Smart choices moving ahead

Art Schroeder, CEO, Safe Marine Transfer LLC  

The easy part, the election, is now behind us. The hard work of execution and implementation lies ahead, and how we perform will make a difference.  

First, “Buddy” Musk and partner Vivek Ramaswamy have been asked by President-elect Donald Trump to lead the newly formed Department of Government Efficiency, or DOGE. With a 2025 budget of $7.3 trillion, it would seem there is much potential. The men have made it clear they are about cutting costs and reducing/removing regulations that have, for decades, been layered on by non-elected bureaucrats. “Cutting regulations should allow at least a proportional reduction in federal head count, and also a corresponding reduction in the regulated private sector head count, as well as a productivity/income boost.”¹ 

There are a couple of recent court cases, in particular Loper Bright v. Raimondo² (reversal of the Chevron doctrine, whereby courts were required to defer to an agency’s reasonable interpretation of an ambiguous statute that the agency administered), which should give them a much larger operating envelope than in the past.  

What really needs to happen is a complete re-thinking of government mission. The U.S. Department of Education was first launched in 1867, then killed one year later. The latest re-birth was under President Jimmy Carter in 1979, and it has grown to a 2024 annual budget of $238 billion. An easy fix is to return responsibilities to state and local governments, bam—savings. Some will be more difficult. Behind every infamous $600 Pentagon hammer,³ there is a congressman with a district that manufactures hammers (or equivalent).  So, DOGE can’t do it alone.  

Congress will need to step up and participate. Despite holding more than 700 votes this year, the U.S. House only managed to pass 27 bills that have made it into law.⁴ In comparison, the lame duck 100th U.S. Congress under President Reagan (in 1988) introduced 3,740 bills and resolutions during the session, and a total of 471 bills cleared Congress and became public laws.⁵ 

The private sector will also need to step up, as it did in 1940 under President Franklin D. Roosevelt, as he saw how unprepared America was in the face of adversaries. His so-called “dollar-a-year” men (to legally distinguish them from volunteers) included William Knudsen, CEO of GM, who was responsible for revolutionizing mass production, under which in 1944 American industry had ramped up to 50 merchant ships a day and a warplane every 5 mins.⁶ Among the many pieces of advice being offered today, Hudson Institute’s Arthur Merman pulls lessons learned from the WWII ramp-up and advises; First, seek out the most productive sectors, second focus on results, not process, and third, establish incentives.⁷  

Selecting the important sector of energy and the now closely linked “climate change,” I believe here in the United States of America, and across the planet, all forms of energy should be developed and exploited to help raise the standard of living for all humanity. There are smart choices that need to be made, and some of the smart choices may be cancelling, or not even starting, programs that don’t make sense and cents! The difficulty is discerning just what makes sense and how to perform the economic trade studies.  

U.S. POLICY IS IMPORTANT 

During the final presidential debate against Donald Trump on Oct. 22, 2020, U.S. President Joe Biden declared climate change the “number one issue facing humanity” and vowed a national transition from fossil fuels to renewable energy that could create millions of new jobs. Continuing, he said, “..it’s the number one issue facing humanity… climate change is the existential threat to humanity…. unchecked, it is going to bake this planet. This is not hyperbole. It’s real. And we have a moral obligation.”⁸ Wow!  

Putting his political muscle where his mouth was, Biden’s signature  Inflation Reduction Act (IRA) made the single-largest investment in climate and energy in American history, and,  according to the administration “…enabling America to tackle the climate crisis, advancing environmental justice, securing America’s position as a world leader in domestic clean energy manufacturing, and putting the United States on a pathway to achieving climate goals, including a net-zero economy by 2050.”⁹  

In his second State of the Union address on Feb.  7, 2023, Biden continued to highlight the threat of climate change and its hazardous impacts, “Let’s face reality. The climate crisis doesn’t care if you’re in a red or blue state. It’s an existential threat,”¹⁰ and he continued to hammer his point home.    

While many of the law’s energy subsidies are slated to end in 2032, new guidance from the Internal Revenue Service (IRS) states taxpayers may be on the hook indefinitely for tax credits for electricity production and energy storage costing $3 trillion or more.¹² The IRA’s longest-lasting energy subsidies—investment tax credits for energy storage and production tax credits for low-greenhouse gas (GHG) electricity production—have no fixed expiration date or spending cap. Instead, these tax credits only go away when the Treasury secretary determines that the U.S. electricity sector has reduced its GHG emissions to 25% of 2022 emissions (or lower).¹² 

Fast forward, new administration, quite a different philosophy. Chris Wright, Trump’s nominee for Secretary of Energy, has sparked plenty of debate, and he has been labeled by some as a “Climate Denier.”¹³ Wright describes himself on his LinkedIn page as, “Tech nerd turned entrepreneur. Founder, Chief Executive Officer and Chairman of Liberty Energy. Passion for bringing the benefits of energy to every community in the world. I am all in on energy from my start in nuclear, solar, and geothermal to my current efforts in oil and gas and next generation geothermal. I don't care where energy comes, as long as it is secure, reliable, affordable and betters human lives.”¹⁴ 

Wright picks up on comments from Steven Koonin, who served as bp’s Chief Scientist and Under Secretary for Science, Department of Energy, in the Obama administration. Koonin, writing¹⁵ about a report produced by the Council of Economic Advisers and the Office of Management and Budget, which assesses the economic consequences of climate change, says the difference in anticipated GDP growth is “in the noise. The report¹⁶ shows 12 independent peer-reviewed estimates of how America’s gross domestic product would decline as the global temperature rises. If the average annual GDP growth rate is 1.5% for the next 80 years, the economy would grow 232%. A 2% climate-change effect would reduce that growth to 225%. (Editor’s note: Sounds like a typical, liberal, ivory tower study with a typically inconsequential result.)  

ROLE OF INDUSTRY  

Somewhat in-between the polar extremes of the two administrations, we have positions being expressed by a number of large companies. Globally, energy is, of course, a major component of manufacturing cars, steel, cement and chemicals, as well as growing crops—virtually everything—and powering most all modern conveniences. Germany, which until the Ukraine invasion benefitted from low-cost Russian gas, now better understands the reliability and security components of sound energy policy. Volkswagen, with 300,000 workers and 10 operating plants in Germany, is going through a second round of strikes, with plans to cut workforce, pay and plants, adjusting for energy costs and dampened demand for electric cars.¹⁷   

Publicly traded oil companies are weighing in, as well. Shell and bp have recently and significantly backed off green energy plans and walked back earlier talk of reducing fossil fuel production. Oxy’s CEO, Vicki Hollub, this year called climate change “the greatest crisis our world has ever faced,” and ExxonMobil CEO Darren Woods said that Trump should not pull the U.S. from the Paris climate pact (again).¹⁸ Continental Resources CEO Harold Hamm remarked to Financial Times interviewer Derek Brower, “Put some teeth in” global climate agreements, so coal plants can be closed.¹⁹ Hamm is no green advocate. He wants coal to be replaced with natural gas, which emits less CO₂ than coal when it is burned (but still contributes to climate change).  

Cheap, plentiful, reliable natural gas has been a big part of the U.S. CO₂ reduction, driven more by economics than laws and mandates, Fig. 1. Despite Trump’s campaign cry of “drill baby, drill,” it is yet to be seen if independents will exercise fiscal discipline required for economic growth or chase volume growth and thereby lower gasoline prices.  

Fig. 1. CO2 emissions from energy consumption in the U.S. from 1975 to 2023, millions of metric tons. Chart: Statista.com.

REST OF WORLD POLICY  

The re-distribution of wealth has become an ever-larger topic in the past decade, and energy access and climate change are part of the equation.²⁰ Developing nations are consuming more energy—the cheap and plentiful kind, oil and gas—and are thus driving CO₂ emissions up as they grow their economies. This was highlighted at the recent United Nations COP29 in Baku, Azerbaijan, where campaigners, celebrities and politicians talked at length about “climate justice” and the need for payments of trillions of dollars per year.²¹ The poorer counties, led by India, demanded $1.3 trillion in grants, while representatives of wealthy countries promised to spend $300 billion a year to help poorer ones adapt. Of course, even the $300 billion is not legally binding.²² 

Even if the U.S. achieved net-zero carbon emissions overnight and stayed that way for the rest of the century—basically destroying its economy and much of America’s quality of life—the 2100 projected global temperature would only drop 0.3^oF, based on the United Nations’ climate model,²³ Fig. 2. 

Fig. 2. Impact of U.S. achieving net-zero emissions. Chart: http://live.magicc.org

WAY FORWARD EXAMPLE: BLEND INCREASED SUBSEA PRODUCTION WITH DECREASED CO2 EMISSIONS 

A company I co-founded, Safe Marine Transfer, LLC,²⁴ (SMT) exemplifies taking an existing, proven set of technologies and re-deploying them in new applications—in our case, to increase subsea production through the use of drag reducing agents (DRAs). Onshore and export lines have used DRAs for decades. In some instances, flow improvements of up to 80% have been achieved.  

The long-term proven performance now makes DRA application routine in design optimization parameters for new pipelines, resulting in reduction of pipeline diameter (saving capital expense), increasing throughput (increasing revenue) and reducing the number/increasing spacing of pump stations (reducing operating and capital costs). DRA basically substitutes parts per million of DRA (molecules) to reduce turbulence and increase flow versus megawatts (electrons) of power to turn pumps and boost flow. They can both serve the purpose of increasing throughput.  

With recent interest on CO₂ reduction, increased use of DRA is being considered for existing pipelines, where shutting down pump stations can effectively reduce CO₂ emissions (and pump maintenance) and maintain throughput. SMT was originally founded, based on a need articulated by industry consortium and Chevron-led DeepStar® in 2012. The goal was to lower costs and extend the reach of subsea tiebacks by developing subsea chemical storage and injection of production chemicals, scale, corrosion, wax, asphaltene and other inhibitors.  

The technology was matured with financial help from the U.S. Department of Energy, along with both technical guidance and financial cost share from DeepStar®. OTC paper #26966, titled “Development and Qualification of a Subsea 3,000 Barrel Pressure Compensated Chemical Storage and Injection System,” and OTC-28775, titled, “Enabling Longer and Cheaper Subsea Tie-backs Utilizing Local Subsea Chemical Storage and Injection,” triggered DRA companies to consider expanding their offering to an entirely new market, subsea. While the subsea market has been around for decades, it was unaddressable to DRA deployment, as the chemical is not umbilical-tolerant. 

Today, a full-scale prototype unit has been built and qualified, and strands ready for deployment, Fig. 3. Details are documented in OTC paper #31054, titled, “Key Technology Qualification for Increasing Subsea Well Production via Drag Reducing Agents.”   

Fig. 3. Full-scale prototype, subsea DRA system.

CONCLUSIONS 

As Hall of Fame baseball player Yogi Berra is credited with saying, “it’s hard to make predictions, especially about the future.” Clearly, the new administration is outlining different policies and is nominating loyalists to implement them. Will they actually be able to implement these items? Will the results be better? For all, or just some? On the whole, cheap, reliable and secure energy has helped make America great! Let’s not transition away from oil and gas, and let’s add solar, wind, nuclear and energy efficiencies.²⁵ In considering CO₂ impacts and the costs to mitigate, we should keep in mind there are many, many issues we humans across the planet face and prioritization of spending will be important. Additionally, adaptation is also an available tool, which humans are pretty good at.  

REFERENCES 

1. Wall Street Journal, 2024-11-21, Elon Musk and Vivek Ramaswamy 
2. https://www.hoganlovells.com/en/publications/loper-bright-enterprises-v-raimondo-decision-summary
3. https://www.ashlime.com/insights/2019/3/4/the-fallacy-of-the-600-hammer-e2als
4. https://www.nytimes.com/2023/12/19/us/politics/bills-laws-2023-house-congress.html
5. https://library.cqpress.com/cqalmanac/document.php?id=cqal88-1140626
6. https://manufacturing-victory.org/history/leaders.php
7. Wall Street Journal, 2024-12-10 
8. https://www.cnbc.com/2020/10/24/joe-biden-climate-change-is-number-one-issue-facing-humanity.html
9. https://www.energy.gov/lpo/community-jobs-and-justice
10. https://eos.org/articles/biden-calls-climate-change-existential-threat
11. https://www.federalregister.gov/documents/2024/06/03/2024-11719/section-45y-clean-electricity-production-credit-and-section-48e-clean-electricity-investment-credit
12. https://www.cato.org/blog/new-irs-guidance-makes-inflation-reduction-acts-energy-subsidies-harder-eliminate
13. https://www.forbes.com/sites/rrapier/2024/11/29/understanding-chris-wrights-position-on-climate-change/
14. https://www.linkedin.com/in/chris-wright-b8370a17b/
15. https://www.wsj.com/articles/the-white-house-tells-the-truth-about-climate-change-global-warming-gdp-temperature-economic-growth-52aaf575
16. https://www.whitehouse.gov/wp-content/uploads/2023/03/CEA-OMB-White-Paper.pdf
17. Wall Street Journal, 2024-1-10, Dominic Chopping. 
18. Wall Street Journal, 2024-12-08, Benoit Morenne. 
19. https://financialpost.com/commodities/energy/oil-gas/the-oilmans-fury-shale-pioneer-harold-hamm-blasts-bidens-fossil-fuels-policies
20. https://www.sciencedirect.com/science/article/pii/S0040162520304157#bbib0195
21. https://nypost.com/2024/11/11/opinion/un-climate-conference-just-an-excuse-to-shake-west-down-for-cash/?mc_cid=32c750b3b2&mc_eid=dc30625464 , Redistributing global wealth won't solve climate change. 
22. Wall Street Journal, 2024-11-26, WSJ editorial board. 
23. http://live.magicc.org
24. https://www.safemarinetransfer.com/
25. World Oil Industry Leaders’ Outlook 2024, Energy Transition, Addition is what’s required.  https://read.nxtbook.com/gulf_energy_information/world_oil/december_2023/industry_outlook_2024_schroed.html

About the author

ART SCHROEDER co-founded Safe Marine Transfer, LLC in 2012, where he serves as a board member and CEO. He also co-founded Subsea Shuttle, LLC in 2019 and serves as a board member and CEO. Previously, he founded Energy Valley in 2000, a company that provides money, marketing and management to commercialize and advance energy-related technologies. Prior to that, he worked 25 years for a major integrated oil company, serving in operations, engineering, construction, strategy development, and crisis management roles, domestic and internationally. 

Mr. Schroeder has served on numerous civic, corporate and professional boards, including the Offshore Technology Conference and the AIChE Program subcommittee, since 1989. He has published over 100 technical papers and has been granted 100+ patents. He is the recipient of numerous awards, including OTC’s Special Citation; Engineering, Science and Technology Council of Houston’s Lifetime Achievement Award; U.S. Department of Energy recognition for leadership building Offshore Technology Roadmap; designation by Society of Petroleum Engineers as a Distinguished Member; SPE’s Management and Information Award; and election as a Fellow of the American Institute of Chemical Engineers. Mr. Schroeder graduated from Georgia Institute of Technology, with both BS and MS degrees in chemical engineering , with a minor in environmental engineering. He also earned an MBA from the University of Houston, majoring in finance and International Business.