EQT Says High Power Bills to Drive Energy Development

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2:30Chris J.:Bloomberg Audio Studios. Podcasts. Radio. News.

2:36Toby Rice:You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio.

2:42Chris J.:Bloomberg reported over the summer that businesses and households served by the largest U.S. power grid will spend a record$16.1 billion to ensure electricity supplies amid a massive artificial intelligence-driven demand surge. We are talking about this a lot. And having said that, we just talked about what NVIDIA is doing with OpenAI and their spend. That price increase, though, prompted calls from utilities and energy groups to build more generation. So we want to see what our next guest has to say about it. He is in the midst of it. Toby Rice is president and CEO of EQT, the nearly$31 billion market cap vertically integrated energy company, obviously specializing in net gas.

3:19Chris J.:Toby, good to have you here. I want to start big on broad, the macro. How would you describe it right now for you and your business?

3:28Toby Rice:Natural gas markets, in one word, I would say it's going to be very volatile in the short term. And one word for the long term, I'd say incredibly exciting. When you look at the three major themes that are hitting energy right now, the desire to continue to evolve our energy systems, replacing coal with natural gas, major theme. AI is what everybody's talking about right now. That's a major, that's going to be a major source of demand. And then providing energy security to our allies is still a thing. And that's going to be playing on the LNG. You step back and you add it all up. We're talking about a 20 to 40 % increase in natural gas demand in this country.

4:01Chris J.:But let me just ask you, because before that, let's go back. That's longer term. But I know our BI people have put some research and they talked about North American gas is at an inflection and they talked about AI data centers adding to domestic demand near Appalachian supply while LNG exports sustain global. But tell us about the shorter term. Is there a little bit of an inflection point for you?

4:20Toby Rice:I'd say the next the next three to five years data centers and fueling the revolution is going to be a very big focus. But keep in mind, we're going to be doubling U.S. LNG exports over the next five years. So we're doing both of these at once. And the good news is that we've got the natural resource in this country. It's just going to come down to how fast we can actually get this infrastructure built, focusing specifically on the power demand side of things. When you step back and look at electrify everything, not just AI, we're looking at a 10 to 18 BCF a day natural gas demand to meet that.

4:51Toby Rice:That's a 10 to 18 percent increase in demand. And about four to six, about 40 percent of that is going to be for data centers. So it's going to be this can be really big. We're seeing these opportunities happen in our backyard. EQT, we signed up over one and a half BCF a day of natural gas. The only cubic feet.

5:07Chris J.:The only cubic feet, yeah. Just for those who might not know.

5:08Toby Rice:And this is a market that's about 100 BCF a day, just to make the numbers ballpark. So one and a half BCF a day of natural gas supply for these data centers in Pennsylvania. This is going to generate enough power to almost power two New York cities. So these are major league infrastructure projects in a grid that desperately needs more power generation.

5:27Chris J.:The tech companies like to talk about nuclear power generation powering their data centers. The president likes to talk about the promise of nuclear power. And I say promise of it because we know how to do it, but it just takes a long time and it's very expensive. How do you view the increased interest in recent years in nuclear power as a threat to your business?

5:46Toby Rice:I think that natural gas is the clear winner right now. You know, this has been a big question that people have been asking over the last, call it 18 months, what is going to power this AI revolution? What was originally thought to be renewable is going to pick this up. Then people went to nuclear and realized it's going to take too long to get it done. Comes back to natural gas. Why? because we have the track record of scale and speed if you look over the last 10 years we've seen natural gas power demand increase 14 bcf a day so think about how much uh we're planning on doing we've done that with natural gas now longer term we think nuclear is going to be a great option but understand this natural gas has a vehicle to become zero carbon and that's why we're spending a little bit of money today on carbon capture that will enable natural gas to be the first reliable, affordable, zero carbon energy solution.

6:35Toby Rice:The world does not have that today.

6:37Chris J.:You know, just like there's a big spend in AI and data centers, there seems to be a big spend in that energy to support it and what's needed. You have announced multiple long-term sales and purchase agreements, I think just in the last few months. Some are fearing an oversupply, Toby, in 2027, 2029. What are you hearing from LNG buyers about kind of your demand visibility window and how confident are you? It sounds like you're pretty confident on a longer term poll for LNG or US LNG specifically?

7:03Toby Rice:Yeah, on the LNG front, we certainly wouldn't disagree. We do see a little bit of an oversupply situation globally for LNG that could lead to softer prices in that 27 to 29 timeframe that you mentioned. And you say, well, Tobe, why did you just go and sign up for a massive amount of LNG? It's because our contracts are going to be starting. We're going to be getting that exposure in 2030. So this oversupply will pass and then we're back to a tight situation. And that's where LNG is hitting the market. When you want to talk about demand, just step back and look at this world for a world that's going to continue to care about climate and emissions.

7:38Toby Rice:Replacing the coal in this world is going to require an additional 170 BCF a day of natural gas. If you care about the people living on this planet, it's going to take an additional 120 BCF a day.

7:48Chris J.:How sure are you that people care about that?

7:50Toby Rice:We are certainly feeling this year a pushback when it comes to concerns about carbon emissions

7:57Chris J.:and climate. Not from everyone. And I have to be very careful because there are a lot of folks that are working really hard on this area.

8:03Toby Rice:But how confident and comfortable are you? On the energy transition, there's a ton of people that are passionate about this. And that passion is not going to go away with just one election. But I think what is happening now is people are stepping back and they're looking at the plans they put in place and they're looking at the results of those plans. And what we're seeing is that Americans energy bills are up over 35 percent now renewables is not to blame for all of that we've had a massive infrastructure cancellation movement that's prevented us from getting energy infrastructure built that's the root cause of this issue but when you step back and look at how much how big of an impact this has had we spent over two trillion dollars on renewables last year and put that in perspective we spent over 1.3 billion dollars in oil and gas the the the energy solution that provides that

8:49Chris J.:again?

8:50Toby Rice:Yeah. $2 trillion in renewables. What do you mean we spent? The world. Invested over$2 trillion in renewables.

8:57Chris J.:And built out and...

8:58Toby Rice:Yeah. And then for comparison, oil and gas investments that provides over 80 % of the world's energy, we invested over$1.3 trillion. So this has been a very big theme, but it's coming...

9:11Chris J.:So this shows to you that people are, this is the future is renewables. That's where they're spending money. Is that what you're saying?

9:16Toby Rice:If you went by where people were spending money, that does not necessarily mean what's going to be the future. The future of energy is going to be the energy solution that is affordable, reliable and clean and has all three of those attributes in check. I think the energy transition maybe has prioritized the clean aspects of energy. But as we're seeing right now, Americans are scratching their heads, looking to see the record amounts of energy investments that we're making and the record amounts of energy production in this country. And their energy bills are up 35%. they're scratching their heads.

9:47Toby Rice:Why is this happening? It's because the solutions that we're putting on the field need to be the right solutions, and that is natural gas.

9:53Chris J.:But it's also because, as you said, the demand has gone up. For years, it was kind of flat, it was stable, and then we saw this huge increase in demand for power here in the U.S. So demand has a lot to do with it, too.

10:03Toby Rice:Well, demand hasn't really started to pick up just yet. We're coming out of it. I think we're looking at massive growth prospects. But this really is is a repercussion from all of the not underinvestment in reliable infrastructure over the past decade. Now, this country in America, since 2018, it's become almost impossible to get a pipeline built in this country. We own an asset called Mountain Valley Pipeline, took an active Congress to get that pipeline built. So infrastructure has been incredibly challenged, and that has really strained markets and really put some stress on the system.

10:36Chris J.:So let's talk about those challenges. Are you having constructive conversations? Are you having any conversations with the Trump administration, representatives from the Trump administration, to try to ease those regulatory delays?

10:46Toby Rice:So this administration truly understands how important, affordable, and reliable is in the energy equation. You know, Secretary Wright, fabulous, really understands energy, all forms of energy. So I think we're going to have some practical approach towards energy solutions that we put in place. But that being said, the executive branch is not going to dictate the types of energy that we put in this country. We're going to need Congress to act to pass meaningful perma reform so we can get back to letting the most cost effective, reliable, cleanest form of energy. Do you consider wind power a form of energy?

11:19Toby Rice:Absolutely.

11:20Chris J.:It doesn't seem like this administration supports that. Yeah.

11:23Toby Rice:I mean, is that a mistake? Well, I would say it's as a as a sponsor of a pipeline, Mountain Valley Pipeline that has had has been subjected to tremendous political force. This is a situation where I think we would be in a much better place if we would let market forces dictate the energy that makes its way to the playing field, let political force take the backseat. Unfortunately, we are going to need some help from our leaders in Washington, D.C. I hope they notice that we've got a massive demand surge coming. We do not have the right infrastructure set up right now. We need to do a massive build out.

11:54Toby Rice:And just for people to understand the race that we're in right now, this is a national security threat for us. We have got to win the race for AI. And right now how we're faring in the US where we put in six gigawatts of reliable power generation this last year China put over 60 of gigawatts of reliable power gen most of that coal so We are not keeping pace.

12:14Chris J.:We need to do a lot more just want to go back to cost Just because it's cheap and I understand there's other parameters that you're putting in there I mean there are net gas there are you know leaks and so on and so forth that do impact the environment So it's not the cleanest and purest. There are problems with it. And I just wonder if we're always constantly chasing the cheapest thing out there, that's not necessarily a good thing. And just bring up all the manufacturing that we've put outside the United States just because it was a cheaper good that we're finding maybe that wasn't such a good strategy.