 This is Think Tech Hawaii. Community matters here. Okay, wait, wait. Okay, we're back. We're live. We're here at the 3 o'clock clock with Lou Putirisi of Aprinc. He joins us from Washington just after arriving back from Jakarta. Welcome to the show yet again. We certainly enjoy having you here. You're a globetrotter. We can catch you at any moment in time. We're happy. Yes, thank you, Jay. I'm glad that Jeff Kissell was able to substitute for me last couple of weeks back. Well, it strikes me over the couple of years we've been doing this program that you're traveling more. And that's a kind of indicator, isn't it? You're traveling more, you're involved in more conferences, more deals? Yeah, I'm traveling a lot more because of the global scope of the research program and the growing interest and sponsorship from the government of Japan and the government of the United States. It's a great place to be. You know, you're on a wave right now, seems like to me. Yeah, yeah. So anyway, let's go ahead. Yeah, I wanted to talk about what seems to be big news on the environmental front, and that is the resignation of Scott Pruitt and how much effect that's going to have on American environmental policy. So now we have Andrew Wheeler. He used to work for EPA and his policies may be very much the same. What's your take on it? Yes, I think actually the new deputy is very much, you know, it's very much consistent with the general overview of the administration for widespread regulatory reform and the environmental side. I don't see, you know, that there's a couple of, there's a three or four big issues out there. One, of course, as we've talked about in the past is cafe corporate average fuel economy and I could tell you a long story about what's going on there. Another issue is whether and I don't see any movement in this issue either whether a price should be placed on carbon. I don't see any interest in the administration to do that, but that issue is still percolating in the background as people as different interest groups tend to look at the regulatory program and say, look, there's got to be a better way to do this. You know, we're sort of trying to, you know, trying to limit carbon emissions and then against that. So there's that background and then there is large scale. You know, there's still a great deal of interest on the what to do about the renewable fuel program, which is this mandated use of ethanol into transportation fuels, which is continuing to be a problem because it's meant the volumes are mandated but gasoline demand in the US is not growing. It's likely to remain flat for the next 20 years, actually decline a bit and then remain flat for the next couple of years. And so those issues are out there as well as many other ones, but those are sort of some of the big ones. Well, you know, it's almost as if, and we've heard this before in other circumstances, when President Trump got into office, his direction was take the wings off EPA. Let's just dismantle the organization. And it sounds to me like, you know, Pruitt has done a fair amount of work on that score. And aside from his personal picadillos and his overspending and, you know, misbehavior around the office. He's effectively advanced Trump's agenda to become less environmental every day. Would you agree? Yeah, but I think I think that you need to sort of temper that with the fact that first we have a huge number of environmental regulations which are implemented at the state and the local level. Right. Right. So those are not changing. Those are driven by state government. Then we have a series of big federal regulations which affect the emission of criteria pollutants into the atmosphere. This year, the emission of effluence into the water supply and of course efficiency standards, which are formulated by DOE, but also automobile standards. And in many cases, you know, we've talked about this before in many cases, huge accomplishments have been made. And so one of the, you know, it's not just like Trump is this sort of, you know, evil character came out of the country. He's reflecting kind of general sense from parts of the political style, you know, parts of the constituency that, well, some of this environmental stuff is very costly and yielding very low return in terms of environment. Now, I mean, this is not how it's presented in the press, but this is the reality. And I'm not saying that I necessarily agree with what everything through it did, but I'm just saying that beyond the kind of painting of bright colors that we've got, you know, black hats and white hats, there is a background of genuine debate on, you know, how should we regulate the environment efficiently? Yeah. Well, I mean, I think it's clear that a lot of people in industry don't really like the EPA and have felt that the EPA has been overbearing over the past few years. Well, I think, you know, people look at, you know, if you look at the, I can, you know, if you look at some of the things that go on, I mean, I do think there is, unfortunately, our political processes are not amenable to this, but I do think you could have a reasonable discussion that says, okay, how should we, what's the least cost method to reduce carbon emissions into the atmosphere, right? What's the cheapest way to do that? Because, and instead, we have this patchwork of regulatory programs, and some parts of the country are doing things that cost $1,500 a ton, and some folks are doing something at $50 a ton. Right. And so, and, you know, it's a global problem. I don't know if you saw the, you know, and you do have participants on, let's say, the other side. For example, there was this court suit in California, which the judge threw out in which the cities of Oakland and Alameda and San Francisco sued like six oil companies saying they should pay, they should pay a lot of money for carbon emissions, right? For global consequences of global warming. And the judge said, well, actually they produced it, but it was the consumers that burned it. I mean, are you saying that all the accomplishments of fossil fuels that improved the life of mankind, that somehow those should be ignored? So, I mean, it's, we need more intelligent ways to do it. And I think part of the problem, if you think of this as a left-right problem, part of the problem is on the left kind of seeking very unreasonable things, which caused the reaction on the right. Yes. So, you know, I understand, I understand, you know, the desire to paint this as good guys and bad guys. And, you know, Trump is not my particular cup of tea, but I'm just saying this issue is more, you know, there are more nuances than meets the eye. Now, Pruitt gets, you know, thrown out effectively, resignation or otherwise, because of his personal management style and his overspending in the life. Well, I think that, I think there could be another reason also is that he, he also, right, was unsympathetic to the farm block that wanted mandated use of biofuels into the, into the transportation fuel system. And I would not, I would not discount that, that dissatisfaction, which is a very large base of the Republican Party and very worried about the upcoming election. He was not sympathetic to the use of mandated volumes of biofuel in the transportation system. The way he implemented the existing law on that, I think a lot of the farmers felt he was, you know, not following the law. Okay, so now we have Andrew Wheeler and the likelihood is he's not going to be nearly as infamous over his management style and his spending. That's the case. He, you know, he had a well experienced, he worked on Capitol Hill. He worked in the administration in a previous administration, the Bush administration, he knows the ins and out of EPA. So he is unlikely to be a lightning, he will be a lightning rock, but not the same way Pruitt was. He did represent coal interest when he was in the private sector. So my question to you is, aside from the, you know, the front office things that brought Pruitt to the front page, how is Wheeler's policies differ? Is he going to be really doing the same thing? I don't think they're any different. I think it's going to be just less of a lightning rock. I think he's going to be more methodical. And in some of these issues, we do reflect actual powerful interest in society. I mean, what we do about cafe and how much should be paid for the, you know, implementation of subsidies for electric vehicles. It doesn't matter who's, I mean, yeah, if the Obama administration was still in power, the auto industry and the some of their allies would get much less interest on this whole cafe fight. That's true. But I don't think it's going, I don't think it would be entirely, you know, just wouldn't be hunky dory. These some of the fights you see in EPA represent genuine political and economic disagreements for which we don't really have a good answer yet. Well, one thing is for sure, Lou, the press is going to be watching Andrew Wheeler like a hawk to see if there are things there that are reminiscent of some of the abuses by Pruitt. And seeing whether his policies do change one way or the other. Yeah, I think, I mean, I do think that, you know, what people are not there is this, you know, what one of the interesting things is there is this growth of renewable fuel in the electric power sector everywhere. And with that comes certain challenges to the grid. And it's quite interesting to see DOE actually trying to try to give special treatment of coal facilities and nuclear facilities and this is getting very little traction. So, you know, we're still being overwhelmed a little bit by the fundamental economics of what's happening in lower cost renewables. I mean, I do think renewables pose certain costs, but and that those costs are not reflected in the operation of the utility sector. You know, the backup power, the high cost of the grid, you know, what are batteries really cost, all these things are going to start to get circulated out. But, you know. Okay, Lou, we're going to take a short break. We'll come back. I'd like to talk about gas. I'd like to talk about your your joint research in Jakarta. I'd like to talk about LNG and the Pacific Rim. And I'd like to talk about the World Gas Conference, which took place in DC. We'll be right back after a short break with Lou Puyirisi of DeepRank. This is Think Tech Hawaii, raising public awareness. Hi, I'm Ethan Allen, host on Think Tech Hawaii of Pacific Partnerships in Education. Every other Tuesday afternoon at 3 p.m., I hope you'll join us as we explore the value, the accomplishments and the challenges of education here in the Pacific Islands. They would not be a lot easier. We're back. We're live with Lou Puyirisi. He's the CEO of DeepRank and Energy Policy Research Think Tank in Washington. And he's just back from Jakarta. So I guess a question and a biting question here, Lou, is what were you doing in Jakarta? Okay, so every year for the last six years, there's a meeting in Tokyo of all the world's consumers and producers of liquefied natural gas, right? And if you go back a few years, there would just be Japan, Korea and Taiwan. They were virtually the only consumers of LNG in the world. And there was just a few producers, Australia, Qatar, some modest supply, very small supplies out of the Kenai Peninsula in Alaska. But several forces are underway, including massive discoveries of natural gas. And the enormous interest in dealing with local air pollution, not necessarily, you know, global warming, but local air pollution, particularly the very, and you've seen these pictures of pollution, air pollution in Beijing, Nanjing, Delhi, you know, in a lot of the Asian countries have real problems with air pollution. So Prime Minister Abe and Trump have been working on this joint project in which the Japanese, with their long experience in LNG, would help and promote the build-out of recastification facilities throughout the Pacific, and the U.S. would undertake policies to promote and advance higher volumes of liquefied natural gas exports from the U.S. And so this project brings together all the major producers, particularly in the U.S., and a lot of the current and prospective new consumers in Asia, such as Vietnam, Thailand, Bangladesh, India, China and Indonesia. And our role in this is to produce a report and set of recommendations for this year's event, which will be October 22nd in Nagoya, Japan. And we're doing that jointly with the Japanese Research Group called the Institute of Energy Economics in Japan. And this was our first workshop of the 2018 series. That's great. Yeah. So I just wonder, you know, it comes to mind, you know, this is something we've talked about that you've mentioned on and off about the United States with its huge gas supply, selling gas, LNG, to Asia, through Japan. But one of the buyers is China. And as I recall, it doesn't take much to recall this, we are in a trade war with China, imposing tariffs on commodities. So is China going to scuggle this by imposing a tariff on LNG? So in the first and second round of tariffs, which we looked at very carefully, the Chinese did put widespread tariffs on a range of American products, petroleum products, including crude oil. Interestingly enough, they have so far not imposed any tariffs on the importation of liquefied natural gas from the U.S. That has remained off the list. And that may be off the list for a couple of reasons. One is they want access to the cheapest LNG in the world. They don't want to make themselves vulnerable to pricing power from competitors to the U.S. But it also might be to leave an opening to find a pathway out of the trade war. So I think those are the two things. That's what be my assessment. It's quite clear the biggest issue with China in our, if you went back a year ago, the LNG market was in the tank in the sense that LNG prices in the Pacific were half of what they are today. But because China and India are so big, they began to enter the market. And they might have only bought another 5 or 10 percent. But they're such big players. They have caused the price of LNG to double in the Asia-Pacific region. Can you help me with one thing? You say it's a way out. It's a way out of the trade wars. How would leaving LNG off the tariff list in China, China's tariff list, create a way out of the trade war? Can you give me that scenario? Well, in itself it's not enough. But I pretty soon that they could be, there could be some concessions the Chinese make. And they make it clear that look, we've never, LNG is here. We're going to start to increase our purchases of LNG, long-term commitments. We're going to make some long-term commitments. We have a very big, the Chinese have a very big proposal to develop the natural gas reserves in Alaska for LNG. Very important to certain political interests in the U.S. And they could say, look, let's get some confidence-building measures. There are certain things we're going to do, but there are certain things you need to do. And as an initial step, let's see where we can start expanding here. And they could hope that there was some reciprocity from the U.S. side. So I do think that they're leaving that door open there as a kind of exit strategy or a pathway to try to build back the trade relationship. Let me give you one thought that comes to mind is that the infrastructure, the actual supply line of LNG in this particular project, American LNG through Japan, into Asia, through so many parts of Asia hasn't actually been built yet. And hence the need for your report. But I'm just wondering if that plays into the China strategy on this. In other words, they're waiting to see the infrastructure built, and then they would address the question of a tariff. Yes, that's possible, but they would be the ones that have to- I mean, this is a big problem because LNG investments are lumpy. They're hard to finance without a buyer, but as the market gets bigger, it's starting to look more like the oil market. And so companies are willing to take the risk on their balance sheets, so to speak, knowing that they can find a home for this LNG. And the other issue that came up in Jakarta that was just fascinating were the advances in small-scale LNG. And the Hawaiians looked at this several years ago and rejected it. But I think just like any other technology, I think that might have been premature because the new technology and the new scale, you know, the ability to scale down at low cost appears to be emerging now in a lot of different ways. I saw some fascinating presentation on, you know, LNG, put on a barge with a little kind of, you know, the containers that were of a certain size that could roll around and be delivered to different islands, you know, in the archipelagos of Asia. So, you know, it came to me, the debate that Hawaiians had over this, where they said, well, it's just not going to work for us. On the other hand, in the time between that debate occurred and now, there's been enormous advances in small-scale LNG. So I wonder if what you're saying is that maybe Hawaiians ought to take, reconsider that decision. Maybe LNG, maybe it's time for another look at it. Yeah, I mean, I don't know. I mean, if you read the press report, it seems that the Hawaiian governor, I mean, the Hawaiian administration, Governor LNG, are saying that they can do 100% renewable and that they have this battery in Kauai and that it's going to be very cheap. But I don't know if anyone's electric bill will show that yet or not. That would be a nice thing to know. One thing that comes out of this is something you mentioned before we started the show, and that is that LNG is playing a relatively larger role and petroleum is playing a relatively smaller role going forward. But LNG can't help propel cars. LNG is not... Well, of course, if you look at... That's kind of true, but if you look at two great events in the small-scale LNG that I saw, one was it's used as a substitute for diesel fuel, particularly in India, to do its fleets. And a lot of cars in India are being run by CNG, which can... And the variance of that can be just as well done off of LNG. So, yes, it's true that the penetration of LNG into the automobile fleet or trucking fleet is very limited in the U.S. There is a lot more interest in that in some of the Asian... China has a lot of LNG trucks. I think something like 70,000. Interesting, too, that I suppose in the model going forward, the LNG would generate electricity and the electricity would go to fuel the electric car. And so this is also a function of the replacement of fossil cars with electric cars. But let's move on to our last... I do think that the big motivation, of course, is local air pollution in China and India, the Asian countries. They need... The political pressure even in the communist country, like China, is enormous. So let's talk about China and India because they were part of the World Gas Conference every three years, which recently took place in Washington, D.C., with 12,000 people came around to discuss gas on a global basis. Can you talk about that conference? Yeah, so I thought it was absolutely fascinating. It took over the entire convention center, 12,000 delegates for a whole week. This is such a big deal that these big companies, they have exhibits. And I realize on these exhibits that they serve people through these and drinks. Those teams actually travel with the companies for these exhibits around the world. It's like a big... I was just overwhelmed by the size of the whole event. And both the Chinese and Indian delegations were very big. No one had seen them so big before. And if you look at what's happening in the world, petroleum demand is going to grow, but its growth is going to be modest. But gas demand is going to grow enormously over the next 25 years. And that is what is happening now. So now if you look at China's role in the face of the isolationist policies adopted by the Trump administration, where China fills the vacuum left by America's isolationist policies, and then you look at China's active participation in renewable energy and now in gas and LNG and so forth, and in this conference with India, it gives me the feeling that China wants to be... It always wanted to be on top, but it wants to be on top of energy. It wants to be on top of LNG. It wants to be on top of gas in general. That's why it is active in a conference like the World Gas Conference. And I guess this means that wherever it goes, whatever facilities it builds in other countries and continents, it's going to be investing in infrastructure consistent with its own. And if that is gas, then we'll see a proliferation of gas all the way west to Africa, no? Yes, of course, that's true. And this is also based on two circumstances. First, China has a huge kind of power requirement going forward, and we do not. Our power supply, we need more power over time as we replace the coal-fired power plants. But we have nothing compared to the requirements of these developing countries like China and India. And so, of course, they're going to look very active in a lot of these areas. But even if you go forward, almost all the forecasts I've seen on China and India, the best case forecast for China is that the installed coal capacity that's in place now does not grow so much. It doesn't go away, and there's a lot of coal installed. So I think that, yeah, there is a geopolitical concern. China's one belt, one road policy, investments in Africa and these places around the world. But they also have a huge requirement. They're going to be buying a lot of gas from Russia by pipeline them, and from Myanmar as well. Yeah, there was a piece about that this morning's paper about Trump complaining in the face of the NATO conference coming up, that Western Europe was buying too much gas from Russia. And I suppose, you know, that's another huge source of gas. And if you say that gas is the future, then that's an important deal, an important deal for Russia and for Western Europe. Right, and that is the so-called Nord Stream 2 project, which would be enough to take up an entire program. I'm very familiar with that project. We will not be able to take your audience through that in a very short period of time. Okay, well, what you're suggesting to me is that we are out of time, which is true. We are out of time. And you're also suggesting it's something we should discuss in the future. So I hope next time we come back, we'll be able to address the Russian and Western Europe gas deal and compare that with the LNG deal that you're working on. So interesting. It's all global. Just as you become more global, we become more global, Lou. That's great, Jay. Lou Pudirisi, CEO of E-Pring. Thank you so much for joining us. Thank you so much, Jay. Talk to you in a couple of weeks. Okay. Bye-bye.