 This is Think Tank Hawaii. Community matters here. Okay. We're back to live with Lou Pulirisi. He's the CEO of E-prink, an energy policy research think tank in Washington, D.C. He joins us, and it's after nine o'clock at night, so we really appreciate that, Lou. And he's about to go on a trip to Nagoya. So can you talk about Nagoya for a minute, Lou? So for the last seven years, all the world's producers and consumers of liquefied natural gas meet in Japan. Usually it's Tokyo this year they're going to meet in Nagoya, which is close to Tokyo. And they're going to be talking about all the fundamental issues that need to be addressed to expand the production and liquefaction of natural gas, and then the development of regasification facilities throughout the Pacific. You know it strikes me that you've been, you know, that in your energy career, your energy think tank career, your, the trips you take are accelerating, you're traveling more. Exactly. It's becoming more global than it was before, am I right? It's becoming very global and it's becoming very well connected, you know, the communications are so. Yeah, part of it. People need to talk to you, you know. So let's talk about, gee, let's talk about what's going on in terms of tariffs and other news. So I thought I'd put the North American Petroleum Renaissance, a little context in the international, how we're plugged into the international world. And why it's important for us, for our own, you know, future expansion of our, particularly our petroleum sector, oil and natural gas, to be connected into the world market. And by the way, I don't know if the news came out there in the Hawaiian Islands, but the U.S. for the second year in a row had a reduction in its carbon emissions. And all the European countries that have harassed us and said we're such bad people are accelerating their carbon emissions. So it's always interesting to question. So let me take a moment to ask you as a point on that, and why? Why have our emissions declined? So the reason for that is because we have cheap natural gas and it's driving out of coal. And to some extent it's also driving out in the consumer sector, heating oil and fossil fuels with higher carbon content. So this is the direct result of the increase in portable tech? No. The renewables have had no virtually an unmeasurable amount of impact on that. Okay, well back to the point. I interrupted you. Please tell us. So let's go to just see what's happening here. So if we go to the first slide, you see it has three pictures there, right? U.S. crude oil production, U.S. lower 48 dry gas, natural gas production, and natural gas liquid production from natural gas processes. That would be like propane, butane and things like that. As you can see, the increase is very dramatic in all three categories. In fact, today the United States is the largest oil producer in the world and the largest natural gas producer in the world, virtually unthinkable a few years ago. It's a remarkable expansion and if you go to the next picture, the next picture, right? You can see in this next picture that pro-natural gas, the red part of this graph, which has now made the U.S. the largest natural gas producer in the world, were up to something like well over 80, 85, 87 billion cubic feet a day. And that is driven largely by the shale gas revolution. And a lot of that's not just in Texas. The Appalachia region is the most cost-effective in the world and in fact a funny thing happened last year because the city of Boston could not get, within 100 miles of the city of Boston, some of the cheapest gas in the world, but they ran short and they had to import and liquefy natural gas from Russia. And the reason for that is because the good people of Massachusetts don't want to build a pipeline. They would rather have the Russians dig up to Sea of Avod and kill all the whales there. So that is an ongoing fight in the United States, but you can see we have a lot of gas. The problem is we have so much gas, we have to start selling it to other people. We've sold it by as much as we can to Mexico. And so one of the important developments in the world is the transmission of these exports in liquefied form called liquefied natural gas. And it turns out one market that's quite important. If you go to the next slide is in China. And the next picture shows the rapid acceleration in natural gas use in China. Now this gas is served both by pipeline exports from Eurasia and even other parts, Myanmar, but also the importation of liquefy of LNG. Which the Chinese entered last year in a big way and began to, in fact, it was such a big entry that it started to ramp up LNG prices throughout the Pacific. And what's interesting about this is that this is a political response to the Chinese people who want the government to take some action not on climate. They don't even know what climate is on local air pollution. And one thing natural gas is very good. It has no particulate. So you're going to see a lot of pressure in China to get more gas supply. And they can buy this liquefied natural gas from a lot of sources and they have been buying it from the US. And if you go to the next slide you can see, I just want to get you a little bit more, unlike India in which coal still predominates in China, gas is now the fuel of choice over coal. It's a big change in China. And as I say, it's driven very much by local air pollution concerns. And for the legitimacy of the party itself they have to address this issue. It's the one area where the Chinese government is very much concerned about what the people think. Sure, pollution. I mean a few years ago in Beijing you had to wear a gas mask. That's how bad the air was. Now it's better. And they're taking a few years ago everything was coal. Look at the AC River and the coal barges going hither and yon, now it's not so much anymore. Yeah, so you can see the increasing use in power turbines which is the light, the bottom chart. And it's gone from four billion cubic feet a day to eight. Now to put that, expect you to get to eight by 2023, by the way to put that four billion cubic feet in perspective for 2015, that's how much gas we send to Mexico every day by pipeline. So Mexico is also making expansive use of U.S. natural gas and we're very hopeful about that relationship as we know have a trade agreement with Mexico, at least we believe we do, right. We're still waiting to get Canada in the next year. Well how do the political diplomatic moves affect this, if at all? I mean our relationship with China is not nearly as good as it was a few years ago. Our relationship with Mexico and Canada at least in terms of import and export is not as good. How does that affect the exportation of LNG? Yes, so I think I'm going to show you a slide here which deals with that. I think for Canada and Mexico, we don't really have the whole story yet, the relationships are so strong. I haven't seen any disruption in the energy trade, however, the aluminum and steel import tariffs, much of which are now being sort of negotiated, let's say, or trying to be resolved through the World Trade Organization. But though there have been the actions the administration took under section 232 of the Trade Expansion Act, but tariffs on aluminum and steel have not been helpful to the cost competitiveness of the industry. So if you go, and I think that if you go to the next slide here, the next picture here, you can see. What is the title of the slide? The next one is the, it shows the high export scenario and the low export scenario. Can you see that there? Yes. Okay. The colored part of the chart is really baked in. We are going to move to about, by 2021, we're going to be exporting in liquefied form nearly 15 billion cubic feet a day of natural gas. That is a huge amount of gas and places us up one of the top tier suppliers of liquefied natural gas to the world market. It's very important. Whether we, you know, how fast that ramps up is going to depend a lot on, you know, the development of the technology, the size, and mostly the size of the market. We actually believe that the price of natural gas is going to remain low in the U.S., low that is, somewhere from $2.75 to $3.25 a thousand cubic feet and it's going to stay that way for many, many years. We have so much gas. Am I right, am I right to assume that a country importing these exports from the United States is not going to want to put tariffs on LNG because it needs the gas, no? Yes. So I would say if you go to the last picture here, LNG imports from the United States to China are in fact declining. China did sign up for a long-term agreement with one exporter called Shanir and they are the elephant in the room. We just had a big workshop on this with the Japanese and, you know, the two big uncertainties in the Indo-Pacific market is going to be China and India. India, we sort of understand, but China, small changes in policy there can overwhelm the world LNG market. So we have to really be, we actually have to find a way to engage the Chinese so we understand the process and then we understand how to address this kind of huge requirement they're going to have. But I think what's telling is that the trade policy, the trade dispute with China is starting to have an effect. And if you look at the red, the sort of red parts of the bar, those are Chinese imports from the United States. Let's see that slide one more time with the, yeah, the red parts of it. Yeah. Go ahead. LNG imports from USA to China are declining is the title of this slide, okay. Okay. That's the wrong slide. Let's look at the other side. Yes. Okay. Yeah. It's the last slide. Okay. Right. Yeah. So you see the red bar and the larger bar there and the, along the bottom are all the countries the US is shipping liquefied natural gas to. And in, as we enter 2008, you can see it's starting to decline and flatten out. Yes. Okay. So you see the Chinese are sending a message. Okay. They are trying to find other sources, they're trying to find levers to the US, to the Trump administration that says, look, this trade policy has two sides to it. And it's not just us going after your soybean exports. We're going to go after a central theme in your word administration, which is energy dominant. And we're going to show you that we can find supplies and LNG from sources other than the United States. We don't want to be dependent on the United States. Well, I don't think they, you know, they have a huge source that there's domestic production. They have, they have supplies from Russia from Eurasia. So they have a diversified strategy, but they also want to be able to send a signal that trade is a two way street as far as they're concerned. I think the Trump administration's view is that they have to do this because of certain other quote, unfair practices of the Chinese, particularly a combination of requirement of technology transfer or some technology theft. And that I actually I'm quite concerned about this because, you know, my, our strategy, I mean, if, if I were kidding, I would say, look, you should have a strong trade relationship with Canada, the Europeans, Mexico, and then you should gang up as a group on the China. Don't try to take on everybody at once. It's a huge, it's a huge burden. And you're not likely to succeed. And it bites you. One more thing before we go to the break room is that that chart we just looked at shows that this process of, you know, China looking for other LNG elsewhere and taking less from the U.S. started in 2008. So it's it's strategy really goes back when the two that was long before Trump. No, 2018, the slide, if you look at the slide, it's only from the years 2017 to 2018. Okay, I see it now. Okay. So this really is very recent then. Yes. Yeah, this is very real time data. Actually, the LNG market wasn't much of a market 10 years ago. It was Japan, Korea, Taiwan. That was it. Well, it looks to me at the end, at the end of it, the final part of the slide, that the amount of gas that the Chinese are getting from other sources is greater than the amount of gas they're importing from the U.S. Exactly. And this is just LNG. They're getting lots of gas from a pipeline from Myanmar and from Russia, and then they get fairly big supplies from Turkmenistan and Eurasia. And does this mean that they have put money into infrastructure, which is dedicated to those other sources? I mean, is this reversible or is this a sort of permanent condition? Oh, no, I'm pretty sure the LNG stuff is very reversible because right now they're just swapping out one LNG supplier from another. I do think that long term it could cause them to fundamentally shift their sources of supply. Sure. On a momentum basis, anyway. Right, right. Well, let's take a short break. That's a loop for Eurasia. We're going to come back and talk about more of the things that are happening in Washington, and plenty is happening in Washington these days. We'll be right back. This is Think Tech Hawaii, raising public awareness. When I was growing up, I was among the one in six American kids who struggle with hunger, and hungry mornings make tired days. Grumpy days. That kind of days. But with the power of breakfast, the kids in your neighborhood can think big and be more. When we're not hungry for breakfast, we're hungry for more. More ideas. More dreams. More fun. When kids aren't hungry for breakfast, they can be hungry for more. Go to hungarees.org and lend your time or your voice to make breakfast happen for kids in your neighborhood. Hello. My name is Stephanie Mock, and I'm one of three hosts of Think Tech Hawaii's Hawaii Food and Farmer series. Our other hosts are Matt Johnson and Pomei Weigert. And we talk to those who are in the fields and behind the scenes of our local food system. We talk to farmers, chefs, restaurateurs, and more to learn more about what goes into sustainable agriculture here in Hawaii. We are on at Thursdays at 4 p.m., and we hope we'll see you next time. Okay. Luke, we're having a good time during the break. So, Lou, you know, we got all kinds of stuff happening in Washington. In a sense, you are our man in Washington. Can't say that. So I'm always interested in your view of how things are going in Washington. And clearly one of the biggest things going now, aside from, you know, today's action on tariffs, is Judge Kavanaugh. Can you give me a feeling about what the rank and file feel about what's happening with Judge Kavanaugh's confirmation? Well, you know, I think you have to look upon this. There's a kind of substantive issue. And I do think now with the so-called Me Too movement, for whatever that's worth, that it's a very hot potato for any politician, right? Everybody panics when this starts to happen. But I do think Judge Kavanaugh's getting... I mean, I'm not a position to talk about the merits, although I do think that this happened a long time ago. It doesn't mean it's not serious. It happened when he was... I mean, the FBI today said, look, they want us to invest... I mean, there's a lot of confusing statements coming out. The FBI said, well, actually, you don't understand what we do. We go out and interview people. We write down what they tell them, tell us. And we send it to the lighthouse. And instead of gates, it's your decision. And the Senate is supposed to be the place that makes the judgment. So I'm pretty sure that what's going on is, you know, Schumer and your Senator Haloney and Halona and Bill DeBrand and all the Democrats, they just want this thing to get delayed in the hope that in the election that somehow the Democrats take the Senate and then they can stop the nomination. And I just think it was, for me, a little outrageous that Dianne Feinstein sat on this document she had, this anonymous letter she had. And then she waited until all the hearings were over and then released it. That's pretty crafty. Pretty crafty. It's very hard ball, you know. But I don't think it's... Actually, I'm sort of thinking the guy's going to probably get confirmed. I mean, you know, I think the other thing that comes out in all these me-two things like Weinstein and Matt Lauer, usually there's like dozens of women who showed up. There hasn't been a single woman who's said that this is a bad guy. So I mean, there should be a statute of limitations on how far... Actually, do you know that when the FBI does a background check on somebody, they stop at 18? You mean 18 years of age? Yeah, they don't go before the age of 18. It's just a matter of... Well, you know, this is a message to all those 17-year-olds out there. What they do on a Saturday night may affect the rest of their lives, like it or not. Yeah, so I do think it's a terrible way... Look, I get it. They're unhappy with this guy. You know, they wanted a lot more documents from him. But he settled over 360... I mean, he's written an opinion and been involved in 360 cases from the bench. So are you telling me we can't figure out whether how this guy comes out by looking at 360 cases? They've never had that much before yet. And so it's really... You have to see it as a circus it is when you watch it. It's just a circus because I used that term earlier today. Yes, it is a circus. Well, it shows you... You used the term hardball before. And indeed, that seems applicable on both sides of the aisle. Everybody's playing hardball and it really has not a lot to do with the substance. It has to do with playing the game. I mean, I thought the good senator from Hawaii who said today that this is really a problem men have. And men have to step up. So that's like 50% of her voting block she went after. Well, this is kind of an intersection between Supreme Court confirmation and the Me Too movement. See what happens when you smash the two of them together. So what's your prediction in terms of timing and result? Well, so my prediction is that the Republicans... This is a big deal for Senator McConnell, majority leader. This is the one thing he can point to. It means a lot to his legacy. It fires up the Republican base. I mean, actually, this could backfire on the Democrats in the election because it might get all these Republicans who are going to... They hope we'll stay home. Come out. So I believe Gavinal will be concurred. I just think the guy, they just don't have anything. Had these huge, you know, Bush came out for him again today. There's so many people at 65 women from his high school to talk about what a great guy he was. I just, I mean, I do think... I do think you have to take these allegations seriously. It is a problem, but it was so long ago. You don't know if it's an implanted memory. It's nothing she revealed to she with 2012. You know, it's very interesting. She's represented by the same lawyer who represented Bill Clinton against Juanita Broderick and me. So it's a specialty area. Right, but it's got too much political, you know... But you know what's troubling about this, Lou, and I'm interested in your thought about it, is that let's assume for the moment that she has enough, and maybe that's one of the reasons she wants to see an FBI probe, she has enough to be credible, that something untoward happened, even though they were just kids, something untoward happened. He, on the other hand, is saying pretty clearly that he is denying anything happened. He said he wasn't even in the room. Yeah, so he denies it all. And then you have that fellow, the friend, who says, well, there was something. And who knows where additional information will go. Who knows how it will present when you put people under oath in front of that committee on this issue. But my concern is if the Senate finds the committee, let's assume the committee finds that she's right, that she is more likely to be believed, that she is the credible one, then they're also inherently finding that he's not telling the truth, isn't that true? And then that's a problem. Look, if it turns out that he lied, right, that he should not be confirmed, it's very straightforward. But he's pretty adamant about this, that he was not there. And here's the problem. Can you remember anything about what you were doing 36 years ago? I don't have a diary I can look up and see what I was doing. She can't remember the day, the year. I think this is really very problematic. Yeah, well, it's got the play out. And it's woven into how the midterm elections will go. I mean, it's a direct connection. Unfortunately, it's all about politics. Yeah, so let me ask you this. This sort of takes us to my last question. The midterm elections. They could confirm the Republican position in Congress, and they could upset the Republican position in Congress. And maybe it's a tight race in that way. How does that race affect energy? How does it affect LNG? How does it affect energy in America? Do you lie awake at night thinking about how this is going to change the world in energy? No, you know, it's very interesting. I bet you didn't read about this in the paper. Two weeks ago, the Department of Interior had an oil and gas lease sale in New Mexico, right? Not Mexico, New Mexico. And the sum of the high bid, that means the money people were willing to pay was about a billion dollars. Yet you didn't read about that anywhere. So in terms of energy policy, a change in the Congress is not going to change it that much. If the House goes to Democratic control, which is, you know, probably at least 50-50, maybe slightly more, there's going to be lots of hearing, lots of oversight and investigation hearing, lots of people getting brought up there and yelled at, and they're going to request lots of things. But basically, the administration is not looking for any new legislation. So they'll be able to continue on the road they go forward. They may impeach Trump, I don't think they've done it, but they won't get very far unless the Senate shifts dramatically. And the most likely political forecast is that the House moves to a slightly Democratic majority, and the Senate stays where it is or gets slightly more Republican. If that's all so, I get what you're saying, that doesn't mean there'll be new initiatives to renew an environmental change. Well, yeah, we may be. We're reducing our carbon emissions every year now. I don't know what the problem is. Okay, well, we'll have to follow it. If the Germans are shut down their nukes and are now digging up coal in an ancient forest. I mean, it's ridiculous. Well, they're harassing us for being bad stewards of the environment. It's all connected, Lou. It's all connected, and we have to follow it. So in two weeks' time, I am certain to a moral certainty there'll be more for us to discuss. Let's hope so. Let's hope so. It's okay. Thank you, Lou, very recently. Energy in America, Lou, very recently. Thanks so much.