Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Deborah Gordon, a senior associate in the Energy and Climate Program at the Carnegie Endowment for International Peace. Deborah, thanks for coming on the show.

Deborah Gordon: It's my pleasure.

Monica Trauzzi: Deb, Carnegie has released a new report focused on understanding unconventional oil. It's a buzz phrase here in Washington. It's also a major topic of debate throughout the United States. How has the oil landscape changed in recent years?

Deborah Gordon: Well, it's been changing for quite a while. As oil has gotten heavier, we've heard about that. You know, and I should say, when it's heavier it's because there's more carbon in it and that's what makes everything about oil about climate change. But oil has gotten heavier slowly, but surely and now it's getting to the point where oil is starting to spread to become, in some cases, more like coal and then in some cases more like natural gas. So, oil is not really remaining liquid oil as we've known it. A lot about oil is starting to change on the margin.

Monica Trauzzi: So, this term unconventional energy, is there a way to clearly define it?

Deborah Gordon: Well, that's been one of the problems. There really isn't a clear definition of unconventional oil because so much is changing in so many different ways, it's not any one way. So, we could talk about examples. The tight oil that's in say North Dakota, that's conventional oil, but has to…we have to use unconventional means, fracking, to get it out of the ground. So, that has one type of chemistry, but a different type of geology. Then you have the bitumen in Canada, the oil sands, that are really more like coal. They're asphalt like. They are tied up in sand and rock. And the same is the case with the Carrigan, which is in the Rocky Mountains. And all of this is happening globally. I should -- I'm using examples in North America, but oil is also changing geographically. So, a lot of these changes are happening around the world, but the Carrigan in the Rocky Mountains is oil shale and that's oil that's soaked into shale rock, so that's changing chemically as well. So unfortunately for Washington, so much of the change is chemistry and that's probably not the most favorite subject of a lot of policymakers. But people are going to have to start understanding what these new oils are in order to know how to deal with them.

Monica Trauzzi: But because the definitions and the types of oil are so wide-ranging, what does that mean for policy then? Does that mean we need to cater policies for each type?

Deborah Gordon: Well, it depends on what you're trying to control for. The issue that Carnegie is working on is climate change and so in order to deal with the carbon impacts from these new oils, it would be relatively simple if we had a fee on carbon. You know, that would be -- that's, you know, I'm not a silver bullet person, but I do think that it would restructure a lot of what's changing economically and technologically in the marketplace around oil could be structured to be lower carbon. There's a crossroad. We're somewhat at a crossroad now between whether we're going to have a heavier, more carbon-laden oil future, oil, you know, because it's going to be all of these things, or if we're going to have a low carbon, liquid fuel alternative fuel, you know, electrified other future. And without rules, without these new rules for these new fuels, really, there's going to be very -- it's going to be difficult to structure it.

Monica Trauzzi: Is there a way to change the carbon footprint of these fuels?

Deborah Gordon: Well, because it's so many different things that we have to have the rules and then we can figure out, well, the first thing we need is the information. These oils are very much different from each other. They're heterogeneous, so what we really need -- we have this for conventional oils, interestingly, I mean there's a huge database for conventional oils because no two conventional oils, and I mean like Middle Eastern crudes, are alike, we need the same type of database growing. It's going to be far more vast because these oils differ more than the conventionals do, but we need to know what they are. I guess that's the first step, is figuring out and getting information so that we can then develop the right policy to deal with them, which most likely will be some sort of pricing.

Monica Trauzzi: You focused on the two different tracks that the U.S. could go on, sort of more unconventional fuels or alternatives, electrification. There is a school of thought though that we might have to go down both roads in order to meet our energy demands.

Deborah Gordon: Yeah, it's interesting. I think I brought that up because the feeling that peak oil was going to come and save us has really been out there for so long and what we're seeing now is there's really not a peak in oil. It's just going to be, again, this technological economic transformation of liquid hydrocarbons. And the question is which will we maybe tap more slowly or even keep in the ground, you know, for a longer period of time and which will we have flow, you know, sooner? And if that's based on climate, then you're going to have real choices to make.

Monica Trauzzi: So, do unconventional oils compensate for the decreasing supply of conventional oil?

Deborah Gordon: Yeah, so conventional oil is plateauing. We're not going to run out of conventional oil anytime soon from mostly the Middle Eastern, North Africa, but it's plateauing. But on the margin, all of that marginal growth is going to be in unconventionals of varying sorts. And how steep that curve is on unconventionals will depend on demand growth largely in say China and India and elsewhere around the world. Hopefully, we will back out our demand, continue to back down our demand in the U.S. That will make us far more secure to just again less on these oils in the future. But we're always going to depend on oil.

Monica Trauzzi: Where does the United States stand in the heavy oil discussion? I mean there have been several other countries around the world that have sort of led the way, led the charge. Where does the U.S. stand?

Deborah Gordon: Well, right now a lot of our debate or a lot of our tapping in North America, in our part of North America, has been on the tight oil, which is the fracked oil, and that's not considered heavy. That's considered medium to light, pretty much like the crude that we have now. It's just really spread out and dissociated and you can't -- it's not pooled anywhere. It's harder to produce. The Canadian oil and the oil from Venezuela are both heavy, so we've started -- and even some of the California oils are heavy and now the question is are we going to get headlong into extra heavy? You know, that's when it gets to the point where, you know, walk on water, this is solid. It's more solid than it is liquid.

Monica Trauzzi: Are there extraction issues happening internationally that might sort of foreshadow what could happen in the United States?

Deborah Gordon: Well, it's largely happening by the international oil companies, so Exxon and Chevron and BP. They are in all of these nations doing it. The countries that have oil and have these resources tend to be the national oil companies. They tend -- or countries, they tend to be further behind the U.S. and Canada on technology in general. So some of it is starting, but there often are even fewer rules in some of those countries than there are in the U.S., which argues for us to be a leader in terms of transparency and rules.

Monica Trauzzi: The line of thinking that's being pushed right now politically is that the more we explore these unconventional sources, the lower prices will be and that the U.S. will sort of be in a better strategic position. Is that true?

Deborah Gordon: Well, oil is a world market, so even if we tapped all the oil we could from our own backyard, it's going to go into an oil basket, a global basket. So if there's skirmishes in say Iran, that's going to affect the global price for oil. So the question of the economics, oil is very complicated and what's interesting is for the so long it seemed so simple to so many people and, ironically, what's going to happen with all these oils changing, are the gas pump is not going to change anytime soon. So, for the public, they're not going to necessarily know so much is changing economically and, as you're talking, about geographically, chemically. So much upstream about oil is changing, I would argue that we can't -- drilling in our own backyard will not guarantee us security, the security that we so much want. And energy independence is probably not a very realistic goal for us either.

Monica Trauzzi: So, from a policy and regulatory standpoint, the focus right now is on fracking regulations, both for air and water. Does it end there or do we have years of possible regulation and policy ahead of us?

Deborah Gordon: I think we need to figure out what these oils are. You know, the problem is it's a bit of a vacuum in terms of information, because the first group that gets information is industry, because they're on the front lines. So we need to make sure that we, the public, you know, policymakers are getting this information, because it's not great for the oil industry either if there's not that transparency and there are big problems down the line. That will disrupt everything that's happening. So whatever the transition is, we want it to be smooth and from a climate perspective, that's going to mean figuring out where the carbon is and keeping that heavy oil, the heaviest of heavy coal-like oil in the ground maybe sooner. And then there will be a lot of local impacts that are going to have to be regulated for. I mean obviously, because if you're going to keep this oil consistently flowing, it cannot have these unintended consequences that hurt people.

Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show, nice to see you.

Deborah Gordon: It's a pleasure.

Monica Trauzzi: Thanks for watching, and we'll see you back here tomorrow.