The following interview with Andrew Holland  was carried out in Washington D.C., USA, January 14, 2014 by Patrick Renz and Frauke Heidemann. The main focus of the interview was on the definition of energy security, U.S. shale gas and tight oil, Chinese shale gas and environmental goals, the impact on U.S. strategy as well as on U.S. Navy fuel options. All footnotes are remarks by Patrick Renz and Frauke Heidemann, aimed at giving some additional background knowledge and especially giving the links to the cited documents so that the reader can follow up on these issues easily.
. Energy Security
In your article “The many empty meanings of “energy security’”  you criticize that the term energy security seems to be used in many cases without the knowledge of its actual meaning. How would you define energy security?
You are right, it is a problem. When people in Washington D.C. use the term security you can’t argue about the issue any more, it becomes sacrosanct. My definition of energy security is the ability of a country to act in its foreign policy – independent of how it uses energy domestically. The idea behind this is that even though the U.S. is producing more energy than ever domestically, we are really not energy secure in oil. When acting in the Middle East in particular, our political leaders think about how our actions are going to impact oil markets. If suddenly we are able to stop using oil and run all on solar cars for example, we would have a very different calculus in the Middle East. That is how I personally define energy security and how we at the American Security Project defines it. You get people from the American Petroleum Institute saying that we have more energy security than ever.  My question to them is: What is your metric? We do indeed have more domestically produced energy, the percentage has changed but this does not really mean anything.
. U.S. Shale Gas and Tight Oil
From your work in the House of Representatives and the Senate,  can you draw any conclusions as to what politicians are currently thinking about the shale gas production in the U.S.?
During my time, shale gas was not even something we had heard of. Even though I was doing energy policy, I don’t recall anyone ever saying “fracking” or anything like that. I do remember people coming in and talking about horizontal drilling and that it was a good thing because it enabled us to get a smaller footprint for drilling. However, nobody talked about fracking. Unless the politicians are experts and on the Energy Committee there is still some confusion today – people don’t know all about shale gas, and tight oil. They read the articles saying we have more oil, they see North Dakota, they see Texas and they see domestic production increasing. Some are concerned about fracking as it sounds dangerous and environmentally harmful but it depends on whether they are an expert on energy questions. Furthermore, it depends on the partisan side as well as on where they are coming from. Republicans are going to be likely in favor of it – we spend so long talking about the Republican’s slogan “Drill, Baby, Drill”  – Democrats have historically been more environmentalists, so they are going to be more skeptical. Regarding where you are from it depends on whether your state or district has drilling interests, whether there are people coming in to talk about benefiting from shale gas and tight oil development. Aside from some people who are experts, most of the Members of Congress don’t think about those questions that much.
How would you assess the potential for U.S. Liquefied Natural Gas (LNG) exports also with regard to your recent visit to the Cove Point facility?
There will be LNG exports from the United States. So far, 5 facilities have been approved by regulators in the Department of Energy (DOE),  and they are still awaiting sign off from the Federal Energy Regulatory Commission (FERC), which has oversight over electricity and natural gas markets.  Open questions are as to how much LNG exports will be approved. Up until now the facilities that have been built have contracts for 100% of their capacity. So for instance at the Cove Point facility, 50% of the exports are going to be sent to GAIL India, 50% to Sumitomo in Japan.  The pace the DOE is approving has been very slow and very deliberate. They have made some indications that they are not going to approve everything. To me this seems like they are trying to have it both ways.
There are some opponents who say we shouldn’t export gas because natural gas has gotten cheap in the U.S. and this benefits chemical producers and other energy users.  The energy and natural gas industry is fully in favor of exports. The administration seems to be trying to play both sides. They approve exports but not so much that it will affect markets. For me it seems like we should approve as much as the market will bear. I think they are trying to manage it and I believe they will mess it up. Cove Point is such an example of how there are a lot of players involved. There is some pretty serious environmental opposition because this is not an export facility in Louisiana or Texas where environmentalists are pretty weak. The environmentalists think they can stop this export facility in Maryland.
After all, it is a controversy. There will be exports from the U.S., the question is just how much and that is a question of a) how much will the Obama administration approve and b) how much of a global market is there for LNG exports. It may not be that there are enough people who want to import it. Prices are very high in Asia now and medium high in Europe but there is a lot of LNG coming from all around the world. It is not just the U.S., it is Australia, Mozambique, Norway, even Russia is building export facilities. 
How do you see the potential for crude oil exports from the U.S.?
It currently is illegal to export crude oil from the United States, except for Alaska. This exception for Alaska was put into law in the late 1990s, as it is actually cheaper and more efficient to ship oil from Alaska to Japan than it is to the American West Coast.  In the continental U.S. we are exporting petroleum products, refined product, more than we ever have, but we can’t export the crude. I don’t quite know if we will and whether we should. This is such a new topic that Members of Congress really haven’t settled on their positions yet but anything around gasoline prices is a very hot button topic. It is very difficult for a Member of Congress do to anything that could lead to him being accused of raising gasoline prices. If you approve crude exports and even if it doesn’t affect prices, you could be blamed for any upward or downward movement of the gasoline price. This makes for a good thirty-second add: “My opponent caused the price of your gas to go up at the pump.”
There are a few other things we should do before approving crude exports. We are probably never going to produce more crude oil than we demand in the US. We do however face an imbalance of supply and demand at the Gulf Coast in Texas and Louisiana. All the refineries there are set up to handle heavy, sour crude and what we are producing in North Dakota and Eagle Ford in Texas is light, sweet crude.  This is actually of high value while the heavy, sour crude is of low value. So consequently, we have the refining capacity to turn this low value crude into higher value products, which we export and use. The idea therefore is to export the crude, which is high value. The East Coast and West Coast ports are set up to import the light, sweet crude from places like West Africa and Saudi Arabia. Instead of exporting crude coming mostly from the Gulf Coast let us first work on getting the crude from the Gulf Coast and the Midwest to the refineries on the East Coast and the West Coast. We have this legislation from the 1920s, the Jones Act,  which prohibits ships travelling between U.S. ports from travelling on anything other than U.S. flagged ships. It is therefore illegal for the oil tanker that goes from Saudi Arabia to New Jersey, which is probably under a flag of convenience such as a Liberian flag, to then sail around to New Orleans and pick up oil there and go back to New Jersey. The original idea behind it was to help protect the U.S. shipbuilding industry. But we don’t have the shipbuilding capacity to build these ships, we never had. It is an outdated law that should be repealed. Maybe we also should build more pipelines within the country and work on making the U.S. a more coherent market instead of solely focusing on exporting.
Is it fair to say that the U.S. tight oil and shale gas production might have negative effects on renewables?
I don’t think tight oil will have a negative impact, as tight oil is not reducing the global oil price significantly. Gasoline prices are high enough to provide enough financial incentive for finding alternatives to oil whether it is biofuel, electric cars or just cars that have a higher mileage. The U.S. car fleet is more efficient than it has ever been. There is a big debate going on whether 2014 will see a drop in oil prices, steady prices or an upward pressure.  I think it will be a bit of a drop but not a big sustained drop. The demand from Asia, especially from China and India is almost insatiable at 80 or 90 dollars. Oil has therefore not harmed renewables.
Natural gas might have a negative impact because it is used for electricity generation and therefore directly competes with renewables. However, I don’t think it is harming as much as some people thought it would. Renewables are still more expensive than electricity production from natural gas or coal. The market for renewables at the utility scale in the U.S. is built more on renewable portfolio standards, when you have states requiring you to get 20% of your electricity from renewable energy on the big scale. At the lower scale, it is private consumers wanting to offset their electricity prices with solar panels on their roof, driving the growth of renewables. It is not yet a direct cost fight between natural gas and solar or natural gas and wind.
China is also interesting on climate policies right now because it is really on flux how aggressive they will be in the UN negotiations. Secretary Kerry has made a big push to work with them on climate issues,  while at the same time investment in coal continues, but so does investment in solar, wind and nuclear energy. It is a fascinating time in China. They are throwing a lot of money on a lot of things – let us see what sticks.
. Chinese Shale Gas and Environmental Goals
China supposedly has the largest shale gas resources, but faces issues ranging from geological difficulties and water scarcity to environmental degradation. Is there an argument to be made that developing shale gas resources could lead to a drop of the natural gas price, a more rapid shift to increasing natural gas use and thereby to less coal use and better air?
It would mean less emissions, better air and less particulate emissions as well. There are however a lot of challenges. Some people think the shale gas revolution can’t be repeated outside the U.S. Others argue it has to be, it should be, it must be. They point out that the resources are there in China so the Chinese will get them out. I am more in that second camp and believe they will get it out. It might be dirty, they might fail a couple of times but they will figure out a way. The U.S. State Department has done some exchanges sending American companies and American experts to China to help with their shale gas and sell our technology.  The trick with China is to make sure to sell our technology. There are lots of problems, as they don’t have the infrastructure we do in terms of pipelines, the shale is far from existing pipelines, and it is far from water. You do need a lot of water to frack properly and they already have shortage of water. 
China will however have an easier time than some European countries such as Poland and the UK. The U.S. is at one extreme: private ownership, entrepreneurial companies. Europe is in the middle with Poland and the UK really going in but in the UK for example the government owns all of the mineral rights while the people living there own the land rights, which allows for more opposition. In China the government owns everything, so if the government determines that they want to do this, it is the opposite extreme, they are going to do it even if it is not economically viable.
. Impact of Unconventional Fossil Fuels on U.S. Strategy
With the U.S. unconventional fossil fuels boom some argue that now the U.S. can reduce or even stop its engagement in the Middle East. Are there actually talks in the policy field about pulling out of the Middle East?
The Pentagon and the Navy have said we are not leaving the Persian Gulf. Our mission continues to be the protection of sea lines and the oil flow out of the Middle East. This idea that now suddenly we are energy secure is wrong. However, it is a psychological effect. If policy makers and the public believe that we are energy independent and therefore don’t have to protect the oil supply lines in the Middle East, maybe they are going to look at the money we spend on it. There was a RAND study that calculated costs of about 87 billion USD a year for protecting sea lines for energy, this basically is how much the Fifth Fleet costs.  If the budget continues to be tight, there could be some pullback from the Middle East. The Navy won’t be the one who promotes that but it still has to follow orders from Congress and the President. The current President has said we continue to protect it.
A further aspect to consider is that a certain sort of relationships only gets built by buying and selling oil. A lot of the close relationships between the U.S. and Saudi Arabia were based on that and the interpersonal relationships between the Saudi royal family and the Bush family as well as with a lot of the high ranking people in the US government were possible because of these buyer-seller relationships. As we lose this, maybe we’ll have less ability to affect events in the Middle East. That is something to worry and think about.
Given this change of previous producer-consumer relations, do you believe China will be the country stepping in?
I do see signs of that. There have been a number of Chinese investments in the oil production of Iraq. The Chinese might try to come in and I don’t know whether they will be successful because they don’t have these long built-up relationships. The Chinese go into Iraq but some of the Iraqi locals and governments haven’t liked dealing with the Chinese, they haven’t liked the relationships they have built up. That is partly because China has not been involved in the Middle East. There is this difference between seeing oil solely as a liquid global market where the buyer who needs it will always get it or seeing it as these relationships back and forth. I know that the oil market is a liquid global market but there are these sorts of relationships as well.
. U.S. Navy Fuel Options
When you would see the U.S. in war with any country it would probably need its fleet, which uses apart from the nuclear driven vessel a lot of fuel. Is there any progress or alternative fuel in sight, which could help overcome this issue?
Yes and it is a big deal. The Navy has said they have a goal of replacing 50% of their oil with biofuels by 2020.  That is pretty aggressive. They are working with the Department of Agriculture (DOA) and the DOE, and directly invest in biofuels refineries here in the U.S. We are not going to suddenly turn all of our ships from oil burning to battery operated. The engineering doesn’t work, the cost of taking this on would be too high. And you obviously don’t want to run a ship on compressed natural gas in a war. So that leaves you with an energy dense liquid fuel that basically acts like oil – the only thing that can do this is biofuel.
There are two concerns with energy security for a fleet. There is the strategic concern: dependence on oil from places that are insecure and unstable. It would be better to get supply of biofuels from stable places. The other one is tactical. Supply lines are most vulnerable in a war against a country that has the ability to attack our ships, they would be wise to not attack the carrier strike group but the oilers, the ships carrying the oil. If you can knock them out, the whole fleet has to pull back and that is the way a war with a country like China would play out. They would force us away. For the Navy it is therefore about using fuel more efficiently, using less fuel to stay on station longer and be less vulnerable – which they are doing too. The Operational Energy Assistant Secretary at the Pentagon is looking especially at this issue.
We are used to a Navy that was unchallenged for the last 50 years. We were able to park our aircraft carriers off Vietnam and not have them threatened, park them in the Persian Gulf and not have them threatened. Iran in any sort of conflict would be a threat and we probably would have to pull our carriers back a bit from the Persian Gulf. For what it is worth, we are aware of it.
Thank you very much for the interview.
 More about Andrew Holland at: http://americansecurityproject.org/about/staff/andrew-holland.
 The article of Andrew Holland in the Christian Science Monitor can be found at: http://www.csmonitor.com/Environment/Energy-Voices/2013/0419/The-many-empty-meanings-of-energy-security?nav=472763-csm_staff-storyList.
 An elaboration on energy security by the ASP is available at: http://americansecurityproject.org/issues/climate-energy-and-security/energy/energy-choices/energy-security.
 This argument is made by the American Petroleum Institute (API) in its 2014 State of American Energy Report: http://www.api.org/~/media/Files/Policy/SOAE-2014/API-2014-State-of-American-Energy-Report.pdf.
 Andrew Holland was Legislative Assistant on Energy, Environment and Infrastructure for U.S. Senator Chuck Hagel of Nebraska from 2006 through 2008 and worked in the U.S. House of Representatives for the House Ways and Means Committee and the Office of Congresswoman Roukema.
 “Drill, Baby, Drill” was used as a campaign slogan by former Maryland Lt. Governor Michael Steele in 2008. More eon this in the Wall Street Journal article “Stelle Gives GOP Delegates New Cheer: ‘Drill, Baby, Drill’” from September 3, 2008: http://blogs.wsj.com/washwire/2008/09/03/steele-gives-gop-delegates-new-cheer-drill-baby-drill/tab/article.
 At the time of the interview, five LNG export terminals were approved. On February 11, 2014, a sixth export facility has been approved. More on this in the Oil & Gas Journal: http://www.ogj.com/articles/2014/02/doe-allows-lng-exports-from-cameron-terminal-to-non-fta-nations.html.
 A full overview over proposed/potential LNG export sites can be found at the FERC website: http://www.ferc.gov/industries/gas/indus-act/lng/lng-proposed-potential-export.pdf.
 The outline of the signed contracts for LNG are available of the website of the operator of the Cove Point facility: http://dom.mediaroom.com/2013-04-01-Dominion-Cove-Point-Liquefaction-Project-Moving-Forward-Cements-Front-Runner-Status.
 A comparison done by BP shows the difference in natural gas prices paid by major consumers: http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy-2013/review-by-energy-type/natural-gas/natural-gas-prices.html.
 An overview over LNG exporting countries is provided by the International Energy Agency (IEA): http://www.iea.org/aboutus/faqs/gas.
 For an overview over the discussions that were held with regard to lifting the export ban on Alaskan crude oil refer to: http://www.gao.gov/assets/110/103144.pdf.
 More information on the quality of U.S. crude is provided in an article of January 3, 2013 in IEA Energy: The Journal of the International Energy Agency by Michael Cohen: http://www.iea.org/newsroomandevents/ieajournal/iea-journal-issue-3/name,34049,en.html.
 Read more about the Jones Act at: http://www.law.cornell.edu/uscode/html/uscode46a/usc_sec_46a_00000883—-000-.html.
 Follow the different sides of the debate at: http://www.eia.gov/forecasts/steo/report/prices.cfm, http://eurasiagroup.net/pages/top-risks-2014-5 and http://www.forbes.com/sites/billconerly/2013/05/01/oil-price-forecast-for-2013-2014-falling-prices.
 The commitment to cooperate on climate change issues was reiterated at a meeting in Beijing this weekend with U.S. Secretary of State John Kerry: http://www.reuters.com/article/2014/02/15/us-china-usa-climate-idUSBREA1E05320140215.
 More on the U.S.-China Shale Gas Resource Initiative in the Fact Sheet provided by the White House Office of the Press Secretary: http://www.chinafaqs.org/files/chinainfo/US-China_Fact_Sheet_Shale_Gas.pdf.
 Concerning the water intensity of fracking there are diverse studies such as the ones by Jean-Philippe Nicot and Bridget R. Scanlon in Environmental Science & Technology of March 2012 on “Water Use for Shale-Gas Production in Texas, U.S.”: http://www.circleofblue.org/waternews/wp-content/uploads/2013/04/Nicot+Scanlon_EST_12_Water-Use-Fracking.pdf and http://switchboard.nrdc.org/blogs/mmcfeeley/new_research_fracking_uses_and.html.
 The respective RAND study is available at: http://www.rand.org/pubs/monographs/MG838.html.
 More on the “Farm-to-Fleet” program in the U.S. Department of Agriculture Release No. 0237.13: http://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2013/12/0237.xml&printable=true&contentidonly=true.
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