The following is a summary of Nick’s October 15, 2024 address at the Drake Energy Security Forum.
It’s awesome to be here, at the birthplace of the modern oil industry. It’s fascinating to think that shortly after Edwin Drake struck oil here, the company I work for, CNX Resources, was just getting started.
For 160 years we have been at the forefront of Appalachia’s energy and economic evolution, and today, we continue to be a regional innovator.
That term – regional innovator – plays to the conference theme this year, “At the Crossroads: Navigating America’s Energy & Climate Dilemmas”. I don’t see a dilemma as much as a crucial need for all stakeholders to accept the realities of the situation.
I’ve got a lot to say and cover, so let’s get into it. You may not agree with everything I have to say today. But, as pointed out earlier, the purpose of this forum is to engage in civil discourse. Let’s have some fun.
Climate, Renewable Fuel Sources, and Geopolitics
Let’s talk climate. Weather is in the news with the recent tragic storms.
Climate change is happening. It’s been happening for millions of years. It will be happening as long as there is a planet Earth. And we know that well before the start of the Industrial Revolution, when human beings figured out how to harness the magical power of that carbon atom, the extent of climate change had been much more severe than what we’ve seen the past couple hundred years.
Three quick examples. Around 5000 years ago the Florida Keys were completely underwater for substantial periods of time because of higher sea levels. In the time of Christ in the Mediterranean region, both sea levels and temperatures were significantly higher than today. And then around 1000 AD, there were Vikings in Greenland doing what? Farming.
Atmospheric carbon dioxide has indeed increased since the start of the Industrial Revolution. It’s gone from about 200 parts per million up to about 400 parts per million today. Think of those proportions as follows. For a college football stadium holding 100,000 fans, a 200 parts per million concentration of visiting fans is only 20 spectators in the stands. 99,980 are home fans. If you double the concentration of visiting fans to 400 parts per million, the number of visiting fans has doubled. It’s gone up from 20 to now 40 fans. Has the atmosphere of that crowd changed to any observable extent?
And despite CO2 levels going up over the past couple hundred years, climate-related deaths globally have plummeted. They’re down 95 percent over the past century. And we know that more people die globally from extreme cold, many more than from extreme heat.
Innovation with the shale revolution allowed natural gas to displace enormous amounts of coal in the power grid, reducing CO2 emissions tremendously the past 30 years.
That wasn’t from government, mandates, regulation, and it certainly wasn’t from wind and solar. It was the private sector innovating with disruptive technology in places like Pennsylvania. Yes, Pennsylvania. Since 2005, using natural gas on our grid dropped state CO2 emissions over 40 percent.
Yet while US and PA carbon emissions are down since 2000, India’s are up 150+% and China’s are up 200+%. The developing world uses more coal than ever. Can’t blame them. They’re after reliable and affordable energy access and who doesn’t want that?
And so-called renewables, that’s false advertising. There’s nothing renewable about wind or solar. Wind and solar are not zero carbon or zero emitting. The supply chain life cycle assessment of what it takes to produce a kilowatt hour from solar or wind betrays huge carbon footprints.
Wind and solar also suffer from very low energy density, making it impossible to scale without ecological damage. The amount of wind turbines or the acreage of solar panels needed to pursue supposed net zero plans would require blanketing entire states with either solar farms or wind farms,
And it brings collateral damage with it. Offshore wind and whale kills along the East Coast of the United States. And onshore wind, the worst thing that happened to birds since the cat.
These realities are why it’s concerning to see what elites and experts are forcing upon society and economies when it comes to policy cures or medicines to ‘tackle’ climate change.
The consequences of those medicines or cures may be significantly worse for economies and quality of life across the globe than the actual symptoms or ailments of climate change.
Consider the carbon dioxide emissions tied to wind and solar and electric vehicles and their supply chains I mentioned.
First you need massive mining and movement of surface area to get to the requisite materials , requiring substantial carbon-fueled energy, transportation, and equipment.
And most of that must happen in faraway lands. Secondly, once you’ve mined the stuff, you need to concentrate it into purified feedstocks. That is going to require even more carbon energy. Again, most occurring in foreign locations.
Once concentrated, all those feedstocks come together in a manufacturing facility to start building the components for wind turbines and solar panels and electric vehicle batteries. Those factories are likely powered by a carbon-based grid, often coal-fired.
Then all those components are transported to the United States and Europe. Whether via ships, rail, trucks, or planes, what’s going to fuel that transportation? Yes, carbon-based energy.
Oh, and constructing the wind turbine towers and the solar arrays requires concrete, clearing trees for pads, clearing right of way, and metal transmission lines for the kilowatt hours. All carrying significant carbon footprints.
And once everything’s installed, if the wind doesn’t blow or the sun isn’t shining, often the case in places like Pennsylvania, you need a reliable back up, which will be some form of carbon-based power.
Add all that up. A very substantial carbon dioxide footprint for wind and solar. And a legitimate accounting of the life-cycle CO2 footprint for EVs will show they are materially higher than the internal combustion engine.
That’s why the consequences will not be positive ones with pursuing the policy medicines that have been prescribed. The promised cure ends up being worse than the vilified disease.
But there are other negative consequences. Wind and solar are not cheap as a foundation of an electric grid. We see proof everywhere. Wind projects are failing because of poor economics and higher costs.
Another negative consequence is general inflation. General inflation is raging as economies and societies embarked on these net zero follies because the latter causes the former. Increase the cost of energy and you create energy scarcity, you reduce reliability of energy, and that will adversely affect the cost of everything in society because everything utilizes energy.
None of this is good news for consumers or the middle class or businesses.
Our balance of trade also suffers, because China has built a stranglehold on the supply chains to manufacture an electric vehicle or a wind turbine or a solar array. The US and EU simply cannot mine, process, or manufacture enough of the stuff needed for a net zero plan relying on wind, solar, and EVs. Ridiculous to assume so.
There are dire geopolitical aspects to climate policies. They enable bad actors across the map.
Russia now enjoys energy leverage over Europe because of EU climate polices. Europe purposely shut down domestic energy sources of natural gas and nuclear. Coupled with a mad dash to wind and solar, which failed to deliver. That created an energy imbalance, and it was filled by Russian natural gas through pipelines like Nord Stream. Putin saw leverage and was emboldened to invade Ukraine not once, but twice.
China has been gifted enormous leverage from western climate polices. Again. it controls the supply chains of wind, solar and EVs. And now China can confidently eye up Taiwan.
How about OPEC. The US shale revolution slayed OPEC. But the climate alarmists with their policies dutifully resurrected OPEC because we need Mideast oil to flow to keep the price of oil down. Crazy.
Crazier with Iran. Iran knows its oil is now necessary due to climate policies. We appease, loosen sanctions, and fly pallets of cash to them on a carbon fueled plane. The debacle reaps hundreds of billions of dollars for Iran, which it uses to fund Hamas, Hezbollah, and nuclear weapon capability.
Totalitarian Venezuela is yet another example suffering from the same root cause: western climate policies. It went from a pariah and under heavy sanction, to where we ease sanctions, respect sham elections, tolerate kidnapping of our citizens by the government, and ask Chevron to flow billions of dollars of Venezuelan crude.
But the biggest tragedy: individuals in the developing world without access to reliable, affordable energy. Climate alarmist policies ensure they continue to be denied reliable and affordable energy. What gives anyone the moral authority to do so?
What’s really behind these policies? They make no sense from a chemistry, physics, math, and economics perspectives. I think I know; it’s an adversary lurking externally and internally.
The natural enemy of western republican democracy is the Left. Communist, socialist, totalitarian, or some combination. The Left benefits from climate policies on an unprecedented scale.
External vanguards of the Left are coauthors of our climate policies. It’s been well established that Russian interests are huge funders behind the Ban Fracking movement. Climate polices force a transition from energy independence of the West to an energy dependency on totalitarian nations of the Left.
But the adversary is found internally here as well. The Left despises the individual and his or her freedom to choose for themselves. The Left wants to tear away that freedom.
And then place that decision making power in the hands of a higher authority. A religion or ideology. The state. The expert class. Or a toxic cocktail of all three.
What better way to achieve the aims of the Left than by controlling energy? If you wanted to control society and the individual, but you could only choose one industry or sector to achieve it by, what would you choose? Health care or maybe finance or maybe tech? Not bad. But I would choose energy. Because the kilowatt hour, HP, and BTU touch everything in a modern economy.
If you control the kilowatt hour, the HP, and the BTU, you control decision making. Folks, climate policies are not about atmospheric carbon dioxide levels. They are not about weather. They are about control.
If my premise is correct, one would see climate policies bleeding into things beyond the generation grid. We are seeing just that.
Consider food. What you can and should eat is being attacked by everyone from radical environmentalists to the United Nations. Now experts demand we consider the carbon footprints of foods. There is a hit list. Red meat, ice cream, beer. So if you like those foods, I’ve got some bad news that might be coming your way when these climate policies continue on their inevitable march toward control.
Driving is another front in the fight. What better expression of personal freedom than the personal automobile? But with EV mandates, the individual now is reliant on the availability of the grid and when and where you may charge. Climate policies aim to transition the personal car from a quality-of-life booster for the masses to a luxury of the 1%. Another form of control.
Did you hear of 15-minute cities? It’s a movement found in climate policies to ultimately force individuals to live in urban areas within so many minutes of walking distance to public transportation. Because that would be the only mode of transportation available. And to force living in small apartments versus larger individual homes.
Climate policy is manifesting in emergency powers. Climate emergency days that you now see in California. When it’s hot, don’t charge your EV or run your air conditioner or open your business. Grid emergency. Created by climate policies.
The end goal is for the individual to lose control over their own decision making. Instead, trust in the higher authority, the government or the expert. In line with the ideology of the Left.
They’ll take care of you and tell you what to do. But history informs what happens once the Left controls.
What is an energy industry, Keystone State, and American to do? There is a quite exciting path if you assess. I admit I have a somewhat contrarian view versus the common consensus. Let me share my thoughts and see what you think.
The Evolving Energy Landscape
First, I agree with certain aspects of the common consensus.
- Policy and key sectors of the global economy continue to pursue lower CO2 emissions; maybe not zero but much, much lower than current.
- Policy is mandating an electrification of everything, resulting in unprecedented demand growth for the power grid. The most recent example is data centers and AI.
- The ability of wind and solar to deliver uninterruptible, reliable, and low-cost energy at scale to feed the growing grid demand is extremely suspect (to be kind).
Natural gas should be the clear winner across energy sources to meet higher energy demand at lower CO2 intensity.
Better yet, the Appalachian basin and Pennsylvania, with the Marcellus and Utica shales, is the premier natural gas deposit on the planet.
If all this comprised the complete analysis and game board, one would rightly conclude that the Appalachian basin is poised to flourish, and one would have expected these results to have already manifested in current market metrics.
Yet that has not occurred. And I believe it will not occur without a shift in the situational assessment by the industry, capital markets, and policy makers. We are misreading things.
This is where I diverge from the common consensus.
I believe:
- Policy across governments and bureaucracies prohibits the smooth allocation of capital into infrastructure to link Appalachian nat gas to growing grid demand. Attempts to navigate the policy roadblocks are met with a coordinated lawfare campaign that strangles with litigation. The idea of a new pipeline to provide Appalachian energy to Boston is ridiculously obvious. But such a pipe will not be allowed to be built; it is counter to that ideology that permeates a system from which approval must be secured to proceed.
- Supply from the Appalachian basin is experiencing a step-change evolution with the deep Utica. CNX has pioneered this horizon, and we see it delivering a new level of supply magnitude (higher) and response time (quicker) for the basin.
- When a basin establishes higher potential supply levels, delivers quicker supply response times, and is artificially bottled-up due to the inability to invest in logical infrastructure, there will be in-basin price consequences. Unless something creates new demand or take-away, a sustained upside for in-basin pricing will remain elusive.
- The industry looks to LNG export as being the answer. However, to unlock the next wave of Appalachian supply, LNG requires more pipes to move our product to coastal LNG terminals. Even setting aside the infrastructure constraints, a true step-change in LNG export capacity is a nonstarter over the next decade due to policy and legal constraints, the most recent example being the LNG permit ‘pause.’
- Now many point to growing grid demand to power AI data centers as the answer. After all, such demand in-basin doesn’t require new long-haul pipes or large-scale LNG facilities. But the tech industry who buys the power to feed the data center economy will demand the power come from something that offers a low/net zero CO2 footprint. They don’t want just low-cost and reliable power. They demand low-cost, reliable, and low/net zero CO2 power.
Those realities may depress at first blush, but there is an exciting path available from the herd mentality. What would that look like? Well, it’s been what CNX has been up to.
There are key industrial sectors of today’s economy that are growing and have an appetite for energy. Hydrogen and the IRA, Sustainable Aviation Fuel (SAF), power grid and AI Data Centers, and transportation fleets.
Energy to the above sectors must meet certain criteria. The following ‘boxes’ must be ‘checked’: reliable, uninterruptible, low-cost, short supply chain, ready now, net zero or low CO2, and the ability to demonstrate no harm to local/regional ecosystems.
None of the touted energy solutions check all the boxes. Wind and solar – we covered those fatal shortcomings already. Nuclear has lots of excitement but recent experience is not promising. Ultra-high cost to build, as evidenced by Georgia Power; not ready now and will take years to build.
Natural gas? Many advantages and boxes checked, but one key shortcoming of not net-zero CO2.
So, what energy solutions would check all the boxes? CNX and Appalachia offer a few.
The first is captured coal mine methane, or CMM. As determined by the US Department of Energy, CMM is a carbon-negative product that reduces the methane emissions entering the atmosphere.
When CMM is custom blended with the Marcellus and Utica, companies like CNX can deliver to customers an energy supply with the exact carbon intensity desired. A CMM blend product has a fraction of the cost of new nuclear and offers scalability, reliability, and supply chain benefits that are far superior to wind and solar.
But our solutions are not limited to CMM. Technologies now ready for deployment allow us to harness the unique characteristics of the deep Utica to manufacture low-cost, low-carbon intensity CNG and LNG on-pad, serving markets beyond those linked by existing pipelines.
These products can meet those growing sectors of energy demand.
- Hydrogen production at scale requires enormous amounts of reliable energy. CNX’s CMM blended with shale gas is ready-now to provide net-zero hydrogen at scale. This, when coupled with the IRA, will kickstart hydrogen production across Appalachia.
- The creation of SAF to decarbonize aviation has remained elusive as emerging alternatives to existing jet fuels have failed to meet scalability and cost challenges. CMM blended with shale gas provides a net zero CO2 solution. Our project at the Pittsburgh International Airport will be the first SAF plant at scale utilizing CMM.
- The re-shoring of American industry is another opportunity. CNX is partnering with NewLight Technologies to provide CMM as a critical feedstock into their manufacturing process that creates revolutionary, net-zero, biodegradable, plastics-substitute products. Manufacturers looking to decarbonize and de-risk supply chains will look to Appalachia and CNX.
- AI will increase energy demand and Appalachia is uniquely positioned to benefit from this growth due to its proximity to CMM, short supply chains to shale gas, and legacy infrastructure. But the AI economy needs energy solutions at scale, today. Data center developers are logical customers for CMM blends and CNG/LNG.
- Pad-level CNG and LNG are poised to disrupt transportation fleets served by diesel and gasoline. Our solutions are reliable, local, and ready-now to improve emissions and economics by converting away from heavier hydrocarbons.
The opportunity for this basin is exciting. End markets are just starting to realize it. We are about to experience a transformation of Appalachia.
Real solutions to real problems require policy rooted in objective fact.
There is the need for good macro policy, what we discussed, but also good regional policy.
Radical Transparency
On that note I want to wrap up with an approach CNX is working on to change the paradigm on the local and regional level – we call it Radical Transparency.
An air quality monitor at the CNX RHL37 well pad in Greene County, PA. Visit www.cnxradicaltransparency.com to learn more.
What is it? Data-driven monitoring, analysis and transparency to guide policy that protects the public and recognizes the important role of energy in Pennsylvania and Appalachia.
We built and rolled this out with help from Governor Shapiro and PA Department of Environmental Protection.
We are monitoring air and water quality, waste, and methane in and around our operations.
We are open sourcing data for all to see in real time. This is critical. We can’t continue to hold our data in a black box and release it on our terms to a limited audience. You can find it on the web right now.
The data is collected independently by an accredited third party.
And the PADEP is provided this data unabridged at the same time as it is provided to us – further transparency and confidence.
Simple but powerful. Without real time transparency, industry data will always be questioned and dismissed. So, let’s provide it.
We’re just getting started with this effort so expect to hear much more about it.