Change Makers: Kent Williamson, author American Heat Engine

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Hill Vaden:

All right. Welcome back to EnergyCents, an S&P Global Commodity Insights podcast, covering all topics on the intersection of energy and finance. This is your host, Hill Vaden, and I'm here, as always, with Samantha from Tetbury. Sam, how are you?

Samantha Humphreys:

I'm great, thank you, Hill. And it's glorious in Tetbury at the moment. The sun is shining and summer has finally arrived. I'm not sure when this episode is going out, so it might be already be cold.

Hill Vaden:

I think it'll still be warm.

Samantha Humphreys:

Future me, sorry if it's cold already.

Hill Vaden:

I tried to-

Samantha Humphreys:

It was [inaudible 00:00:34] for a day.

Hill Vaden:

So I tried to introduce you as the historical Samantha of Tetbury. I told you that I'm listening to some stuff on English history where everybody's got these great names that... Ethelred the Unready, Robert the Marvelous.

Samantha Humphreys:

They had wonderful names.

Hill Vaden:

Or the Magnificent.

Samantha Humphreys:

There's a lot of Magnificents. The Prosperous.

Hill Vaden:

That would be a good one.

Samantha Humphreys:

There's a few of those. The Righteous So-and-So or other. Yeah, there's a lot. Kind of get back to medieval England.

Hill Vaden:

Yeah, the hundreds, the first millennium.

Samantha Humphreys:

That's it. Cracking names.

Hill Vaden:

Who would you be? What would you have a nickname? The Magnificent?

Samantha Humphreys:

The Magnificent Samantha. Let's go with that.

Hill Vaden:

Okay. This is an historical podcast on US history, so we're talking today with Kent Williamson who is author of American Heat Engine: Hydrocarbons and the Power of the United States, which is a book that he has recently published on the use of fossil fuels or hydrocarbons in the development of the United States. And Kent is a friend that had the pleasure of working with and was glad to have him back to talk with us on the podcast. Can you tell our listeners what they should listen for?

Samantha Humphreys:

Yeah, absolutely. Like you said, this is the first time we've done a book and it is a fascinating read. So we really go into his outline of what they were covering, and it's really pulling together the history of hydrocarbons, so that's coal, gas, and oil, and how that sort of shaped the US as it is today in the industry. And we also touch on the parallels of those shifts and that transition and how that kind of matches up with today's shift in the way we look at energy, which was fascinating and it's a really insightful read.

But what about you? Anything you wanted to add there?

Hill Vaden:

Yeah, just it's exciting to, I'm always impressed by people who can put all their ideas into a book and he describes it as a very accessible book. It's only about 300 pages or so, and he was nice enough to share with us a copy and I've been able to read parts of it. It's an entertaining, if you like history and you like energy, that's an entertaining book. We'll hand off to the conversation now.

All right, Kent, thank you so very much for joining us today from Tulsa to speak to us about your new book, American Heat Engine: Hydrocarbons in the Power of the United States.

Kent Williamson:

I really appreciate you having me on. It's a real honor to be back with you two colleagues from the old days at IHS, IHS Market, S&P Global. Very happy and honored to be here.

Hill Vaden:

Well, good. And we're here to talk about your book, which you were nice enough to share a copy with Sam and me. But I'll just set up in it and I'd like you to kind of introduce some of the process of what inspired you to write it.

So I remember years ago reading a book by George W. Bush about his father, George Bush. And he said in that, "This book is a love story. Yes, it is historically accurate, but this book is a love story about my father." And I get somewhat of a similar tone on your book that it's very much there's an admiration for the American heat engine or the American hydrocarbon economy. Can you tell me if you agree with that assessment? And talk a little bit about what inspired you.

Kent Williamson:

Yes, I think that is definitely one of the things is it's a love story, love letter, thank you letter, thank you note to the United States. And I guess one of the things that did inspire me that kind of plays into that is my grandmother wrote some books later in her life. She worked for her small town newspaper in North Dakota for a number of years, and she wrote some books on our heritage. And that side of the family, there are Germans from Russia or they actually came from what's now Ukraine. So she wrote books about that and that partially inspired me.

And then I came to appreciate it because she was born in a sod house premature, and then she lived almost 100 years. But she told me about what happened to some of the people that stayed over there and obviously we're seeing what's going on in Ukraine and Russia now, and it's not too pleasant. It just made me very thankful that they had the courage to come to the United States, and I'm very grateful for that, for what this country has done for my family.

I always loved American history, and I'll tell you here in a few minutes, I learned a lot about hydrocarbons kind of partway through my life. And then I realized hydrocarbons aren't really covered that well in at least general American histories. There's a lot of really good books and other resources. But I look back on my own history in high school and college and I was pretty well-read, but I realized how little I knew how important they are to American history and how important that's been to world history. So all that kind of played into it.

But what led to it was about 20 years ago, I had never heard of Daniel Yergin and I saw this book and it's a really awesome book, it's obviously a classic. And that actually led me indirectly to hiring on with IHS in 2007 here in Tulsa.

One of the things I noticed is there's so many oil and gas wells in the United States. At that time, there was 4.5 Million. I don't know, it's probably well over 5 million now. I remember distinctly a gentleman who had a Petra project that had every well in the United States in it. I asked, "Why are there so many wells in the United States?" And one of the reasons is because of private mineral rights. We're basically the only country in the world, there's a little bit in Canada, but where landowners can own mineral rights. So that, in part, is one of the reasons that we had very robust exploration of production in the United States. It made it a lot easier to produce things.

So then as 15 years go by, I learned about the chemical industry. I learned about coal along the way. And then towards the end I was just like, "This is really amazing and interesting, and I don't think there's really been anything written on this in kind of a comprehensive way."

When I left the company a few years ago and I had the opportunity to write the book, I first was actually going to write a book on private mineral rights. But I kind of found that was a bit too complex and legal and academic, beyond my capabilities. I decided, well, let's try a general history. And I had also read this book called An Empire of Wealth: The Epic History of American Economic Power by John Steele Gordon, one of my favorite books, along with The Prize. But that book, it's a comprehensive history of American economic history, but there's no graphs or charts and he tries to write it in a way that's very readable. So that's kind of what I patterned my book after. So that's kind of the overall inspiration.

Samantha Humphreys:

So can you explain the story that you're portraying? It's a lovely introduction. You're comparing the industry to a road trip, which I think is fabulous. But if someone were to pick it up today, what are they expecting from this? Is this from the first coal discovery through to today? Or is this just looking at oil and gas? What's the sort of narrative that you're portraying here?

Kent Williamson:

So it covers coal, oil, and natural gas, so all the hydrocarbons, the major hydrocarbons. They are related, being hydrocarbons, but they're different because coal is mined and oil and gas generally drilled for, and they've evolved quite a bit differently. And then frankly, they've been in competition a lot over the years.

So that's one thing I did is combined all of those, and the inner relationships between them are what are really fascinating. And that's where I think even people that know a lot about one or the other, oil and gas or coal, I think will be intrigued by the inner relationships that go on.

I start with a basic geologic overview. Why does the United States have so much in hydrocarbon resources? And it goes all the way to the present day, and I even give a little bit of a glimpse into the future. Now, it's not meant to be a forecast or anything, but I just kind of pontificate a little bit about where I see things going.

It's mainly a history and it is comprehensive. It starts at the beginning, it goes all the way through American history. But it's very high level and it's not like an encyclopedia or an academic textbook. It's, like I said, only about 300 pages. And I came up with this concept called the strategic hydrocarbon bridge concept, and there's 15 of them in the book. And basically I found, as I just studied it, there's several kind of discrete geographic extension and time extensions in American history. So I used those to build the book around and then I added some other areas, major inflection points, so forth, like wars and other kind of interesting transitions, so that's what it is. But readable, understandable, so people that aren't familiar with the industry don't shy away from it.

Hill Vaden:

I remember when I first got a job offer to join the energy industry, I remember sitting down with my dad saying, "I don't even know where to start with this. This is something that I really want to do." And I was able to learn a lot quickly, but having a book like this would've set me up better for my first day.

Know that a road trip introduces the book. Could you talk a little bit about some of the road trips that you may have taken as part of your research? I assume that you didn't do all of this from the comfort of your own home, but you were able to either drive around Oklahoma or out to Pennsylvania or North Dakota? All the above?

Kent Williamson:

I have driven around Oklahoma and seen some of the sites. But then what's really amazing is these days you can get some of these historical books, like from the 1800s and early 1900s, they're just online. They're digitized. And it was more a virtual road trip, I guess.

But what I did when I launched the book in April is I flew up to New England because that was the 250th anniversary of the start of the American Revolution at Lexington and Concord. I was trying to do is tie it in with that area, it was also the start of the American Industrial Revolution in the early 1800s. And it was mostly water power and wood for a long time.

And that area, interestingly, hardly has any hydrocarbon resources. There's a little bit of coal in Rhode Island, Massachusetts, but it mostly ended up coming from elsewhere. The American Industrial Revolution was reinvigorated or sent into a higher gear in around the 1820s, 1830s with coal from anthracite from Eastern Pennsylvania. And I went to all these different historical sites, including where the Corliss steam engine company was in Newport, Rhode Island. It's now a post office distribution center. But anyway, going to all those interesting historical sites with American industrial history and how they were affected by hydrocarbons.

Samantha Humphreys:

And I think that's the interesting part because you have tied this to industrialization of the US. Can you give us a bit of background on how you narrowed that down? How did you choose those anecdotes? How did you get to those points that you said, "This is a turning point, this is what I should be talking about"?

Kent Williamson:

Yeah, and that was the toughest part of it because there's so much interesting material that it was what not to write about was the toughest part. So that's where I kind of came back to the strategic hydrocarbon bridges. One of my first strategic hydrocarbon bridge I mentioned is the anthracite, which is hard coal in Eastern Pennsylvania.

So it's important to note that part of the reason that American hydrocarbons got going is because most of our early immigrants were from Great Britain and we were an English colony for a long time. So obviously, you have a lot of coal there and have a lot of experience using it. And of course, the Industrial Revolution kicked off in Great Britain in the 1700s and used a lot of coal. So people came over here and knew about coal, and then the coal resources became known.

But for various reasons it was tough to use them. Part of it was because there was a lot of water power and there was also a lot of trees in the eastern United States, so they would use wood for fuel, and then they also used wood for charcoal for smelting iron. So that delayed the use of coal after the War for Independence, we were getting most of our coal actually imported from Britain. And that, of course, got cut off by the Royal Navy. So that stimulated the anthracite trade coming out of eastern Pennsylvania.

After the war of 1812 with the canal mania, so the Erie Canal in 1825, they built several canals in eastern Pennsylvania to get the anthracite to Philadelphia, New York, New England, and so forth. And over the early to mid-1800s, that kind of touched off the American Industrial Revolution. So that's an example of a hydrocarbon bridge.

Hill Vaden:

What surprised you most? So you'd obviously worked in energy for many years prior to writing the book. So by the time you come to writing it, you're pretty experienced and knowledgeable in the space. What was something that caught you by surprise?

Kent Williamson:

Well, like I mentioned, the interrelationships between the hydrocarbons. And studying the history, that was one of the major things is how long these things take. Energy transitions take a long time. But it really, as I dug into it, really became apparent.

So for instance, the natural gas industry, natural gas was fairly well known, and there was a rudimentary natural gas system in Western New York as far back as the 1820s. And then the first major natural gas utility was in Pittsburgh in the late 1870s. But it took until the 1950s for natural gas to basically displace manufactured gas that primarily used coal as fuel. So you can see it as over a century for natural gas. And there's a lot of reasons for that, but it's kind of interesting.

The other thing that surprised me is the unexpected turns things take. And related to manufactured gas and natural gas, one of the interesting anecdotes that I put in there, there was a gentleman named Thaddeus SC Lowe. And he was involved in hot air balloons back in the 1800s. He invented these mobile hydrogen gas generators for filling up balloons. He was the chief aeronaut for the Union Army in the American Civil War. He was actually appointed by President Abraham Lincoln. So these balloons were, it was kind of like drone warfare that you see these days. This was like revolutionary technology. They would float these balloons up to observe troop movements and stuff during the Civil War.

Well, in the 1870s, he goes on to invent something called the carburetted water gas system. As I mentioned, there's manufactured gas systems that they started, again, in Great Britain, but in the United States in 1816, '17, Baltimore had the first manufactured gas system. And this was basically, it used different substances, but mostly it ended up using coal. And you generate a low heating value gas that could be used for lighting, so gas lights. And towns in the 1800s would use them for street lighting, and wealthier people would light their homes with this before electricity.

So it goes along in the 1800s. And then, of course, we all know about the first oil well at Titusville and the kerosene for lamps. And that started really hurting the manufactured gas industry because now suddenly, there's cheap, safe kerosene and more people are using lamps and lamp oil. And then, of course, there's the light bulb and electricity in the late 1870s, early 1880s. And that quickly displaces gas lighting in urban areas.

So you'd think, okay, the manufactured gas industry is on its way out. Well, this carburetted water gas method that Lowe invents, it uses liquid hydrocarbons sprayed into this chamber, and it basically supplements the coal and creates a higher heating value gas. And it allows manufactured gas to migrate over to heating and cooking from lighting. And that, as you probably can tell, really forms the basis for the natural gas industry. It lays the groundwork in cities and other places. And his process also makes the manufactured gas facility smaller, so it spreads out to more small and medium-sized towns.

So it's really fascinating because manufactured gas, under assault from kerosene lamps and electricity, and you'd think it's going out and then it makes a comeback. But the whole reason it makes a comeback is because of the liquid hydrocarbons. And what they use initially is actually like gasoline and naphtha left over from the refining process of kerosene. Kerosene is the major refined product of the late 1800s. And that migrates to other diesel like fractions like gas oil and so forth over time.

So it's interesting that the oil boom creates a lifeline for this old manufactured gas industry that's mostly based on coal. And then that somewhat leads to, a few decades later, the natural gas industry. You're seeing that today with the AI data center boom, and the natural gas is kind of the best fuel for that because it's easy to build power plants or we have so much natural gas and so forth.

Samantha Humphreys:

You've just touched on it then, the AI boom and how that changes the landscape going forwards potentially for the energy industry. And you mentioned that you touch on the future a little bit towards the end of this book. So can you kind of summarize some of those key takeaways? Because this is fascinating. There's a lot to learn from history, and I think just saying that it takes maybe a century for a transition is, in itself, surprising to some people potentially.

Kent Williamson:

Yeah, and that's where I point out at the end of the book, you see some of the predictions that happen throughout the book, and Dan Yergin points it out with oil, it's this constant feeling that we're running out of oil. So that happens a lot. Natural gas is the same way, and it actually does run out. You'll see, if you read the book, that was one of the big sticking points for the natural gas industry for a long time is there was a lack of geologic understanding. There was also a lot of wasteful use and the industry wasn't mature. But the major part was they didn't have pipeline technology for a long time. They didn't have storage methods like storing natural gas in depleted fields and so forth that they could use during high peak demand periods like winter or summer. It took decades for all that stuff to come together.

So in a lot of cases, natural gas actually did run out. One of the areas was in Indiana in the late 1800s, they had a natural gas boom that created a huge industrial boom. But they wasted a lot of it [inaudible 00:19:22] just natural depletion and they couldn't really get it from elsewhere, so it actually ran out. And for instance, they piped natural gas to Chicago in early 1890s and it replaced their manufactured gas system. And then in 1907, the natural gas basically ran out, and so Chicago had to go back to manufactured gas for a few more decades. And that, of course, gave the natural gas industry quite a black eye. But its value was still appreciated over time. It eventually took over.

So yeah, I would say the length of time things take and the unexpected turns is what to look out for the future. So one of the things I'm curious to see, the next six to 12 months, the unconventional oil boom, we're seeing more and more even executives saying it's probably peaking. But we've also heard that before, so I'm really fascinated to see is it peaking or will they figure out some new way to keep producing more oil? That's one of them.

And then coal is another intriguing one because natural gas seems to be ascendant. It's just very inexpensive and it's a little cleaner, so it's the bridge fuel if you want to talk about energy transition to clean energy. Coal is kind of off in the background and it has been eroded a lot. But what I'm seeing is some interesting stuff about coal almost going back to some of the early uses when you had the manufactured gas and so forth. And they'd burn this coal and then there'd be a lot of leftover stuff that they would use, including coal tar.

And coal tar, sometimes it was just disposed of, and that's caused some environmental issues. But coal tar actually was the basis for the petrochemical industry. So I'm seeing some interesting stuff about coal getting, what is it? The rare earths and other critical minerals out of coal ash. And then I'm seeing some companies that are looking at new methods of getting fuels and other materials out of coal.

So who knows, with the technology and the economics, coal could make a comeback. And one of the things I point out in the book is the United States has more coal than any country in the world. One of the presidents, Calvin Coolidge back in the 1920s said the supply of which is unlimited. So we have a lot of coal. It's just whether there's the technology, the economics, and then the political will to use it.

Hill Vaden:

Yeah, I remember there was one of your quotes from the book that I wrote down, "The era of low cost energy is dead. Popeye is running out of spinach," from the US Commerce Secretary Peter Peterson in 1972.

Kent Williamson:

Yeah.

Hill Vaden:

So maybe just to wrap up, can you tell some people where they can find the book? And what's next for you? You got another book in mind? What's going on?

Kent Williamson:

Right now, it's just on Amazon. So it's paperback and e-book, so you can find it there.

As far as for me, I'm just looking for speaking engagements. So if anyone out there is listening and needs a speaker on something a little bit different, on the history of hydrocarbons, I can give all kinds of interesting anecdotes.

And then I did want to get in real quick, I know this is the Energy Sense Podcast, and of course, hydrocarbons and energy in general are capital intensive, need a lot of money, so they're definitely intertwined. But there's some really fascinating parts of the book on that as well. One I'll mention is the D&H Canal Company, which was one of the anthracite canals. And I found a really cool quote. This was one I actually didn't use in my book right. It was an article I actually didn't read until after I published the book.

So this company was chartered in 1823. This quote is, "On January 7th, 1825, subscription books for shares of the D&H Canal Company were open following a demonstration of the heating capabilities of anthracite coal at the Tontine Coffee House on Wall Street. The warmth provided by the coal must have been appreciated during the New York winter, as the stock was fully subscribed, making D&H Canal Company one of the first private enterprises in America with a capitalization of an excess of $1 million." And the Tontine Coffee House, which I mentioned in the book, it was the site basically at the early New York Stock Exchange.

Hill Vaden:

There you go. Well, great. Well, there's a lot more hydrocarbon bridge stories in the book. And Ken, it's great to reconnect here in this format. So congratulations on the book, that's very impressive to have put together.

Samantha Humphreys:

Very cool.

Kent Williamson:

Yeah, thank you so much again for having me on here.