Wednesday, July 11, 2007

The 2007 Energy Bill: Significance, Symbolism and Cost

After receiving the opinions of Paul Dreissen, we asked other member’s of our Energy Counsel for their thoughts. The following is what we received from Michael Economides (previously published with Human Events). What are the Senators thinking? Or, are they thinking?

On June 21 the US Senate passed an energy bill that if it becomes law it would set in motion one of the most economically destructive paths in memory. Thrown together is an unsavory mix of little impact but enormously expensive, complete with delusions of energy independence, biofuels, global warming and all the other slogans du jour of environmentalism. More to the point, and not surprising, the bill does not address at all the fundamental issue: In a modern world run on energy, with galloping China and India, with ever-controlling producing nations, where will America’s energy supply come from? The country imports now almost 70 percent of its oil and the rest of it is under constant assault.

A sample:
An increase in automobile fuel economy requirements (the Corporate Average Fuel
Economy, CAFE standard) to a fleetwide average of 35 mpg by 2020 from the
current requirements of 27.5 mpg for cars and 22.2 mpg for SUVs and small

There is nothing wrong with better efficiency, but we went through this before. The American public voted with bigger cars, driving more and asking for more services. For example, FedEx and DHL have created a new era of deliveries and expectations. One of the things that the social engineers forget is that the personal car is a symbol of American personal freedom, what makes this country what it is. And yet they constantly want to harp on forcing us back to a European mold, forgetting that Holland can be driven across in two hours. Gasoline demand constantly increases because we drive more, and we do more with our driving. In 2004, the National Commission on Energy Policy determined that even if Congress mandated that the domestic auto fleet increase its average to the much larger fuel economy of 44 miles per gallon America’s motor fuel consumption will still increase by 3.7 million barrels per day by 2025. Even the apologists of the bill, in very flawed calculations, suggest that the bill will save 1.3 million barrels per day (about 6% of current consumption) by 2025 and manipulatively “slightly less than what we import from Saudi Arabia.” (echoes of Al-Queda?) The new CAFE standards will put an economic straightjacket on already battered US automobile manufacturers but are unlikely to change the American public’s tastes and preferences.

Requires that half of the new cars manufactured by 2015 be capable of running on
85 percent ethanol or biodiesel fuels

A requirement to produce 36 billion gallons a year of ethanol, as a substitute for gasoline, by 2022, a sevenfold increase over production in 2006. Ethanol would be made from corn and cellulosic sources such as prairie grass and wood chips.

Corn ethanol is a scam with a negative energy balance. It takes about 1.8 gallons of gasoline to produce one gallon of ethanol. More important is that corn ethanol cannot provide enough fuel to displace imported oil. In 2005, U.S. farmers produced about 11.1 billion bushels of corn. If the U.S. turned all of that corn into ethanol, it would only supply about 6 percent of America’s total annual oil needs or about 20 percent of our gasoline needs. If all 3.2 billion bushels of soybeans produced by American farmers in 2006 were converted into biodiesel, they would only yield about 4.8 billion gallons of diesel fuel, about 1.5 percent of America’s oil needs. The talk about cellulosic ethanol is tantamount to legislating that all new American children grow to be 6-ft tall. The enzyme that would convert biomass into cellulosic ethanol does not exist and nothing is expected any time soon.
Supports large-scale demonstrations that capture carbon dioxide from
coal-burning power plants and injects it into the ground.

Carbon dioxide sequestration is what the bill advocates imply. But again reality raises its ugly head. Taking just the portion of oil and gas used in combustion for transportation and power generation (the rest is used as source of materials) and adding the combustion of coal, according to EIA calculations, world carbon dioxide emissions are slated to increase from 25.55 billion metric tons in 2004 to 43.68 billion metric tons per year in 2030, a 71 percent increase. If just the incremental carbon dioxide is injected at a very good rate per well of 10,000 tons per year, there is a need for 1.8 million new wells, about the same number of wells in current operation worldwide, still active and drilled in the entire history of production of all oil and gas. At an average cost of just drilling of $2 million per well, there will be a need for $3.6 trillion, not counting infrastructure which could easily double the figure. This is about 60 times the current annual budget for well construction in the industry, estimated at $120 billion.

This is why anthropogenic global warming is not a trivial issue for the world in either the cost of energy transition to something else or in sequestering emissions. In going from idea to reality the path is lined with staggering costs.

But none of this bothers the architects of this bill, whose real significance is at best symbolic and very costly but smacks with social engineering, a yet another failed attempt throughout the last 150 years in Europe and the United States. We should all be stewards of the environment (the US is one of the cleanest nations on earth), but radical environmentalism, even when it wears a tie, has replaced older–isms. It is more of a nuisance, intended by mostly upper middle class and wealthy westerners to shock and be relevant, a more veiled attempt than Paris Hilton’s antics. Of course, try as they may, the US economy is enormously resilient and will likely shrug this nonsense off.

Although it may have been attributed to others, the recent bill has about the same depth as what Georges Clemenceau, France’s World War I prime minister said: “If my son is not a communist by the age of 20, I will disown him and if by the time he is 40 he is still a communist I will disown him.” Many environmentalists are way past 40.

Prof. Michael J. Economides, University of Houston and also Editor-in-Chief Energy TribuneHouston, TX

No comments: