An official website of the United States government

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.
2017-2021 ARCHIVED CONTENT

You are viewing ARCHIVED CONTENT released online from January 20, 2017 to January 20, 2021.

Content in this archive site is NOT UPDATED, and links may not function.

For current information, go to www.state.gov.

Consumer Energy Alliance (CEA):  I’m Michael Zehr, I’m Vice President of Government Relations for Consumer Energy Alliance.  Consumer Energy Alliance is a nationwide grassroots organization created to advance a dialogue between energy producers and energy consumers.   

 Energy affects every aspect of our lives and we believe that sound energy policies that benefit families, farmers and small businesses are essential for our economy and our security. 

 CEA supports traditional energy sources as well as renewable sources.  We believe that we’ve been blessed to live at a time when technology is advancing so rapidly providing consumers with many options to affordably access energy while also reducing emissions which benefits our environment for generations to come. 

 With the global pandemic and economic challenges associated with it, Americans are more aware than ever of the connectiveness of our world.  We can look at the next few years and we look at what is coming up.  We know that we’ve got some real challenges ahead of us and the energy sector has provided ways out of previous downturns in the economy and it appears to be poised to help us out of this one.  But more than ever before, we understand the connectivity of our world and that this industry and what we do here in the United States and what others do abroad will impact the ability of that sector to generate jobs and help us move out of this. 

 So we are really, really pleased to have Assistant Secretary Frank Fannon with the U.S. State Department join us.  He is the head of the Bureau of Energy Resources and in this role Frank oversees U.S. foreign policy at the critical intersection of energy and national security and he leads efforts to promote universal access to affordable, reliable energy from all sources. 

Prior to his work at the State Department Frank ran the Washington offices of a number of global energy companies and served in the U.S. Senate where he served as counsel for the Environment and Public Works Committee and advised a number of U.S. Senators on energy, environment and transportation policy. 

We’re grateful to have you join us, Assistant Secretary.  Would you mind giving a little background on the Bureau and some of the issues that are really coming before the State Department right now that are keeping you busy. 

Assistant Secretary Fannon:  Yeah, thank you Michael.  It’s great to be with you and your membership.  I was reflecting on your comments.  We’re an all of the above bureau and it’s great to speak to an all of the above kind of group. 

We really look at the area where energy is really a proxy for other foreign policy issues and it’s been a remarkable journey in terms of the evolution of energy as a foreign policy and security issue. 

Of course a lot of that was born out of the oil crisis of the 1970s when then Secretary of State Henry Kissinger helped to found the International Energy Agency which was designed to address energy inadequacy and  insecurity by working with other countries to create a buffer in terms of oil supplies. 

You mentioned my other government service, working in the Senate.  At that time we were convening hearings on gas insecurity and the exporting of jobs in crucial manufacturing in places like Germany where prices of gas were much less expensive and chemical manufacturing was relocating over there. 

So I was fortunate then to work on energy issues and policies creating the right policies, and to have allowed for the energy industry to flourish.  In particular, working on the hydraulic fracturing provisions when I was working for Chairman Inhofe then Chairman of the Environment Committee.  We drafted and negotiated and eventually passed into law Provision 2005.   

So when we were in that area and when I was last in government service from energy insecurity to now have this role, serving more than two years and we’re in the era of energy abundance from the United States.  It’s a remarkable and very fast sea change. 

Secretary Pompeo understands the critical role that energy plays in our foreign policy.  In fact he was the first sitting Secretary of State to speak at the CERA Conference in Houston and he spoke about some of these issues.  And it’s not just about oil and gas, but also some of the broader suite of issues that we have in terms of energy transformation that we’re seeing around the world. 

We’re here meeting virtually, unfortunately.  I’d much prefer to meet in person.  But we’re here because of the current COVID pandemic.  It’s done a lot more than just interrupted our way of diplomacy and my kids’ school, but it’s also drawn a level of attention to the broader issue of supply chains and the need to ensure that they’re resilient. 

So there’s a tremendous amount of work that we have ongoing in energy supply chains as well.   

Last, I want to really get into the questions, but what we see , there’s two issues.  Firstly, our energy abundance has created a degree of head room for diplomacy that was unthinkable just a few years ago.  One of the areas — I have five main priority missions and we’ve established strategies.  But I’m always reminded, we actually have a sixth one which is managing energy sanctions work.   

We took more than two million barrels of Iranian oil off the market through our target sanctions program.  And it was because of the U.S. energy abundance that we were able to do that without creating any economic dislocation at all around the world, but especially for the United States.  So our abundance is opening up a new aperture of energy partnership that we can have with other countries around the world. 

Again, I can’t underscore how fast this has all occurred.  When the U.S. started exporting natural gas through LNG in 2016 in earnest we were the 15th biggest exporter in the world.  In less than three years we’re at third.  It’s just remarkable the way in which our energy provides opportunities for other partners all around the world.  

But it’s not just the commodity itself that’s so important, but it’s the way in which the U.S. private sector shows up, having the best health, safety and environment standards and critically important in these days of great power competition. 

Our companies respect the sovereignty of the nations in which they operate and with whom they partner.  

I’m extremely grateful the President nominated me for this position working under Secretary Pompeo.  We’ve got a great team.  What we try to do here is also create enabling environments, but it’s the private sector that are the real implementers, really an extension of our soft diplomacy. 

I look forward to discussing more, but I’ll pause there Michael. 

CEA:  That’s great, and it’s just an incredible success story going from 15th to 3rd.  You really, and talking about the head room that it’s providing you in terms of diplomatic efforts, it really is extraordinary.  And to sit where you are, to see it and be able to use it I think is fantastic. 

One of the things I wanted to kick off our discussion with, because I know that some of the folks that are members of CEA are very interested in this, are ongoing efforts of the State Department and other parts of our government to help stabilize oil markets.  We know that the private sector is a partner and a key aspect of this, but I wanted to see if you can talk a little bit about State Department energy diplomacy now with oil.  It was negative for a while and then got to 30, and I think nudged up to 40 and it’s around.  I’m just curious if you can speak a little bit to the efforts of the State Department for oil market stability around the world.  It’s a critical commodity and something that our members are very interested in. 

Assistant Secretary Fannon:  Sure.  Those negative days, it’s unprecedented, truly.  And we all know the biggest cause in terms of the demand destruction that COVID has created on the world.  And then the OPEC Plus members decided to get into a bit of a spat. 

What we were seeking to do, and Secretary Pompeo in early March spoke to this and there’s a public readout of this, but he recognized firstly that the Kingdom of Saudi Arabia, of course, is a leader in energy.  Global leader.  But they’re also the head of the G20.  The G20 is there to help support global economic market stability.  So the Secretary encouraged the Crown Prince to use his position and the Kingdom’s position as this leader of economic stability to bring together a group of countries through the fore of the G20 to focus on how collectively we can create a degree of certainty and stability when the world is really on its knees.  And we were very pleased to see the Crown Prince take that and run forward with it and call an extraordinary meeting of Energy Ministers of the G20.  We ended up seeing, of course, the OPEC Plus came together and made their cuts. 

Through that process a variety of countries — again, I’m consistently reminded how unique our system is in terms of our free market relative to other countries.  They wanted the U.S. federal government to somehow step in certain ways, but we were confident that the private sector would react based on market conditions and react they have.  And we were able to certainly, you mentioned where the oil prices are now. 

The other thing we did is we talked to other countries like Australia to use the U.S. SPR to put some oil.  The Department of Energy leads in very creative ways and using the SPR to be effectively another demand response.  So there was a lot taking place.  

The other thing that we have to remind is that the U.S. is a remarkably huge economy, it’s extremely diverse.  Not all countries are as diverse, and countries that have a different percentage of their income is related to oil revenue, and if there is no oil revenue then it creates a whole host of other challenges for those governments and can magnify already poor security conditions. 

So we continue to implore all producers to act rationally and provide a level of certainty that the world needs at this time. 

CEA:  I think that point on some countries being disproportionately dependent upon oil revenues is something of some interest to us as well.  When we look to kind of the longer term oil diplomacy and some of the work that you’re doing, it’s been said that low oil prices help the U.S. in putting pressure on states like Venezuela by reducing resources that they have available. 

I was curious if you could comment on how these price instabilities and the efforts to stabilize markets that we’ve all been looking for, how have these impacted our goals in terms of putting pressure on those countries that have policies that are counter to U.S. interests? 

Assistant Secretary Fannon:  I go back pre-COVID to talking about some of our work.  I think the experience of COVID is such that there was already a trend line in a lot of areas and it’s just accelerated that.  It’s just brought things forward. 

Like the world was concerned about the security of the supply chain, but now everybody has moved beyond concern to taking action.  And I would go to that with the need to have certainty in terms of markets. 

Our energy sanctions component firstly is targeted — why are we going after oil in Venezuela or oil in Iran?  It’s because those regimes use oil to generate revenue that in the case of Iran uses that revenue to fund proxy wars in the region and terrorism around the world.  And in the case of Venezuela, it continues to fund an autocracy, just a criminal enterprise and create a true human rights tragedy. 

We hear a lot about the Syrian refugee crisis that’s occurring, but there are actually more refugees because of the illegitimate former Maduro regime’s control in Venezuela.  More Venezuelan refugees than there are Syrian refugees.  

The level of harm that Maduro has done, it’s at a scale that’s hard to really appreciate.  And he’s been aided by various Russian entities to continue the illicit trade that somehow think that this human rights tragedy is okay. 

So we’re continuing to marshal on in that theater and energy sanctions continually to look at other opportunities to target in a ratcheting up the pressure constantly in a thoughtful, way as we look toward the next day of turning the corner on that illegitimate regime. 

CEA:  Excellent. 

One of the things that you mentioned a bit when you’ve spoken too, we’ve been watching you.  You’ve been very active during the course of the COVID pandemic, you’ve been online quite a bit.  So we’ve been watching, but we’ve listened to you speak a number of times about the importance of the diversity of supplies and supply chains.  Recently the U.S. was in the news for its first shipment of crude oil to Belarus, this during a time of reduced demand and production. 

Just out of curiosity, that was a great story and I’m curious how has that development impacted Belarus’ energy independence and do you see prospects for continued exports? 

Assistant Secretary Fannon: This was again from the Secretary of State really keyed in on.  Russia has a history of using energy as a means to coerce other countries and they’ll change the market, they don’t have market terms, they have in many instances a monopoly because they control the infrastructure that’s connecting countries to others so there’s no other outlet.  Most of that discussion tends to be focused on gas.  Also a little bit on nuclear, but mostly on gas.   

But here is the situation in terms of Belarus, it was oil.  The Secretary met with the head of Belarus and we came back and had a discussion about finding mechanisms to provide the alternate supply routes for Belarus and it was successful. 

I think this just demonstrates the need to continue to invest in infrastructure and connectivity, because we see time and time again, whether it’s oil or whether it’s gas.  If there is the optionality for them to import elsewhere then it changes the psychology of a country and the way in which they position themselves and the extent to which they’ll be open to market reform. 

And then by having that optionality it creates the potential for competition.  And even if that competition isn’t acted upon, it forces behavioral change by all parties.  

So I have great confidence that Belarus will continue to want to import from the United States.  They’ve seen the level of relative leverage they get from doing so.  They’re going to continue, I’m sure, to bring in Russian oil, but it creates a sense of leverage.  And we know this because it’s happened time and time again elsewhere. 

The Russians don’t want to see countries have alternatives.  They don’t like the idea of optionality that I spoke about.  And famously, in the case of Lithuania, they wanted to create some options to bring in non-Russian gas and they decided to fund an FSRU which (would mean) independence.  And within a very short period of time the FSRU made money, it was positive, but it wasn’t just because of the volumes that Lithuania was getting was cheaper than what the Russians — it forced the Russians’ behavior to change.  They dropped their prices something like 20 percent, 25 percent over what they were prior to the optionality.  It’s changing the complete dynamic.  And U.S. gas in that instance or U.S. oil in the case of Belarus, is providing the actual, not just a credible alternate, but it is an alternative that’s being acted upon and it forces the other side to behave differently. 

CEA:  That would clearly, in the case of 20 percent reduction have benefits for consumers over there, individual people. 

You mentioned leverage and optionality and how these are playing out with Russia and the European theater.  We’re also seeing some other challenges in some other parts of the world right now.  COVID-19 has had a large impact on a lot of projects, but in particular a lot of renewable projects and also highlighted some of the minerals and the rare earths that are needed for that industry. 

I know the administration has had a critical minerals policy focus for some time.  Actually the executive order that was put forward was very well received and there’s been consistent effort and focus on that that we’ve been watching since it came forward.   

But I was curious if you could share your outlook on the impact of this crisis on renewable energy projects and supply chains with respect to critical minerals and rare earths as we do have the goals that were set out by the EO a while back.  And then do you see a sort of continuation globally, expected ramp-ups in renewable energy development, critical minerals development and the expansion of electric vehicles abroad? 

Assistant Secretary Fannon:  In terms of, you’re exactly right, the President was pressing it in terms of the EO and critical minerals.  Of course it then triggered a whole of government, Department of Commerce led report on that issue, identified about 35 different critical minerals.  And we’ve been focused here on a subset of those, about 15, or 17 minerals that feed into clean energy technology.  So renewables, battery storage [and these] and so we’ve been looking at the subset. 

What we see is the demand for cleaner forms of energy is moving forward and in my view it’s because of a bottoms-up call by governments, by people. Peopled are calling on their governments.  And it’s also reflective of the amazing, the opportunities that people have around the world. 

We have about 3.4 billion people living in the middle class today.  That’s supposed to jump up to 5.3 or 5.4 billion in a decade.  The middle class have agency and they demand their governments provide cleaner environments.  So that’s creating a huge push by governments to be responsive to the people and oftentimes that means cleaner forms of energy and integrating gas and things like that. 

So we see this trend continuing.  COVID I think has accelerated some of the policies that have been pushing that, in particular in the case of Europe I would say.  Europe, of course, is looking at their Green Deal.  They already have their Green Deal.  Now they’re using COVID as a way to accelerate some of the implementation on that in terms of getting people back, their stimulus program in Europe. 

So that’s creating a catalyst.  I would look at, in the United States we have some of the auto manufacturers.  I’ve talked to auto companies, I’ve talked to battery companies, I’ve talked to miners, throughout they just say this is not a demand that’s being destroyed for these types of technologies, it’s simply demand delayed, and maybe that’s a matter of months, not years.  And we’re seeing more and more investments all the time and that’s a good thing. 

But we have seen some impacts and some temporary impacts in terms of some mining projects and some delay in some renewable deployments, but we think those are temporary.  They’re going to get back going. 

We are very concerned about the relative security of supply chains and the technologies, so we have a raft of programs, we have some bilateral programs with the Japanese, with the Australians, with the Canadians where we’re looking at these issues. 

We also rolled out one multilateral program called the Energy Resource Governance Initiative which would be celebrating one year this month.  And actually later this evening I’m going to have a  founding partners call with the other countries and those countries are Australia, Canada, Peru and Botswana.  These are five different countries spanning four continents with very different records, very different histories, regulatory structures.  But they’re all leading the world in terms of responsible mineral development.  So we’re partnering together to help other aspiring countries develop their own capacity to responsibly develop their industries and supply chains. 

The scale of what we’re talking about is tremendous.  There could be according to the World Bank or International Energy Agency or IRENA a 500 to 1000 percent increase in demand for minerals that go into clean energy technologies in the next two decades.  It’s absolutely tremendous. 

You’ve seen these new frontiers of opportunity, but also having worked in the industry I know there are some places that for a variety of reasons company’s best in class investors won’t go.  So we want to work with countries to help them raise their standards and create opportunities for U.S. investment around the world.  And also by raising standards we believe that we’ll also create a more level playing field globally, and we’d like, as the Critical Minerals Report to the President Commission, we have a lot of these minerals in the United States and it would be, the most secure way would be to not only work with our partners but reinvigorate our domestic capacity  here at home. 

CEA:  I think that’s excellent, and the opportunity for U.S. companies to lead in this area in terms of responsible resource development when there’s going to be so much new development I think is incredible. 

From our members, and I know that they’re grateful, we really appreciate your effort on the Energy Resource Governance Initiatives.  It is a really important effort.  If we are going to have this transition occur and we’re going to have to develop these resources, doing so in a manner that respects the indigenous peoples and the environment for the future I think is absolutely essential. 

I was curious, with the initiative with the best practices that are collected, what’s the process for — we’ve got a number of members that are best in class in terms of the way they operate in the U.S., the way they operate around the world.  What is the manner in which these best practices are being collected and then disseminated?  And are there other incentives through the U.S. government to encourage countries to participate in this initiative? 

Assistant Secretary Fannon:  Thanks.  What we’ve done, we’ve come together.  I started talking about this of course two years ago publicly at the big global mining conference, PDAC, that takes place in Toronto every year, and spoke to about 25 different Ministers, private sector — what all the Ministers were talking about is there is this amazing drive, the demand for clean energy technologies going like this, globally support for mining extractions going like, you know, I’m trying to do this —  

CEA:  We get you. 

Assistant Secretary Fannon:  But it’s an inverse relationship and we need to somehow let these things meet or they’re not going to be able to achieve that ambition. 

So the point about issues with respect to communities, indigenous peoples, transparent procurement, even fundamentally.  Some of these countries lack capacity to create a USGS like entity.  How do you have a geological survey?  How do you create an entire regulatory structure around development?  How do you go about the need for immediate revenue to your country but do it in a way that allows for a mine to be developed over the longer term in a way that’s also, that allows you to get a benefit that’s beyond just simple compliance? 

As I mentioned, the five countries got together and what we did is we evaluated what are the various option sets that any country would have to go through  in order to develop a minerals industry through the long term, through the entire life cycle, and maintain stewardship throughout, responsible stewardship?  And what are the lessons?  And what are the actual steps a country can take and can implement? 

So what we did, wouldn’t it be great if there were a tool kit?  Well, there isn’t one, so we made one.  And it’s free.  It’s open access.  www.ERGI.tools    You can go to it.  So that provides countries with the optionality on where to go, how to go, how to set it up.  And what are the choices at each step you can be confronted by? 

What we’re also doing beyond that from a U.S. Government perspective is information is great.  It’s critically important.  But we’re also providing the capacity building, kind of technical support so that countries can actually implement the tools.  So we have a variety of work we’re doing there. 

And lastly, we’re integrating ERGI principles into our U.S. Government development assistance.  So the Development Finance Corporation has integrated ERGI principles into the way in which it determines preferences for support in countries around the world.  It’s not dispositive, but it’s a preference.  And this is important.  So now we can actually go to a country and, and that’s the other thing by the way.  Global remit.  One thing every Minister or head of government has ever told me, they all want to see more U.S. investment.  To a person.  But how do you  create the appropriate conditions that incentivize that investment? 

Why go to Thailand if I can go to Texas?  There is a global competition for capital and they have to create the kind of environments. 

So ERGI has created the tools to do that.  We’re developing the technical support to implement it.  Then we’re creating the financing to actualize that ambition. 

CEA:  I think that financing end is going to be really critical in the competition particularly with critical minerals.   

We’re coming to the end of our time and you’ve been very generous with your time and we’re grateful for that.  One thing that we wanted to ask you about and maybe in your closing comments you can address, but also with the best practices, there are some entities around the world that are investing heavily, but some of those deals don’t end up being actually in the best interest of the people.  I was curious if you could address maybe through ERGI or others, what efforts are there to dissuade some of these deals that some of these developing countries are making that ultimately they may end up becoming lager liabilities than they are assets as well. 

Assistant Secretary Fannon:  Thanks for the question. 

I think the secret’s out in terms of the Secretary’s spoken to the Debt Diplomacy Model.  You have this kind of, the creation of a trap for a country.  The countries all need revenue.  They also need jobs and they need a long-term degree of security.  And the predatory investor goes in in a very corrupt non-transparent way, oftentimes they’ll bring in their own labor force which may or may not be people who have a choice in the matter, and also they tend to increasingly and every month maybe or less you’ll see a story in the media about children working in abhorrent conditions.  And it shocks the conscience.  No country wants to have that stain on it. 

So we encourage more focus on this.  We think that there needs to be more attention focused on it.  The same kind of care and consideration that has, in terms of some of the activism, the  shareholder activism, we would invite a degree of scrutiny in terms of the type of investment that’s occurring in some of these countries.  And whether this is creating a new type of curse, as it were, for those countries. 

I’ve been evangelizing this issue my two years here and I’ve spoken to even the Vatican.  The Pope has issued his Climate  encyclical in which he calls for non-polluting forms of energy, but it could be on the backs of some of the most vulnerable populations in the world.   

So it’s critically important that we call out the predatory investor and try to create a change, an opportunity for governments and countries to develop the resources they want.  Eventually the world is going to turn and I think we need to focus on some of these conditions.  And it’s going to create a preference for the responsible investor. 

So what we’re seeking to do through ERGI and through other mechanisms is to ensure that the world gets the resources it needs for this energy transformation that we talked about, and also the countries that are the resource-rich countries get the opportunity that they have to develop their own economies and their own people in a longer term way. 

CEA:  Frank, thank you for your leadership on that.  I can tell that you’re very passionate about that.  Please, if there’s anything that CEA or our members can do to be of assistance to you as you continue down this path, please, we want to be a resource to you.  We want to be helpful for you.  But we’re grateful for your time and we’re grateful for your leadership. 

I don’t know if there was anything that we didn’t get to cover that you’d like to make sure that we knew, just a parting word.  Other than that, we’re just so grateful for your time and all of your efforts. 

Assistant Secretary Fannon:  Thank you.  Thank you for your members.  I appreciate the work. 

Again, as I said, what we seek to do in government is create the right environment that allows companies the opportunity to make the investment.  I want to see more companies out in the world, more American companies out in the world, and we invite you to call on us.  We’re on the front lines.  We’re working with posts around the world to help create the right conditions to optimize your investment opportunities.  So thank you. 

CEA:  Excellent.  Thanks again. 

We may have some follow-up questions that we’ll contact your office with, but we really appreciate everything you do, and thank you for your time. 

Assistant Secretary Fannon:  You bet, have a good day. 

U.S. Department of State

The Lessons of 1989: Freedom and Our Future