API SVP Frank Macchiarola Addresses University of Texas at Arlington Oil & Gas Conference

WASHINGTON, December 14, 2021 – Today, American Petroleum Institute (API) Senior Vice President for Policy, Economics and Regulatory Affairs Frank Macchiarola delivered the following remarks at University of Texas at Arlington Oil & Gas Conference. Macchiarola highlighted API’s role as a standards-setting organization and discussed API’s Climate Action Framework.

As prepared for delivery:

Last week, industry and government leaders from around the world convened right across the street for the 23rd World Petroleum Congress (WPC). It was fitting that this important event took place here in Houston, the Energy Capital of the World.

I was pleased to participate in the WPC. One focus of this year’s Congress was the energy transition, and the essential role oil and natural gas will continue to play in the global energy future.

But another theme from last week was just how important it is to be gathering in-person. The collaboration continues here this week at the University of Texas at Arlington Oil and Gas Conference, and I am very pleased to be here.

I am going to speak with you about three topics today, and I also hope to hear from you during our time together.

First, I will discuss API’s commitment to safety and our programs to promote and enhance this priority within the oil and natural gas industry.

Second, I will talk about API’s Climate Action Framework, and the public policies and initiatives our industry is advancing to address the risks of climate change while ensuring access to affordable and reliable energy the world needs.

Third, building on the theme of last week’s World Petroleum Congress, I will address the meaningful role our industry will continue to play as the world transforms to low and zero-carbon emission energy systems.

First on safety. Safety is the top priority for the U.S. oil and natural gas industry and API member companies are committed to developing and utilizing the technologies, standards, best practices, and programs needed to help ensure that workplace safety remains at the forefront.

API is the global leader in convening experts to establish industry standards which enhance environmental protection, safety, and sustainability across our operations.

In addition to our advocacy role in representing 570 member companies, we are a standards-setting organization. In API’s 102 years of operation, the association has developed more than 700 standards which help the industry enhance operational and environmental safety, efficiency, and sustainability.

Building on this legacy, API recently established the Energy Excellence program. The program is designed to create a comprehensive roadmap for accelerating environmental and safety progress across all aspects of industry operations through the sharing of best practices and new technologies, as well as transparent reporting.

The API Energy Excellence program is centered around 13 elements to safeguard employees, the environment, and the communities in which our industry operates. The program helps demonstrate our industry’s significant actions in advancing performance toward operational excellence.

Personally, my introduction to API’s safety programs was in learning about API’s Center for Offshore Safety. But we have programs that span all aspects of the value chain. I will highlight four such programs today.

1) First for offshore, API established the Center for Offshore Safety (COS) more than a decade ago. The mission of COS is to advance safety and operational integrity for the offshore oil and gas industry.

Members of COS demonstrate a commitment to that mission and have a platform to participate in the design, development, and strategy for COS programs. These programs help guide the direction of the industry on safety, environmental protection, and sustainability.

COS provides tools and peer learning opportunities, sharing of industry practices, and support for companies on the U.S. Outer Continental Shelf.

Much of the work of COS is grounded in Safety and Environmental Management Systems (SEMS) and based on API Recommended Practice (RP) 75.

RP 75, now in its 4th edition, provides guidance for establishing, implementing, maintaining, and continually improving SEMS for offshore operations.

COS coordinates regularly with the U.S. Coast Guard and the Bureau of Safety and Environmental Enforcement (BSEE), and BSEE regulations incorporate by reference our recommended practice and guidance documents.

2) Second, for the downstream segment of the industry, the API Process Safety Site Assessment Program (PSSAP®) provides a review of process safety management practices at refinery and petrochemical sites around the world.

Our PSSAP assessment protocols incorporate more than 100 API and other standards to ensure that sites are incorporating relevant standards into their written procedures and operations. PSSAP’s independent expert teams assess individual sites using industry-created, good-practice protocols and provide safety benchmarks for each site to further a culture of safety around these processes.

3) Third, for the midstream, the Pipeline Safety Management System (SMS) Assessment Program proactively supports industry adoption and commitment to API Recommended Practice 1173 and implementation of pipeline safety management systems. Pipeline SMS assessments contribute to a culture of safety and continuous improvement across the pipeline industry.

The assessments are designed to facilitate Pipeline SMS implementation and share real-time benchmarking information to drive improvements in safety and pipeline safety performance for every operator's level of SMS maturity.

4) And finally, in June of this year, API launched the Onshore Safety Alliance (OSA), a joint industry initiative designed to help the industry work together toward the common goals of protecting workers and reducing serious injuries and fatalities in U.S. onshore oil and gas operations.

Upon joining the OSA, participating companies commit to carry out safety actions within their organizations, and the OSA provides resources, guidance, tools, and peer-to-peer support to help companies implement these safety actions.

The OSA establishes an alliance of operators, drilling contractors and service companies to bridge industry knowledge, advance safety cultures within companies, and reduce serious incidents.

Taken together, these API safety programs cover the full value chain of the U.S. oil and natural gas industry. These programs serve to promote, advance, and elevate industry safety and serve as a foundation for the important advocacy work that we do at API.

We have API professionals from our Global Industry Services division and Policy division here at the conference this week, and I encourage you to discuss with them the work we are doing at API to enhance industry safety. I also encourage you to explore ways that you can get involved in some of these ongoing efforts.

On advocacy, much of the debate about the future of energy policy today focuses on how we will meet the climate challenge. Last week, at the WPC, we heard industry leaders from around the world discuss the actions their companies and nations are taking to reduce emissions.

For API, this is the central challenge our industry faces. Namely, how we continue to meet the challenge of providing the world with the affordable, reliable energy it needs while reducing emissions and addressing the risks of climate change.

To advance progress in this area, API released the Climate Action Framework. The framework is a compendium of policies and industry initiatives that serve as the foundation for our industry advocacy on the issue of climate change.

The framework consists of five components that encompass actions industry can take to reduce our own emissions in operations, actions the U.S. federal government can take, and lower carbon choices that our industry can offer to consumers.

The five points of the framework are as follows:

First, Accelerating Technology and Innovation. The U.S. federal government has taken significant steps in the funding of basic research, development, and deployment for technologies such as carbon capture utilization and storage, hydrogen, and other low and zero-carbon technologies. There is more investment in these areas included in the recently passed bipartisan infrastructure legislation. API proposes specific areas in which the federal government can do even more to drive this needed innovation, in coordination with high-tech industries like ours.

Second, Further Mitigate Emissions from Operations. API recognizes the important steps the oil and natural gas industry will continue to make in reducing emissions in our own operations. Therefore, our industry proposes tangible, forward-leaning initiatives to address upstream methane and flaring, and downstream refinery emissions. We have incorporated a flare management program into our existing Environmental Partnership program and already see positive steps in the reduction of flaring in industry operations. API will also be advancing a program to focus on refinery emissions reductions.

Third, Endorse Carbon Pricing. We believe a well-designed, economy-wide federal carbon price is the most impactful policy to address the risks of climate change. The policy should seek the lowest cost emission reductions, with the goal of minimizing regulatory duplication and ensuring interoperability with other climate regimes. Principles such as consumer transparency, flexibility in time and application, and ensuring U.S. competitiveness must guide this policy.

Fourth, Advancing Cleaner Fuels. On electricity policy, the U.S. federal government must recognize that natural gas is the current, and likely future, primary driver of CO₂ emissions reductions. The federal government must promote the value of U.S. natural gas in policymaking and advance the global benefits that U.S. LNG will play well into the future. In recent weeks, in response to higher prices, some policymakers have considered limiting U.S. LNG exports. This is the wrong approach. In fact, a report released this morning by IHS Markit notes that, “A stoppage of U.S. LNG exports would create a severe dislocation between supply and demand in the U.S. natural gas market that would stifle investments in the supply. The likely result would be greater volatility and higher prices, not lower ones.” This study reaffirms just how important U.S. LNG exports is to America’s energy security.

On transportation fuels, we seek to advance an approach that promotes technology-neutral polices at the federal level to drive CO₂ emission reductions in the transportation sector using a holistic approach for fuels, vehicles, and infrastructure systems.

And fifth, on Climate Reporting, API released an industry reporting template that will advance consistency and transparency in sustainability reporting. In the coming months we will seek to build on this template to provide uniform metrics for stakeholders to evaluate industry performance.

I encourage you to learn more about API’s work on climate change, and I would be happy to discuss this work further with you. The Climate Action Framework, available at api.org/climate, establishes our voice in this important debate, and we will continue to refine these policies and initiatives in the coming year.

With each of these challenges in front of us - from continuous improvements in safety, and sustainability to tackling the climate challenge - I am optimistic about the future of the oil and natural gas industry.

Last year, at the start of the pandemic, global demand for oil declined in a matter of weeks from 100 million barrels per day to approximately 80 million barrels per day. The commodity price dropped from above $60 at the start of 2020 to negative $37 dollars on April 20, 2020.

Here in the U.S., production was over 13 million barrels per day in early March 2020 and today it stands at approximately 11.7 million barrels per day. The recovery in demand has been swifter than the recovery in supply, and we find ourselves with yet another series of challenges.

More than the challenge of facing a sharp imbalance between supply and demand – at the outset of the pandemic our industry faced the challenge of ensuring that its essential workers remained safe and could still deliver the fuel that Americans needed to power their lives during uncertain times.

The resilience shown during the Covid 19 pandemic was truly extraordinary and provides us with confidence that our industry has the skill, capability, and ingenuity to tackle the future challenges we face.

Our industry has been written off before. About 15 years ago books like Twilight in the Desert warned us of declining global supplies and the end of the oil era.

Pulitzer Prize winning energy expert Daniel Yergin writes about this period in his new book The New Map. He recounts that in 2006, one geologist wrote, the “role of the Permian Basin as a major oil producing province thus appears to be past, and its future can thus be only one of continuing decline.”

One year later, in 2007, the Permian output hit a low point in production of 850,000 barrels per day. Last month, the Permian reached a record high in production of nearly 5 million barrels of oil per day.

Consider the impact this has had on our energy security and our national security. It is an astonishing achievement of industry innovation and ingenuity.

Through the technological advancements of hydraulic fracturing and horizontal drilling, the oil and gas industry helped usher-in a shale revolution that in 2019 led the United States to become a net exporter of total energy for the first time in 67 years. It also helped us drive CO2 emissions down to generational lows, with the use of more natural gas for power generation.

As we think about climate change, it will be this same solutions-based ingenuity from our industry that will help tackle this challenge. Last week, Chevron CEO Mike Wirth kicked off the World Petroleum Congress on a positive note, speaking about his confidence in the industry and his optimism for a brighter future.

He reminded the audience of the importance of optimism, “in the power of human creativity, imagination, and ingenuity, and a belief in engineering and innovation, as a means to develop new solutions.” He noted, “the prospects for the human condition have never been brighter.”

“Optimism” he said, “is the spark of innovation, the catalyst of risk taking, the impetus of discovery.” He went on to encourage our industry to harness this powerful force to achieve our goals.

We share this optimism at API. Our commitment to safety and sustainability and our hopes for a brighter future will continue to drive the American energy century forward and will help us meet the challenges we face together. Thank you.

API represents all segments of America’s natural gas and oil industry, which supports more than 11 million U.S. jobs and is backed by a growing grassroots movement of millions of Americans. Its nearly 600 members produce, process and distribute the majority of the nation’s energy, and participate in API Energy Excellence®, which is accelerating environmental and safety progress by fostering new technologies and transparent reporting. API was formed in 1919 as a standards-setting organization and has developed more than 700 standards to enhance operational and environmental safety, efficiency and sustainability.

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