it will be at the global top of the heap for electricity production. But in rich countries that have built infrastructure, natural gas has displaced coal as the biggest source of electricity. So oil and natural gas, the petroleum industry matters massively. Building smart infrastructure and having smart policies and delivering these products as efficiently as we can just impacts the economic opportunities for Americans. So God bless your commitment to that mission and your effort to inform us and to bring that data. I want to get to hearing about the study and asking questions about that, but I think we've got about 20 minutes where I'm happy to take questions from absolutely anyone on anything. Don't worry about being polite. I think we got in some of these ruts by not having open, honest, candid dialogue about the tradeoffs between climate change, for example, or other environmental issues and oil and gas and infrastructure and all that. We had sort of a hush silence or a polarization or whatever. My goal, the Trump administration goal, is to be open, transparent, and discuss all of these tradeoffs, discuss these things so we can have a more rational view. We don't want to de-industrialize the United States. We don't want AI like the other energy-intensive industries to go overseas and offshore. We don't want to keep exporting job opportunities for Americans. We actually want to grow opportunity and prosperity right here. The idea of energy dominance, I get asked that a lot. What do you mean by dominance? In Europe they're like, you want to dominate us? No, that's not what it means. The idea, the aspiration through my life had always been energy independence. That was the political rallying cry. We want America to produce as much energy as we consume. We last did that in the early 1950s. We crossed producing more energy than we consumed seven or eight years ago and have continued to grow, increasing net exports of energy out of our country. But the idea of the term energy dominance is to produce so much energy in our country. Number one, that increasing supply pushes prices down. That helps Americans, particularly low-income Americans, live a better quality of life. It favors manufacturing reshoring in our country. But if we can have so much abundant energy that we can drive down costs and bring industry, I think the biggest change we're going to see is increased energy consumption in the United States with our natural gas abundance. We have a cost and infrastructure advantage. Not just data centers, but manufacturing of all kinds that's energy intensive. America's so advantaged energy-wise. Let's bring those jobs and skills and opportunities here. We're going to see a huge consumption. I think we will see a bigger increase in natural gas consumption in the United States that probably at least matches the incredibly rapid increase in our exports of natural gas. But I'm in favor of both of them. The other part of energy dominance is we have so many allies and friends abroad that count on foes for their energy supply. So the president's idea of this term dominance was to have so much energy that we can be this secure, reliable supplier of energy to our partners around the world as well. Use America's assets to make prosperity at home and for peace abroad. That's the bigger picture agenda of this administration. But I'll stop there and turn it over. I don't know if Alan moderates or whatever, but questions from anyone on the council.

Thank you, Mr. Secretary. Trisha Pridemore from Georgia. I'm so proud that you're there. My question is about LNG. What is the administration's focus on LNG? As we know, it is a great way for us to be able to provide gas from a storage perspective, but also from an export perspective to our allies.

Yes. So, as you know, this could be a longer story. The previous administration paused the permitting of LNG export terminals. Again, this was another one of these just shameless misuse of politics. They actually did a study that showed the economic impact of growing exports was that they came up with a 30% price rise by the year 2050. That's less than 1% a year. In other words, price rise below the rate of inflation for natural gas and greenhouse gas emissions that in general slightly went down. They didn't like that study. They buried it and they did a different one that couldn't show any different economic conclusion. But if you only considered a smaller slice of the potential future energy scenarios, you could show a minuscule increase in global greenhouse gas emissions. I think unrealistic. Therefore they paused the permitting of LNG export terminals. That's exactly what we're not going to do. We want to follow the math and data where it leads. But it turns out natural gas exports are the fastest growing export of our country. In five or 10 years, I think they will be the largest export of the United States of America. That's awesome. Not just for us, but it's awesome for the world. Who was the biggest exporter of natural gas if you go back 20 years ago? Russia. Do you want a world where Russia is the biggest supplier of natural gas to countries around the world or the United States? I think the US is a much better candidate for that role. It's a question I often get asked. In fact, from a great senator from Maine when I first met with him, he said, well the problem is the more gas we export, it sounds like economics, the more gas we export, it's going to drive up prices. It may help those gas producers, but it's going to hurt Americans. I said, I don't think that's the case. If you look at when the United States first started to export natural gas, when we were 20 years ago the largest net importer of natural gas in the world, natural gas prices were far higher then than they are today, even in nominal terms, let alone inflation. So the more gas we have produced, the more we pushed down the price of natural gas. When we were the world's largest importer of natural gas, we had about an 8-year period where we were running over a thousand drilling rigs targeting natural gas. And we were the largest importer in the world. Today we're running about 125. So think about that. We went from over a thousand rigs to 125. And we're the largest exporter in the world. So if we double our LNG exports, we need to add about 15 or 20 more drilling rigs. Can we do that? I think so. So I think growing our gas production is great for the economy of our country. It's great for the world. Larger supply, more ties between the United States and elsewhere. I would say we celebrate gas production elsewhere as well. It's not like it all has to come from America. The Eastern Med discoveries, operated by Chevron right now, phenomenal. Israel went from dominated by coal in their electricity sector, which again I'm fine with. They switched, now they've got natural gas. They've changed their power sector there and they're a huge exporter to Egypt and Jordan. When I talked to the energy ministers from Egypt and Jordan, what do they think about Israel? Awesome. They're our energy supplier. We want more. We want to industrialize. We want to grow. Syria and Lebanon, what do they want? Maybe we can get some gas from Israel too. That's music to our ears. When you build these energy systems and connect countries together, I think it's not just economic opportunity. It becomes a force for peace. So we want those connections. I think continued export of pipeline gas into Mexico. There's even a project we're talking about maybe that goes down through Central America. If you can bring low-cost gas, you can bring greater economic opportunities to parts of the world that don't have them today. I'll tell you in the dialogues I had in Europe, incredible dialogues. I think most of the European nations, some will say it publicly, almost all will say it privately, maybe we didn't go the best direction on energy and we need to lower the cost of energy in our countries. US LNG, even though when you deliver it by LNG tanker, it's much more expensive than it is on a pipeline, it still can be a massive force to reduce electricity prices in Europe. Hawaii is going to convert from diesel, that's what islands get their power and energy from, to LNG, lower cost, cleaner air. So I think the future of natural gas is quite bright. If you look at it over the last 50 years, 50 years ago the world got 85% of its energy from oil, gas, and coal. 50 years ago. Today, last year, 85%. The difference is the relative contributions. Oil's grown a little over 1% a year compound annual growth rate. Coal about 2%. Natural gas about 3%. Natural gas is about infrastructure. The cost of natural gas today, like a gallon of gas, it's like 50 cents for a gallon of gasoline. If you're located in the Permian Basin or near a hub or whatever, might be 20 cents a gallon gasoline. So low-cost, abundant energy source, great for America, great for Georgia. I think exports is a growing industry for us. I promise I'll give a shorter answer to the next question. But she had such a good one.

Got one right here in the front here. Jose with Energy. Thank you very much, Mr. Secretary. We support everything you guys are doing. The strategies are outstanding. We look at it as an opportunity for not only the economic opportunities you mentioned, but the affordability issue is a very critical part of this. Our challenge seems to be on educating our leaders in our community here in the United States. Part of the challenge is, to be honest with you, the other side's done a lot more work in getting their messages to them than this message we're listening to today. So how can we overcome that? Do you have any thoughts about that? Nice to see you again, Jose.

Yeah. I do think it's incredibly important that all the people in this room who are quite knowledgeable about energy. The average person in Washington DC, I can tell you, knows very little about energy. It's not because they're dumb or uncurious. There's no energy produced or not a lot produced nearby here. They're politicians. They're doing other things. So where do people get their knowledge about energy? Either from the press or the media. They have not done a good job because scaring people about dramatic end of the world is much more newsworthy than the nerdy facts I'm talking about. So people are going to learn and get their views of energy from talking to you and your friends and your people. It's very important that we not shy away from that, that we be open and honest and engaged. I can tell you in my new role in a political role, you think that would be maybe even more charged communication, I have had tremendous dialogues with Democratic governors, Democratic senators, Democratic House members. I think just an open and honest engagement and an amazing change of opinions and views. People want to lower cost. They want to have AI. A lot of governors, a lot of senators, I think, weren't really connecting the dots of why their state or their region has more expensive energy, thinking it's bad luck or they've been told something else. If we build more of these, energy prices will come down. But I have seen incredible willingness of having those dialogues mostly in private. I think the pendulum is moving. People being realistic and open and honest about energy and understanding the real connections between energy and climate change and what's a greater threat or a bigger impact on people. I think we're in a new world and I think we've passed peak crazy and I think we're swinging in a positive direction. But to continue in that direction, we need to honestly and openly and politely engage in dialogue with everyone. My heart has been warmed in the last year that we really can move this needle. We really can get the focus back on humans. Thank you for your work, Jose.

Thank you, Secretary. Jeff Warman from Monroe Energy. We're a refiner on the east coast. I have a question on your opinion or the DOE's position on the obligations for the RFS EPA as well as OMB. They have followed agriculture and are trying to set these aspirational volumes required to blend into the fuel system which is causing these RINs to go up in price, which is causing the price of gasoline to rise, which is exactly opposite of what you've just been saying. What is DOE's position and is there any actions that you're taking to help dissuade the rest of administration from setting these volumes so high?