Volume 65, Number 3 Fall 2011 www.pesa.org

PESANewsIn thE nEWS

Explorers Awardreception Nov. 16, 20115:00 p.m. to 6:30 p.m.Lakeside Country ClubFYI: Oxy Oil & Gas will acceptthe award and ten executiveswill attend to network withPESA members, including:

William AlbrechtPresident, Oxy Oil & Gas

Stacy PalmataryVice President, Supply Chain

Jeff BennettDirector, Supply Chain Management

Richard JacksonVice President, Drilling Americas

Jeff SimmonsVice President, Subsurface Engineering

Vicki HollubPresident, Permian CO2

Michael LandPresident, Permian Prime Development

Bill RobyPresident, Mid-Continent

Joseph DeDominicPresident, Williston

Ron BrokmeyerPresident, South Texas

2012 Supply Chain SeminarFeb. 1, 2012InterContinental Hotel HoustonFYI: Speakers TBA

PESA ExecutiveAddress SeriesFeb 28, 2012Westin Memorial CityFYI: Speaker is John Gremp,President & CEO, FMC Technologies, Inc.

EvEnt CAlEnDAr

Save the Date: Annual Meeting

PESA’s signature event, thePESA Annual Meeting, is set forApril 11-14 at the Hyatt RegencyScottsdale Resort at GaineyRanch in Scottsdale, Arizona.

A brochure detailing the complete array of events will bemailed in early 2012.

Security of energy supply isthe most vital, but complexchallenge faced by energy importing nations around theglobe.

“Today, the world faces critical challenges, includingweak economies, high unemployment, and growingglobal tension fueled by differing political views,” saysGretchen Watkins, Vice Presidentof International Production Operations for Marathon Oil.“No matter what those politicalviews are, one thing is certain:economic growth requires abundant, reliable, and affordableenergy—the key elements ofenergy security.”

Speaking to PESA membersand Foreign Service Officers,Watkins discussed the realitiesof meeting the nation’s energyneeds while maintaining energy

security. She also delivered keyelements of what she believes isan effective and achievable U.S.energy security plan.

“The geopolitical and environmental challenges weface must be addressed as weseek to moderate our dependenceon crude oil, while at the sametime sustaining our economicgrowth and our global leadership,”she says. “The measure of oursuccess will be determined notonly by our technical abilities,but also by our political will andcommitment to long-term

solutions with both industry andgovernment working together.”

Global Complexity

There is no quick or easy solution, says Watkins.

Some believe that a quick reduction in fossil fuels willlessen the nation’s dependenceon other countries, some ofwhich are struggling to stabilizetheir governments. Watkins saysthat while there is some logic in

FSO Training 2011Government,industry mustteam to meetfuture demand

PESA’s Foreign

Service Officer

training program has

graduated 470

representatives of the

U.S. government over

nineteen years. This

year’s class spent a

week touring a

number of PESA

member companies.

Here, Carla Bock,

Department of State,

looks inside an

armoring machine

at Oceaneering’s

High Performance

Cables facility.

For a photo essay on

this year’s FSO

Training, see Pages 6

and 7.

The FSO Membership Dinner’s three presenters were PESA Chairman John Gremp,Marathon’s Gretchen Watkins, and U.S. Department of State’s David Henry.

n See Watkins, Page 6

In early October, 25 industry companiesdescended on Beeville, Texas with thehope of hiring enough workers to satisfythe growing boom in the Eagle Ford.

Prepared to hire on the spot, the companiessought to bring 900 new people to the industry. This was but one of several jobfairs held in South Texas in the past year… more are held regularly in other boomspots including Wyoming, North Dakota,Canada, and the northeast.

As we continue to prosper in a post-downturn environment, short-term hiringchallenges like those in the Eagle Fordwill continue. Some would argue that thepains of expanding our businesses are niceproblems to have following 2008 and2009. But I think it underscores and foreshadows the looming talent issue.

“The big crew change” is still coming.The average age of workers across all sectors of the industry is about 50 yearsold, compounded by the fact that there is ashortage of mid-career employees to takethe helm as the older generation retires. Sofar, this has meant that our currentyounger generation has taken on greaterresponsibilities and more senior roles thanwould have been typical in an ideal workforce. Again, so far, our younger generation has been successful in their accelerated roles.

The issue is that we not only have tobackfill our current generation but alsocreate the mid-career employment poolmissing from our industry for 20 years.Further, we must hire in the midst of a reputation crisis—despite the high pay andchallenging work, too few graduates seekoil and gas as a first or even secondchoice.

PESA’s Effort

We’ve discussed the anticipated talentshortage for five years or more. We knowit’s coming, and we know that simple recruitment won’t be enough. So what isthe industry doing to help itself?

PESA, for one, is working to solve theproblem on multiple fronts via the EnergyEducators Committee. The association’seducation outreach began in earnest several years ago, and has steadily rampedup with each succeeding year.

The largest of PESA’s programs aims to

encourage high school students to enterthe oil and gas industry. Partnering withIPAA, the association helps to supportthree Petroleum Academies in Houston—Milby, Westside, and Lamar HighSchools—all of which focus on a mathand science curriculum.

Throughout the year, PESA providesdozens of guest lecturers to each of theschools in nearly every business discipline.Engineers, geoscientists, and other expertsfrom member companies volunteer a fewhours to share and discuss their expertiseand experience in oil and gas.

PESA also sponsors the annual externship dinner for the Academies. Forthree weeks this summer, 62 studentsworked as externs with industry companies,attending executive meetings, testingequipment, learning new technology, andessentially getting a preview of working inthe industry. Upon completion of the program, each extern receives a $1,000scholarship from the companies where theyworked. Each student now wants a careerin oil and gas.

Further, PESA presented two $5,000scholarships to this year’s academy graduates.

Another way PESA supports the Petroleum Academies is the recognition of

teachers who exemplify excellence. Theaward—dubbed the PESA Teacher of theYear Award—carries a $10,000 stipend,distributed to the teacher and his or herschool. Pat Bond (Schlumberger) presented the award to Kimberly Myers ofWestside High School at the IPAA annualmeeting.

Based on the World Affairs Council’s“World Quest” program, PESA co-foundedand sponsored the first Energy Quest—acompetition in which students from 14schools and five districts were quizzed onenergy topics. Foster High School won thefirst contest, and every school involvedasked that we repeat the event. This year’sEnergy Quest is set for Nov. 9 in northwest Houston.

These, of course, are just part of our education programs. PESA also providesguest lecturers and speaking events at theuniversity level, sponsors education materials targeted to the elementary andjunior high level, and supports universityscholarships.

Your turn

The problem, as many see it, is that recruiting young students into the industryis one of perception and reputation—oiland gas has a reputation as an environmentally unfriendly and unchallenging career. While we know reality to be 180 degrees from that sentiment, we need to spread the word.

An effective means of changing a student’s mind is for him or her to simplymeet someone from the industry—someonewho can relay what it’s like to be a part ofone of the most technologically advancedindustries in the world. PESA’s work inarea schools is the perfect opportunity toplace a lot more faces in front of students.

However, these programs, like all otherPESA initiatives are successful only withthe support and help of its member companies. If you would like to volunteerto speak in a local school, act as a judge atEnergy Quest, or if you have a/v materialthat PESA can use in schools, please callthe association’s office. The work you donow could influence one young person tochoose a career in energy, which meansone less person needed at events like thejob fair in Beeville.

PESA ChairmanJohn Gremp, FMC Technologies, Inc.

PESA Vice ChairmanChris Cragg, Oil States International

PESA 1st Vice PresidentCharlie Jones,

Forum Energy Technologies

PESA PresidentSherry A. Stephens

PESA Vice PresidentMichael Perini

PESA Director of CommunicationsChris Evans

PESA, Petroleum Equipment Suppliers Association, and the PESA logo are allregistered marks of the Petroleum Equipment Suppliers Association.

PESA News is published by:Petroleum Equipment SuppliersAssociation1240 Blalock, Suite 110Houston, Texas 77055Phone: (713) 932-0168Fax: (713) 932-0497© 2011, PESA

2 PESA News Editorial

The crew change is coming, but what have we done about it?

PESA Chairman John Gremp (FMC Technologies, Inc.)

3PESA NewsNEws

Petroleum Academy students sample future careers in oil & gas

This year’s class of 62 Petroleum Academy externs pose following the PESA-sponsored graduation ceremony.

High school students fromHouston’s three IPAA PetroleumAcademies experienced their futures this summer.

For three weeks, 62 studentsfrom HISD’s Milby, Westside,and Lamar High Schoolsworked as externs with industrycompanies, attending executivemeetings, testing equipment,learning new technology, andgetting a sense of the industry.

Alex Barbieri worked at Halliburton, shadowing vicepresidents and global marketmanagers. His parents say that inthe three weeks that Alex was inhis externship, they noticedtremendous growth and enrichment.

“We’ve all heard the sayingthat it takes a village to raise achild—I feel that I am in partnership with Halliburton, theteachers, and the principals thathave allowed him to have thisopportunity,” says Alex’smother. “It doesn’t matter howmany times we tell him as parents, or how many exampleshis teachers can show him in aclassroom, it’s another thing toexperience it. Halliburton madeit possible for him, and I reallyappreciate it.”

Jeff Judah says his son, Kyle,had a fantastic experience atMarathon Oil.

“He was already interested inengineering, but talking tosomeone who is already at thatlevel, talking about the scienceand technology, solidified hisdecision,” says Judah. “After thefirst day, he was already talkingdirectional drilling and physics.By the third day, he told me,‘this is what I want to do, and Ihave an understanding of what I

need to do in college.’ This wasa well-organized program—hehad something to do everyday—I know that’s a lot of workand we appreciate it.”

Upon completion of the pro-gram—externships require atleast a 3.0 grade point average—PESA hosted an awards gala forthe students and their families atBrady’s Landing in south Houston.The gala was emceed by PESAEnergy Educators Chairman PatBond (Schlumberger), and thefeatured speakers were IPAAPresident and CEO Barry Russelland HISD Chief Academic Officer Dr. Aaron Spence. Eachstudent received a certificate ofcompletion and a $1,000 scholarship from the companieswhere they worked.

Spence says that while Houston is the energy capital ofthe world, and some HISDschools are located next to oiland gas businesses, many kidsnever considered a career in theindustry until this program.

“Through these externships,you are now working with executives, geoscientists, engineers, and learning what it’slike to work for a company inthis field,” says Spence. “Thework you’ve done today,whether it’s learning drilling operations, building robots, orusing cutting-edge mappingsoftware, it’s preparing you forcollege and giving you a foundation you need to be successful in this field.”

The experience was eye-opening for the students—uponaccepting their scholarship at thebanquet, each student had theopportunity to address the crowdand explain their favorite parts

of the program. At first, somewere disquieted to learn thatthey would shadow experts inareas that sounded too simple atthe outset. This included JohnJoj, who worked at Cameron.

“We talked with a welding engineer—we figured that weldingwas just sticking two pieces ofmetal together—but actuallytalking to someone who knowswhat he’s doing and the depth ofengineering that it requires waschallenging and makes me wantto pursue engineering evenmore,” says Joj.

Brian Corzo had a similar experience with mud engineersat Halliburton.

“I was told that I’d learn aboutmud—I thought, great, we’remixing water and dirt together,”he says. “Of course now I knowthat it’s water and oil based, andused for controlling drilling temperature and well control.The opportunity to learn what Ididn’t know was amazing.”

Others were stunned by theindustry’s technology, such asNicholas Rebman at FMC Technologies, Inc.

“The first day we got toshadow the engineers, and wewere working with an aftermarketengineer who was trying to repair a tubing hangar,” saysRebman. “When he pulled upthe drawing on the computer, itblew me away with the intricaciesthat went into building theequipment—it looked like it belonged in space. The work,details, and focus that goes intoit is amazing.”

Tyler Hanson shadowed logging experts at Core Labs,learning how the effectivenessof a frac job is measured.

“It was interesting that theycould pump radioactive isotopesthat don’t damage the environmentinto a well, send a tool down,and see how well the frac jobworked—then they could figureout what they need to change forthe next well to improve thefield’s performance,” says Hanson.

Others found their exact call-ing through the externships, likeAnissa Pena with Halliburton.

“I met the Supply Chain Management program newhires, sat in the classes, wentthrough logistics, P&Ls, andeverything that goes into supplychain—I know I want to be apart of it,” she says.

IPAA’s Barry Russell encouraged the students to stayin contact with their mentors in the companies.

“There’s a lot you can learnby experience and mentors—find the model for what youwant to do and go for it,” hesays. “As you experience whatwe have to offer in this program,it’s as much about learning whatyou don’t want to do … as you gothrough the process of college,find your essential self—thecourses that are really yourthing—and stay in touch withyour mentors. One person canchange the course of your life.”

Companies participating inthis year’s externship programwere Apache Deepwater,Cameron, Core Laboratories, ElPaso, FMC Technologies, Halliburton, Marathon Oil Corporation, M-I SWACO, National Oilwell Varco, NewfieldExploration Company, PEC Premier, Schlumberger, ShellOil Company, and Valerus.

Editor’s note: This essay wascompiled from John Hofmeister’spresentation during an EmergingLeaders seminar. He is founderand Chief Executive of Citizensfor Affordable Energy.

Our industry and our countryare at risk of failure.

On Aug. 30 at the NationalClean Energy Summit, attendeeslearned that the U.S. cannot leadthe world in the 21st centurywith its current energy policy.Vice President Biden said the nation is already trailing Chinaand Germany in green technology, and that we facetrading our dependence on foreign oil for a dependence onforeign energy technology. Hesaid, “If we shrink from decidingwhether we are going to lead inthe area of alternative and renewable energy, then we willbe making the biggest mistakethat this nation has made in itsentire history.”

I agree that we cannot lead inthe 21st century with our currentpolicy, but green technology willnot be our savior. Eight presidents and 19 Congresseshave made noise about energyindependence since 1973 and allhave failed to lead the country. Inthe 20th century, absent politicalleadership, the U.S. energy industry built the most robust,most efficient, most homogenousenergy system the world has everknown. We are making advancesin alternative energy, but it’s thetraditional energy sources of the20th century that will ultimatelyenable this country to be energysecure in the 21st century.

We are facing political leadership today that looks at theworld in an either / or perspective.My favorite example is that mywife attended the DemocraticNational Convention. Thousandsof delegates gathered to choosetheir nominees, and discuss,among other things, the energystrategy of the nation. But thedelegates took charge andpushed their view—it became aresounding chant of “no morecoal.” She attended the Republi-can equivalent convention a couple of weeks later. Amidst thethousands of delegates there to

represent the interests of thosewho sent them, the chant began,“drill baby, drill!” That’s the na-tional divide, the either / or asrepresented by those who represent us. Is it any wonderthat the 111th Congress didn’tproduce one single piece of legislation having to do with energy policy?

We’re headed for an energyabyss. We are taking a path toglobal failure as the world’s leading economy, and our economy is 100 percent reliantupon affordable fuel. Look at ourenergy mix today. We have atotal of 600 coal plants in theU.S. Their average age is 40years with a design life of 50years, so half are already pasttheir design life. We have 104nuclear plants with a design lifeof 40 years, and an average ageof 33 years in service. We aren’tbuilding any new nuclear plants,other than one in Oak Ridge, Tennessee. There are 100 newcoal plants whose designs areshelved because the boards of

directors will not go forward dueto the risk of the regulatory environment.

About 49 percent of our electricity comes from coal, 18percent from nuclear, and about24 percent from natural gas—thegood news is that we have a lotof natural gas and we can produce more and more, right?Wrong. We can produce morenatural gas until the EPA federalizes fracking—it’s nearerthan further away, and it’s inevitable on the path that we’reon.

We’re hugely successful withfracking technologically, butwe’ve been miserable at explainingthe impact to those affected. Dueto the confusion, misinformation,and the horrible stories the publichears—with nothing to offsetit—more people believe“Gasland” than believe AubreyMcClendon, and that’s sad.

We’re also facing three thingsin Washington, D.C. that aren’tgoing away. Number one is partisanship—the 2010 elections

aggravated it. The 2012 electionsmay be worse still—class warfare is the main rhetoric ofthe debate so far … us againstthem … it’s as miserable an outlook as one could imagine ina country that considers itselfunited.

The second obstacle is time.You don’t build a new powerplant or new technologies in ayear. It takes a decade or more todo things right in this industry—a decade of thinking, planning,conceptualizing, inventing, engineering, and funding. Meanwhile, the elected officialswho govern us work with a twoyear frame of mind. The worldcan change drastically with eachcycle. Political time and energytime are incompatible.

The third problem is that wehave created a monstrosity ofgovernment. The Department ofState recently determined thatthe Keystone pipeline does notcreate sufficient environmental

4 PESA News NEws

n See hofmeister, Page 8

John Hofmeister, Chief Executive at Citizens for Affordable Energy, says that the oil and gas industry is at risk of failure due to aseries of obstacles, mostly political. However, the underlying cause is a lack of public acceptance for oil and gas production,which he says has been an industry-wide failure.

We are at risk of failure, we are to blame

5PESA NewsENErgy Educators clay shoot

Clay Shoot —The Energy Educators Committeesponsored a sporting clays tournament to raise funds forPESA’s education initiatives. Theevent attracted more than 100shooters.

At top is Lauren Grabski, NationalOilwell Varco; middle left is TomMoyers, Cameron; and left isWayne Wallace of GE Oil and Gas.

6 PESA News Fso traiNiNg

this thinking, the facts suggest that the transition to greener energy will be long andchallenging.

First, she says there is no question thatglobal energy demand will continue to increase, driven by world populationgrowth, primarily in developing countries.The IEA projects that energy demand willincrease by more than 45 percent between2008 and 2035, which is roughly equivalentto adding two countries the size of the U.S.to world oil consumption. Meeting that demand is estimated to require an investment of between $30 and $35 trillion.

“In liquids supply alone, the current production of about 85 million barrels perday will need to increase to 95-100 millionbarrels in 2030,” she says. “Half of thatnumber will need to come from newsources as fields decline and demandgrows—adding the equivalent of four moreSaudi Arabias in the next 20 years.”

Watkins says that renewable energy is anessential and growing part of the world’senergy mix. But the world’s solar, wind,biomass, and geothermal energy account forabout 10 percent of total energy supply, andis expected to increase to about 12 percentby 2030. The IEA predicts fossil fuels willmake up 80 percent of the energy mix in2030, the same as today.

“Given all of this, nations are strugglingwith their greenhouse emission goals whilestill being able to meet their energy needs,”she says. “The reality is that even if wewere to completely transform the world’sentire transportation and power generationsystems to green energies, we wouldachieve only a 40 percent reduction ingreenhouse gasses—well short of the 83percent target discussed in Washington,D.C. in the past few years.”

Another complication is the high price ofoil. Prior to the financial collapse in 2008,high demand left oil supplies tight with littleexcess capacity, as a result the price rose to$147, reflecting fear premiums on tensionsin Iran, terrorist attacks and piracy, and natural disasters such as hurricanes. Excesscapacity is unlikely to grow significantly inthe future.

Watkins says that the greatest ramificationof high prices is that the balance of geopolitical power may have shifted fromenergy importing nations to producing nations. The U.S. now faces competitionfrom other importing nations with oil-hungry economies, such as China and India.These growing economies are competingfor limited supplies, which helps governmentsthat control oil gain power.

In Europe, most countries are heavily reliant on imported oil and natural gas—currently 50 percent is imported, and

expected to rise to 70 percent by 2030.“Russia is a key supplier of oil and

natural gas in Europe—Germany imports32 percent of its energy from Russia, whilePoland imports two-thirds of its natural gasand 97 percent of its oil from Russia,” shesays. “Today, Russia uses its massive natural gas reserves as a means to gain control and global power. Illustrating this isthe winter of 2009, when Russians shutdown the main pipeline into Europe over aprice dispute with a main transit country,Ukraine.”

Finally, she says that NOCs control 79percent of global oil reserves, which equatesto hundreds of billions of dollars of profitsto their governments.

“This financial power could allow hostilegovernments to impact geopolitical issuesincluding conflict through intimidation,threats to cut off supplies, and support forgovernment-funded terrorism.”

U.S. Energy Security

To achieve a secure energy supply, theU.S. needs a comprehensive plan to transitionto a clean energy future that focuses onthree key elements, says Watkins. First, isenergy efficiency.

“The McKinsey Global Institute has indicated that projected energy demand in2020 could be reduced by more than 20 percentthrough energy efficiency investment,which will more than pay for itself,” shesays. “It includes more fuel efficient carsand hybrids, energy efficiency in the residential and commercial sector throughstricter building codes, and green buildingtechnologies and appliance standards.”

Second, the U.S. needs to further diversifyand increase the sources of its energy supplies.Watkins says that diversity equals securityand it comes in two forms: diversity in the

forms of energy we use and diversity as towhere it comes from. Given the growth indemand, the U.S. will need to significantlyincrease supplies of all forms of energy—among the cheapest and most secure potential new supplies is domestic oil.

“The U.S. is the world’s third largest oilproducer, and we accomplish this with lessthan 5 percent of federal acreage underlease for development,” she says. “Toomany unexplored areas are off limits suchas the Atlantic, most of the Pacific, parts ofthe West, large parts of Alaska, and areas inthe eastern Gulf of Mexico.”

Unfortunately, she concedes that the Macondo oil spill last year presented amajor setback to opening more areas to offshore development.

“The Deepwater Horizon incidentprompted intense reflection in our industryand we have since taken definitive steps toensure that the safe and responsible development of these important offshore resources is possible. We strive every dayfor a zero incident work environment—noharm to people, and no harm to the placeswhere we work.”

However, access to new resources remainscritical. One example is the evolution ofU.S. natural shale gas, which has reversed aprojected shortage of gas to a 100-year supply. The lure of similar finds around theworld has led many countries to seek investment to explore their own gas supplies. The early activity in Europe haswide geopolitical ramifications.

“For example, Poland has been leasingmillions of acres of prospective shale gasblocks to international oil companies, including Marathon Oil, with the hope thatproduction success could lead to the lesseningof their dependence on Russian energy,” she

WAtkInSContinued from Page 1

Gretchen Watkins, Vice President of International Production Operations for Marathon Oil

n See Watkins, Page 7

7PESA NewsFso traiNiNg

Twenty four Foreign ServiceOfficers attended this year’sweek-long training program.

Top Left: Russ McBeth discussessubsea field architecture priorto a tour of FMC Technologies,Inc.’s production floor.

Top Right: FSOs listen asHeath DePriest highlightsstrategies for ConocoPhillips’refining business.

Above: James Ellinwood discusses the need for precision parts inside of aWeatherford directionaldrilling tool.

Left: Showing a mock-up of aPDC drilling bit, Jim Sengerprepares FSOs for a tour ofHalliburton’s manufacturingplant.

says. “Should Poland’s shale gas productionprove to be a revolution that alters the energy landscape, the nation could becomean exporter to the rest of Europe, furtherbreaking Russia’s monopoly on the continent.”

Diversity can be enhanced by further encouraging imports from secure andfriendly sources.

“Canada’s oil sands are one of the world’slargest oil deposits, about eight times that ofthe U.S. oil reserves. We already processmuch of this oil in the U.S., which createsgood jobs and tax revenues.”

The third key to energy security is innovation and new technologies.

“These are vitally important for increasingsupply, moderating demand, and protectingthe environment,” she says. “We need to accelerate the development and commercialization of key technologies suchas batteries, hydrogen fuel cells, biofuels,and lowering the cost of solar and wind.Government can best help with investmentsin basic research, leaving commercializationto the private sector.”

Watkins again stressed that there are noquick fixes—the challenges to energy security are inherently long-term, and transcend narrow, short-term interests andelection cycles.

“These are complex challenges, but complexity is not an excuse for inaction,”she says. “This is a long-term effort thatmust be addressed in a rational, fact-basedmanner that taps leadership and the finestcritical thinking skills from people acrossthe spectrum regardless of ideology or political affiliation.”

WAtkInSContinued from Page 6

PESA NewsPetroleum Equipment Suppliers Association1240 Blalock, Suite 110Houston, TX 77055

First ClassUS Postage Paid

Houston, TXPermit No. 04805

8 PESA News NEws

MAY Jun JULSingapore 55,398 87,899 50,061Brazil 46,666 39,369 73,679Russia 49,761 19,284 36,849Mexico 15,345 21,776 47,046U.K. 30,649 24,571 28,454U.A.E. 24,617 26,423 27,789Canada 19,261 27,624 29,640China 23,641 23,632 27,246Venezuela 18,568 34,328 13,242Korea 10,756 29,809 21,917Saudi Arabia 19,317 20,121 18,939Colombia 18,263 20,685 15,722St. Maarten 338 4,877 49,358Norway 8,331 6,864 17,221Trin. & Tobag. 6,732 6,168 15,057

Subtotal: 347,643 393,431 472,222 All Other: 281,167 181,882 202,685 Total: 628,809 575,313 674,907

U.S. Oil and Gas FieldEquipment Exports

Top 15 Destinations for Q2-Q3 2011(in U.S. $1,000)

Source: U.S. International Trade Commission

damage to prohibit its construction. Great, but what isthe Department of State doing inenergy? They are one of 12 cabinet level authorities from theexecutive branch that determinethe future of energy. Don’t wehave a Department of Energy?There are also 26 congressionalcommittees and sub-committeesto govern energy. And then theJudiciary, in particular the 9thFederal District Court in SanFrancisco that has single-handedly stopped more oil projects than we can count.

These, however, are preventable obstacles. The industry that looks out for itselfin the public domain enables itsown future. The industry we’re apart of has a fundamental flaw.Deep in the DNA of every energy executive I’ve known isan aversion to public engagement of the reality ofwhat they do. It’s hard to talkabout. It’s complicated, technical, and trying to explainthose realities to a person whogives you a soundbyte doesn’twork. If you’re a responsible

executive, you want to explainso they truly understand it—butyou’ll never get 45 minutes.Look at it this way, if I want toknow the time, don’t tell me howto build a watch—learn to simplify.

I had a conversation with aChesapeake executive about thepublic relations impact of publicrelease, or not, of the content offracking fluids. He ran a pollwith ANGA, and only 8 percent

agreed with the voluntary releaseof the information—92 percentwere against. That’s not how legislature sees it, nor the public.The reason I predict federalizationof frac permitting is that it’s ahuge powergrab for politicianslooking to take charge. The industry isn’t forthcoming, thestate-level is not forthcoming, sowhere does the public look forresolution—the highest authorityin the land, the federal

government. We can fix this. But we have

to change the business model ofevery company that earns aprofit in the energy industry.Public acceptance has to be atthe front end, because publicnon-acceptance will kill the industry. That’s why we havelimits on offshore drilling, whywe have bans on drilling in statewaters off California, why nocoal or nuclear plants are beingbuilt—none of it has public acceptance.

Let me be clear, I’m not suggesting a task just for the PRdepartment—along with profitsand market shares, the businessmodel must take into accountpublic acceptance of who we areand what we do. If all the thousands of companies, andmany thousands of executiveswere out there demonstratingtheir concern and explainingwhat they do, we’d have a verydifferent discussion over energy.

It’s the pathway to success, it’snot defensive, its proactive andengaging and can change thegame for the industry. It’s my belief that’s what it’s going totake.

hofMEIStErContinued from Page 4

John Hofmeister, Citizens for Affordable Energy