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First Move with Julia Chatterley
Beijing Says Negotiators Agreed To A Tariff Cut; Bank Of England Governor Upbeat On A Brexit Deal; Two Former Twitter Employees Are Facing Charges In The United States; The Global Energy Challenge. Aired 9-10a ET
Aired November 07, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:11]
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Coming to you live from the New York Stock Exchange, I'm Zain Asher in for Julia Chatterley and here is what you
need to know.
Tariff phase-out. Beijing says negotiators agreed to a tariff cut.
Carney calms. Bank of England Governor upbeat on a Brexit deal, but was about growth.
And spying claims. Two former Twitter employees are facing charges in the United States.
It is Thursday, my friends. And this is FIRST MOVE.
All right, welcome FIRST MOVE. I'm Zain Asher. So good to have you with us on this Thursday morning local time. The bulls are back in the driver's
seat here on Wall Street amid a lot of optimism when it comes to that U.S.- China trade deal.
Let's take a look and see how the Dow is doing right now, about half an hour, it is the opening bell. Dow futures are already up about 140 points
or so. Stocks are of course set to rise to record highs yet again on new hopes that tariffs will be cut as part of the U.S.-China trade deal.
China says negotiators have agreed to cut tariffs in phases in a sort of piecemeal trade deal. Beijing says that both countries need to
simultaneously roll back tariffs and by the same proportions if a final agreement is to be reached.
European stocks -- let's take a look here and see how European stocks are faring. Okay, so European stocks, they are mostly higher on trade optimism
as well. New numbers show the German industrial production falling to a two-year low in September.
Meantime, the E.U. cut its growth forecasts for the Eurozone again today and says the Euro area faces a long period of weak growth and low
inflation, partly because of trade uncertainties.
But let's get right to the drivers now and the latest on trade and the markets. John Petrides joins us live now. He is the Portfolio Manager at
Tocqueville Asset Management. John, thank you so much for being with us.
JOHN PETRIDES, PORTFOLIO MANAGER, TOCQUEVILLE ASSET MANAGEMENT: Thank you so much.
ASHER: Let's talk about this tentative U.S.-China trade deal that's happening in a phase by phase piecemeal type of way. China is likely going
to have to spend about $40 billion to $50 billion investing in U.S. agricultural products at the same time as well. Walk us through that.
PETRIDES: Yes, I mean, this is all good news, right, in terms of both sides have come to the table. It's going to take time until we get a full
resolution. Tariffs will never go away, but we're definitely headed in the right direction.
The U.S. has committed to not increasing tariffs. Chinese have come back as well. Both sides are now talking at the table and now let's see on
Phase 1 how much the Chinese will put towards buying Ag products. I think that's the next step in this path towards normalcy.
ASHER: We're seeing a huge smiley face on the Dow, the futures are up triple digits right now. Why is the market happy or content rather with a
piecemeal phase by phase trade deal as opposed to just a normal trade deal? Why is it okay within stages?
PETRIDES: Well, I think it's been evident that trade tariffs have been a big pressure on the Chinese economy, which has rippled through the global
economy, right? And that has slowed the global growth and stocks are a discount of future cash flows.
So if we can roll back tariffs, in theory that should help put some pressure, alleviate pressure on the Chinese economy, which should help
corporations and companies make more money in the future, and that's what the market is pricing in.
ASHER: And what about companies? I mean, the trade deal is likely happening first phase next month. What about the companies who have
already made significant changes to their supply chain and that sort of thing in anticipation, that the can would get kicked right down the road a
little bit longer, what happens to them?
PETRIDES: Yes, it's a good question. Well, I think they've put -- continuously put plans in place. Presumably they moved to -- they were in
China and they moved to Thailand or Malaysia for their supply chain, well, hopefully to save their own margins.
And presumably they didn't move a hundred percent of their operations out, maybe they moved a portion of it. And, you know, the companies are
adjusting.
ASHER: Very few people thought that we would get another rate cut in December anyway. Now with these headlines, in terms of the trade deal, it
seems virtually what? Impossible that there would be another rate cut this year, what are your thoughts?
PETRIDES: Yes, not impossible, but the Fed has basically said there's significant stimulus already in the economy post the cut they did last
week. They've done three cuts this year and Powell called out trade tariffs multiple times during his conference.
So he is waiting on that to be the variable and if there's resolution to alleviate pressure on the global economy, which the Fed doesn't have to cut
too much because the Fed has basically unwound everything they did in 2018.
They cut four times last year -- I mean, they raised the interest rates four times last year.
ASHER: Right. They've raised it.
PETRIDES: Now they've cut three times this year. What the Fed does not want to do is cut aggressively again, then there is a resolution to
tariffs, and this time next year, we're talking about the Fed having to raise rates.
ASHER: Yes.
PETRIDES: Because they went too far in 2019, right? So the Fed is tired of playing catch up.
ASHER: Just given what stock turn around we've seen, this time last year to this time this year, what would it take, what would have to happen over
the next say, month or two for a dramatic turnaround in Fed policy?
PETRIDES: For Fed policy, I think you would have to see the U.S. consumer just fall off a cliff, which I don't forecast at all.
ASHER: So across holiday sales.
PETRIDES: For holiday sales, you know, maybe the upcoming jobs number is terrible. You know, wage growth goes, you know, it really starts to
collapse and that forces the Fed to cut rates further. I just don't see that in the cards, not in the near term.
ASHER: What about overseas potential risks like Brexit, for example?
PETRIDES: Yes. I don't think Brexit is a massive issue on a global scale. It's an issue for the U.K. It's an issue for the European Union. But the
U.K. is just not as large of a percentage of global GDP - that it's going to thrust the global economy into a further tailspin.
It adds confusion, because no one really knows the outcome that when Brexit happens, what unintended consequences could be there, right?
ASHER: What sort of effects could be --
PETRIDES: That's the black box of the whole issue that people are unaware of. But you know, again that, too, looks like it's heading in the right
direction.
ASHER: So the fact that the trade deal is happening in piecemeal stages that really allows for perhaps one side to renege or that one side to
backtrack, for example. So how cautious should investors be at this time?
PETRIDES: I think you -- the probability of a deal getting done or this moving in the right direction has increased today, right? And it has
increased, you know, a month ago and it keeps moving in the right direction.
But we're clearly not at a hundred percent certainty that this is a done deal. It's probably, I don't know, 65 percent -- 70 percent is probably
the right probability for all this now. Is there a 30 percent chance that this falls apart? Yes, I think that's probably the right way to look at.
ASHER: And I think investors have been burned before.
PETRIDES: Yes, that's right. That's right.
ASHER: Okay. We tread at caution. John Petrides live for us there. Thank you so much.
The U.S. has accused two former Twitter employees of spying on behalf of Saudi Arabia. The Department of Justice alleges the men accessed sensitive
data on dissidents, and then passed information to Saudi official.
Brian Fung joins us live now. So Brian, just walk us through in terms of more specifics about what we know about these two former employees.
BRIAN FUNG, CNN TECHNOLOGY REPORTER: Yes, so this is a huge deal according to security experts. We have U.S. officials accusing two former Twitter
employees of essentially accessing the data of thousands of Twitter users because they had access as employees, as web engineers, essentially.
The type of information that was accessed or that they had access to includes IP addresses, e-mail addresses, phone numbers and logs of
activities of these Twitter users.
Now, one of these men is in U.S. custody; the other is believed to be in Saudi Arabia. But it really highlights some of the security concerns
facing tech companies, you know, as they kind of encounter a lot of regulatory scrutiny in Washington.
You know, it's clearly an issue, not just in terms of internet security and data security online, but also a matter of human security. What are the
procedures and processes that these companies use to make sure that their own systems aren't compromised by human intelligence agents -- Zain.
ASHER: So, yes, I mean -- what -- I mean, just given the fact that privacy has been a major topic when it comes to Silicon Valley and these tech
companies, what can other tech companies who are watching this from the outside say Facebook, for example, learn from this story?
FUNG: Yes, well, Alex Stamos the former Chief Security Officer of Facebook tweeted yesterday that this is a major issue, and that all tech companies,
especially big ones, need, quote, "internal monitoring and hunting teams" to make sure that this type of infiltration doesn't occur in the future.
ASHER: And overall, just I mean, how frequently does this happen just in terms of tech employees who have internal access going rogue?
FUNG: Well, this is the first time that U.S. officials have accused Saudi agents of operating within the United States and Stamos said, you know, he
wouldn't have put the Kingdom of Saudi Arabia on the top of his list for potential threats like this.
But he said you know, there are going to be a probably more instances of this coming out particularly because Silicon Valley does employ so many
foreign nationals.
ASHER: Brian Fung, appreciate it. Thank you.
[09:10:07]
ASHER: In the UK, the Bank of England is keeping rates steady as the country heads for a snap election. Anna Stewart joins us live now. So
Anna, there's still somewhat of an uncertain cloud hanging over the U.K. when it comes to Brexit. Surprisingly, the bank seems to be optimistic
about the prospect of a no deal Brexit, but what exactly is the bank forecasting for next year?
ANNA STEWART, CNN REPORTER: Yes, there were several things to be picked out in this report. No rate change that was as expected, but what was a
real surprise it was not a unanimous decision. Seven-two. Two members of the Bank of England actually wanted to cut rates by 25 basis points this
time around. That's the first split we've had since June last year.
And I think as a result, that is why we're seeing the pound trading lower against the dollar today. There was a new line in the report as well
saying monetary policy might need to reinforce the expected recovery in U.K. GDP growth and inflation.
Let's get to GDP growth because this was also interesting. The bank is saying that it was expected. Well, it's been lower in its forecast this
year. It will pick up next year.
But overall, Zain, the bank is forecasting that GDP will be slashed by a percentage point over the next three years, largely a result of changing
asset prices. The Sterling has appreciated of course fairly recently. Global economic growth -- major, major headwinds as well.
You did headline of course the good news and there was some good news in this report. The likelihood of a no-deal Brexit has decreased as a result
of the Prime Minister getting a new Brexit deal and having had that actually be passed through Parliament for a second reading. Mark Carney
says that has lifted the pressure for some households and businesses.
ASHER: And just sort of switching gears to the U.K. snap election, the Chancellor and the Shadow Chancellor both released economic plans. How do
you plan economically just given that no one really knows how Brexit is going to end?
STEWART: With great optimism, Zain. Both of the main parties in the U.K. are going to spend, spend, spend. Those were the announcements made today
and actually supported in many ways by the Bank of England Governor, Mark Carney.
He did say that any future fiscal policy is an upside risk to today's forecast, i.e. growth could be stronger if the government spends more.
But just let's take a listen to what they want to spend. So the Conservative government wants to rip up current spending plans and spend an
additional $28 billion a year on new infrastructure, on schools, on the NHS, on transport. The opposition party, the Labour Party, puts it at $70
billion a year, over double current spending.
Overall, they want to spend $190 billion over five years -- schools, hospitals, the same sort of projects, but also a big focus on climate
change. How would they afford that? Well, mostly borrowing from what we're hearing today. Of course, these plans aren't yet completely costed.
I would expect for the Labour Party with their huge spending plans to also consider of course, raising income tax on the wealthy -- Zain.
ASHER: And Anna, just in terms of the Bank of England's decision, this is the penultimate decision for the head of the Bank of England, Mark Carney.
Just walk us through -- I mean, he is leaving at the end of January, just walk us through what his legacy will be overall.
STEWART: Well, his legacy will -- it will be actually having to extend his period time and time again to try and help navigate the U.K. through one of
the most turbulent periods of history, through Brexit and one of the main questions, Zain, today in the Q&A that followed, the press statement was,
what are you going to do? Are you going to be leaving at the end of January given that is the new Brexit deadline?
They won't appoint a new successor to Mark Carney until the election has happened. We don't know who that could be. There's so much uncertainty.
Will Mark Carney have to stay on longer? And he was fairly tight lipped. He just said he would ensure a smooth transition -- Zain.
ASHER: Anna Stewart live for us. Appreciate it. All right, so these are the stories making headlines around the world. This hour, U.S. impeachment
investigators are about to hear from one of Vice President Mike Pence's staffers for the first time. Jennifer Williams was on the July 25th call
between President Trump and Ukraine's President. We are told she was concerned by what she heard.
We don't know yet if former National Security adviser, John Bolton will appear today for testimonies. So Suzanne Malveaux joining us live now from
Capitol Hill. So, Suzanne, how difficult has it been for the Republicans to come up with a clear, strategic unified coherent voice defending the
President just given the fact that the evidence against him so far has been very damning.
SUZANNE MALVEAUX, CNN U.S. CORRESPONDENT: Well, Zain, we have heard a number of explanations from the Republicans and it seems to change from
day-to-day. At first, it was many complaints about the process. That the process was closed. There's still some who say that.
But now the process is turning and transforming to one that is much more open. So they have looked to the substance of it and having five witnesses
now testify, at least five saying that there was an exchange of quid pro quo, if you will, President Trump trying to pressure Ukraine to dig up dirt
on his political opponents in exchange for military aid.
[09:15:11]
MALVEAUX: They're now saying, well, some of those witnesses are not as credible as the others. And then you have a new defense from Senator
Lindsey Graham, one of the President's closest allies, saying that they were essentially too inept as an administration and are very confused, all
over the place with Ukraine's policy to even carry out a quid pro quo.
So Zain, many, many different discussions, explanations, defenses as we prepare to actually see this process open.
(BEGIN VIDEOTAPE)
MALVEAUX (voice over): House Democrats announcing televised public impeachment hearings will begin on Wednesday, starting with top diplomat to
Ukraine Bill Taylor and deputy assistant secretary George Kent. Then next Friday, Marie Yovanovitch, the U.S. Ambassador to Ukraine who was fired
from President Trump.
(BEGIN VIDEO CLIP)
REP. ADAM SCHIFF (D-CA): Those open hearings will be an opportunity for the American people to evaluate the witnesses for themselves.
(END VIDEO CLIP)
MALVEAUX (voice over): It comes after House investigators released more than 300 pages of Taylor's testimony from his bombshell deposition, where
he revealed it was his clear understanding security assistance money would not come until the President of Ukraine committed to pursue the
investigation.
Taylor also discussed his concerns with Trump's personal attorney, Rudy Giuliani's involvement with Ukraine policy, calling it a nightmare. House
Democrats hoping Taylor's public testimony will help shape their abuse of power case against President Trump.
(BEGIN VIDEO CLIP)
REP. MIKE QUIGLEY (D-IL): If you want an initial hit, someone to describe exactly what took place, I don't know if anyone is better than Ambassador
Taylor.
(END VIDEO CLIP)
MALVEAUX (voice over): Sources telling CNN the White House worries what Taylor will say in public testimony. His earlier deposition was seen as
damaging, alleging an explicit quid pro quo with Ukraine, with Trump freezing military aid in exchange for Ukraine announcing investigations
against the President's rivals for political gain.
Trump's Republican allies continue to change their defenses, including highlighting this part of Kurt Volker's testimony, telling lawmakers, "I
didn't know that there was a quid pro quo."
(BEGIN VIDEO CLIP)
REP. JIM JORDAN (R-OH): His account is consistent with the fundamental facts. There was nothing wrong on the call transcript.
(END VIDEO CLIP)
MALVEAUX (voice over): Other Republicans taking it a step further.
(BEGIN VIDEO CLIP)
SEN. LINDSEY GRAHAM (R-SC): What I can tell you about the Trump policy towards the Ukraine, it was incoherent. They seem to be incapable of
forming a quid pro quo.
(END VIDEO CLIP)
MALVEAUX (voice over): Meantime, "The Washington Post" this morning reports that Attorney General William Barr rejected a request from the
President to hold a news conference publicly declaring he did not break any laws during his July 25th phone call with Ukraine's leader.
Despite the report, some House Democrats still remain cautious of Barr.
(BEGIN VIDEO CLIP)
REP. DENNY HECK (D-WA): Perhaps it is a measure that he sees of the gathering storm clouds on the horizon and he is being just a tad bit
cautious here. But frankly, I'm not terribly trusting of Attorney General Barr, so we'll see.
(END VIDEOTAPE)
MALVEAUX: And Zain, what we have seen, just in the last couple of days, really an escalation of the vitriol kind of harsh language that we're
hearing from lawmakers this surprisingly on the Senate side.
We heard from Republican Senator John Kennedy at a Trump rally last night saying and I'm quoting here, about Speaker Nancy Pelosi and the Impeachment
Inquiry saying, "I don't mean any disrespect, but it must suck to be that dumb."
I spoke with Democratic Senator Tim Kaine this morning who says he believes that this language comes from desperation -- Zain.
ASHER: Incredible stuff. Suzanne Malveaux, thank you so much.
All right. He took Canopy Growth public, now he is taking a leading role in another cannabis firm. We're going to be speaking to Bruce Linton about
his new business and the wider green market as well. That's next. You're with FIRST MOVE.
(COMMERCIAL BREAK)
[09:21:58]
ASHER: All right. He is one of the key players in the legal marijuana market having cofounded Canopy Growth, which became North America's first
cannabis producing company listed on a major stock exchange. He was forced out of the company, which he readily admits. He is very honest with that,
but now he is back in the green game. Bruce Linton has been now unveiled as Executive Chairman of Vireo Health. He joins us live now.
So the last time we spoke to you was on the phone.
BRUCE LINTON, EXECUTIVE CHAIRMAN, VIREO HEALTH INTERNATIONAL INC.: Yes.
ASHER: It was right after you got fired.
LINTON: Yes, yes.
ASHER: And you were very honest with me about what happened.
LINTON: Yes.
ASHER: You've had the entire summer to think about, okay, what am I going to be doing next? And you've chosen Vireo Health. Why?
LINTON: Well, I looked around, so I know pretty much all of the companies and this one first, most of the people watching the show wouldn't have
heard their name, but they're in 11 states and they're kind of like, if an adult with a medical degree wanted to start a company in the sector, what
would they do? They would do what these guys have done. They basically said science is going to deliver results.
ASHER: So they are the adults in the room.
LINTON: Right, and they went to states where it's like a high barriers, hard licensing and they want licenses. And so when I looked at him, I
said, you know, the two things they don't have are low enough cost of capital, and then you can be a bit more aggressive on what you buy and they
don't have the visibility.
And so, you know I hosted them, and I actually really liked them. So at the end of the day -- when I talked to you when I got fired, part of the
way I operate is I want to be totally open, transparent and have fun and interact.
ASHER: I was surprised by it, actually. I was surprised by it. It is very refreshing. But so -- what are you going to do? I mean, obviously
for Vireo Health, having you as part of the team presents some sort of short term value, but what are you going to do to really turn them into a
top U.S. producer?
LINTON: So I haven't had a chance to discuss any acquisition targets today with Kyle, the founder.
ASHER: Okay.
LINTON: But I did yesterday, the day before. We haven't talked about family offices that should fund. If they knew about this company, there's
a number of family offices that would say, I want to buy that stock. I didn't know about it. So you start getting a little bit more traction.
What starts to happen is as you gain momentum in the capital markets and the visibility a little bit more aggressive, before you know it, you're
gobbling up market share intellectual property. So they've got about 15 patents filed. I'd like to see way more.
And I think I can collaborate with them on spaces that I've seen around the world because like, next week, I get to go in England and present. And
then I get to meet with very senior people in Greece in government and talk about what has to happen there.
I'm seeing dog research that we're doing a Czech Republic in another company, so I think with these guys, I can bring them a lot of insight from
a global perspective.
ASHER: I mean, because one of the things is that in the cannabis market, it is so crucial to try to offer your customers somewhat of a unique
experience something -- I mean, it's very hard to do. So how are these guys doing that and how is technology changing the cannabis experience
particularly with Vireo Health?
LINTON: So they even have patents on a delivery mechanism, and what they figured out is, you know, people don't want to buy THC and CBD, they really
don't. What they want to buy is, I'm not sleeping very well. They want to buy, you know, outcomes we will call it.
[09:25:00]
LINTON: And so these guys have been doing the research on and targeting their products towards a way that I think we're going to win market share
short term by just being trustworthy. I think we're going to win big market share midterm by actually having medical products that you wind up
to buy.
ASHER: Okay.
LINTON: And some of it is going to be the delivery device. So like if you can have a heat not burn, or vape device that, you know, is accurate, if
some of our work actually says, well, we can't do some of these tests in the U.S., let's see what we can do in Chile. We might start to use a
global pattern of how do we deliver the results we want.
ASHER: I do want to talk to you about something a bit more somber, which is of course, the vaping deaths and the seizures we are seeing and you
know, just what that means for the regulatory environment. What does the Fed actually need to do to strike that balance between protecting people
and also allowing the industry to thrive at the same time?
LINTON: They should really like almost choke everything with regulations. The more regulations there are, the better is for companies like Vireo.
And I say that in that one of the criteria I had is I checked, have you guys have had any kind of adverse reactions to your vapes? Have you been
tracking?
For four years they've been tracking. They started in Minnesota. They moved into New York. So they've probably had millions of users and there's
been no reported adverse reactions to their products. That's that kind of --
ASHER: For this company. Right? Okay.
LINTON: For this company. But that should become a regulatory minimum in every jurisdiction for every operator.
ASHER: You don't worry about the industry being choked with regulations?
LINTON: You know, I'm worry more about the illicit market ruining it. And so what you want to have --
ASHER: Okay, so people getting products in the black market.
LINTON: Right.
ASHER: They don't know what they are inhaling, okay.
LINTON: Right. This is an illicit market issue where most of the issues I think are going to keep coming back to whether it's the device has really
weird battery location that overheats things. It is made in an illegal shop in Shenzhen, China, and then somebody over here fills it with a bunch
of stuff that may or may not contain vitamin E and concentrated pesticides. The next thing you know -- you say well, that's a bit bitter. No kidding.
ASHER: Bruce, we have to leave it there. We are out of time already.
LINTON: Thank you.
ASHER: Always a pleasure having a lot to share.
LINTON: Thank you very much.
ASHER: Thank you so much. I'll be back with a quick check of the headlines and the opening bell, after this short break, don't go away.
(COMMERCIAL BREAK)
[09:30:00]
ASHER: Welcome back everyone, I'm Zain Asher at the New York Stock Exchange where the opening bell has just rung. Our special programming,
"The Global Energy Challenge" is coming up next, but first let me break down the headlines for you.
U.S. stocks are rising to fresh record highs in early trading. New trade headlines are boosting sentiment. Beijing said U.S. and Chinese
negotiators have agreed to cut tariffs in phases as part of a trade agreement. China says both sides must agree to cut tariffs simultaneously
and by the same amount for a deal to get done.
Jennifer Williams, an aide to U.S. Vice President Mike Pence just arrived on Capitol Hill where she will testify in the Impeachment Inquiry.
Williams was on the July 25th call between President Trump and Ukraine's President. We are told that she was concerned by what she heard.
The first funerals for the victims of the horrific massacre in Northern Mexico will be held in the coming hours. Nine American women and children,
all members of the same Mormon family were killed in a gruesome attack earlier this week. Investigators all still trying to determine who is
behind the massacre and why.
And more than 80 farmers reportedly have been arrested in Northern India for allegedly starting fires that contributed to the blanket of toxic smog
choking New Delhi and other cities for 12 days now. Hazardous levels of air pollution have forced flight cancellations and school closures.
That's it for FIRST MOVE. "The Global Energy Challenge" is up next. You're watching CNN.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR (voice over): Energy, the power behind humanity. Progress at a cost and still close to a billion
of us are without electricity.
As we aspire for quality and the quality of life, our numbers rise. With each new generation, expectations will demand more efficient power from
greener and cleaner sources.
On this journey, I'm in the United States of America to meet the visionaries and innovators who explore how to make this critical energy
transition.
Our very existence may depend on how we face up to the global energy challenge.
The United States consumed more energy in 2018 than ever before. Eighty percent of it was generated by fossil fuels. As the world urgently debates
the global energy transition, what happens in America impacts the globe.
For this nation of 330 million people, so much is at stake. The picture complex. How to allow the economy to thrive, to raise and maintain living
standards for all citizens and uphold the responsibility to the environment.
Our journey begins in Midland, Texas, a population less than 150,000. What makes it special is all underground. There is an abundance of shale oil
and gas across America, 8 million barrels produced each day.
The Permian Basin, straddling New Mexico and Texas is the country's most productive site. Midland is at the epicenter.
UNIDENTIFIED MALE: Okay, I think the best place to start would be right here is the pump for our oil.
DEFTERIOS (voice over): I am taking on a tour of the Pioneer facility, a whopping 680,000 acre site.
DEFTERIOS (on camera): What happens here has far reaching implications on us energy policy, but foreign policy as well.
DEFTERIOS (voice over): This is a critical turning point for U.S. shale. After plans for retirement, Scott Sheffield came back as pioneer CEO to
restructure that company.
In the last four years alone, nearly 200 oil and gas companies in the U.S. have gone bust with over $100 billion dollars of debt.
(BEGIN VIDEO CLIP)
SCOTT SHEFFIELD, CEO, PIONEER: The Permian Basin started in the 1920s. And so we've been producing for over a hundred years. And so with the
recent unconventional shale revolution, which started here in the Permian Basin about five or six years ago, it'll allow it to last another hundred
years. So we're probably about halfway through.
Before we thought we were on our significant decline until unconventional was discovered out here in the Permian Basin, which is probably 2011. But
now it's going to last another hundred years.
[09:35:03]
SHEFFIELD: We're at 80 billion barrels recoverable in the Midland Basin, and probably about the same in Delaware, which puts us around 160 billion
barrels of oil equivalent, which is pretty close to what the numbers are in some of the Middle Eastern countries.
DEFTERIOS: How do you think you fit into the energy equation because there's much more awareness now to introduce solar and wind to the equation
and where natural gas fits in into the future, say 20 to 30 years from now?
SHEFFIELD: Yes, we're still -- in this country, we're still using about 80 percent hydrocarbons for energy use. We have some of the cheapest energy
cost in the world today in this country, and has kept renewables probably from growing faster, because they have to compete with natural gas. That's
their competitive nature.
(END VIDEO CLIP)
DEFTERIOS (voice over): Pioneer has some 6,000 wells currently in operation. Each one is closely monitored to maximize efficiency. But
fracking is not benign to the environment.
Heavy water us and flaring, the burning of excess methane gas are issues to be addressed by everyone.
(BEGIN VIDEO CLIP)
DEFTERIOS (voice over): Do you use a lot of water? There's concerns about the methane leakage is still taking place. Have you advanced it to the
level that you're happy with?
SHEFFIELD: Pioneer has been a leader on both fronts. In regard to water, we decided to move away from fresh water several years ago. We entered
into agreements with the cities of Midland and Odessa to use their effluent water and use that to frack with.
Secondly, in regard, do we take methane emissions seriously? We're the first company to start aerial flying over all of our sites, are tank
batteries and our well sites so we use a plane flying about 3,000 feet above the surface. We do it once a year and we have methane sensors and
flare guns that we use on the local surface side.
And so we try to estimate, do we have any leakage going on? When we detect it, we fix it immediately.
The biggest issue in the Permian Basin today is the flaring issue in my opinion. We're flaring about 700 million a day. It's roughly about seven
to eight percent of the current gas production in the Permian Basin. And it has got stop and the best way to stop it, we've got to build more
natural gas pipelines to get the gas from the Permian Basin to the Gulf Coast.
And I wish every company would adopt a policy, do not connect your oil well. Because a lot of people are producing their oil wells right off the
bat and flaring immediately.
(END VIDEO CLIP)
DEFTERIOS (voice over): Rapid growth of shale has outpaced the infrastructure needed to handle what's unearthed. In the last few years,
it created an opportunity for America to do what was unheard of -- export gas to global markets.
DEFTERIOS (on camera): For decades, these terminals on the Louisiana-Texas border handled inbound oil tanker traffic to satisfy America's thirst for
energy.
But in 2016, this equation has been turned upside down. There's so much natural gas around that the U.S. exports to better than 30 countries. This
vessel is headed for Chile.
(BEGIN VIDEO CLIP)
ROBERT FEE, VP INTERNATIONAL AFFAIRS, CHENIERE ENERGY: Asia is the primary driver of energy demand, and a lot of our cargo is over 40 percent since
2016 are landing in Asia.
So countries are trying to meet their growing energy demand and do so in a way that reduces carbon emissions and improves air quality and natural gas,
LNG from this facility plays an integral role, particularly compared to coal, and it also enables renewables.
DEFTERIOS: What are you doing internally in the United States to reduce methane emissions, for example, to pressure the industry to do even more
than it's doing today?
FEE: I think it's important for us to have a dialogue to think about what industry can do in addition to local, state and Federal regulations to
address the methane emissions. And that's something that U.S. producers want to do because every molecule of natural gas they capture, every
molecule of methane is one that it can send to us, we will pay them for and then we will liquefy and send on our tankers.
(END VIDEO CLIP)
DEFTERIOS (voice over): At present, America is the world's number one oil producer, outflanking heavyweights, Saudi Arabia and Russia. But job
creation and less reliance on imported crude need to be balanced with the threat to the environment.
As I leave Texas, you can see the winds of change. In 2019, for the first time, Texas wind power outpaced coal in terms of electricity generation.
The drive for more solar on the grid is underway. To understand what determines the speed of change, I travel north to see if Wall Street is
willing to continue to finance America's shale.
[09:40:07]
DEFTERIOS (on camera): The growth of U.S. production in the future will depend in large part of what happens here on the floor of the New York
Stock Exchange because major stock funds are looking for a higher return on their investment, and many are shying away from oil and gas now, all
together.
DEFTERIOS (voice over): The market value of energy stocks has shrunk over the last five years.
Step off the trading floor, for those who analyze commodities, one can see that the shale boom has altered the global energy landscape. But this
should not be confused with U.S. energy independence. The United States is still a major oil importer.
(BEGIN VIDEO CLIP)
HELIMA CROFT, MANAGING DIRECTOR, RBC CAPITAL MARKETS: I joined the U.S. government right after 9/11. We never thought we would have this resource
endowment in the United States. We really saw ourselves as perpetually dependent on foreign supply.
So this story, this explosive growth of American production has been an enormous game changer in terms of economics, in terms of foreign policy and
it really is the story of the sort of individual companies in the U.S. It wasn't really U.S. policy. U.S. policy facilitated it, but it's really the
story of like, individual companies and their entrepreneurial spirit.
DEFTERIOS: Do you make the link between global independence or growing independence and climate change?
CROFT: I do think there's this kind of general malaise, about energy, about investment in energy, because there's this view of maybe we're not
going to need it a few decades out. Maybe this is potentially a dying industry. And so I do think that there's kind of a dark cloud hanging over
the energy sector.
(END VIDEO CLIP)
DEFTERIOS (voice over): Despite the storm clouds brewing for the energy sector, the Federal government lacks a unified direction of action.
The President prone to make wild claims.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: More than 100 Democrats in Congress now support the so called Green New Deal. Their plan is estimated
to cost our economy nearly $100 trillion.
You know, you're not allowed to use hairspray anymore because it affects the ozone. You know that right?
If you have a windmill anywhere near your house, congratulations, your house just went down 75 percent in value.
And they say the noise causes cancer. You tell me that one.
(END VIDEO CLIP)
DEFTERIOS (voice over): The rhetoric from the White House has given individual states a new sense of urgency to pursue their own green
policies. More when we return.
(COMMERCIAL BREAK)
[09:45:18]
DEFTERIOS (voice over): Washington, D.C., the seat of America's political power. We are living in turbulent times as we navigate through this global
energy transition. Change is not entirely driven by the men and women who occupy Capitol Hill.
DEFTERIOS (on camera): Donald Trump is the first U.S. President to tout America as the number one oil and gas producer, allowing it greater energy
independence and providing an option to disengage from a Middle East conflict.
But on the policy side, many wonder whether American innovation is being held back in the green economy as a result.
DEFTERIOS (voice over): For political thinkers and analysts, it's a time of frustration.
(BEGIN VIDEO CLIP)
MICHAEL ECKHART, FINANCIAL AND RENEWABLE ENERGY EXPERT: The lack of a relationship, a working relationship between our political world and our
capital world is shocking. Just not too many people work on that access. But that's what's happening here in the energy transition, because business
as usual is financing in the debt market in the bond market and in the equity market, oil companies, gas companies, coal companies, it's just
grinding on while we're talking about an energy transition.
The bond market issues $12 trillion a year -- mind boggling. That's $12,000 billion a year in the bond market. And a trillion of that is
investor grade, corporate bonds, most of which is to the energy and industrial sectors that are causing the climate change we're talking about.
We're financing climate change, not solutions to climate change. We're financing climate change in the capital markets at a phenomenal level.
So we both have to start new things. And question should we keep doing these things? It's like buying heroin. You've got to stop doing that
stuff.
(END VIDEO CLIP)
DEFTERIOS (voice over): Former U.S. Energy Secretary, Ernest Moniz, is the founder of an organization intent on nurturing the next energy
breakthroughs. He is a realist, there are no quick solutions.
(BEGIN VIDEO CLIP)
ERNEST MONIZ, FORMER U.S. ENERGY SECRETARY: The carbon dioxide removal from the atmosphere through a variety of processes, I actually put at the
top of the list as a giant game changer. And if we have this rapid technology transformation to go to low carbon, many of those technologies
depend upon a supply of critical materials and minerals and metals.
Let's call it an order of magnitude increase in the supply of these minerals and metals. That implies a lot more mining activity going on --
some, you know, that's part of the underbelly of this transition.
DEFTERIOS: Give me the best example of what you think? What are -- the states that are really driving the energy transition and doing it well in
the context of where we are today?
MONIZ: States, first of all, are really in the lead in terms of addressing climate in the absence of any explicit climate policy at the Federal level.
Now, clearly, states like California and New York, well and the New England region have always been out front in terms of state energy policy, energy
efficiency, low carbon, getting into carbon pricing.
When President Trump made his announcement to start the withdrawal process from Paris, a very strong we are still in movement began and that certainly
had roughly half of the governors in the United States.
MAYOR BILL PEDUTO (D), PITTSBURGH: I'm speaking out on this as mayors all across the country who have already committed to following the Paris
Agreement and will continue to do
JERRY BROWN, FORMER GOVERNOR OF CALIFORNIA: This is a crazy decision. It's against the facts. It's against science. It's against reality
itself.
MONIZ: It didn't take long for more than 2,000 business people to say, you know what, we're still in too, because handwriting is on the wall. We're
going to low carbon. The pace, the scope, the scale remains in some state of uncertainty, but we're going there.
So in California's case as an example. They say, okay, we're going to net zero by 2045. We looked at that in great detail at our organization,
Energy Futures Initiative, and we looked at 33 technology pathways to meeting that 40 percent reduction in just over a decade. We found that
actually it could be done. Not easy. We really need to see I think more cost reduction across the board to get there.
[09:50:07]
MONIZ: Frankly, we need to see a very coordinated economy-wide approach to address all the sectors of the economy to make that goal.
(END VIDEO CLIP)
DEFTERIOS (voice over): I grew up in California, the side of pump jack's nodding in fields or farmed clustered in urban areas is a familiar sight to
me. The gold rush in oil fueled past fortunes.
Going forward, the California Energy Commission has declared clean tech will define its future.
(BEGIN VIDEO CLIP)
DEFTERIOS (voice over): You have an ambitious target to go 100 percent renewable by 2045. Is it overly ambitious?
DAVID HOCHSCHILD, CHAIRMAN, CALIFORNIA ENERGY COMMISSION: So it's absolutely achievable. And to those who believe it is mythology, I would
just point out what's happened in the last 10 years.
So we've tripled renewable energy production in the State of California over the last decade. Renewables have fallen radically in price. So go
back to 2000, solar energy was about 50 cents a kilowatt hour. We're now getting bids of two cents a kilowatt hour. Energy storage has fallen
almost 90 percent in the last decade.
So there's incredible momentum in this space. We're at 55 percent carbon free electricity on the grid today. So we're already -- you know, the term
alternative energy is a misnomer for renewables. We really shouldn't use that. Fossil is actually the alternative energy now.
(END VIDEO CLIP)
DEFTERIOS (voice over): Hochschild has cause to be enthused. California is blessed with natural resources. Hydropower, thousands of hours of
sunlight each year. A terrain favorable to offshore and onshore wind.
But infrastructure upgrades are critical to enable this energy mix of renewables and hydrocarbons to power the state.
(BEGIN VIDEO CLIP)
HOCHSCHILD: The modern wind industry globally was born in California, the modern solar industry was born in California, obviously, electric vehicle
industry born here. And the very first energy efficiency codes and standards born here and spread around the world.
So we have a good track record of doing that. And I think we're going to continue. You're seeing even more of a push towards clean electricity,
towards clean transportation. The market here has grown for these technologies.
We're adding, for example, about 20,000 electric cars to the road every month in California. We're deploying a new program here, 200 electric
buses that we're supporting for public schools around the state. So the maintenance of electric buses is virtually nothing. And so that's the
sector we expect will grow very rapidly.
DEFTERIOS: Many see natural gas as a transition fuel. We have it in abundance in the United States. It's not going to be needed in California
in your view, though.
HOCHSCHILD: The trend is very much away from natural gas. We now have more pollution coming from natural gas appliances in our buildings than
coming from our entire gas power plant fleet. Okay. That's partly a function of the gas power plant fleet shrinking as more renewables come on.
We've had nine cities and one county in California since May of this year that have adopted natural gas bans on new construction or electrification
preferences and we expect as many as 50 cities to adopt similar policies in the next few months.
(END VIDEO CLIP)
DEFTERIOS (voice over): Citizens would need to embrace the policy. It may be easier to sway people to give up gas in their homes than change their
cars. High electric vehicle cost makes switching unaffordable for most California.
And of our daily distraction, the hunger for content has seen internet traffic double since 2015.
By 2025, five billion of us will be online while on the move. Data centers are set to drive electricity consumption worldwide.
Apple the world's first trillion dollar company claims to have become 100 percent renewable energy sourced. Their space-age HQ, a testament to their
intent with power to influence its global supply chain as well.
(BEGIN VIDEO CLIP)
DEFTERIOS (on camera): How do you define 100 percent renewable energy in practicality?
LISA JACKSON, VP OF ENVIRONMENT, POLICY AND SOCIAL INITIATIVES, APPLE: I love your word practicality because we have to work with what we're given,
and we are very much in the middle of a transition, right, to clean energy around the world.
And so what our goal has been is a couple of things, first to add new clean energy to the grid. So we didn't want to do this through simply offsets or
renewable energy credits. Those are great tools for transition for us. But we thought, wouldn't it be cool if we were putting new, what we call
additionality, additional energy on the grid?
[09:55:10]
JACKSON: We'd love to whenever possible displace dirty energy, brown resources of power, like fossil fuel generation.
DEFTERIOS: Is there a lot of pushback from the supply chain, or do you have such a predominant position in this segment of the market that they
will follow suit if you set the example?
JACKSON: You know, I think one of the -- sort of the surprising things for me at least was how eager the supply chain is to embrace the idea of clean
energy. What they don't have is know-how.
So a lot of what we bring to them is, you know, know-how. We've done it. We can show them how to do it in their country. We will be right alongside
them. Sometimes we're investing right alongside them.
DEFTERIOS: Can design and innovation be compatible with renewable energy?
JACKSON: Our approach at Apple has been to bring the same level of innovation and engineering and design to the clean energy journey as we do
to our products.
Recycling rare earth elements and getting those into our products, recycling the aluminum that forms the enclosure for so many of our products
-- all of those things are part of the innovation our engineers love.
They love being part of rethinking what you know the iPhone will be as it continues to be more friendly for the planet.
(END VIDEO CLIP)
DEFTERIOS (voice over): Apple is more than hardware. Products of their ingenuity and operations consume vast amounts of electricity. To mitigate
this, Apple invested in its own renewable infrastructure.
Solar farms like this one in San Luis Obispo powers their grid.
(BEGIN VIDEO CLIP)
JACKSON: You know, if America had a power system that was designed to get as many people energy as quickly as possible and we should take a minute
and realize that our energy system has been key to our success and prosperity as Americans. It is a gift that our parents and grandparents
and others gave.
The lesson of what's happening today, and you know, the tragedies of the wildfires that we've seen, the loss of life, certainly, you know, the
property damage, and now the blackouts that we're seeing in the state right at the second is that we need to think about climate resilience.
Investing in our energy system is much more forward looking than defending the old systems. A new energy system is what we need.
(END VIDEO CLIP)
DEFTERIOS (on camera): After this tour of the United States, I can see firsthand that the energy transition is well underway. The pace will be
set by the big states, California out here in the West, New York and the East, Texas in the south.
But after a quarter century of under investment in energy infrastructure, it is also clear that business as usual will not work, especially with
climate change knocking out the door.
(COMMERCIAL BREAK)
[10:00:00]
END
