Shell Oil exec sees ‘cap-and-trade’ win

NEWSMAKER INTERVIEW:

Shell Oil Co. President Marvin E. Odum said Wednesday that President Obama probably will win approval as early as next year for his signature environmental goal, a “cap-and-trade” system to reduce greenhouse gases.

The prediction runs counter to the hopes of many business lobbies that have been working hard to block the system, fearing it would impose huge new costs on them and consumers. Under the system, companies, including oil refiners, would pay the government for every ton of carbon dioxide they emit and could sell the right to pollute to others if they reduce their output below government limits.

Mr. Odum, who runs Royal Dutch Shell PLC’s operations in the United States, said his company is planning for the enactment of the law, which Mr. Obama estimates will generate $646 billion between 2012 and 2020, and is focusing on trying to shape the legislation so it imposes the least possible burden on Shell.

Mr. Odum indicated he would prefer that proceeds go into renewable energy technology rather than the tax cuts for individuals envisioned by Mr. Obama.

“I waver back and forth in terms of how much time it’s going to take. I do think the political will is likely in the direction of cap-and-trade,” Mr. Odum told editors and reporters of The Washington Times.

At the same time, Mr. Odum said, Shell strongly opposes Mr. Obama’s plan to raise $30 billion in new revenue over 10 years by rolling back oil and gas industry tax breaks and increasing drilling fees. He warned that the tax changes in the president’s budget plan and restrictions on offshore drilling would curb supply and production of domestically produced oil and gas, and would make the U.S. more dependent on foreign-produced fuels.

“We know what the response is. The response is typically less investment and less production,” Mr. Odum said.

The Shell executive also downplayed the practicality of the widely publicized energy plan of oilman T. Boone Pickens to tap natural gas as a transportation fuel to reduce oil imports in the short term. He said it may take up to five years to know whether new natural gas fields in Pennsylvania, New York and elsewhere prove to have the reserves needed to support Mr. Pickens’ idea. “It’s part of the solution. Natural gas alone will not be that bridge” to replacing gasoline and diesel as an auto and truck fuel, he said.

Top Democratic lawmakers have said they plan to vote on cap-and-trade bills in the House this year and in the Senate by early next year.

Mr. Odum said he expected that the direction of the plan would be apparent before the next global climate treaty talks begin in Copenhagen in December. “There’s going to be a very concerted effort to at least have the framework in place before Copenhagen, to give the U.S. administration somewhat of a position to go into that with,” he said.

Shell has been an advocate of a cap-and-trade system through the United States Climate Action Partnership, a consortium of oil, industry and environmental groups that has called for a phased-in system that grants some free pollution allowances to blunt the impact on vulnerable sectors of the economy.

Mr. Obama has taken his plan further than that, calling for polluters to purchase all of the required allowances, essentially erasing the phase-in period.

Mr. Odum said he wants the Obama administration to take a strong leadership role in Copenhagen. He said the company has separately stressed to the administration and Democratic lawmakers that higher royalties and fewer tax breaks, combined with restrictions on new offshore drilling, would undermine Mr. Obama’s plans to decrease the nation’s dependence on foreign oil.

Story Continues →