Latest posts by James H. Rust (see all)
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President Obama’s Energy Speech at the University of Miami February 23 added more details to his energy thoughts as given by his State Of The Union Speech and 2013 Fiscal Year budget submitted to Congress.
His ideas are based upon curtailing use of fossil fuels, in particular coal, due to fears carbon dioxide produced from combustion cause catastrophic global warming. This is the reason why given for our failed energy policies. Detailed discussions of climate science are too lengthy to be given in this paper.
There is little experimental data to support combustion of fossil fuels play a big part in climate. However, there is a vast amount of data showing the role of carbon dioxide is minor compared to other factors influencing climate such as the sun, earth’s orbit, volcanos, ocean currents (El Nino and La Nina), and clouds. The administration’s actions should be taken as future energy policies for the next four years. Policies implemented and policies ignored will lead to a dismal future for the United States.
The United States has the most abundant fossil fuel reserves in the world, the greatest agriculture system, and the most innovative population which should lead to prosperity for centuries. A few remarks about energy policies follow.
HIGH RESOURCE BASE
President Obama decried high gasoline prices and said his opponents will shout the 30-year old solution—drill, drill, drill—that has not worked. He said, “Anyone who tells you we can drill our way out of this problem doesn’t know what they are talking about…The U. S. consumes more than a fifth of the world’s oil. But we only have 2% of the world’s oil reserves.” President Obama could not be more wrong.
Our annual consumption of oil is about 7 billion barrels. Reserves in Alaska exceed 35 billion barrels of oil, reserves off-shore 29 billion barrels, and oil shale reserves in Texas, Wyoming, Colorado, Utah, Montana, and North Dakota exceed 1 trillion barrels. Available oil in Alaska’s 19 million acre Arctic National Wildlife Refuge contains 10 billion barrels of oil on 2000 acres located 60 miles from the Alaskan pipeline. This project has been stalled for more than 30 years. Another trillion barrels of oil are in Canada’s Alberta province adjacent to Montana. TransCanada’s proposed Keystone XL pipeline is to transport 700,000 barrels per day of Alberta’s oil to Texas. Application for the pipeline construction, which is shovel-ready, was made in 2008 and approved by the State Department and EPA last summer. In February, President Obama delayed approval for pipeline construction until after the November election.
HIGH OIL PRODUCTION IN SPITE OF POLICIES
President Obama mentioned the United States produced more oil in 2011 than in the past eight years. This is true due to technological breakthroughs that allowed increased oil production on state and private lands in North Dakota, and natural gas wells in Texas, Ohio, and Pennsylvania. This is in spite of millions of acres of Western land being declared out of bounds for exploration by the Department of Interior, delays in permitting exploratory drilling in Alaska, and delays in off shore drilling on the East Coast and Gulf of Mexico. Has Shell Oil Company been given permits to do exploratory drilling off Alaska’s northern coast it has been seeking for years?
PRESIDENT OBAMA’S MEXICO AGREEMENT
President Obama made a big issue of an agreement with Mexico to open 1.5 million acres (2350 square miles) of the Gulf of Mexico for exploration that could yield 172 million barrels of oil and 304 billion cubic feet of natural gas. These numbers may appear large; but they only amount to 9 days consumption of oil and 5 days consumption of natural gas by the United States. This amount of oil, that would take decades to be delivered to the United States, could be delivered in 250 days by the Keystone XL pipeline. Just one of the new 1100 Megawatt nuclear power plants being constructed near Augusta, GA could save this amount of natural gas in 3.7 years.
ALL OF THE ABOVE
President Obama said we need to exploit “every available source of American energy—oil, gas, wind, solar, nuclear, biofuels, and more.” What about coal which is the leading source of electricity in the United States and the rest of the world? He complains “four billion of your tax dollars subsidizes the oil industry every year.” At the same time we need “to double-down on a clean energy industry that’s never been more promising.”
Wind, solar, and nuclear provide electricity and we use very little oil in producing electricity. Thus, these sources provide no immediate relief on oil consumption. For years solar and wind has been provided subsidies of grants or government-guaranteed loans for plant construction, requirements for utilities to buy back electricity from these plants at costs way above conventional electricity costs (feed-in-tariffs), and mandates (renewable portfolio standards–RPS) to use their electricity regardless of cost.
A string of bankruptcies from solar energy companies show solar energy is not economical; winners are bankruptcy lawyers, and losers are taxpayers and electricity ratepayers.
California has the most stringent mandate in the nation with an RPS of 20 percent renewable electricity by December 31, 2013 and 33 percent by 2020. As of May 2011, the all sector cost of electricity in California was 13.38 cents per kilowatt-hour versus a national average of 9.87—36 percent higher than national average.
Biofuels consist mostly of ethanol produced from corn. In 2011, five billion bushels of corn was converted to twelve billion gallons of ethanol which caused the wholesale price of corn to rise to $7 per bushel against $2.50 a few years earlier. Much research shows it requires more energy to make ethanol than is contained in the product. The situation will get worse in the future because of mandates from the 2007 Energy Independence and Security Act to use 35 billion gallons of ethanol as fuel by 2022. Wikipedia states a 2010 study by the U. S. Congressional Budget Office found the cost to taxpayers to replace one gallon of gasoline with ethanol was $1.78.
The whole country suffers because of food price inflation due to this program. Some policy experts speculated increased worldwide corn prices may have been the primary cause of the Arab Spring uprisings that started January 2011 due to starvation-level food prices.
One of the “more” clean energy forms referred to by President Obama is electric cars. Presently electric car purchasers are given $7500 by President Obama and states, like Georgia, further subsidies. In order to stimulate more sales from the dismal 16,000 in 2011, President Obama is proposing raising the “gift” to $10,000 in 2013. Because electric cars cost from $35,000 to over $100,000, these subsidies are clearly for the highest income people in the country.
It is easy to show electric cars provide no energy savings because their energy use must be traced back to power plants from which electricity to charge batteries originated. These cars are compacts and their equivalent energy consumption is the order of 30 mpg versus the 40 mpg from cars they compete against. About $5 billion has been given as subsidies to manufactures, buyers, and placement of charging stations in homes and elsewhere.
NUCLEAR: WHITHER CO-2 ALARMISM?
President Obama only mentioned nuclear power once in his Miami speech; but it has promise for extending our fossil fuels to hundreds of years in the future. Just one of the two 1100 Megawatt nuclear power plants under construction near Augusta, Georgia could save the consumption of 230 million tons of coal or 5 trillion cubic feet of natural gas during its 60-year lifetime. These numbers represent 23 percent current consumption of coal or natural gas in the United States.
The public may not be aware, but since 1983 all electricity produced by nuclear power paid a fee of 0.1 cents per kilowatt-hour to the federal government for storage of nuclear waste. The annual fee today is $800 million and cumulative payments the past 28 years have to exceed $16 billion. Back in the 1980s a search was made throughout the United States to find the best location to store nuclear wastes. After much study it was decided the Nevada Yucca Mountain location was best and construction started to prepare the site. After $13 billion was spent on the project, President Obama decided to stop construction and revisit site selection. After all the work and money spent on Yucca Mountain, it seems inconceivable a better site could be found.
Only a few percent of materials in nuclear power plant spent fuel elements is considered waste. This is a small volume compared to fuel element volume. The majority of materials are uranium and plutonium that can be used as fuel for future power plants. These materials are reclaimed by a process called nuclear fuel reprocessing. To date the United States has not built a facility to reprocess fuel elements from our commercial nuclear power plants. As a result of this policy, spent fuel elements are stored on site at nuclear power plants for times exceeding forty years.
One of the lessons learned from the Fukushima Daiichi nuclear power plant accident is the presence of spent fuel elements creates problems. It seems prudent the United States government embark on a program to reprocess nuclear fuels to remove spent fuels elements from plant sites. This reduces nuclear waste volumes and allows a site like Yucca Mountain to permanently store materials for thousands of years. Building these facilities will create jobs. Tax payers should not have to pay for this project– use fees paid by customers of nuclear power generation.
RHETORIC, NOT REAL ENERGY
President Obama’s energy speech was long on rhetoric and solved no problems. It suggested expanding subsidies for renewable energy that are a total waste. Solar and wind power plants have lifetimes of 20-25 years. After this time there is nothing left to show for money spent. Uneconomical biofuels are not needed because of our vast fossil fuel reserves.
Some projects to conserve oil can be achieved at no cost to taxpayers. Eliminate heating oil use by extending natural gas pipelines to areas heating oil is used. Due to heating oil costing 6 or 7 times natural gas costs, customers pay for pipelines by lowering heating bills by a factor of two. Once pipelines are paid for, customers receive true cost benefits. Stop use of 3 Btu of oil or natural gas to generate one Btu of electricity for water heating, heating, and cooking.
Instead of oil use liquefied natural gas for producing electricity in Hawaii. This could substantially reduce electricity costs of 36 cents per kilowatt-hour paid by islands customers.
Compressed natural gas can be used as a replacement fuel for oil in buses and other municipal vehicles as done in Atlanta, Georgia. Other applications are using compressed natural gas for fleet vehicles. Based upon energy content; gasoline or diesel fuels are about ten times as expensive as natural gas. So there are numerous examples of replacement fuels to be innovated, for example electric generators, etc.
President Obama mocked the four billion dollar subsidy given oil companies each year. Is it in the form of taxpayer grants to oil companies to do explorations or building pipelines, refineries, and filling stations? Is there a mandate citizens buy gas from particular companies or pay government selected higher prices? Or is it a tax deduction for costs of doing business that all other forms of business are granted?
Oil companies seem like a nice whipping boy in times of stress. That can divert attention away from terrible mistakes in energy policy. Does it make sense eliminating oil company business tax deductions would lower gasoline prices or encourage future oil exploration in the U. S?
There are vast oil reserves across the world. It is not prudent energy policy to drive oil companies to other countries to search for oil as was done in 2010-11 after the Gulf oil spill. Multi-million dollar rigs that left the Gulf of Mexico in 2010 for exploration in Brazil and Africa may never come back.
ENERGY IS A PRODUCT
Much attention is given to United States’ loss of manufacturing sector employment due to technology improvements and movement of jobs out of country for lower paid workers. Production of coal, oil, natural gas, and uranium is manufacturing. Six hundred tons of coal, four hundred barrels of oil, or ten million cubic feet of natural gas has the same economic value as making a $30,000 car or harvesting 4,000 bushels of corn.
Millions of high-paying jobs can be created to satisfy domestic energy demand and an expanding export market. These jobs can’t be outsourced because raw materials are domestic.
The beauty of this activity is no government funds are required. Trillions of dollars in revenue are available to federal and state governments through royalty payments and business and individual income taxes.
THE PURSUIT OF FOLLY
It is assumed present failing government energy policies are due to belief carbon dioxide from burning fossil fuels causes global warming. Sacrificing our economy is for naught because China and India are pursuing policies of increased fossil fuel use that render our use of smaller significance. Another factor is calculations from global climate computer models show if the U. S. reduces fossil fuel use to the level of 17 percent the 1990 level by 2050, the global reduction in temperature would be about 0.2 degrees by the year 2100.
The administration is riding the wrong horse with regards to energy policy. It will be difficult to dismount due to pressures from its constituency.