speech

Kenneth T. Derr At The American Petroleum Institute's Annual Meeting, November 1995

By Kenneth T. Derr, Chairman of the Board and Chief Executive Officer
Chevron Corporation

Annual Meeting, November 1995

Houston, Texas

Let me start by saying what a privilege and pleasure it has been to serve as API's Chairman for the past two years. I had considered using my remarks today to recap these two years . . . To take an in-depth look at major events, big upheavals and high-profile controversies.

After all, George Keller had the crude price crash of 1986 . . . Dick Morrow had the Alaska spill . . . Allen Murray had the Iraqi invasion of Kuwait . . . and Pete Silas had the BTU tax.

However, looking back on my own tenure, I guess all I can do is smile . . . and take all the credit for how relatively quiet things have been. The worst I've had to deal with is a mostly friendly, mostly Republican Congress that supports things like regulatory reform . . . tort reform . . . budget reconciliation . . . opening ANWR . . . and repealing the Alternative Minimum Tax.

Do I hear someone playing "Camelot" in the background? It has been a relatively quiet two years. Frankly, that was my vision when I signed on as Chairman.

Of course, I say all this partially in jest. As Charlie DiBona noted in his speech, we aren't exactly having our every wish granted on Capitol Hill. And internally, within our own companies, we have seen plenty of challenge in dealing with continuous change . . . restructuring . . . and adapting to a very demanding business climate.

The same holds true for API, which has gone through its own rigorous process of streamlining and prioritizing. Thanks to these efforts, API has held the line on its budget . . . while giving its members a consistent or improved level of service.

The Institute has eliminated its Executive Committee . . . significantly reduced the number of meetings for the Public Policy Committee and Management Committee . . . and improved the format of the Annual Meeting to make it more productive and of broader interest.

I sincerely believe that today's API is staffed and managed to provide, more effectively than ever, the wide and diverse range of services that its member companies well deserve.

Speaking of diversity, I'd like to focus my remarks today on the diversity of our own organization . . . and the concurrent need for us to pull together to meet our mutual goals.

In its broadest sense, the petroleum industry comprises more than 40,000 companies . . . from the independent with a couple of stripper wells in East Texas . . . to the big multinationals . . . to vendors, suppliers and service companies.

Within this diversity is competition and occasional conflict . . . but also enormous commonality and strength.

When we unite and speak with a single voice, we can have dramatic impact. And when we partner with other industries and constituencies, we can have even more input.

Charlie touched on this in his remarks this morning on regulatory reform, which I still think is the most urgent issue facing the 104th Congress. He pointed out that the only way to push through regulatory and tort reform is to broaden our base of support within the business community. And he noted that the public, when it has been provided with rational, science-based information, will end up on our side.

I'd like to take Charlie's comments one step further . . . and challenge all of us in this room to partner ourselves with each other . . . with other businesses . . . with appropriate special-interest groups . . . and, in particular, with our customers . . . to help meet our business goals . . . not just in regulatory reform, but in other areas as well.

There are precedents that prove this kind of partnering works. We all recall the potent "off-oil" agenda of the early 1990s, which included the proposal for the famous BTU tax. The petroleum industry vigorously opposed this tax.

However, even with our united efforts, we probably would not have been able to defeat the BTU proposal alone.

Fortunately, other industries, large and small, joined us in opposing this tax. So did credible organizations like the U.S. Chamber and the National Association of Manufacturers. And a lot of credit for this coalition-building goes to Charlie DiBona and Pete Silas. Because we were able to show consumers the larger picture, we gathered partners and allies, and prevailed in efforts to head off that ill-conceived tax.

Today, of course, the anti-oil movement still persists. It has taken on new forms, such as legislative mandates for alternative fuels and vehicles. I believe an effective antidote to this anti-oil agenda is the Auto-Oil alliance, which is now in its fifth year.

This alliance has helped shed some much-needed light on options in the push for cleaner fuel systems. Its scientific research has helped educate the public, and particularly policy-makers, on the facts about gasoline-powered motor vehicles.

The alliance has helped make the point, and strongly, that there is no better or more economical fuel system . . . today, or in the foreseeable future . . . than the combination of new, efficient cars using reformulated gasoline. Certainly there's a logic to the automobile and petroleum industries partnering on issues of importance. We share 100 million customers every day. But what's important here is that, as an alliance, we've effectively educating the public to our issues . . . and, in fact, demonstrating that our issues are their issues.

Let me tell you about another issue on which different companies and entities are coming to agreement.

Sustainable development is one of the most visible and least-understood environmental issues of our day. Sustainable development is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs.

But the interpretation of that simple statement is surrounded in misinformation and a great deal of pseudo-science. How this issue is addressed carries powerful implications for the future of our industry.

I've been on the President's Council for Sustainable Development since 1993. Other members include Carol Browner; Bruce Babbitt; Hazel O'Leary and Ron Brown . . . the leaders of seven major environmental organizations . . . eight business representatives . . . and various others.

Serving on the council has not been an easy experience. We did not reach agreement on every issue . . . and at times that's an understatement. However, we will have a report out in about month. I have every confidence that it will contain something to both please and displease every member. But we have reached consensus in two areas that I think are important. First, our recognition of the need to balance intelligently concerns about the environment, the economy and society as a whole. And specifically that economic growth is a prerequisite to environmental regulation.

And second, recognition that although regulations have in fact improved the quality of our environment, the current command-and-control regulatory system must be changed to deliver better results at lower costs. In its place, we need a system that encourages and rewards superior environmental performance with enhanced flexibility - for example, the use of market mechanisms as drivers for cleaner air and water.

As I said, there is disagreement among council members on the specifics of how this change should be made. But there is no disagreement on the need for regulatory reform, now.

When you can get groups as disparate as these to agree on nearly anything, it's an accomplishment. When you get this group to acknowledge that a healthy economy is a prerequisite for a healthy environment, I think that's progress.

I take a lot of encouragement from examples like these. The simple fact today is that the issues of our industry are in many respects the nation's issues.

And we need to work harder to get this message out. Too often, our industry, and big business in general, is seen as the automatic Goliath to the Davids of the world in any issue or initiative we support.

A good example of this is the regulatory reform effort, where industries like ours have been portrayed as wanting to roll back 20 years of progress in environmental protection and civil litigation. That is fundamentally not true.

Regulatory reform is not as simple as David and Goliath. Or, if it is, there's something David should know. Which is that government regulations will cost David and his family, the typical American family, nearly $6,000 every year.

We need to keep putting our issues in the context of our customers - to make sure our messages resonate with the average American voter. The ultimate beneficiary of so many of the initiatives that we in the petroleum industry pursue . . . be it regulatory reform, rationalization of taxes, or the need for a balanced budget . . . is really our customer, the American consumer.

And that is why we need the consumer's support, and buy-in. When I look to the future of our industry, I'm very optimistic. Sure, I worry about issues of supply . . . or global competitiveness . . . or electric cars.

However, the one thing that truly concerns me is our ability to gain and maintain the confidence of our consumers, the American public. I hope most of you have had a chance to read the National Petroleum Council's recent report called "Future Issues."

This report identified the major categories of issues that are important to our industry.

Let me address just one of these; our industry's public image. The NPC report is pretty blunt about how that image - which we helped to create, of course - causes problems for us.

It says there's a widespread public perception that we are difficult to deal with . . . fighting every inch of the way to promote our agendas, and our agendas alone.

The other perception is that the petroleum industry lacks a unified vision of its future.

I'm sure there's a bit of truth in both these perceptions. We have to address those perceptions, and the way to do it is with straightforward communication of facts.

The NPC report puts it this way: "The oil and gas industry may never captivate the public . . . but better communication between industry members and the public can at least improve public understanding of the industry and its value to the country."

The report goes on to say that industry should focus on obtaining a better understanding of public and customer concerns. Through communication, we can achieve a shared vision - both among ourselves, and with our consumers and our other stakeholders.

Also through communication, we can demonstrate to those stakeholders that our interests are not just self-serving, but include their interests as well. There are many things we should be doing to accomplish this mission. One is to emphasize the diverse and constructive role oil and gas play in the U.S. economy.

Our industry employs 1.5 million workers. Our total contribution to the economy, at nearly $400 billion, outpaces the healthcare, auto and computer industries and represents nearly 5 percent of gross output of this entire nation.

Facts like these show that we are a contributor . . . or, as the NPC puts it, a fundamental enabler . . . of the American way of life.

Another fact we must continue to communicate is our industry's environmental performance, where there are so many good stories to tell. The API's STEP program has made good progress in this area, but much more needs to be done. In areas such as regulatory reform, we must continue to press for the use of sound science, risk assessment, and cost-benefit analysis to improve the public's understanding of these issues.

And we must point out, at every opportunity, the indisputable link between environmental quality and economic growth.

Finally - and this gets back to my opening remarks - we need to recognize and partner ourselves with stakeholders outside of our traditional parameters. This means changing the perception that we are inflexible. It means promoting bipartisan agendas, where necessary, and exploring new relationships with customers, competitors, small and medium-sized businesses . . . regulators and politicians . . . and even special-interest groups . . . anyone who's willing to have a rational, fact-based dialogue.

The efforts and activities I've just described are not always that easy to accomplish. They require patience, persistence and openness. But over time, they can make a difference to our industry.

Ultimately, they are necessary to ensure our industry's ability to successfully operate in this country over the future. And it's not a question of whether to do these things. It's really a question of how best to do them.

The U.S. petroleum industry is one of the strongest, most diverse and most competitive industries in the world today. Among our many members we'll always have differences of opinion. But our areas of agreement, and alliance, can be infinitely greater . . . and therefore much more powerful. I invite and challenge each of you to commit to working together toward what can be a very bright future . . . for us, and for the public we serve.

Thank you very much.

Updated: November 1995