May 28, 2007
The motion of the ocean | A chat with energy investor Matthew Simmons on his plans for an ocean energy research institute in Rockland
By Whit Richardson
Earlier this year a group of investors, including local business owners and a few seasonal residents of the midcoast, purchased the former MBNA building on Rockland's waterfront. The 10-acre property, assessed at $17.5 million, was snapped up by the group for a fraction of that price and is being marketed as office and retail space.
But the biggest surprise coming out of the purchase was that one of the buyers, Matthew Simmons, a seasonal resident of Rockport, plans to use part of the property as an ocean energy research institute that will study how the ocean can decrease the world's dependence on fossil fuels.
Simmons ˆ who also renovated the historic Strand Theater in Rockland ˆ made his name in the oil and gas industry as CEO of Simmons & Co. International, a Houston-based investment bank he founded in 1974 that works primarily in the energy sector. (Simmons in 2005 stepped down as CEO of Simmons & Co., but now serves as chairman of the company.) In the last 10 years, the company has shifted its focus from oil and gas to renewable energy, including solar and wind.
A man immersed in the oil and gas industry for almost 40 years may seem an unlikely champion of alternative energy. On the contrary, says Simmons, 64, who adds that understanding the traditional energy sectors ˆ oil, natural gas, coal, nuclear ˆ lends an excellent perspective on the future of energy. He also made a splash in the oil industry in 2005 with his book, Twilight in the Desert, which argued that the world's supply of oil has peaked ˆ or is close to peaking ˆ and will steadily decline.
Mainebiz recently spoke with Simmons about his proposed ocean energy research institute, the burgeoning field of ocean energy and how Maine can reduce its dependence on fossil fuels. An edited transcript follows.
Mainebiz:You've been immersed in the oil and gas industry for so long. Why are you trying to create an ocean energy research institute?
Matthew Simmons: Well, I got very concerned about 10 or 15 years ago that it was going to be very hard ˆ unless we found some miracle things we weren't doing ˆ to make sure we had a sustainable oil and gas industry.
Then two and a half years ago we went to Puerto Rico and during our stay we saw this beautiful restored plantation in the hills outside of Ponce, which is the oldest city in North America, and in the 1850s some Germans built this great plantation with grinding wheels of several tons that grind coffee beans and grind corn. There's this little tiny stream that comes off the river that's a concrete culvert about 12-15 inches wide and 12-15 inches deep, and the rivulet of water coming through that powers the entire plantation. If someone had asked, "Do you think there's any energy in that stream?" I'd have said, "No." So that got me incredibly curious about what we don't seem to appreciate about how much energy there is in the ocean.
And then when the tsunami happened I'd read these stories that this was the equivalent of 50 atomic bombs. And then we had, two summers ago when I was in Maine, the awful spectacle of hurricanes Katrina and Rita, which was basically equivalent to bombing the Gulf of Mexico and obliterating the Gulf Coast, and I kept thinking, "I wonder why we're not doing more in energy in the water." There must be some reason that that's never been done.
Then last summer someone pointed out this incredible MBNA building in Rockland Harbor and said, "Someone's going to get the bargain of all time." And I thought to myself, "Man alive, if you were ever to create an institute to study all these aspects of energy in the water that would be a fabulous place to do it." If you're going to study ocean energy, why not look out on water for inspiration?
Why is the MBNA building in Rockland a great site for your institute?
Well, it's not necessarily a great site for it, but it's as good a site as any. I've always had a theory that if you're going to study corn you probably ought to have your institute in Iowa versus Hawaii.
When I started 42 years ago at Harvard Business School, Boston was just emerging from the shadows of being a pretty ugly mill town. The textiles had left, the shoe industry had left, the largest building in Boston was the Customs Tower in downtown Boston, the harbor was filthy, the Prudential building was just going up. By the time I finished Harvard Business School, Route 128 had been built and Boston became the first-generation Silicon Valley. Well, I think five years from now there's just as good a chance that what we call midcoast Maine could become the Silicon Valley of ocean energy. All sorts of sparkling research entities and even some manufacturing places that resemble today what we call a boatyard could be creating the only possibly viable new energy source that can start to replace the era of fossil fuel energy.
With ocean energy, are we just talking about harnessing the tides?
It turns out that there are a host of different things, and that surprised me. The three most obvious, because they're visible, are tides and waves and current. But what's also interesting is that those are three totally different forms of energy. They take three totally different forms of apparatus to capture the energy, and they're all totally real.
Then there's a whole other area that I hope, if this gets off the ground, [Rockland] becomes a center of excellence for, and that's examining the way we move people and goods, which today is primarily over roads by long distances. If you go to Scandinavia, which looks just like Penobscot Bay, you'll see these unbelievably beautiful hydrofoil ferries skirting along the top of the water taking people a couple hundred miles away.
People shouldn't be in their car chugging up every weekend, driving back in traffic jams, between New York City and Maine; they should be coming by ferry. Goods shouldn't be fanned out all across the United States from the handful of ports on the West Coast carrying goods from China. They ought to be put in high-speed cargo boats that are able to go to the canal and probably cross the canal by lightweight train and then creep up the Intracoastal Waterway and be in Portland, Maine, in half the time you do in a truck and with 1/35th the amount of energy you use.
What do you think about some of the other energy proposals going on in Maine right now, from wind farm development to biomass plants to tidal projects up and down the coast?
I think the tidal energy projects are great. I think wind has a very important but limited role in the future of the energy mix. I don't have anything against wind, by any stretch. Our firm provides research coverage on two or three of the good wind providers. What I do bridle on is some of the outrageous claims that promoters of wind make about this being a viable solution for not using oil. It has no relevance. Wind is an intermittent source of electricity.
You said you like the idea of tidal energy. Is the technology really there to make these projects viable?
keep saying the whole area of ocean energy is about where offshore oil and gas was in the 1950s, which was just crawling. Today we have these unbelievable super platforms that can drill for oil in 10,000 feet of water ˆ it's really more complicated than operating a space station on the moon, but it took 40 years to get there.
There's no theoretical reason that tides can't work ˆ there's absolutely no theoretical reason that waves can't work, and no theoretical reason that currents can't work. You have to basically make sure you're putting them in a location where your device properly captures the primary energy force and doesn't create some unforeseen consequences as a result that you haven't thought through. Which is all the more reason that I think it makes sense to have an epicenter institute where you gather together from time to time all the best minds in the world. You're not going to force them to move to Rockland, Maine, but if in fact the sources of money end up being there to fund projects and fund fellows, if you look at the history of the way science works, the best people flock there particularly when it turns out to be an unbelievably attractive place to live year-round.
You resigned as CEO of Simmons & Co. in 2005 and hit the speaking tours pretty hard after that. In the speeches you've done across the country you often say that finding new sources of energy is only part of the solution; the other goal is to decrease our dependency on oil. How does a rural state like Maine cut down on its energy consumption?
Well, the same way everyone does: End long-distance commuting. One of the things Maine needs to do really seriously is grow up and get over this obsession against modern cellular towers so we can become a wireless state, because the states that can't address becoming wireless really go back to the buggy age. Once you're totally wireless you can basically end the long-distance commuting.
And then as we start shipping goods by water, the port cities start becoming unbelievably important ˆ and that includes Searsport, and Rockland Harbor, and Portland is a huge winner in all this. The port cities come roaring back as the most economically viable cities in the United States, but it [will be] the ones that are the most attractive to live in through cultural diversity and so forth that become the biggest winners, and so guess which becomes the hottest real estate market in the United States? Midcoast Maine.
Can you tell us any more about when this ocean energy research institute may get off the ground?
No, because I have a lot of ideas, but I'm finishing off a briefing paper that I've been off and on working on for ages, and every time I finish I look at it again and say it's not quite done.
And until I get that process done and sit back with a world-class group of friends that have said, "Count me in on helping you figure this out and lay out a game plan," it's a little like creating a new university. I know the idea's good and we now have an unbelievable piece of property that I'm part owner of and now we just have to build a virtual university from scratch. So how long will it take? I have no idea. I'm so visibly committed to do this now that I keep joking if I don't pull it off I'm going to get run out of Maine on a rail, tarred and feathered.
But the biggest surprise coming out of the purchase was that one of the buyers, Matthew Simmons, a seasonal resident of Rockport, plans to use part of the property as an ocean energy research institute that will study how the ocean can decrease the world's dependence on fossil fuels.
Simmons ˆ who also renovated the historic Strand Theater in Rockland ˆ made his name in the oil and gas industry as CEO of Simmons & Co. International, a Houston-based investment bank he founded in 1974 that works primarily in the energy sector. (Simmons in 2005 stepped down as CEO of Simmons & Co., but now serves as chairman of the company.) In the last 10 years, the company has shifted its focus from oil and gas to renewable energy, including solar and wind.
A man immersed in the oil and gas industry for almost 40 years may seem an unlikely champion of alternative energy. On the contrary, says Simmons, 64, who adds that understanding the traditional energy sectors ˆ oil, natural gas, coal, nuclear ˆ lends an excellent perspective on the future of energy. He also made a splash in the oil industry in 2005 with his book, Twilight in the Desert, which argued that the world's supply of oil has peaked ˆ or is close to peaking ˆ and will steadily decline.
Mainebiz recently spoke with Simmons about his proposed ocean energy research institute, the burgeoning field of ocean energy and how Maine can reduce its dependence on fossil fuels. An edited transcript follows.
Mainebiz:You've been immersed in the oil and gas industry for so long. Why are you trying to create an ocean energy research institute?
Matthew Simmons: Well, I got very concerned about 10 or 15 years ago that it was going to be very hard ˆ unless we found some miracle things we weren't doing ˆ to make sure we had a sustainable oil and gas industry.
Then two and a half years ago we went to Puerto Rico and during our stay we saw this beautiful restored plantation in the hills outside of Ponce, which is the oldest city in North America, and in the 1850s some Germans built this great plantation with grinding wheels of several tons that grind coffee beans and grind corn. There's this little tiny stream that comes off the river that's a concrete culvert about 12-15 inches wide and 12-15 inches deep, and the rivulet of water coming through that powers the entire plantation. If someone had asked, "Do you think there's any energy in that stream?" I'd have said, "No." So that got me incredibly curious about what we don't seem to appreciate about how much energy there is in the ocean.
And then when the tsunami happened I'd read these stories that this was the equivalent of 50 atomic bombs. And then we had, two summers ago when I was in Maine, the awful spectacle of hurricanes Katrina and Rita, which was basically equivalent to bombing the Gulf of Mexico and obliterating the Gulf Coast, and I kept thinking, "I wonder why we're not doing more in energy in the water." There must be some reason that that's never been done.
Then last summer someone pointed out this incredible MBNA building in Rockland Harbor and said, "Someone's going to get the bargain of all time." And I thought to myself, "Man alive, if you were ever to create an institute to study all these aspects of energy in the water that would be a fabulous place to do it." If you're going to study ocean energy, why not look out on water for inspiration?
Why is the MBNA building in Rockland a great site for your institute?
Well, it's not necessarily a great site for it, but it's as good a site as any. I've always had a theory that if you're going to study corn you probably ought to have your institute in Iowa versus Hawaii.
When I started 42 years ago at Harvard Business School, Boston was just emerging from the shadows of being a pretty ugly mill town. The textiles had left, the shoe industry had left, the largest building in Boston was the Customs Tower in downtown Boston, the harbor was filthy, the Prudential building was just going up. By the time I finished Harvard Business School, Route 128 had been built and Boston became the first-generation Silicon Valley. Well, I think five years from now there's just as good a chance that what we call midcoast Maine could become the Silicon Valley of ocean energy. All sorts of sparkling research entities and even some manufacturing places that resemble today what we call a boatyard could be creating the only possibly viable new energy source that can start to replace the era of fossil fuel energy.
With ocean energy, are we just talking about harnessing the tides?
It turns out that there are a host of different things, and that surprised me. The three most obvious, because they're visible, are tides and waves and current. But what's also interesting is that those are three totally different forms of energy. They take three totally different forms of apparatus to capture the energy, and they're all totally real.
Then there's a whole other area that I hope, if this gets off the ground, [Rockland] becomes a center of excellence for, and that's examining the way we move people and goods, which today is primarily over roads by long distances. If you go to Scandinavia, which looks just like Penobscot Bay, you'll see these unbelievably beautiful hydrofoil ferries skirting along the top of the water taking people a couple hundred miles away.
People shouldn't be in their car chugging up every weekend, driving back in traffic jams, between New York City and Maine; they should be coming by ferry. Goods shouldn't be fanned out all across the United States from the handful of ports on the West Coast carrying goods from China. They ought to be put in high-speed cargo boats that are able to go to the canal and probably cross the canal by lightweight train and then creep up the Intracoastal Waterway and be in Portland, Maine, in half the time you do in a truck and with 1/35th the amount of energy you use.
What do you think about some of the other energy proposals going on in Maine right now, from wind farm development to biomass plants to tidal projects up and down the coast?
I think the tidal energy projects are great. I think wind has a very important but limited role in the future of the energy mix. I don't have anything against wind, by any stretch. Our firm provides research coverage on two or three of the good wind providers. What I do bridle on is some of the outrageous claims that promoters of wind make about this being a viable solution for not using oil. It has no relevance. Wind is an intermittent source of electricity.
You said you like the idea of tidal energy. Is the technology really there to make these projects viable?
keep saying the whole area of ocean energy is about where offshore oil and gas was in the 1950s, which was just crawling. Today we have these unbelievable super platforms that can drill for oil in 10,000 feet of water ˆ it's really more complicated than operating a space station on the moon, but it took 40 years to get there.
There's no theoretical reason that tides can't work ˆ there's absolutely no theoretical reason that waves can't work, and no theoretical reason that currents can't work. You have to basically make sure you're putting them in a location where your device properly captures the primary energy force and doesn't create some unforeseen consequences as a result that you haven't thought through. Which is all the more reason that I think it makes sense to have an epicenter institute where you gather together from time to time all the best minds in the world. You're not going to force them to move to Rockland, Maine, but if in fact the sources of money end up being there to fund projects and fund fellows, if you look at the history of the way science works, the best people flock there particularly when it turns out to be an unbelievably attractive place to live year-round.
You resigned as CEO of Simmons & Co. in 2005 and hit the speaking tours pretty hard after that. In the speeches you've done across the country you often say that finding new sources of energy is only part of the solution; the other goal is to decrease our dependency on oil. How does a rural state like Maine cut down on its energy consumption?
Well, the same way everyone does: End long-distance commuting. One of the things Maine needs to do really seriously is grow up and get over this obsession against modern cellular towers so we can become a wireless state, because the states that can't address becoming wireless really go back to the buggy age. Once you're totally wireless you can basically end the long-distance commuting.
And then as we start shipping goods by water, the port cities start becoming unbelievably important ˆ and that includes Searsport, and Rockland Harbor, and Portland is a huge winner in all this. The port cities come roaring back as the most economically viable cities in the United States, but it [will be] the ones that are the most attractive to live in through cultural diversity and so forth that become the biggest winners, and so guess which becomes the hottest real estate market in the United States? Midcoast Maine.
Can you tell us any more about when this ocean energy research institute may get off the ground?
No, because I have a lot of ideas, but I'm finishing off a briefing paper that I've been off and on working on for ages, and every time I finish I look at it again and say it's not quite done.
And until I get that process done and sit back with a world-class group of friends that have said, "Count me in on helping you figure this out and lay out a game plan," it's a little like creating a new university. I know the idea's good and we now have an unbelievable piece of property that I'm part owner of and now we just have to build a virtual university from scratch. So how long will it take? I have no idea. I'm so visibly committed to do this now that I keep joking if I don't pull it off I'm going to get run out of Maine on a rail, tarred and feathered.
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