 This is Think Tech Hawaii. Immunity matters here. This is Think Tech Hawaii, raising public awareness. OK, Vingo, we're back. That's Jeff Kissel over there. You can see him. And I'm Jay Fiedel. And this is Energy in America. We explore the larger picture of energy in this country and beyond. And we so appreciate Jeff coming around. Jeff, why don't you tell us where you are today? Well, Jay, it's a pleasure to be with you. I'm glad you got my high school picture up there. Looks good. I am working in the East Coast today. I'm in New York City. And I wish we were actually on video because the view from where I am is just spectacular. If I look west, I see the Empire State Building. It's a little after 9 o'clock tonight at night. And it's all lit up at the top with a rainbow of colors. If I look south, I can just look straight down Park Avenue where the Avenue intersects Broadway. And we can see the Freedom Tower in the distance. I look north to Grand Central Station. And of course, I look east out on the East River. And it's just a beautiful, beautiful site. We're having a Hawaii weather out here. So the only regret I have is that I brought my aloha. I shared 3,000 miles, and nobody gets to see it. Next time soon, Jeff, we have to do this again. I'll be glad to. I'll be glad to. We'll do it live and direct from Central Park. Yeah. Oh, that'd be great. I really like live. And I like Manhattan. I like New York. And I left New York essentially in, gee, 1965. And I've only been back as a tourist since then. And I must say it's, well, actually I came back for graduate school. So that's not entirely right. I left it finally in 1971. But I must say that New York is such a pleasing place. There's so much there, there's so much nutrition in New York. And so I envy you being there today. Well, it's certainly a financial center. As you may or may not know, it is the energy center in the world today where more oil, oil commodities, oil, natural gas, all of this material is traded and priced right here in Manhattan. There are other centers, Chicago and London and the like. But there's nothing to compare with the volume here. And we're fortunate that we're in Hawaii. We're part of an economy that has access to these energy markets. North America is essentially, as you and I have discussed, it's now energy independent. And of course, we're a big exporter of energy products, gasoline, diesel, and the like. Obviously, coal as well. And Lou Budyerisi has told us about the effort to sell natural gas, LNG to Asia. And so we are an exporter in many ways and in many different kinds of products. And so I would have thought, if you asked me, coal, I would have thought that the US was not a major fuel production or the major fuel production center in the world. But that's not true. It is the number one fossil fuel production center in the world right now today. Not the Middle East, not anyplace else, but the US. How do you like that? Well, I like it better and better when you consider that the US is also the number one renewable energy producer in the world. People don't realize that. There is more renewable energy produced in the continental United States by any measure than anywhere else on Earth. And that supply is growing. It's growing in a place like California, which is the number two energy-producing fossil fuel producing state in the 50 states. So it's really quite something. Well, I think what's interesting is that the capital powers, the capital investment organizations in the country or centered or headquartered in the country, probably in Manhattan, all of them, recognize that the more energy you have in a given country or jurisdiction, the better the economy is going to be. That would seem clear as a matter of fundamental economics, but it's somehow become all the more clear these days, don't you think, with the US especially. If we have more energy, we do better in our economy. Well, it's one of the factors that got us out of the great recession a lot sooner than the rest of the world economy because we floated to prosperity on a sea of oil, natural gas and natural gas liquids from the natural gas revolution and the Permian Basin and the other regions in the United States. And that fact will be discussed for decades to come as we analyze what's going on in the energy sector in North America. Is it fair to say that the Trump administration has had a salient effect on this over the last 18 months, or has it been happening anyway, regardless of what efforts he may be exercising? Well, it really started and, you know, the Energy Policy Research Foundation is not political and not partisan. So we're, you know, we look at this from an economic perspective and the physics. It really started earlier than that. It started really during the Bush administration when unconventional gas was first developed and it continued on through the Obama administration and now it continues. Now certainly the Obama administration and the Trump administration with their energy policy have influenced the process and they've influenced it in many directions. But the underlying trend is economic. It really is not political. Well, let me turn to the subject you and I were going to discuss and that is the energy relationship, if you will, between Alaska, interestingly enough, and Hawaii. What is that relationship? How does that work and how does it benefit us? Well, Jay, you know, not to put a, to find a point on it, but if you stand out on your front porch and look almost due north, you will see Sarah Palin's porch. The Alaska-Hawaii trade route is critically important and it has been for many, many years. Alaska developed the trans-Alaska pipeline as we all know in the 1970s and it exported at one point over a million and a half barrels a day of crude oil. That's down by about two thirds as the resources being fully deployed and exploited. But that doesn't mean that Alaska is any less important to Hawaii. You and I were both around when the Alaska oil workers used Hawaii as an R&R base during the 70s. And I think we're both old enough to remember when Western Airlines flew from Honolulu to Anchorage and then on to London. And a very important link in the energy supply chain is the North Sea, Alaska, and other Pacific destinations were being developed for oil production. Well, if you look at my slide pack and you go to slide two, you actually see that Alaska West Coast and Alaska-Hawaii trade route. It is critically important for Hawaii's energy future. I want to make a point that you and I have made previously but I think it's important to set the context again for this show. Hawaii has decided that oil will be its bridge to its renewable energy future. It has eliminated effectively the gas. It has eliminated the option for natural gas and it has effectively eliminated coal as a source of energy to get through the oil era to hopefully what will be the state's goal of a more or less renewable energy future not dependent upon fossil fuels. Now I'm saying that because it's the fact. It's not something we believe is right or wrong. But in order to do that, Hawaii needs inexpensive oil. And if you look at the line between Hawaii and Alaska, you will see that the trade route is there. It's all established. The infrastructure is established. The only thing we need of course is oil. If you go to slide three, you'll see that I point out that Hawaii, both of Hawaii's refineries were built or modified so that they run best on Alaskan-type crude oil. Both of them run best on a mix of Alaskan and other low-seltzer crude oils. That produces the least costly gasoline, diesel, jet fuel and power plant fuel for Hawaii. The important point here is not that you should or shouldn't use fuel. The important point here is that if the Hawaii economy is going to have enough money to invest in its renewable energy future, it needs to get its energy today from the least costly sources. So I grew up understanding, I grew up in energy understanding that we were using LSO oil from Indonesia. Is that not so? Or is that just part of this mix you described? It's part of the mix. The low-seltzer fuel oil for the power plant is a very important part of the mix. And that came originally from Hawaii's refinery. It then, as the crude oil blend changed, it was more economical to bring it in from Indonesia. It is now more economical to make it domestically if we can get the crude oil. The reason for that is that low-seltzer fuel oil is in much higher demand because the International Maritime Organization has mandated the use of low-seltzer fuel oil in ships. And so it's no longer going to be available at an economic price outside of Hawaii. The whole idea is to keep the cost of production, keep the cost of energy down. Obviously maintain a policy where we encourage conservation. Nobody is arguing with that. But then while we're trying to wean ourselves away from hydrocarbon, we got to have the least costly hydrocarbon so we can invest in our renewable energy future. Okay, but so we now have LSO that's going to be in greater demand because of this change from, what did you say, the IMO? And as a result, that element, that part of the mixture that comes from Indonesia or elsewhere, which is LSO, low-seltzer oil, is going to be more expensive. How can you maintain a cheaper source of oil if this part of the mix, this LSO part of the mix is getting more expensive? Well, we want to, in order to do that, you know, we've got to try and buy a wholesale. And the way you buy a wholesale is to bring it in as crude oil and refine it. And if you look at slide four, you will see that there is a source for additional Alaskan oil. And it is being developed. And that is the Alaskan National Wildlife Reserve, section 2000 acres out of 19 million in Northern Alaska that is being opened up for development that has the potential to produce nearly a million barrels a day of low-seltzer Alaskan crude oil that can move down the already existing Transalaska pipeline. Transalaska pipeline is running at about one third of its original capacity. So there's plenty of capacity to bring the oil down. There's plenty of oil to come down, we believe. And the ports, the shipping facilities and the receiving facilities in Hawaii are already in place. Now, people are concerned and I understand that I'm very sympathetic to the potential for environmental damage from the development of oil resources. But the point is this resource is already developed. It's already in place, building new pipelines, installing new port facilities, building new breaker walls, T-walls and shipping lanes all have a risk. These risks have already been dealt with, mitigated and in large parts are cost-effective ways to use the resources we need while we're developing our renewable energy future. Well, Jeff, if this is so easy to do, existing infrastructure, existing systems and routes for the oil and existing demand for the oil and that really hasn't changed all that much, why haven't we done it before? Is this something we're doing now or is this something that we will hope to do later? What's the timeline on what you've described? Well, the Trump administration is committed to opening this particular 2000 acre piece to oil exploration and drilling. I believe, and the Energy Policy Research Foundation sent a couple of studies that are available on our website that it is certainly worth public debate. Again, we're not advocating one position or another, we're calling everyone's attention to the fact that you've got billions of dollars worth of infrastructure that could be utilized so that we don't have to develop new infrastructure with the inherent costs and risks and concerns that we would in order to bring this oil to Hawaii and the West Coast through other needs. So these fields then, these fields are fields that were not available before. These fields were for one environmental ruling or consideration or another, we're not available to oil developers to bring the oil down through the Prudhoe Bay and the pipeline and to Hawaii. So this is a new source of Alaskan crude then. That is correct. Now, the Alaskan Natural Wildlife Reserve was set aside by Congress and the administration years ago as a pristine natural reserve. And I think it was a noble thing to do. It was entirely good to do. The question we have to ask ourselves is is it worth taking a look at exploring oil resources on 2019 million acres? And that's a matter for policy debate. I'm not entering into it. I'm pointing out as we do at the foundation that the benefits of producing oil at $15 a barrel, up to a million barrels a day, are enormous compared to the cost of getting that oil from elsewhere in the world. Perhaps again, from economies and countries whose political systems do not have the same interests as our own. Well, have you looked at... Go ahead. Have you done an analysis of how much savings would be involved using this source as opposed to another? For example, suppose Donald Trump was not in office. Suppose the EPA took another view of this and was gonna protect this environment in Northern Alaska near the Arctic Circle and not permit development of oil in this area as had been the case in the past and would not open these fields. What's the difference between that arrangement, sort of the status quo as before, plus the new fields in terms of price to Hawaii? Have you made an analysis of that? How much do we save? Well, we actually have. And if you look at our website, we've got a lot of data, but the fundamental is this. Alaskan oil costs about $15 a barrel to produce. It costs about $2.5 a barrel to transport. The impact to the economy is a positive $14.5 billion. It will save jobs in Hawaii, it will preserve jobs in Alaska. And so those numbers are pretty compelling. Today, if we can bring in oil for around $60 a barrel and produce the low sulfur fuel oil from that, it's a lot cheaper than the $200 a barrel that we have to pay to get that oil out of Indonesia, Singapore, where we have to compete for it against the people who are running ocean-going vessels who need it for their fuel. So, yeah, so okay, so we would save because it would cost more going forward in Indonesia, especially given the supply and demand curve in the future. But let me ask, just so this interests the oil development community. And of course, to a certain degree, it's obviously of some help in our efforts here to save money on energy and car operation. But the thing that I wanted to ask you is, suppose Trump is not re-elected and that possibility exists. We have a very contentious political environment right now. Who knows what exactly will happen in the midterm elections or in the elections in 2020. And so if I'm an investor out of those big oil companies in New York, the ones you're standing right nearby, and I'm trying to look down the pike on this and decide whether to spend billions of dollars in developing these oil resources and transport systems. And I'm not sure that he's gonna be in office that long. And I worry that if the Democrats get back in there and try to return to the old environmental model and not use this oil in these fields, what happens then? So how can capital investment sources who would invest in development of oil in Alaska for the benefit of Hawaii and elsewhere, how can they model their future when they don't know what will happen politically? And political is the operative word, I think, when you're talking about developing oil fields in Northern Alaska. Well, I don't know either, but I do know that the way the legislation is being structured, the administration in power or in office, rather, will not have that much to do with it once the die is cast. And that's because everybody in Congress, Democrat and Republican, recognizes you cannot strand billions of dollars worth of investment and have an American economy that functions properly. It just, that can't happen. So I'm optimistic that the, and again, I have no opinion and I'm not offering a political advocacy for the development of ANWAR or the development of any other resource. I can only tell you what the economics are. I can tell you that if we can get it developed, it will allow Hawaii to escape from the jaws of this impending crisis in the availability of power generation fuel. And it is a natural trade route that's been in place now for half a century between Hawaii and Alaska. The ships are built, the ports are configured, the workers are there, it's good jobs, good energy. And if Hawaii is wise in its energy policy and I commend the state government for being wise the last 25 years, it will use that money to continue to invest in a diversified renewable energy structure that is not dependent upon oil. Well, take one look with me, one further look with me at the possibility that there is a shift in when I call it public opinion and thus the political wins in the next few years. After, for example, we rely heavily on this possibility and we invest billions in it. And now the switch turns the other way. How much trouble would it be to go through the investment to put this infrastructure down to set up these supply lines, if you will, and then change it later, stop it. Well, I will tell you that the oil industry is a very sophisticated industry and they have been putting their capital at risk essentially for about 125 years. And I think that they are doing it in a way that will allow the industry to survive comfortably. But unfortunately, the consequences to Hawaii will be terrible because you will see oil prices go up so dramatically that you'll be paying roughly a dollar a kilowatt hour because of the cost of fuel in the power system. And that is crushing to the Hawaii economy. You and I both remember what happened to the economy in the early part of this century when oil prices spiked well above $100. It just crushed the economy. So I hope that whatever administration is in office takes into account the fact that even though it is a noble cause to protect the environment, and we should, there is a cost to it and the costs have got to be weighed against the benefit. Yeah, one more thing comes to mind in our remaining couple of minutes, Jeff, and I wanted to, this is an old question. And it's a question that came up when LNG was under consideration here in Hawaii. I'm sure you remember that people were saying LNG, as we have discussed today, would be a bridge, a bridge to renewable fuels, a bridge to 100% renewable back down the line. So the process that you and I have been discussing, the opening of these fields and the building investment and building infrastructure will provide a lower price for fossil fuel to Hawaii. Let's accept that. The question is whether we can still manage a bridge because once you have put the investment in, then those who invested it would like to earn a return from it as long as they possibly can. And to tell them in say 10 or 15 years, stop, stop boys, we don't want to use the benefit of that investment anymore. They will probably just, at the time it happens, they will resist that. And thus you have resistance to using this as a bridge, rather you have a certain swell of support for using it forever. And that would impede acceptance of renewable fuels, wouldn't it? And my question to you is how can we be sure that a bridge will really be a bridge? Well, you've got a bridge right now and it's oil because by not looking for another bridge, you have defaulted to oil and that's what it is. So today, if you go to my slide six, the statistic is very simple. Hawaii's got about 20% renewable energy in its economy. Every electric car on the street runs on 80% oil. That's a fact, can't dispute. That's an interesting analysis, yeah. So the bridge is oil. It's a slippery bridge. Aiding natural gas, I thought it was a better bridge, but public policy is what it is. It couldn't agree on anything different. So we've got 70 year old refining assets, 100 year old oil pipelines and tanks in the harbor and that's what Hawaii is running on today. And that's, I can't change it, it's just what it is. So if you look at my slide seven, you see the economic benefits of bringing this oil in from Alaska are new production, lower cost and more jobs. Now, we can't make people do this, but we can certainly point out the economic state we're doing. Yeah, let's take a look at slide seven for a moment and then we'll have to say farewell. Yeah, okay, economic benefits. And 980,000 barrels per day of production and $15 per barrel to produce and that would create a benefit. So assuming that this all happens in the way that you describe and that we'll be able to get relatively cheap oil from Alaska and make an appropriate mix of LSO and satisfy our demand in that way. When will we see gas at the pump less? When will we see the benefits of this economic benefit and reduction? You're already seeing a California pays more for gasoline than Hawaii. But the real benefit will be when you can run an electric car on 100% renewable energy instead of 80% oil and 20% renewable energy. That's the benefit. And that I hope will come about because we're using lower cost oil and saving that money and investing it in our renewable energy future. Yeah, so the whole scenario you described assumes what you said at the outset is that you have to take the money that you are saving and apply it to the development of renewable resources. And that's the critical point and that requires legislative intention, attention and intention and a long view on making the one work with the other. I think it's a really critical point. Correct, and if you're sending that money off to Saudi Arabia or Venezuela or elsewhere, you don't even have the money to make that choice. If you're sending it to Alaska at a lower cost than Singapore, the money is there and at least the policymakers have the ability to make the choice and choose to invest. I hope they get it. And I hope you come on the show again to discuss this very point again and I look forward to that time, Jeff Kissel, E. Prink talking about energy policy research. That's really valuable. Aloha, Jay. Aloha, Jeff. Next time soon. Take care.