The Gulf Disaster: Is Failure an Option?

Have you ever heard the phrase “rocket scientist” in reference to someone really smart, someone who can solve problems? Well, we are pleased to have a “rocket scientist”—or at least an astronaut and a scientist—on board to help shed light on some of the current issues facing America—especially energy. We welcome Harrison Schmitt, former New Mexico State Senator and Apollo Astronaut.

As is pointed out here, no matter how many rocket scientists one has working on a project, accidents can still happen. Here, Harrison Schmitt draws comparisons between how NASA handled a crisis and how the federal government is handling the BP/Gulf disaster. He offers and interesting perspective and shows that it is possible to do it right—even for government agencies.

No Analogy Between The Gulf Oil Spill Crisis And Apollo 13
President Obama’s Administration and its supportive media repeatedly use our 1970 Apollo 13 experience as analogous to the effort to contain and cap the Deepwater Horizon oil spill in the Gulf of Mexico. Not hardly! The rescue of Astronauts Jim Lovell, Fred Haise, and Jack Swigert after an oxygen tank explosion on their spacecraft illustrates how complex technical accidents should be handled in contrast to the Gulf fiasco. Nothing in the government’s response to the blowout explosion on the Deepwater Horizon and its aftermath bears any resemblance to the response to the Apollo 13 situation by the NASA of Apollo and its Mission Control team at the Manned Spacecraft Center in Houston.

“Failure was not an option” for Gene Kranz and his Apollo 13 flight controllers and engineers. In contrast, failure clearly has been an option for President Obama and those claiming to have been on top of this situation "from day one" in his White House and in the Departments of Interior, Homeland Security, and Energy. With no single, competent, courageous, and knowledgeable leader in charge of a comparably competent, courageous, and knowledgeable team as we had with Apollo 13, the Administration has been doomed to failure from the start. The President, without any experience in real-world management of anything, much less a crisis, has no idea how to deal with a situation as technically complex as the Gulf oil spill.

Whatever may be the culpability of British Petroleum and its federal regulators in the accident, it has been left to BP engineers and managers and to Gulf State officials to respond as best they can in a regulatory environment that is politically charged, incompetent, fearful, and hesitant.

Absolutely no reason exists to assume that any part of the Federal Government has engineering expertise comparable to the petroleum industry that can be applied to this or any future energy-related crisis. Certainly, White House Chief of Staff Rahm Emanuel, Interior Secretary Ken Salazar, Homeland Security Secretary Janet Napolitano, and Energy Secretary Steven Chu have no more experience in these matters than does the President.

Salazar’s empty threat to “push BP out of the way” has no basis as a realistic option and best illustrates the floundering of the Obama Administration. Indeed, from "day one," the expertise of the entire U.S. and British drilling and production industry, with a single experienced engineering manager in charge, should have been mobilized to combat this spill. It still is not too late to start doing it right.

A more appropriate analogy from the Apollo era would be the recovery from the tragic fire during a pre-launch test on January 27, 1967, that took the lives of astronauts Gus Grissom, Ed White, and Roger Chaffee. The Apollo 204 fire occurred in the clearly recognized crisis atmosphere of the Cold War in which America raced to demonstrate to the world the superiority of freedom over the communist oppression of the Soviet Union. The Deepwater Horizon explosion took place in the equally apparent crisis of America’s dependence on sources of oil from foreign nations governed or intimidated by our enemies or economic competitors. There, however, the validity of the 204 fire analogy ceases.

The NASA's response to the 204 fire was to rapidly implement its previously well-formulated, objective investigation of its causes, both technical and managerial. Managerial responsibilities were identified and George Low and his engineering team made appropriate changes without a prolong exercise in finger pointing or the delays of another Presidential, buck-passing "commission." NASA of that day moved forward and even accelerated the Apollo effort to its successful conclusion. Apollo 8’s Frank Borman, Jim Lovell, and Bill Anders orbited the Moon less than two years after the 204 fire. Seven months after that, on July 20, 1969, Apollo 11’s Neil Armstrong and Edwin Aldrin, with Mike Collins in orbit overhead, landed on the Moon.

The lessons from the 204 fire were applied and we moved on. In contrast, President Obama’s and his Administration’s otherwise rambling response to the Deepwater Horizon explosion has been to stop off shore oil exploration by the United States. How misguided and, indeed, how either ignorant or devious can our President be!

President Obama has shown repeatedly that the best interests of the American people are a lower priority than his ideological goals to change America from what it has been, to some mystical, socialist utopia with an energy-based standard of living equivalent to that of the late 1800s. As if the Administration could not make its ineffective, disjointed response to the Deepwater Horizon accident any worse, it did not even use preciously established sea surface burn-off and dispersant procedures to minimize the effects of the spill. Then, it has inexcusably delayed approving and assisting in Louisiana Governor Bobby Jindal’s request to protect the State’s shores and wildlife habitats with offshore sand barriers, as unnecessary as having to make that request should have been. And this is the government that Congress and the President want to run healthcare, immigration, banking, carbon emissions, auto manufacturing, and everything else in American life?

The geologists, engineers, and on-site managers responsible for the Deepwater Horizon drilling effort understood that drilling to an oil reservoir through 13,000 of rock in 5000 feet of seawater would be very difficult. They knew that their geophysically defined target, typical of Gulf petroleum reservoirs, would be a complex mix of crude oil, natural gas, and brine contained in porous and permeable rock. Because of the rock and water depth, the reservoir also would be under very high pressure. In this situation, a reliable blowout preventer, a crimping device installed on the pipe near the floor of the sea, would be essential to reduce the risk of both a spill and potential explosion on the Deepwater Horizon.

Current information indicates that BP installed a defective blowout preventer and does not have a deep water, robotically emplaced, crimping technique as a backup to the blowout preventer. Essential to the prevention of future accidents will be an objective, complete technical and managerial investigation of why a geological and engineering situation of known risks spun out of control. The primary question is, will such an investigation be possible in the politically charged, adversarial “boot on the neck” atmosphere created by President Obama and his team? Imagine if such an atmosphere had surrounded the 204 fire investigation and recovery.

Responsibility for the Deepwater Horizon accident ultimately lies with the chaotic regulatory environment for petroleum exploration created over recent decades by Congress and the Department of Interior. Will we learn anything about regulatory overkill from this tragic loss of eleven lives and disruption of business and employment in the Gulf? Elimination of access to most on-shore and near-shore oil production has driven American exploration away from more easily discoverable and produced resources and into the much more dangerous and technically challenging deep waters of the seas and oceans. Even then, drilling and production accidents are exceedingly rare in spite of the geological, engineering, and weather-related difficulties explorers and producers face as a consequence of misguided restrictions.

Long-term, history reminds us that naturally and accidentally released oil in the oceans disappears due to bacterial action. Remember that the fuel oil blackening of beaches of the world from World War II ship destruction disappeared after only a few years and ocean life survived. The Gulf oil spill will not be this Nation's most serious environmental crisis: World War II tops it by orders of magnitude in more than just this respect.

If America and freedom are to survive indefinitely, the next Congress must begin to restore sanity and intelligence to national energy policy. Until economically competitive alternatives become fully feasible, fossil fuels will remain the mainstay of our economy. Our dependence on unstable foreign sources of oil has become one of our greatest national security vulnerabilities that only domestic production can solve in the next 50 years. The 2010 elections become a critical starting point to bring rational, constitutional, America-first thinking back into the Federal Government.



Harrison H. Schmitt is a former United States Senator from New Mexico as well as a geologist and former Apollo Astronaut. He currently is an aerospace and private enterprise consultant and a member of the new Committee of Correspondence.

A Chill Hits Wind Power

Would you like to save money? Of course you would! If you live in a house or rent an apartment then you probably consume electricity and have to pay an electrical bill at the end of the month. In this spirit of saving money, CARE has decided to take a realistic look at the cost-effectiveness of a popular renewable energy source; wind power.

CARE is not against wind power or renewables in general, but our friend Dennis T. Avery, an environmental economist and senior fellow for the Hudson Institute, has brought some sobering facts to our attention that we would like to share with you. One such fact is that "General Electric has just announced a big wind project: 338 turbines, rated at 845 MW. GE claims it will power for 235,000 homes, and is applying for appropriate federal subsidies." This is troublesome because GE could only realistically provide power for 21,000 households while costing taxpayers money at a time when America is drowning in red ink. This trend isn't limited to America; it's affecting countries that are seen as leaders in wind power such as Denmark and Germany. The British are even being forced to become more dependent on Vladimir Putin's Russia because they overinvested in wind power and... well we better stop there so you have a reason to read the whole article!

A Chill Hits Wind Power
CHURCHVILLE, VA—As I write, a strong wind is blowing across the Alleghany Mountains onto my house. It’s bringing an "Arctic Clipper" that will drop my temperatures this weekend to a frigid and unusual 6 degrees F. Why can’t I get some good from this chill wind—with a wind turbine to harvest the "free" energy?

Out in Oregon, General Electric has just announced a big wind project: 338 turbines, rated at 845 MW. GE claims it will power for 235,000 homes, and is applying for the appropriate federal subsidies.

Will the wind turbines power 235,000 homes? Don’t bet on it. My friend Donald Hertzmark—an energy economist—warns the power deliveries from this wind project are likely to average only 25 percent of its rated capacity. That would serve only 58,000 homes, not 235,000.

But Hertzmark says even this is too high because the wind is highly variable. The Texas power grid’s experience is to rely on no more than 9 percent of the wind farm’s rated capacity. That would reduce GE’s real subsidy claim to about 21,000 households.

It gets worse.

Most of Oregon’s power comes from dams, and the lean period for hydropower is winter. That’s when heating demand peaks—but also when the dams have to restrict their water flow to protect fish, control flooding, and save up irrigation water for the next summer.
How likely is it that wind turbines can add to Oregon’s generating capacity in the midst of the winter electricity demand surge, and offset the hydroelectric generating restrictions? Not very, says Hertzmark.

This January, Britain’s wind turbines (6 percent of total generating capacity after many billions of dollars invested) supplied virtually no power on most days. The wind tends not to blow when and where it’s already very cold.

The stars of the British winter power demand were natural gas turbines, which are 34 percent of capacity and supplied 40 percent of the power during the winter wind lull. But Britain’s North Sea natural gas is running out; the only likely new source would be natural gas piped from Vladimir Putin’s Russia. Ouch.

"Wind cannot be relied upon to provide firm generation at full capacity coincident with peak demand." warns Hertzmark. "Wind might be capable of contributing to the peak demand requirements at some times. However, this will rarely happen—and when it does, it will be for brief periods. For significant periods of time, no households will be served by the wind farms."

Nor have either of the worlds "wind leaders"—Denmark and Germany—decommissioned any fossil fuel plants. The fossil generators are kept in "spinning reserve"—burning fossil fuels—to keep the lights on in the schools, factories, and hospitals when the wind dies.

Why build wind turbines at all? Well, wind and solar were the only energy sources the Greens would endorse, probably because they’re so expensive and erratic that there’s no danger of anybody getting hooked on cheap power again. Denmark was also selling wind turbines to other countries, so they had to be demonstrated at home. Now China is making cheaper turbines. Who will buy?

The cost of the "free wind"? Projections are about 17 cents per kwh—far higher than other energy sources. One of my neighbors has just invested $100,000 in a wind turbine. I think he’s wasted his money—and some of yours.

DENNIS T. AVERY is an environmental economist, and a senior fellow for the Hudson Institute in Washington, DC. He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 24421 or email to cgfi@hughes.net

Power: Commentary: How Myths Distort Energy Policy

Have you ever read something and had a gut feeling that what you were reading was somehow distorted or flat out untrue? Well part of CARE's mission is to provide the public with an accurate picture of the important role that abundant and affordable energy plays in our lives. To help our readers understand how myths distort energy policy in the United States, CARE has enlisted the aid of Thomas Tanton, an Environmental Fellow with the Pacific Research Institute. In the blog posting below, Mr. Tanton dispels numerous myths including: The perception that foreign oil provides most of our energy, renewables will replace conventional energy sources, the United States is a disproportionately large polluter compared to other nations, and energy efficiency reduces energy use. Mr. tanton also establishes a fact that is seldom mentioned in America's energy debate - inreased oil production can yield environmentally friendly results!

Energy is a complex issue but thanks to contributors such as Thomas Tanton, everyday people have the chance to get an accurate picture of the energy debate. We here over at CARE encourage you to read on and to let fact rather than fiction guide your views on energy policy.

Power: Commentary: How Myths Distort Energy Policy
Congress and various states are considering a fundamental restructuring and regulation of our energy policy. Any such effort should be based on facts, but legislators, unfortunately, incline to myths, such as the notion that most of our energy comes from oil.

Myth: Foreign Oil Provides Most of Our Energy
According to the U.S. Department of Energy and the Energy Information Administration, oil represents less than 40% of our energy use. A full two-thirds of that oil comes from North America, primarily Canada, not the Middle East. According to another prevailing myth, alternative energy sources will reduce the use of petroleum. Such sources may first reduce domestic production, but they will not affect production in unstable regions. Renewable technologies are subject to import and price security concerns as well.

Myth: Renewables Will Replace Conventional Energy Sources
A correlated and persistent myth is that increasing wind- and solar-generated electricity will reduce our dependence on foreign oil and thus boost our energy security. Less than 1% of our electricity is generated using petroleum, so any renewable generation will have no appreciable effect on petroleum demand. Activists and regulators believe that energy companies will not invest in clean reliable energy, so we need government programs to do so. This ignores the reality that energy companies are investing huge sums of money to develop cleaner and more reliable sources of energy.

The U.S. faces a 19% increase in energy demand over the next two decades. To meet that demand, U.S.-based oil and gas companies from 2000 to 2007 invested an estimated $121.3 billion on emerging energy technologies in the North American market. This expenditure represents 68% of the estimated total of $180 billion spent by U.S.-based companies. Renewable energy sources, however, will not soon replace most conventional energy sources. Despite considerable publicity on their behalf, renewables will remain a small fraction of our energy mix for the foreseeable future.

Myth: The U.S. Is a Disproportionately Large Polluter
From all sources, the U.S. consumes large amounts of energy. But does the U.S., as mythology has it, emit a disproportionate amount of the world’s greenhouse gases? It should be kept in mind that the U.S. produces a large portion of the world’s goods and services. Energy-related emissions of man-made greenhouse gases represent more than 80% of all anthropogenic emissions. Emissions and energy use are linked.

In 2008, goods and services produced in the U.S. accounted for 30% of all of the world’s production as measured by gross domestic product. In the same year, the U.S. share of global greenhouse gas emissions was only 19.3%. Richer countries are actually cleaner and healthier countries. It is the affluent society that does not want to be the effluent society, as various environmental analysts have noted.

Myth: Energy Efficiency Cuts Energy Use
Prevailing mythology also favors federal mandates for higher-mileage cars in the belief that this means less energy consumption. This ignores the reality that increased energy efficiency leads to increased energy use. In the case of vehicles, the fuel efficiency, as measured by Corporate Average Fuel Economy (CAFE), has led to increased driving, and — along with changing land-use patterns and increases in population — to increased consumption. Some hold that forcing drivers to use alternative fuels will help solve global warming. Such fuels, unfortunately, do not necessarily result in lower greenhouse gas emissions.

Fact: Increased Oil Production Can Have Green Results
Meanwhile, it is not a myth that expanding domestic oil production would reduce imports and even help improve the environment. Less than 1% of all oil found in the North American marine environment comes from offshore oil and gas development. According to the National Academy of Sciences, 60% of oil in the marine environment is the result of natural oil seepage through the ocean floor. In many places, it is even higher.

For example, all of the tar on the beaches of Santa Barbara is from natural oil seeps. Reducing oil reservoir pressure through extraction of petroleum will decrease oil pollution from natural seepage. New drilling technology, developed by private energy companies, has greatly reduced the risk of oil spills.

Seeking an Energy Policy Based on Reality

"It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so." That adage, attributed to Mark Twain, applies in particular to energy. Energy myths have consequences their advocates prefer to ignore. Policy based on myths could easily curtail our energy supply, drive up prices, and even increase pollution, all without an increase in energy security.

On the other hand, a common-sense energy policy based on facts stands the best chance of increasing our supply, lowering prices, trimming emissions, and boosting our overall energy security. If that is indeed their goal, policy makers, the media, and the public should reject energy myths and stick to the path of reality. That way alone leads to energy abundance and security for America.

***

Thomas Tanton is an Environmental Fellow with the Pacific Research Institute.

An Informed Voter's Opinions on Cap and Trade

Typically here at Comments About Responsible Energy, we feature opinions, current energy news, and have made available a cadre of experts who willingly share their insights with us. Upon reading, you are invited to add you comments or questions.

In the CARE Newsletter, The PowerLine, we frequently post questions from the “audience”—either an audience member from one of Marita’s speaking engagements or something that comes in via e-mail in response to the newsletter. We solicit the answer from an appropriate expert and post both the question and answer there.

But this posting is different. It is from a CARE Newsletter Reader and it does have questions. And we are inviting our various experts to comment on it. But we’ve chosen to post this piece here in the Blog because we think the author’s comments and questions may reflect some of what you are thinking. We invite you—expert or not—to respond to the thoughts and questions posted here. Tell Criss where she is right—or where she is off base. If you know the answers to her questions, please offer your insights.

My feelings on cap and trade can best be expressed by the following:
The root purpose of the Cap and Trade bill appears to me to be reducing greenhouse emissions and steer the U.S. away from fossil fuel dependency; the ultimate goal being reducing the emissions by 20% by the year 2020. It accomplishes this via various taxes, surcharges, fines and the like and then distributing these funds to the development and deployment of “renewable” energy sources.

When I look at gas, oil and coal I realize that they give us electrical energy, transportation/shipping fuel and a ton of by-products like: plastic, herbicides, pesticides, fertilizers, pharmaceuticals, cosmetics, more than 50% of all our composite materials, including fabrics, air and water filters and even pencils. Until recently these fossil fuels have been the most cost effective sources of these energy needs. We humans have known, consciously, as a whole, that these fuels put poisons into our air, water and soil. We have also been aware that they kill humans since at least the 1800’s. No government taxes in any country developed or made available these fuels and all their various uses to the masses, rather free enterprise did that. Governments did not really get involved until it was admitted just how deadly these poisons from burning these fuels can be. IE: There were thousands of deaths from these poisons. Also all three of these fuel sources are an earth resource. They are finite as far as we humans are concerned because it takes the earth millions if not billions of years to produce them. Worldwide consumption rates to these fuels are increasing each year. This means eventually they will become consumed to extinction. We humans currently, nor in the near future, have a way to make our own version of these fuels, en mass, quickly and cost efficiently.

I do not want to put any more poisons into our air, water and soil. So any replacement energy source will need to be cleaner than our existing ones. Nor do I want to rely on another finite earth resource for energy as eventually that too will be consumed to extinction. So they should be as renewable as possible. Nor do I want to have the new energy source to be more dangerous than any existing fuel source to harvest, refine, distribute and burn or utilize and dispose of in any way. Nor do I want to be charged to develop these new energy sources or to put these new sources into production. I believe that the private enterprise sector should do that. And the new sources must be at least as cost effective as the existing energy sources.

The existing alternatives to gas, coal and oil are hydro, solar, wind, geo-thermal and nuclear.

I rule nuclear out because it is based on another finite earth resource--uranium, which is rarer than gas, oil or coal. Rarer than diamonds. Plus it has some safety and security issues that have yet to be resolved. The large plants are almost as cost effective as existing gas, coal and oil, but the cost of safety and security make it uneconomical. Then there is the fact that it only addresses, on a large scale, just one energy need--electrical. It does not address transportation, other than large sea vessels, nor does it address all the by-products. Its safety and security issues also means that additional poisons can and have been, released into either or our air, water or soil. And radiation poison scares me as much as any other natural or man-made disaster or poison, if not more so.

I rule out solar and wind because again they only address electrical energy and do not address transportation or by-product. Yes there is some research to use electrical airplanes, but the successful ones so far are for one or two people and not mass transit or cargo. And yes we do have some electrical vehicles, but they too are not ready for economical en mass deployment (being small they are a safety risk to occupants up against say a dump truck, nor do they have the oomph to plow thru a snow drift). When implemented for large scale electrical production there are some environmental issues and they are not as cost effective as gas, coal and oil production plants in our current business economic model (mega bucks, mega profits, mega quickly). Although, these are very good and cost effective on a small non-commercial production scale, so much so that the energy companies are doing everything in their power to push the price up and they must perceive this as a threat to their mega bucks.

I rule out hydro energy as again this is mostly electrical energy and has some safety and security issues of its own to be resolved. Mainly concerning the dams themselves. They disrupt the natural flow and ecosystems of the river they are implemented on and there is the risk of dam failure which could result in deaths from flooding. Nor does hydro address all the by-products. They are however almost as cost effective as gas, coal and oil without the poisons.

I rule out geo-thermal as they only address electrical and are not quite as cost effective as our existing gas, coal and oil, very close but not quite. Nor do they address transportation and by-products.

My research also indicates that if the U.S. achieved its Cap and Trade Bill goal of reducing greenhouse gas emissions by 20% by 2020, the actual result worldwide would be barely over 1%. If all the other countries of the world did the same and reduced by 20% by 2020 the overall worldwide lowering of greenhouse gases in the air would still be in the single percentage points, almost double digit, but single.

Then there is my opinion that physiologically it does not induce or entice people to reduce and conserve their existing fossil fuel usage. Yes it does tax and fine or surcharge if we do not lower our consumption but it does so in a very negative way and not a positive way. Philologists have long been proponents of the quickest and longest lasting behavior changes occur thru positive reinforcement and not negative. IE: Give people a tax break if they lower their consumption (individual or company), taxes stay the same if they stay at the same level as today and then taxes go to a higher percentage rate if they increase consumption over today.

When I compare this research information against the bill, the bill does not address my requirements or priorities. It charges (taxes, fines, surcharges) me to make drastic changes to the U.S. greenhouse gas emissions but does not result in an overall reduction worldwide that is beneficial to humans, et al verses the cost of doing so. Nor does it address finding, developing and deploying en mass cost effective replacements to the electrical, transportation and by-product needs to get off coal, gas and oil. Nor does it address the issue of how to use our existing energy sources more effectively and cost efficiently. And last but not least it does not address the energy infrastructure which is over 50 years old, is falling down around our feet and looses approximately 20-30% of the energy we currently produce via transmission and conversion from AC to DC and DC to AC losses. We need a suite of replacements and no one alternative available today accomplishes enough to charge me to death for their deployment.

I am against the cap and trade bill as it exists today because it basically accomplishes nothing but charges the crap out of me.

My "debate" questions are really asking why everyone seems to be debating the disputed facts concerning greenhouse gas emissions and not zeroing in on the real issues:

Oil, Coal, Gas and Uranium are finite earth resources and will eventually become extinct. Doesn't really matter when they get used up, they will be used up and the longer we take to reduce or eliminate our use of them the faster they will be used up.

Other than people with a suicide wish--I doubt there is anyone who wants more poisons in our air, water or land. So cutting greenhouse gases is not really the issue--cutting all poison emissions is the real issue.

Our energy infrastructure or GRID is so old it is falling down around us. Just putting a computer program on it to re-route surges and drops does not fix this aspect. We need a new, more efficient and cost effective TRUE SMART GRID. We need to stop loosing energy we currently produce to transmission and energy type conversion as well as the physical aspects of the power lines being just too old and tired to keep up with today’s demands.

We need replacements for our electrical energy needs, our transportation (personal and bulk) energy needs and we need replacements for all the by-products that existing fossil fuels, particularly oil and coal, now give us.

Our current US Business Economic Model for Mega Bucks, Mega Profits, Mega Quickly (instead of just bucks, profits and quick) are killing research, development and deployment of any true changes to our existing mass energy systems and enterprises that can get us off these dang blasted finite earth resource fuels.

Our current US Government and energy businesses seem to think that we the American Citizens should pay for this development and deployment of new sources and fixes through taxes, fines, surcharges and debasement of our dollars. Sorry but they created the problem, it was not just us citizens, this needs to be free enterprise.

There seems to be an avoidance of the fact that NONE of the existing alternatives to coal, gas and oil will FIX our true energy issues or the environmental ones either and no one wants to go broke via any means to pay for the fix either. So why do we keep debating all this other crap instead of really brain storming for ideas to fix this mess?

Criss--An Independent, Informed Voter

America: More Dependant on Foreign Oil

For those of us who spend the better part of everyday focused on energy issue--and especially what our elected officials are doing to thwart energy development, we tend think we have it all figured out. While it is true that we know more than the average person on the street (who still thinks CAFE Standards are about quality control at Starbucks), we do need each other. We thinkers and analysts sharpen each other’s expertise. Such is the case with Diana Furchtgott-Roth. Just when we at CARE think we have a good grasp on a particular issue, she sends us one of her articles that sheds new light on the topic. Such is the case with today’s posting.

Most of us who work in the energy arena are frustrated with the policies coming out of Washington, however Diana Furchtgott-Roth brings fresh insight to the policy issue. One of the fresh thoughts she presents here is this sentence: “Rather than leading towards energy independence, Mr. Obama’s proposals would drive oil and gas production abroad and make American oil and gas uncompetitive in a global market.” There are others too. Please give this a good read and comment on any new ideas you glean. If you think she is totally off-base, we’d love your comments on that too.

Watch for the next posting from Diana Furchtgott-Roth on CAFE Standard--especially if you think they are about Starbucks.

Obama's Upside-Down Energy Logic
Although President Obama has repeatedly called for America to achieve "energy independence," his proposals to raise taxes on domestic oil and gas producers would have precisely the opposite effect. They would, if approved by Congress, make the country more dependent, not less, on imported oil.

Prudently, the president might also acknowledge that achieving “independence” is both unlikely and undesirable, and that America’s economy benefits from all imports, including imported oil.
Days after Mr. Obama’s inauguration, the new president declared, “It will be the policy of my administration to reverse our dependence on foreign oil while building a new energy economy that will create millions of jobs.”

Yet in the 2010 Budget that he sent to Congress earlier this month, Mr. Obama specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.

The ostensible rationale for these tax hikes is that the current tax system “distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. To the extent expensing encourages overproduction of oil and gas, it is detrimental to long-term energy security…” This reasoning is repeated eight times in the Treasury Department’s Green Book, a description of proposed spending and revenue changes in the budget.

No mention anywhere in the Budget of the distortion of the $60 billion in expenditures in the stimulus bill to “reduce dependence on foreign oil and create long-term, sustainable economic growth in the green industries of the future.” Subsidies for renewable energy, only four percent of America’s energy supply, and more than would occur under a neutral system, are acceptable to President Obama. But a tax structure that encourages the production of oil, 39 percent of America’s energy share, is termed “detrimental.”

Mr. Obama’s proposals include increasing effective income tax rates on oil and gas to levels higher than for other manufacturing industries; disallowing “write-offs” for certain types of extraction equipment and exploration methods; levying a new excise tax on Gulf of Mexico oil and gas; and taxing carbon emissions through a “cap and trade” program.

If America is to reduce use of imported fuels, it needs to raise domestic production as well as to conserve. This increases our long-term energy security, rather than harming it. Every single additional barrel of oil produced in America is one barrel fewer that we need to import—and as we produce more at home, we employ American workers and produce revenues for all Americans.

No one knows the full extent of American oil and natural gas reserves, and to move towards energy independence, it pays to be looking. In 2007 200 trillion cubic feet of natural gas, equivalent to 33 billion barrels of oil, about 18 years of U.S. oil production, were found in the Haynesville Shale rock formation in northern Louisiana. Texas, Arkansas, and Pennsylvania are also home to new gas fields. New optimism about gas reserves and production has been pushing prices down. With the fuel there, why discourage production with new taxes?

Rather than leading towards energy independence, Mr. Obama’s proposals would drive oil and gas production abroad and make American oil and gas uncompetitive in a global market. The levies would punish domestic American companies and benefit countries with large reserves such as Venezuela, Saudi Arabia, Iran and Russia. Does Mr. Obama really want these countries, all under fire for their neglect of human rights, to get richer at our expense?

Until America has technology to operate its 250 million motor vehicles without gasoline and natural gas, we need more domestic exploration, not less. At some point, maybe later this year, maybe in 2010, our economy is going to shift to post-recession recovery, and oil and gas consumption are going to rise. We want to avoid $5 gasoline and sky-high home heating bills.

Although Congress is spending billions of dollars to create jobs and promote energy independence, President Obama wants to deny access to development of our own oil and gas resources in some of the most geologically promising areas available, and to increase the tax costs of developing these resources.

This is upside down logic. If enacted by Congress, it would make us less secure. Congress might succeed in imposing draconian efficiency standards on automobiles and appliances; requiring electric utility output that comes from renewable sources—wind, solar, geothermal, biomass—to rise from 4 percent now to 25 percent in 2025; and mandating greenhouse gas emissions in 2050 that are 17 percent of 2005 levels. (Whether Congress could enforce such wildly optimistic goals is a question.)

Americans might become greater conservationists, prodded by guilt or by higher energy taxes. But even if they do, they will still need oil and natural gas for driving, home heating, and electricity generation for many years to come. If Mr. Obama is serious about pursuing energy independence, he should withdraw his proposals to increase taxes on domestic oil and gas production.


Diana Furchtgott-Roth is a senior fellow at the Hudson Institute and a frequent contributor to CARE’s Comments About Responsible Energy.

Respect Those Who Seek the Truth, Be Wary of Those Who Claim to have Found It

You may well have already read this, as it has been circulating throughout the Internet. CARE has been sent several copies of this complete speech. However, if you have not read it, we encourage you to do so. It is an excellent primer on today’s overall energy scene--though it is a bit long. To be complete, it has to be. We suggest that you print it out and have a copy ready to pass around to others.

This speech was given by Questar Chairman, President and CEO Keith O. Rattie. It was given to college students at Utah Valley University and Brigham Young University. To make it an easier read, we have edited it slightly and removed the content about Questar that was relevant for that audience, but occupied unnecessary space for you. As you read, you’ll sense the young age of the intended audience, but we’ve removed the obvious inferences. You’ll also glean a slight bias toward natural gas--as Questar is a natural gas company. If you believe, as he implies, that climate change is not a crisis, than the advantages of clean, natural gas are less relevant.

With that said, CARE believes, as Rattie states in Reality 1: “America and the rest of the world will need all the energy that markets can deliver. We’re going to need it all--oil, natural gas, coal, nuclear, wind, solar, geothermal, biofuels.” It is all part of the complete energy picture. Read on!

Energy Myths and Realities
Thirty-three years ago I was trying to decide what to do with my career after graduating with my degree in Electrical Engineering. I made a decision to go to work for an oil company--Chevron--on what turns out to have been a false premise: I was convinced that by the time I reached the age I am today that America and the world would no longer be running on fossil fuels. Chevron was pouring lots of money into alternatives--and they had lots of money and the incentive to find alternatives--and I wanted to be part of the transition.

Fast forward 33 years. Today, we are being told that by the time today’s students are my age the world will no longer be running on fossil fuels.

I’m going to try to do something that seems impossible these days--and that’s have an honest conversation about energy policy, global warming and what it means for America’s energy future--and for you, the generation that will have to live with the consequences of the policy choices we make. My goal is to inform you with easily verifiable facts--not hyperbole and propaganda--and to appeal to your common sense.

There may be no greater challenge facing mankind today--and your generation in particular--than figuring out how we’re going to meet the energy needs of a planet that may have 10 billion people living on it by the middle of this century. The magnitude of that challenge becomes even more daunting when you consider that of the 6.2 billion people on the planet today, nearly two billion people don’t even have electricity--never flipped a light switch.

Now, when I started my career with Chevron in the mid-1970s the “consensus” at the time was that America and the world were running out of oil. Ironically, the media back then was also declaring a scientific consensus that the planet was cooling, fossil fuels were to blame, and we were all going to freeze to death unless we kicked our fossil fuel habit. We were told we needed to find alternatives to oil--fast. That task, we were told, was too important to leave to markets, so government needed to intervene with massive taxpayer subsidies for otherwise uneconomic forms of energy. That thinking led to the now infamous 1977 National Energy Plan, an experiment with central planning that failed miserably. Fast-forward to today, and: déjà vu. This time the fear is not so much that we’re running out of oil, but that we’re running out of time--the earth is getting hotter, humans are to blame, and we’re all doomed unless we find alternatives to oil, gas and coal--fast. Once again we’re being told that the job is too important to be left to markets.

Well, the doomsters of the 1970s turned out to be remarkably wrong. My bet is that today’s doomsters will be proven wrong. Over the past 33 years mankind has consumed more than three times the world’s known oil reserves in 1976--and today proven oil reserves are nearly double what they were before we started. The story with natural gas is even better--here and around the world enormous amounts of natural gas have been found. More will be found. And of course, the 30-year cooling trend that prompted the global cooling scare in the mid-70s abruptly ended in the late 70s, replaced by with a 20-year warming trend that peaked in 1998.

The lesson that we should’ve learned from the 1970s is that when it comes to deciding how much energy gets used, what types of energy get used, and where, how and by whom energy gets used--that job is too important not to be left to markets.

Now, I’d love to stand up here and debate the science of global warming. The mainstream media, of course long ago declared that debate over--global warming is a planetary emergency, we’ve got to change the way we live now. I’ve followed this debate closely for over 15 years. I read everything I can get my hands on. I’m an engineer, so I try to bypass the media’s penchant for alarmism--“World coming to an end--details at 11”-- and go straight to the actual science. My research convinces me that claims of a scientific consensus mislead the public and policy makers--and often reflect another agenda.

Yes, planet earth does appear to be warming--but by a not so unusual and not so alarming one degree over the past 100 years. Indeed, global average temperatures have increased by about one degree per century since the end of the so-called Little Ice Age 250 years ago. And, yes carbon dioxide concentration in the upper atmosphere has increased over the past 250 years from about 280 parts per million in 1750 to about 380 parts per million today--that’s .00038. What that number tells you is that carbon dioxide--the gas that everyone in this room exhales every three seconds or so, the gas that plants need to grow--is a trace gas, comprising just four out of every 10,000 molecules in the atmosphere. But it’s a very important trace gas--without CO2 in the atmosphere, the earth would be a lifeless ball covered with ice. And yes, most scientists believe that humans are responsible for much of that increase.

But that’s where the alleged consensus ends. Contrary to the righteous certitude we get from some, no one knows how much warming will occur in the future, nor how much of any warming that does occur will be due to man, and how much to nature. No one knows what the impact of warming will be, nor how easily people, plants and species will adapt to warming. When you hear someone claim they know, I suggest Mark Twain’s advice: respect those who seek the truth, be wary of those who claim to have found it.

My views on this issue changed dramatically about a decade ago when I looked at the inputs to one of the global circulation models (GCM) that had been built to predict warming over the next century. If the only input were carbon dioxide, the output would be simple--doubling of the concentration of CO2 in the atmosphere would result in only about a 1 degree increase in global average temperatures over the next 100 years. But the earth’s climate is what geek engineers refer to as a “non-linear, dynamic system.” There are dozens of inputs, and as I studied the model further I concluded that many of the inputs into these models are little more than the opinion of the scientist--in some cases, just a guess. For example, water vapor is the most important greenhouse gas--far more potent than CO2. I discovered that scientists do not agree on how to model water vapor, clouds, precipitation and evaporation. Some argue that clouds amplify CO2 forcing, others believe precipitation acts as the earth’s thermostat. The point is there’s no consensus this fundamental issue.

But the reality for American consumers is that whether you agree that the science is settled or not, the political science is settled. The new Congress has promised to “do something”. Carbon dioxide regulation is coming. Indeed, President Obama’s hope of shrinking the massive federal budget deficit depends on vast new carbon revenues from a tax on carbon energy--so called “cap and trade.” Senate Majority Leader Harry Reid has promised a bill by May.

Under cap-and-trade, the government would try to create a market for carbon dioxide by selling credits to companies that emit carbon dioxide. They would set a cap for the maximum amount of CO2 emissions. Over time, the cap would be lowered. In theory, this will induce companies to invest in lower-carbon technologies, thus reducing emissions to avoid the cost of buying credits from other companies that have already met their emissions goals. The costs of the credits would be passed on to consumers. Because virtually everything we do and consume in modern life has a carbon footprint, the cost of just about everything will go up. This in theory will cause each of us to choose products that have a lower-carbon footprint. Any way you slice it, cap and trade a tax on the way we live our lives--one that by design will produce a windfall for government.

Here’s the crucial point. The long term goal is ‘80 by 50’– an 80% reduction in carbon dioxide emissions by 2050.

Please indulge me as we do the math on what ‘80 by 50’ means, using Utah as an example. Utah’s carbon footprint today is about 66 MM tons per year. Our population is 2.6 MM. You divide those two numbers, and the average Utahan today has a carbon footprint of about 25 tons per year. An 80% reduction in Utah’s carbon footprint by 2050 implies a reduction from 66 MM tons today to about 13 MM tons per year by 2050. If Utah’s population continues to grow at 2% per year, by 2050 there will be about 6 MM people living in our state. So 13 MM tons divided by 6 MM people = 2.2 tons per person per year. Under 80 by 50 by the time you folks are about my age you will be required to have a carbon footprint of just 2.2 tons per year.

Q: when was the last time Utah’s carbon footprint was as low as 2.2 tons per person?

A: not since Brigham Young and the Mormon pioneers first entered the Wasatch Valley and declared “this is the place”.

You reach a similar conclusion when you do the math on ‘80 by 50’ for the entire country. ‘80 by 50’ would require a reduction in America’s carbon footprint from about 20 tons per person per year today, to less than 2 tons per person per year in 2050--again, a 90% reduction in per capita carbon footprint.

Q: when was America’s carbon footprint as low as 2 tons per person per year?

A: not since the Pilgrims arrived at Plymouth Rock in 1620.

In short, ‘80 by 50’ means that by the time you folks are my age, you won’t be allowed to use anything made with--or made possible by--fossil fuels.

So I want to focus today on this critical question: “How on God’s green earth--pun intended--are you going to do what my generation said we would do but didn’t: wean yourselves from fossil fuels in just four decades?” That’s a conversation that each of you, and indeed, all Americans need to engage in now -- because when it comes to “how” there clearly is no consensus. Simply put, with today’s energy technologies, we can’t get there from here.

The hallmark of this dilemma is our inability to reconcile our prosperity and our way of life with our environmental ideals. We Americans love our cars. We like the freedom to “move about the country”--to drive to work, fly to conferences, visit distant friends and family. We aspire to own the biggest house we can afford. We like to keep our homes and offices warm in the winter and cool in the summer. We like devices that use electricity--computers, flat screen TVs, cell phones, the Internet, and many other conveniences of modern life that come with a power cord. We want food that’s low cost, high quality, and free of bugs--which means farmers must use fertilizers and pesticides made from fossil fuels. We like things made of plastic and clothes made with synthetic fibers--and all of these things depend on abundant, affordable, growing supplies of energy.

And guess what? We share this planet with 5.9 billion other people who all want the same damn things.

America’s energy use has been growing at about 1.5 % per year, driven by population growth and prosperity. But while our way of life depends on ever-increasing amounts of energy, we’re downright schizophrenic when it comes to the things that energy companies must do to deliver the energy that makes modern life possible.

We want energy security--we don’t like being dependent on foreign oil. But we also don’t like drilling in the US. Millions of acres of prospective onshore public lands here in the Rockies plus the entire east and west coast of the US are off-limits to drilling for a variety of reasons, some legitimate, some not. We hate paying $2 per gallon for gasoline--but not as much as we hate the refineries that turn unusable crude oil into gasoline. We haven’t allowed anyone to build a new refinery in the US in over 30 years. We expect the lights to come on when we flip the switch, but we don’t like coal, the source of 40% of our electricity--it’s dirty and mining scars the earth. We also don’t like nuclear power, the source of nearly 20% of our electricity--it’s clean, but we’re afraid of it. Hydropower, the source of about 6% of our electricity is clean and renewable. But it has also been blacklisted--dams hurt fish.

We don’t want pollution of any kind, in any amount, but we also don’t want to be asked: “how much are we willing to pay for environmental perfection?” When it comes to global warming, Time magazine tells us to “be worried, be very worried”--and we say we are--but we don’t act that way.

Let me suggest that our conversation about how to reduce carbon dioxide emissions must begin with a few “inconvenient” realities.

Reality 1: America’s and the world’s demand for energy will grow by 30-50% over the next two decades--in fact it will more than double and could triple by the time you’re my age. Simply put, America and the rest of the world will need all the energy that markets can deliver. We’re going to need it all--oil, natural gas, coal, nuclear, wind, solar, geothermal, biofuels.

Reality 2: There are no near-term alternatives to oil, natural gas, and coal. Like it or not, the world runs on fossil fuels, and it will for decades to come. The US government’s own forecast shows that fossil fuels will supply about 85% of total world energy demand in 2030--roughly the same as today. Yes, someday we’ll find alternatives. But that day is still a long way off. It’s not about will. It’s not about who’s in the White House. It’s about thermodynamics and economics.

Now, I was told back in the 1970s the same that you’re being told today: that wind and solar power are ‘alternatives’ to fossil fuels. A more honest description would be ‘supplements’. Taken together, wind and solar power today account for just one-sixth of 1% of America’s annual energy consumption today. Let me repeat that statistic--one-sixth of one percent--.0016.

I’m holding a pie chart showing total US primary energy demand today. PowerPoint won’t even create a thin slice for wind and solar--it’s just a line.

Back when I was starting my career Jimmy Carter declared that America would be out of oil and gas by 1990, and declared alternative energy the “moral equivalent of war.” Thirty years and $30 billion in government subsidies and all we get for all the wind farms and all the solar electricity plants in operation in this country today is a thin line on a pie chart.

Undaunted by all of this, President Obama has proposed to double wind and solar power generation in this country by the end of his first term. I would first point out that the line on this pie chart will become a slightly thicker line by the end of his first term. I would also point out that wind and solar power doubled in just the last three years of the George W. Bush administration. I’ll grant you that W. started from a smaller baseline, so doubling again over the next four years will be a taller order. But if President Obama’s goal is achieved, wind and solar together will grow from one-sixth of one percent to a combined one-third of one percent of total primary energy use--and that assumes energy consumption remains stagnant, which of course it will not.

The problems with wind and solar power become apparent when you look at their footprint. To generate electricity comparable to a 1,000 MW gas-fired power plant you’d have to build a wind farm with at least 500 very tall windmills occupying 40,000 acres of land. What about solar power? Well, here’s a photo of “America’s most productive utility-scale solar electricity plant”. It has a capacity 8.2 MW, and it’s located on 82 acres of land in southwest Colorado. When you take into account the fact that the sun doesn’t always shine, you would need roughly 250 of these plants, occupying roughly 20,000 acres to replace a single 1,000 MW gas-fired power plant.

By comparison, a 1,000 MW gas-fired power plant can be built on about 10 -15 acres. (Another example, you’ll find a photo of Sempra energy’s El Dorado Solar near Las Vegas on their website. 10 MW--largest of its kind in North America--built next to a 500 MW gas-fired power plant. They plan to run the gas plant and “supplement” gas-power with solar when its available. This is the current state of the art).

The Salt Lake Tribune recently celebrated the planned startup of a 14 MW geothermal plant near Beaver, Utah. That’s wonderful! But the Tribune failed to put 14 MW into perspective. Utah has over 7,000 MW of installed generating capacity, primarily coal. America has one million MW of installed capacity. Because US demand for electricity has been growing at about 2% per year--we need to build 10-20,000 MW of new capacity every year to keep pace with growth. There’s a worldwide building boom in new coal-fired power plants--over 200,000 MW under construction, over 30,000 MW in China. In fact, there are 30 coal plants under construction in the US today that when complete will burn about 70 million tons of coal per year.

Why did my generation fail to develop wind and solar? Because our energy choices are ruthlessly ruled, not by political judgments, but by the immutable laws of thermodynamics. In engineer-speak, turning diffused sources of energy such as photons in sunlight or the kinetic energy in wind requires massive investment to concentrate that energy into a form that’s usable on any meaningful scale.

What’s more, the wind doesn’t always blow and the sun doesn’t always shine. Unless or until there’s significant breakthrough in high-density electricity storage--a problem that has confounded scientists for more than a century--wind and solar can never be relied upon to provide base load power.

But it’s not just thermodynamics. It’s economics. Over the past 150 years America has invested trillions of dollars in our existing energy systems--offshore platforms, power plants, the grid, steam and gas turbines, railroads, pipelines, distribution infrastructure, refineries, service stations, boilers, airplanes, cars, trucks, appliances, etc. Changing that infrastructure to a system based on renewable energy will take decades and massive new investment.

To be clear, we need all the wind and solar power the markets can deliver at prices we can afford. But please, let’s get real -- wind and solar are not “alternatives” to fossil fuels.

Reality 3: Carbon cap and trade regulation will drive the cost of energy painfully higher. Obama’s budget puts the cost at $650 MM over the next decade. Some believe that this estimate could be off by a factor of three--suggesting the true cost will approach $2 trillion over the next decade. As I mentioned, the businesses that are forced to buy credits will pass this cost on in the price of their goods--we’ll all pay for it.

Aside from the enormous cost, I hope you would ask: will cap and trade work? In my opinion the answer is no. It won’t work until we have viable alternatives to fossil fuels that can be delivered to markets at scale and at a cost that is politically and economically acceptable.

The European Union implemented a cap and trade scheme in an effort to meet their Kyoto commitments to reduce carbon emissions to below 1990 levels by 2012. There’s a reason why they’re failing: no country is willing to sacrifice their economy and their standard of living to do so. Europe’s cap and trade scheme was designed to fail--and it’s working as designed.

Let me do the math to explain why Kyoto would have failed in the US and why I think Obama’s cap and trade scheme will also fail.

Americans were responsible for about 5 billion metric tons of CO2 emissions in 1990. By 2005 that amount had risen to about 5.8 billion tons. Let’s suppose that the US had signed the Kyoto treaty back in 1997--incidentally, Bill Clinton was President and Al Gore was Vice President when the Senate voted 95-0 to reject Kyoto--the US would’ve committed to cut manmade CO2 emissions to 7% below that 1990 level--to about 4.6 billion tons, a 1.2 billion ton per year cut.

Q: what would it take to cut CO2 emissions by 1.2 billion tons per year by 2012?

A: a lot more sacrifice than just riding your Schwin to work or school, and changing light bulbs.

We could’ve outlawed gasoline. In 2005 gasoline use in America generated about 1.1 B tons of CO2. That would almost get us there. Or, we could shut down over half of the coal-fired power plants in this country--coal plants generated about 2 B tons of CO2 in 2005. Of course, before we did that we’d have to get about 60 MM Americans and a significant number of American businesses to volunteer to go without electricity.

This simple math is not friendly to those who demand that government to mandate sharp cuts in manmade carbon dioxide emissions--now.

Reality 4: Even if America does cut CO2 emissions, the same computer models that predict manmade warming over the next century also predict that Kyoto-type CO2 cuts will have no discernible effect on global average temperatures for decades, if at all. The models show that Kyoto reductions would prevent only a small fraction of one degree of warming over the next 50 years. When was the last time you read that in the paper? We’ve been told that Kyoto was “just a first step.” You may want to ask: “what’s the second step?”

That begs another question: “how much are Americans willing to pay for ‘a first step’ that has no discernible effect on global climate?”

The answer here in Utah is: not much, according to a public opinion poll conducted by Dan Jones and Associates published in the Deseret News. 63% of those surveyed said they’re worried about global warming. But when asked how much they’d be willing to see their electricity bills go up to help cut carbon dioxide emissions, only half were willing to pay more for electricity. Only 18% were willing to see their power bill go up by 10% or more. Only three percent were willing to see their power bill go up by 20%.

Here’s the rub: many Europeans today pay at least 20% more for electricity as a consequence of their (failed) efforts to severe the link between modern life and CO2 emissions.

If Americans aren’t willing to pay a lot more for their energy, how do we reduce CO2 emissions? Well, here are four things we can all agree on.

First, we need to improve energy efficiency.

Second, we need to stop wasting energy.

Third, we need to conserve energy.

Fourth, we need to rethink our irrational fear of nuclear power.

Fifth, we need to convert from higher-carbon coal and oil to low-carbon natural gas. The good news: we can now do so without driving the price of natural gas to unacceptable high levels.

Indeed, 2008 will be remembered in the energy industry as the year US natural gas producers changed the game for US energy policy. Smart people in my industry have ‘cracked the code’--we’ve figured out how to produce stunning amounts of natural gas from shale formations right here in the US As a result, we can now say with confidence that America and the world are “swimming” in natural gas. US onshore natural gas production has grown more than 20% over the past three years, a feat that most energy experts thought impossible a few years ago. America’s known natural gas resource base now exceeds 100 years of supply at current US consumption--and that number is sure to get bigger. Abundant supplies mean that natural gas prices over the next decade and beyond will likely be much lower than over the past five years. While prices may spike from time to time in response to sudden, unexpected changes in supply or demand--for example, hurricanes in the Gulf of Mexico or extreme cold or hot weather--these spikes will be temporary.

Greater use of natural gas produced in America--by American companies who pay American taxes--will help reduce oil imports. Unlike oil, 98% of America’s natural gas supply comes from North America.

What’s more, we don’t need massive new investment in gas-fired power plants to substitute gas for coal. I mentioned earlier that America has about one million MW of installed electric generation capacity. Forty percent of that capacity is built to run on natural gas--about 400,000 MW. That compares to just 312,000 MW of coal capacity. But unlike those coal plants, which run at an average load factor of about 75%, America’s existing, installed natural gas-fired power plants operate with an average load factor of less than 25%. Turns out that we’ve got a quick and easy way to cut carbon emissions without driving the price of electricity through the roof--use clean burning, low-carbon, American-made natural gas in our existing, underutilized gas-fired power plants.

Sixth, your generation needs to focus on new technology and not just assume it, as many in my generation did back in the 70s--and as many in Congress continue to do today.

For example, carbon capture and sequestration will be hugely expensive and it’ll take decades to implement on any meaningful scale. The high costs will be passed through in electricity rates to consumers. It’s not just the capture part--we’ll have to construct a massive pipeline grid comparable to our existing natural gas pipeline grid, and drill thousands of wells to transport and pump massive amounts of CO2 into the ground. The facilities required to do this will use huge amounts of energy--which most likely will come from fossil fuels, negating some of the carbon reduction benefits. We’re not sure where we’re going to put all this CO2. Questar is one of the largest owner-operators of underground natural gas storage. Gas storage is in high demand--we’re always looking for places to build cost-effective storage. But I can tell you that there aren’t many places left that are economic to develop. That will be the case with CO2 sequestration as well.

But the point is, R&D aimed at allowing us to continue to use fossil fuels while waiting for breakthroughs in other technologies seems a rational thing to do.

Seventh, it’s time to have an honest discussion about alternative responses to global warming than what will likely be a futile attempt to eliminate CO2 emissions related to fossil fuel use. In truth, while many scientists believe man’s use of fossil fuels is at least partly responsible for global warming, many also believe the amount of warming will be modest and the planet will easily adapt. Just about everyone agrees that a modest amount of warming won’t harm the planet. In fact, highly-respected scientists such as Harvard astrophysicist Willie Soon believe that added CO2 in the atmosphere may actually benefit mankind because more CO2 helps plants grow and increases biodiversity. When was the last time you read that in the paper?

You’ve no doubt heard the argument that even if global warming turns out not to be as bad as some are saying, we should still cut carbon emissions--as an insurance policy--the so-called precautionary principle. While appealing in its simplicity, there are three major problems with the precautionary principle.

First, none of us live our lives according to the precautionary principle. Let me give you just one example. Around the world about 1.2 million people die each year in car accidents--about 3,200 deaths a day. At that pace, 120 million people will die this century in a car wreck somewhere in the world. We could save the lives of 120 million people by banning cars and trucks, or by imposing a 5 mile per hour speed limit worldwide. How many of you can live with a 5 MPH speed limit to save 120 million lives? Of course we don’t--we accept trade-offs. We implicitly do a cost-benefit analysis and conclude that we’re not going to do without our cars, even if doing so would save 120 million lives. Don’t you think we should insist on an honest cost-benefit analysis for cap and trade regulation?

Second, the media dwells on the potential harm from global warming, but ignores the fact that the costs borne to address it will also harm us. We have a finite amount of wealth in the world. We have a long list of problems--hunger, poverty, malaria, nuclear proliferation just to name a few. Your generation should ask: how can we do the most good with our limited resources? The opportunity cost of diverting a large part of current wealth to solve a potential problem 50-100 years from now means we do “less good” dealing with these other problems.

Third, economists will tell you that the consequence of what is in effect a huge tax on the way we live our lives will be slower economic growth. Slower economic growth, compounded over several decades, means that we leave future generations with less wealth to deal with the consequences of global warming, whatever they may be.

In truth, mankind has proven to be remarkably adaptive. Humans live north of the Arctic Circle where temperatures are below zero most of the year. Roughly one-third of mankind today lives in tropical climates where temperatures often exceed 100 degrees. In fact, you can take every one of the potential problems caused by global warming and identify lower-cost ways to deal with that problem than rationing energy use. For example, if in fact melting arctic ice causes the sea level to rise, a wealthier world will adapt over time by moving away from the beach or building retaining walls to protect beachfront property. What about the polar bear? Polar bears have survived sometimes dramatic climate changes over thousands of years, most recently the so called “medieval warm period” of 1000-1300 A.D. in which large parts of the arctic glaciers disappeared and Greenland was truly “green”. It’s an established fact that more polar bears die each year from gunshot wounds than from drowning. The first thing we need to do to protect polar bears is to stop shooting them.

Let me close by returning to the lessons my generation learned from the 1970s energy crisis. We learned that energy choices favored by politicians but not confirmed by markets are destined to fail. If history has taught us anything it’s that we should let markets determine how much energy gets used, what types of energy get used, and where, how and by whom energy gets used. What’s more, no form of energy is perfect, thus only markets can weigh the advantages and disadvantages of different energy forms. Instead, government’s role is to set reasonable standards for environmental performance, and make sure markets work.

I’ve tried to cover a lot of ground this afternoon. I hope my comments provoke at least some of you to become engaged in the discussion about America’s energy future. Most of all I wish you freedom, prosperity--and abundant supplies of energy at prices you can afford.

Big Oil and the House Select Committee on Energy Independence and Global Warming

If you have been a regular reader of our Comments About Responsible Energy, you know that one of our big concerns is the impact seemingly altruistic initiatives regarding energy and global warming have on the unsuspecting consumers—the citizens who make up much of our membership. Last week the House Select Committee made much ado about bringing the CEO’s from the major oil companies to Washington to research the high gasoline prices. While all their posturing is made to look like they are doing something for the citizens, they may, in fact, do more harm than good. Note the comment about increased production costs raising the price at the pump.

With this insightful posting, we introduce you to a new voice. We believe you’ll want to hear more from his experience! Let us know what you think.

Massachusetts Congressman Ed Markey wants some answers from “Big Oil.” He had five oil company CEOs in front of his House Select Committee on Energy Independence and Global Warming, grilling them on high prices and high profits. Markey said, “This is not an April’s fools joke on Big Oil, because the prices at the pump are no laughing matter.”

He’s right. It’s not a joke on the oil companies.

The joke is on us.

Markey wants to revise the tax structure on U.S. oil producers, increasing their tax burden by some $18 billion. Of course, as Rep. Markey should know, increasing these taxes will simply increase production costs and further raise the pump prices that he’s so concerned about. It will make oil exploration in the U.S. even less competitive and force American companies to do more work overseas, further increasing our reliance on other countries.

All in all, a poorly thought out strategy from someone in charge of a committee with “Energy Independence” in the name.

Oil and natural gas companies don’t make any more on their investment than a lot of other industries. In fact, percentage-wise, they’re only around average.

Energy companies make big profits when prices are high, like they are at present. But in good times and bad, they must invest gigantic sums of money in exploration, production and infrastructure.

They’ve sunk $1.25 trillion into energy production since 1992 and it’s estimated that $6 trillion more will be needed to meet global demand over the next twenty years. If high taxes diminish oil company profits and discourage investors, where does the money for development come from?

As Exxon Mobil Senior VP Stephen Simon told Congress, "Imposing punitive taxes on American companies will discourage the investments needed to safeguard our energy security. The pursuit of alternative fuels must not detract from investments in oil and gas."

He’s right. Developing alternative fuels is smart. Diminishing our supply of traditional fuels in the process is not. Markey needs to rethink his agenda.

Jack Rafuse is the principal of Rafuse Consulting, and a former energy policy advisor for the Nixon Administration in the Office of Management and Budget and the Federal Energy Administration. Rafuse had previously worked at the Navy Department and the Center for Naval Analyses. He subsequently worked for Union Oil of California (Unocal), an international oil and gas company. Currently, Rafuse is an independent consultant on energy and trade. His areas of expertise are Global Energy Trade and Supply, and Energy Regulation and Policy. For more information, visit jackrafuse.com.

What Happened to the Starving Children?

Have you wondered, “What happened to the starving children?” We have. Television ads used to be filled with images of desperate children in third world countries who needed our help.

Now, we have warnings about global warming and the need for energy independence. The Natural Resources Defense Council recently sent out a mailing designed to make it look as if it was sent personally from Leonardo DiCaprio begging us to protect the polar bear, “The polar bear is sending us a desperate S.O.S.” The mailing even offered a free tote bag (with a gift of $10 or more) emblazoned with the words “Save the Polar Bear!” and featuring a cuddly looking graphic of a mother polar bear with her cubs.

One has to wonder, are there no more staving children? Is the polar bear more important that human life? (Check out past postings: Food or Fuel and People or the Planet.)

At CARE, we have been concerned with the unintended consequences of global warming’s politics. We do not believe anyone wants to harm the earth. (Well, maybe a few characters from an Austin Powers movie.) When people hear about polar bears drowning, they want to do the right thing. But, they are not aware of what taking preventative measures, in case the Climate change hysterics are warranted, will cost them personally—or what the other unintended consequences might be. We believe that if people have the complete picture, they will make better choices.

Here, one of CARE’s Energy Counsel Members Dennis Avery looks into one of those unintended consequences: the inability to feed the hungry. Yes, even though the needs of the hungry have been downed out by the supposed needs of the polar bears, etc., the hungry are still out there—and getting hungrier.

Biofuels Forcing World To Ration Food Aid
The World Food Program is preparing to ration food aid for the world’s hungriest poor. Why? Primarily because we’re burning food in our automobiles. The rich-country mandates for biofuels have doubled and tripled world food prices in less than three years.

The World Food Program’s costs are rising by millions of dollars per week and the donations aren’t, warns WFP executive director Josette Sheeran. The WFP is trying to feed more than 70 million people in 78 countries with voluntary contributions—but now can’t afford to keep its agreed-upon commitments.

World corn prices are above $5 a bushel, up from $1.86 three years ago. Prices for wheat, soybeans, rice and even cotton are rising as they’re crowded out of field space by biofuel crops. Pakistan says it will reimpose food rationing for the first time since the 1980s. China’s food inflation rate is 18.2 percent, and the Chinese have blocked further expansion of their fledgling biofuel program.

Oxfam points out that the poor in the Third World must often spend 60-80 percent of their incomes for food, so the price increases are a drastic threat to their well-being.
In Yemen, the prices of mostly-imported bread and other staples have nearly doubled in recent months, with at least a dozen people killed in food riots.

The underweight proportion of the world’s children under five had dropped by 20 percent since 1990—but that vital progress may now be reversed by the biofuel subsidies. Meanwhile, while U.S. and European officials stubbornly insist that burning millions of tons of corn, sugar and palm oil in our gas tanks has nothing to do with the soaring prices of farm commodities.

“The fundamental cause is high income growth,” claims Joachim von Braun, the head of the International Food Policy Research Institute. He blames increased meat consumption in such high-growth nations as China and India. But both those big countries have largely supplied their own grain and meat increases over the past 15 years.

The commodity-savvy Financial Times is more realistic. “Biofuels will not feed the hungry,” it warned in a recent editorial. “. . . the biggest structural change [in food pricing] is biofuels. In the space of a few years, the U.S. has diverted about 40 million tonnes of maize to produce bioethanol—about 4 percent of global production of coarse grains. That rapid growth is largely the result of subsidies—which must halt. The environmental benefits of maize biofuel are ambiguous at best and it should not be favored over growing maize for food.”

The same should be said, of course, about the EU’s new commitment to provide 10 percent of its transport fuel from land-hungry biofuels, grown both in the EU countries and imported from such species-rich environments as Indonesia and Thailand. One of the great apes, the orangutan, is directly threatened by palm oil plantations because the apes love to eat the palm seedlings. Thousands of orangutans have been captured and killed because the palm oil plantations are an “attractive biofuel nuisance.”

U.S. corn farmers raised a record amount of grain last summer—but one-third of it is going into ethanol plants to “cure our addiction to foreign oil.” That corn will produce perhaps 10 billion gallons of ethanol—but nets out to just 50 gallons worth of gasoline per acre. That’s after subtracting the nitrogen fertilizer, the diesel fuel, the process heat for the ethanol plants—and ethanol’s 35 fewer Btu’s of energy per gallon.

Match 50 gallons worth of gasoline per acre against America’s annual demand for 135 billion gallons of gasoline! If we doubled corn yields, we’d still not achieve much “energy independence.” Nor would we feed the hungry.


DENNIS T. AVERY is a senior fellow for Hudson Institute in Washington, D.C. and is the Director for Center for Global Food Issues (www.cgfi.org). He was formerly a senior analyst for the Department of State. ALEX A. AVERY is the Director of Research at the Hudson Institute’s Center for Global Food Issues. Readers may write them at Post Office Box 202, Churchville, VA 24421.

Ethanol Lobby Greasing The Palms Of Politicians

It has been a while since we have featured a posting on ethanol. It seems like the noise about it has died down and that people are beginning to realize that ethanol is NOT responsible energy. But, perhaps that is just in our circles—people who study this stuff. It seems that the United States Government is still hell-bent on promoting it—even when it makes no sense. We expected the furor to die down after the Iowa elections. After all, Iowa grows corn and Iowa elects presidents. Politically, ethanol had to be supported through the primary.

But today, this posting arrived in our in-box. It is from Walter E. Williams. He is not one of our regular contributors, but we did post something of his back in October. We believe you will find this piece to be a worthy addition to your energy information arsenal. Do you think ethanol is a hoax?

Big Corn and Ethanol Hoax
One of the many mandates of the Energy Policy Act of 2005 calls for oil companies to increase the amount of ethanol mixed with gasoline. President Bush said, during his 2006 State of the Union address, "America is addicted to oil, which is often imported from unstable parts of the world." Let's look at some of the "wonders" of ethanol as a replacement for gasoline.

Ethanol contains water that distillation cannot remove. As such, it can cause major damage to automobile engines not specifically designed to burn ethanol. The water content of ethanol also risks pipeline corrosion and thus must be shipped by truck, rail car or barge. These shipping methods are far more expensive than pipelines.

Ethanol is 20 to 30 percent less efficient than gasoline, making it more expensive per highway mile. It takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That's enough corn to feed one person for a year. Plus, it takes more than one gallon of fossil fuel -- oil and natural gas -- to produce one gallon of ethanol. After all, corn must be grown, fertilized, harvested and trucked to ethanol producers -- all of which are fuel-using activities. And, it takes 1,700 gallons of water to produce one gallon of ethanol. On top of all this, if our total annual corn output were put to ethanol production, it would reduce gasoline consumption by 10 or 12 percent.

Ethanol is so costly that it wouldn't make it in a free market. That's why Congress has enacted major ethanol subsidies, about $1.05 to $1.38 a gallon, which is no less than a tax on consumers. In fact, there's a double tax -- one in the form of ethanol subsidies and another in the form of handouts to corn farmers to the tune of $9.5 billion in 2005 alone.

There's something else wrong with this picture. If Congress and President Bush say we need less reliance on oil and greater use of renewable fuels, then why would Congress impose a stiff tariff, 54 cents a gallon, on ethanol from Brazil? Brazilian ethanol, by the way, is produced from sugar cane and is far more energy efficient, cleaner and cheaper to produce.

Ethanol production has driven up the prices of corn-fed livestock, such as beef, chicken and dairy products, and products made from corn, such as cereals. As a result of higher demand for corn, other grain prices, such as soybean and wheat, have risen dramatically. The fact that the U.S. is the world's largest grain producer and exporter means that the ethanol-induced higher grain prices will have a worldwide impact on food prices.

It's easy to understand how the public, looking for cheaper gasoline, can be taken in by the call for increased ethanol usage. But politicians, corn farmers and ethanol producers know they are running a cruel hoax on the American consumer. They are in it for the money. The top leader in the ethanol hoax is Archer Daniels Midland (ADM), the country's largest producer of ethanol. Ethanol producers and the farm lobby have pressured farm state congressmen into believing that it would be political suicide if they didn't support subsidized ethanol production. That's the stick. Campaign contributions play the role of the carrot.

The ethanol hoax is a good example of a problem economists refer to as narrow, well-defined benefits versus widely dispersed costs. It pays the ethanol lobby to organize and collect money to grease the palms of politicians willing to do their bidding because there's a large benefit for them -- higher wages and profits. The millions of gasoline consumers, who fund the benefits through higher fuel and food prices, as well as taxes, are relatively uninformed and have little clout. After all, who do you think a politician will invite into his congressional or White House office to have a heart-to-heart -- you or an Archer Daniels Midlands executive?


Walter E. Williams is a professor of economics and serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well.

Energy Under Attack

Happy New Year from CARE! With the new year upon us, we at CARE want to introduce you to a new concept.

If you have been following our postings, we hope you have come to believe—as we do—that energy is under attack. Not just the energy industry, energy itself. While we had a gut feeling about this attack, it was confirmed for us when we completed the first draft of our Environmental Utopia Analysis last summer. Around the same time rumors began to surface about collaboration between numerous extreme environmental groups. Since then validation has been received through a secret document given to an industry source that bears out our suspicions. There is a coalition with a multi-year plan targeting the goal of eliminating oil and gas production in America. They are using the PC view of global warming and environmental protection to push through government regulation that makes energy production harder and more costly. This campaign is called NoDOG—which stands for No Dirty Oil and Gas. You will hear more about this effort here and through the CARE newsletter: The PowerLine.

Just this last weekend a major publication featured an article that we believe is a part of the energy killers’ efforts. Typically, we post the complete articles we reference here in the CARE Blog for those who print them out and pass them around. However, we do not have permission to post this piece. So, in breaking with tradition, we offer you this link. Please check it out and come back and tell us what you think.