Rex Tillerson

ExxonMobil Chairman and CEO Rex Tillerson speaks during the 26th World Gas Conference in Paris, France, June 2, 2015. REUTERS/Benoit Tessier

Rex Tillerson would bring potential positives and negatives to Secretary of State

President-elect Donald Trump continues his controversial appointments – or cabinet trial balloons, in some cases – and some of them could have important consequences for the American oil and gas industry, especially if Rex Tillerson takes over at State.

Exxon Mobil’s CEO is the leading contender, according to the Trump camp, and his possible nomination has drawn fire from both Democrats and Republicans because of close his ties to Vladimir Putin and the Russian industry.

Containing Russian aggression will be – or at least, should be – a key feature of American foreign policy, especially after the CIA linked Russian hackers to attempts to undermine the US election. Combine cyber attacks with support for Syrian President Bashar al-Assad and military interventions into Ukraine, and Russia has become foreign enemy number one.

Would Tillerson’s Russian connections be a help or a hindrance if he becomes Secretary of State?

“It’s a matter of concern to me that he has such a close personal relationship with Vladimir Putin and obviously they’ve done enormous deals together. That would color his approach to Vladimir Putin and the Russian threat,” Republican Senator John McCain told CBS.

But Tillerson, 64, has many supporters within the energy industry. He got his start as a production engineer at Exxon in 1975 and has worked there ever since, running business units in Yemen, Thailand and Russia before being named chief executive in 2006. He was expected to retire next year.

“Rex Tillerson is an accomplished business leader presiding over a far-flung global business.  He has experience working deals with different regimes including those with interests that do not align well with the US,” says energy economist Ed Hirs from the University of Houston.

“But as several observers have pointed out, he was representing ExxonMobil’s interests.  If he is appointed as Secretary of State, he will have a new employer with a different array of interests and objectives.”

Daniel Yergin, author of the Pulitzer Prize-winning “The Prize: the Epic Quest for Oil, Money, and Power,” said Russia represented a relatively small portion of Exxon’s overall operations and played down its significance.

“It was a business relationship,” Yergin said. “The whole Russian thing is so much front and center now so it’s inevitable that those questions be asked but, obviously, if you are a major oil company, you want to go to where your resources (are). You have to replace your reserves.

“This is an Eagle Scout kind of guy…He is a straight arrow.”

Exxon Mobil is still involved in one political controversy relevant to a possible State appointment: New York Attorney General Eric Schneiderman’s investigation into the giant oil and gas company’s role in opposing climate change science.

video-marketing-ad-1Calling Schneiderman’s witch hunt an investigation is generous. He was unable to convict Peabody Energy in a similar probe, settling for an agreement with no admission of guilt and a simple revision of SEC filings. Exxon is pushing back aggressively and Schneiderman allies are quickly distancing themselves from is clearly a losing battle.

But the public spotlight has actually focused some attention on positives taken under Tillerson’s watch: acknowledgement that climate change is real, support for a carbon tax, and $1 billion annually invested in clean energy technology.

Compared to Oklahoma oilman Harold Hamm, who until recently was considered the top contender for energy – not to mention some already announced Trump cabinet selections – Tillerson is absolutely enlightened about the energy transition and the rapidly changing nature of global energy demand and production.

Washington watchers have understandable reservations, but on balance Tillerson is a good choice for Secretary of State. He has the professional and management qualifications to acquit himself well in the job. And his Russian experience and relationships may turn out to be an advantage in a Trump cabinet.

With any luck, he’ll be a steadying influence around the Cabinet table.

rex tillerson

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