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Oil exec: Alternative energy use may improve our industry's image

Published January 31, 2013 9:53 pm

Fuel • Wider availability of other options could invite favorable comparisons, HollyFrontier CEO says.
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The growing availability of electric vehicles and of alternative transportation fuels such as ethanol could end up helping the oil and gas industry improve its image among consumers.

That's the thinking of Mike Jennings, president and CEO of HollyFrontier, the Texas-based company that operates an oil refinery in Woods Cross.

Addressing the 2013 annual meeting of the Utah Petroleum Association, Jennings said that as such options gain wider acceptance, he anticipates consumers will begin to more fully appreciate the value that petroleum fuels and gasoline-powered vehicles bring to the table — benefits that include their relatively low cost and widespread availability.

"In the past, consumers may have felt that they were trapped [by the oil and gas industry], and when the price of gasoline went up, they would get angry," Jennings said in an interview after his address. "But there are now alternatives that they can turn to, even though that could result in the industry losing market share."

Jennings' themes were no doubt familiar to the members of the trade association, who gathered at the Little America Hotel. Although pointing out later that "no one was about to throw any tomatoes," Jennings noted in his address some downsides to the petroleum-based fuels produced by the oil and gas industry.

"When we look at the competitiveness of our petroleum fuels, we have to consider that some of the politically appealing alternatives, including electricity from wind and solar resources, have almost no atmospheric emissions," Jennings said. "Whether those alternatives are reliable or environmentally friendly on a life-cycle basis is the subject of debate, but their air emissions are not."

For tailpipe emissions, there's a big gap between petroleum fuels and the electric alternatives that will need to be closed through innovation, Jennings said.

"There are, of course, other competitive dimensions, including vehicle range, cost of ownership and impact of manufacturing and battery disposal that reflect large advantages for gasoline-powered vehicles," he said.

In comparing the benefits of petroleum and bio-fuels, Jennings said that water use is a key consideration in the production and use of grain-based ethanol.

He argued that the typical volume of water used in manufacturing a 42-gallon barrel of ethanol from irrigated corn fields is about 50,000 gallons, compared with about 50 gallons for a water-fracked oil well to produce a barrel of gasoline (through the horizontal drilling method). "Petroleum fuels are roughly 1,000 times less water intensive than grain-based counterparts."

Jenning said that within the oil and gas industry, there is great opportunity for innovation, "not so much in what we produce, but rather in how we produce it."

He pointed to HollyFrontier's plans to launch a $700 million multiyear expansion and modernization of the company's Woods Cross refinery that will increase production, while also reducing emissions and lowering the operation's impact on the environment.

"We will be adding equipment that will reduce overall plant emissions by about 10 percent from today's levels, despite a near doubling of the crude processing capacity," he said.

Jennings said the modernization effort will be launched once the company gets its required air quality permits.