LA County Lincoln Club • June 2023 Address

The following is a summary of Nick’s June 2, 2023, address to the Los Angeles County Lincoln Club – Downtown Chapter.

I am so happy to be here, to be with so many doers and value creators. I typically decline many of these invitations to speak and interact. It’s much more comfortable for me to write commentary on my website or discuss issues on my weekly Far Middle podcast than to take the much bolder step of interacting with fellow human beings.

And I have a day job running a publicly traded energy company, CNX Resources, with a great team who are always demanding that I focus on the next summit to climb.

But when I first connected with Nish, I didn’t hesitate for a moment; I was all in. Let me tell you why.

Since you here today are from California or the LA area, you may miss something crucial about California and the position it holds within our nation. My family, like Nish’s and most of yours depending on how far you go back, were not from America. Our people came to America. More specifically, our people aspired to come to America. Because of what it represented and offered, which was in stark contrast to the places where our people left. People from all over the world dreamt of…coming to America, to steal the title of a great 80s movie.

But within this great nation sits California. You see, people from all over America dreamt of…going to California, to borrow the title of a great Led Zeppelin song. California for decades was the dream within the dream. The next level of the American ideal.

I had that dream but never realized it. Since I was a kid. My favorite TV shows were centered in California, hello CHIPs. The first movie I ever saw in a theater was Earthquake, where my perceived ideal of a place was devastated by a natural disaster.

A self-respecting Pittsburgher, I was a Pirates fan growing up in the early 1980s. But I was also a massive Dodgers fan. I fell in love with Vin’s voice and the stadium. That crisp white uniform in the sun. Lasorda, Garvey, Dusty, and my personal favorite, third baseman Ron Cey. The Dodgers perfectly mirrored my image of California and LA.

One of life’s great mysteries to me are people, many of them smart people mind you, who say they prefer New York City to LA. What? That’s not even a fair comparison. People…escape from New York; yeah, another 80s movie title again; they don’t desire to go live there, certainly not over LA.

Although I never left Pittsburgh, I remain fond of California and LA. And I am deeply troubled about both. And America. And my hometown as well. Allow me to explain.

AN ENDANGERED AND VILIFIED COMPOSITION

Understand my makeup. Like most of us here today, I am a mosaic of things.

I am an engineer by training, which means I am passionate about the scientific method and objectivity when setting policies. I am not a fan of, and am deeply troubled by, ‘The Science’.

I am a liberal, as in the endangered species of classic liberal, when it comes to individual rights. The Constitution and our republic were structured to protect the rights of the individual. From the tyranny of the majority and certainly from the state. The individual should be free to choose.

I am most definitely a fiscal conservative. I never spent more cash than I took in, including when I was young, starting out with basically nothing, and no car. So why should our government systemically and constantly grossly outspend what it takes in?

And philosophically, I am best defined as libertarian. I recognize we need some level of government – to protect property rights, protect individual rights, and to defend from outside threats. But that level should be minimal so that the individual is optimal.

And I am a proud capitalist. And an unapologetic domestic energy producer of natural gas. And a believer in meritocracy. And free market advocate.

What’s interesting is how out of style that mosaic makeup I just listed has become. In fact, it is now beyond unpopular with the elite and expert class. It is outright vilified as something in need of silencing and eradicating.

Think about it. The Science reigns over science. Individual rights are trampled by the official views set by the elite and expert classes. Fiscal responsibility in government has been obliterated and we pretend the bill will never come due. Government has become a monster, light years away from minimal. Socialism eats away at capitalism. Zero carbon myths are used to attack domestic energy. And equal outcomes destroy meritocracy.

Why are all these things coming to bear at the same time across our great land and this awesome state? It boils down to one culprit, friends: the Left.

AMERICA’S SHALE GAS MIRACLE

Learn how CNX Resources produces natural gas.

If you could create the opposite composite of the things that I love, that I associate with, that I just listed, you would come up with today’s Left.

And not only is the Left the antithesis of all that I hold near and dear, but it also—quite astutely I might add when one considers the Left’s end game—attacks and vilifies the industry and region that are in my DNA. Those being the domestic natural gas industry and Appalachia, with Pittsburgh serving as its beating heart.

And there is much that we all stand to lose if the Left succeeds. Allow me to illustrate with my world, which seems far from here but in fact impacts everything here in Cali. It’s the greatest success story never told.

The U.S. went from being a net annual importer of natural gas as recently as 2016 to the largest global producer of natural gas and a net annual exporter today. The Appalachian basin is a big reason why; the Marcellus and Utica shale horizons underneath where I live represent cumulatively the second largest natural gas field in the world.

What catalyzed this stunning rapid transformation and dominant position? The free market bringing innovative and disruptive technology in the form of horizontal drilling and advanced completions techniques. American ingenuity allowed methane, aka natural gas, to be liberated from shale rock deposits at prolific rates and low cost.

Cumulatively, the benefits across this virtuous value chain total in the trillions of dollars. Because of capitalism and efficient market theory.

You see these benefits locally in places where the manufacturing of energy occurs, often in rural and underserved locales. Landowners have enjoyed a windfall from gas rights leasing that they’ve reinvested into family farms, homes, kids’ education, and local businesses. Communities ravaged by global “free”, but really unfair, trade now see high employment in jobs that pay family-sustaining wages. Where no hope existed not long ago for these communities, attention has now turned to a future with promise.

You see the benefits regionally. Pennsylvania retooled its power grid to feed off domestic natural gas and the state’s carbon dioxide intensity declined nearly 40 percent in just 12 years while its manufacturing sector was revived and businesses and homes enjoy lower energy bills. Old-line manufacturing, petrochemicals, and industrial products are resurrected across the Rust Belt by the jolt of cheap and reliable energy. Which means the building trades are booked solid.

Benefits are evident across America and North America. Canadian heavy industry in western Ontario is now fed by new pipeline infrastructure conveying Appalachian carbon-based molecules, making it more competitive. Mexico is the largest importer of U.S. natural gas.

The US shale industry and free market have done more for North American prosperity than the NAFTA and USMCA, combined.

America’s domestic energy industry is redrawing the geopolitical map.

We broke OPEC’s back. Domestic carbon manufacturing allows the U.S. to withdraw from endless conflicts in faraway lands since we now deliver our own energy security. U.S. natural gas is the biggest strategic lever against the growing threat of the ominous Chinese communist state and its global ambitions, as well as Russia and Putin.

There are basic underlying reasons why this miracle occurred in a very short time.

First, the free market was able to function without major government intervention. The industry innovated faster than bureaucrats and the Left could keep up to meddle. Second, the free market allocated capital across the value chain, and what were once fragmented pieces quickly become integrated and efficient.

And if left unmolested by the Left, we are just getting started. Two big opportunities are on the horizon.

First, another round of disruptive and innovative technology is coming to bear, much of it being developed and demonstrated by CNX in Appalachia, that will allow natural gas manufactured at the wellhead to be efficiently transformed from gaseous methane into compressed natural gas and liquified natural gas. Or CNG and LNG, respectively. That’s a game changer, because CNG and LNG will instantly displace massive volumes of foreign-sourced oil used in the transportation sector.

When you blend in CNG or LNG into a truck, heavy equipment, bus, or airplane in place of gasoline or diesel, a few things happen. Costs go down because the natural gas derived BTUs are less than half the cost of gasoline or diesel BTUs. Huge savings.

Supply chains shrink drastically, from tens of thousands of miles with oil currently, down to as short as dozens of miles under this development chain.

Global CO2 and local emissions plummet, because you are now using the lowest methane intensive natural gas on the planet to displace higher emission pieces of the energy portfolio.

Employment and tax base go up as workers earn family-sustaining wages and pay taxes. Trade balance improves and trade deficit shrinks as energy imports drop. And our geopolitical leverage increases as we create not just improved energy security for ourselves, but also our allies.

Allowing doers to do their thing in domestic energy has the geopolitical reach of several aircraft carrier groups, when one thinks about it.

Second, once you displace the foreign-sourced gasoline and diesel transportation markets, you can start to expand the exporting ability of domestically produced natural gas to other nations.

Liquified natural gas (LNG) terminals along the east and gulf coasts, and what should also be the west coast, liquify natural gas transported from inland basins via pipelines. The product is then shipped to places like Poland, South Korea, Spain, Japan, and India. There, the natural gas is re-gasified and utilized for home heating, electricity generation, and manufacturing. Our carbon-based molecules are being utilized globally to help spur improved quality of life for billions of people.

THE LEFT’S ENERGY BATTLE PLAN

But…the doers in domestic energy and Appalachia are not being left alone by the Left. Quite the contrary. It’s as if the success of the domestic energy industry drove the Left mad, to the point where their zealotry to destroy and appropriate the value of doers exponentially increased.

“It’s as if the success of the domestic energy industry drove the Left mad, to the point where their zealotry to destroy and appropriate the value of doers exponentially increased.”

Code Red for humanity and climate change serve as the overarching religion to destroy not just the domestic energy industry, but everything tied to it. Which is effectively the entire private sector economy and the freedom of the individual. There are three tactical prongs to the Left’s attack under the ideology of climate change.

The first prong of attack is heightened regulatory standards on domestic energy production and reduced access to natural gas reserves. You see this attack every time an administrative state bureaucrat in the EPA issues a new regulation on the industry. Although these attacks have a cumulative negative impact, the industry has become adept at meeting such onerous challenges.

The second prong of the attack targets the industry’s access to capital and looks to cut off supply of the vital lubricant for any capitalistic endeavor. This attack will be evident when major banks bow to pressure from environmental groups to stop lending to the carbon economy, when foundations or endowments of universities chest-thump about their divestment from carbon-producing companies, or when credit ratings firms assign poor credit ratings to such companies not because of quantitative metrics but instead because of subjective views of the industry’s social worthiness. The logic of this prong is simple: starve a growing industry of capital and you can slowly strangle it to death.

The third and final prong of the attack is the most insidious of all: thwarting the future demand growth for natural gas. This attack manifests through the throwing of regulatory and legal roadblocks into the paths of new pipeline projects that would convey natural gas from the producing basins to the growing demand centers.

The Left justifies the three-pronged attack with a few convenient energy myths.

The first myth being wind and solar and EVs are zero carbon. Nonsense; they have massive carbon and CO2 footprints on a life cycle basis, higher than natural gas power generation for sure. Mandating wind and solar power generation and EV adoption will increase atmospheric CO2 net-net, not decrease it.

The second myth being we can manufacture wind, solar, and EV batteries at scale here in the US. We can’t because the stuff you need sits largely in Africa and South America and China. And all the processing capacity to purify that stuff is controlled by China. A mad dash to wind, solar, and EVs necessarily creates energy dependency on the CCP, as designed.

And the murky supply chain of wind, solar, and batteries brings epic human rights abuses. It’s a new form of brutal colonialism. Brought to you by the Left, the Church of Climate, and the IRA.

Now, why aren’t these myths about wind, solar, and batteries exposed as nonsensical under the basic laws of science that a high school student should be able to posit? Well, the myths masquerade under a veneer of an effective tactic. A tactic that if done objectively is of great use, but when purposely misapplied by the Left does great harm.

The tactic I speak of is ESG screening methodology; ESG standing for environmental, social, and governance. The Left uses ESG as a blunt instrument to punish domestic energy and cover over those inconvenient myths of wind, solar, and EVs. How? By distorting the E within ESG.

I wrote a piece that you can find on nickdeiuliis.com that gained a bit of notoriety in the energy space and capital markets. Its title, and this is the last time I will borrow another movie title, is: The Good, the Bad, and the Ugly of ESG.

The good, or the Blondies, of ESG investing focus on tangible objective performance metrics that help filter best-in-class performers within a group from the norm or poor performers. Example: show me the safest and most compliant player in an energy or manufacturing field and it will likely be the most profitable or lowest-cost player.

The bad, or Angel Eyes, of ESG investing is the racket. Corporations making vague promises about this or that years into the future, typically after the CEO retires. Or an investment house using ESG labels to shove high-fee products down gullible throats where the ESG portfolio doesn’t look all that different than a standard one. Or pension funds preaching ESG but who don’t want to do the hard work to properly screen players and instead rely solely on third party institutions who arbitrarily judge ESG worthiness using an ideological bias wrapped within a black-box model no one can see.

The ugly, or Tucos, of ESG investing are what happens when companies get distracted from true substantive risk management by ESG gloss and optics. Exhibit A in state: PG&E. Hundreds of millions spent on charging stations, solar, and optics while starving core infrastructure, including a 90+ year old transmission line hook, of needed maintenance. The utility was celebrated as an ESG leader. Until. Then the consequences: deaths, a third-world grid, and bankruptcy.

Yes, the symptoms and consequences of the Left meddling in energy are real. It creates energy scarcity, which creates energy inflation, which then stokes general inflation. It helps create energy insecurity in the West and a dependency on places like Russia, because when wind and solar inevitably fail to perform at scale, the energy needs to come from somewhere. Putin feels emboldened and decides he can take a nation or two because of his energy stranglehold over the EU that the Left gave him.

Climate change is not the problem. It’s been happening for millions of years. Climate change policies and the myths they embody are the problem.

THE DUTY OF LEADERSHIP

Now you sense my anxiety. The Left is everything I am not. And on top of that, the Left is looking to eradicate my beloved industry and region out of existence, with serious consequences for a range of stakeholders, from the local to the global.

That realization built over time and changed me. I used to subscribe to what I referenced as ‘political quietism’. Keep your head down, ignore the babble, and do your job. But with everything I just discussed looming larger, I began to ponder if that is what good leaders do. Is it ethical to not speak in defense of the accurate, of the rational?

I began to focus on policy advocacy. I maintain a website where I’m constantly posting various thoughts and materials and commentaries; nickdeiuliis.com. I’m active on Twitter and LinkedIn. And I publish a podcast weekly titled The Far Middle, as in not the far right and not the far left.

And, yes, I wrote a book, Precipice: The Left’s Campaign to Destroy America. I encourage you to give the book a read; all the royalty proceeds go to another one of my endeavors, which is helping to fund the CNX Foundation’s Mentorship Academy – check that out on my website or on the CNX Foundation website.

CALIFORNIA & LA: SADLY INSPIRING PRECIPICE

I’d like to discuss the core themes of Precipice and tie them back to where I started: California and LA. What this epic state and great city once represented as the ideal for Americans and what they have unfortunately become: bastions of the Left.

It is uncanny how you can take the themes of Precipice and align them with what is going on here. And you know it better than me, so I will be brief. But it’s worth mentioning.

The overarching theme of the book is that our society, economy, and culture have historically broken down into two broad groups. In one category are Creators, Enablers, and Servers of value creation.

Creators are the foundation; they create wealth, and range from inventors to surgeons to construction workers to those in manufacturing. They are the embodiment of competent man or woman.

Enablers make the job of the creator easier, possible, or more efficient. They include nurses to the surgeon, accountants to the innovator businessperson, or long-haul truck drivers to get a Creator product to its destination. Without Enablers, Creators cannot do their thing, or are throttled.

Servers take the invention or service of the Creator and use it to make life more enjoyable. The Server class is large and includes obvious examples of professions such as waiter or Uber driver. But Servers also include pro athletes and musicians; although sometimes we look to define those professions into something they are not. Servers don’t make life possible like Creators or Enablers, but Servers make life better.

Those three constitute the first category. And some professions can subjectively be defined as part of two or even three of the subcategories. But what these three groups have in common is that if you let Creators, Enablers, and Servers do their thing in a free market economy with minimal government intervention, you have the success that was America. And that was California. And that was this great city that blossomed in an arid basin out of nothing.

Then there is the second category out there today. One that doesn’t create value or optimize it. Instead, this category exists to appropriate value and consume it. I refer to it as the Leech. It is perhaps more of an organism because it exhibits a set of common characteristics that I define as the ‘Leech way’. It serves as a leftist roadmap.

The Leech used its ground game to commandeer professions and regions and institutions, converting them from once manufacturers of value into present-day exporters of need. Once noble professions are subsumed.

Which professions have fallen under control of the Leech and the Left?

Certainly, much of government. The bureaucratic state is a monster. I tag it as the Deep State in the book. Not ‘deep’ as in secret; I wish. No, ‘deep’ as in rooted and entrenched everywhere and with everything. There is a historical lineage of how it came to be, from Wilson to FDR to LBJ to Obama to what we have today. The individual can do nothing today without government approval. And California is in many ways ground zero of the Deep State movement.

Public unions are another domain of the Leech. Teachers’ unions, which punish great teachers, students, parents, and taxpayers so that the union can grow its power and influence. Have you seen LA County Unified School District competency scores in math, science, and reading? Yet what have funding levels done over decades as scores have declined? What happened here with education during pandemic and who called the shots? Who benefits and who pays the price says a lot.

The media: another tragedy where a once noble profession the Founders thought of as vital to our republic and needing Constitutional protection that has morphed into the propaganda agency of the Left. Here we have Hollywood to the LA Times, serving as front and center exhibits of this crisis in journalism.

The tech industry here in Cali and across the nation should be ashamed. On one hand it surely exhibits classic Creator, Enabler, and Server traits; true, massive value creation for society. But then it looked to curry favor with the Left and supported its aims and ideology. And it made the Leech stronger. And now the tech industry is getting its just due in return as the Leech turns its attention to the industry.

Academia went from the marketplace of ideas to an Iron Curtain of ideology. From where a student expanded horizons to one where the student comes out indoctrinated with narrower horizons. The California state university system was once the envy of the world. Today it is a massive burden, fiscally and culturally, for state taxpayers and citizens.

When the Left controls government, it is only a matter of time before the policies of government feed the Leech and catalyze its growth. Consider Fed monetary policy: massively negative real interest rates and constant running of money printing presses fund a model of outspending. To punish savers and to subsidize broken business models. To manipulate capital markets and pick winners and losers.

The consequences here include inflation and real estate bubbles. And a growing spate of bank failures whose balance sheets became addicted to perpetual free money monetary policy along with making loans to risky businesses whose entire business model was premised on free money. And SVB is only the start, friends.

These tactics come to bear the heaviest in our major cities. I don’t need to lecture you about LA or San Francisco. We know exactly what Dave Chapelle meant when he referenced San Francisco and asked out loud, ‘what happened to this place?’

In The Far Middle episode 101, at approximately the 11:20 mark, Nick discusses California’s precipitous drop in personal income tax revenue—signaling difficult decisions loom for the Golden State.

I also have a few chapters at the end of the book that explore three individuals in depth. You may enjoy the chapter on Bono; I understand members of U2 had homes or owned property in Malibu. And with LA being one of the largest dioceses of the Catholic Church in America, check out the chapter on Pope Francis. I am not a fan of the current pontiff, from my perspective of being both American and Catholic.

Yes, sadly California and Los Angeles served as much of the inspiration for Precipice. And the rest of America is gravitating toward where you are. The Left and the Leech never sleep, they always are growing by consuming the value of others. Day by day. Profession by profession. State by state.

FOLLOW ALONG AND SPEAK UP

To wrap, I have just a few simple asks. First, please consider giving Precipice a read and share your thoughts on LinkedIn or in an Amazon review. Second, please follow me if you use LinkedIn or Twitter. Much of my advocacy effort flows on those platforms; they are great ways to connect with me and the content.

The Far Middle podcast is always looking for new constant listeners. Please join those growing ranks – we issue episodes weekly, and they run under half an hour. I think you will enjoy them. Prior episodes are archived and available as well.

And my website nickdeiuliis.com is the depository for all the advocacy content, from book to podcast to news. Check-in regularly. By the way, I posted a piece on LA in late 2021 you can find on the website under the Commentary section titled ‘Ode to Los Angeles from a Wary Admirer.’

Last, please speak up in defense of free enterprise, capitalism, individual rights, fiscal responsibility, value creators, and the middle class. For LA, for California, and for America.