As was discussed in part 1 of this series, your quality of life depends on reliable access to low-cost energy. Yet the sources of energy are at risk for becoming much more expensive. A number of existing and proposed laws such as Waxman-Markey are designed to make the cost of energy significantly higher.
This, combined with increasing global demand for energy, and the fossil fuels that are the source of that energy, could mean that you will no longer to be able to count on reliable low cost energy. When that happens, you will see a significant increase in your cost of living and a corresponding decrease in your standard of living. If the gap between global energy supply and demand becomes too large, the United States could face a far more serious economic crisis than what we are facing now.
Before we discuss some of the potential solutions to this dilemma, it will be useful to understand how we got here in the first place.
In the spring of 1986, the price per barrel of oil on the world market plummeted in a few short weeks from $30.00 per barrel to $10.00 per barrel. The affect of that price drop on the oil and gas industry was significant. Oil and gas fields that were marginally economic at $30.00 oil were non-economic at the lower prices, and were shut-in or sold to smaller, low cost operators. Mergers and layoffs, affecting 10’s of thousands of workers left a toll on the energy industry
Exploration and development projects years in the planning were halted so domestic oil and gas drilling plummeted and US. Production declined. This decline in domestic activity was offset in large part from increased imports from the Middle East, where the costs of production are much lower. At the same time, U.S. demand for oil imports kept growing.
As the domestic oil and gas industry recovered from the 1986 oil price collapse, it found it increasingly difficult to explore and develop remaining domestic reserves. Due to environmental concerns, access to many prime oil and gas basins, including offshore Florida has been limited.
Permitting costs added to already high operational costs; keeping many projects un-economic. In short, the costs of exploration and development activities, coupled with the traditionally high economic risk of drilling hampered our domestic industry’s ability of offset the increasing imports.
So, we have allowed ourselves to become overly dependent on imported oil and now, increased global competition for that oil threatens our economic stability.
The solutions to the problem will to some extent require changes in our thinking, as well as changes in policy and legislation. It is beyond the scope of this paper to recommend specific legislative changes. What can be said with certainty, however, is that for any solutions to be truly effective, they must address both the supply and the demand sides of the equation.
The Supply Side
To address the supply side of the equation, we must look at all of the available options to increase US Energy Supply. There are 5 steps that must be taken together to do this, and all steps are necessary.
Develop Wind and Solar technologies
You have no doubt heard that “green energy” is the future. And, in the long run it is. But we are many years from being able to rely on green energy technologies.
Windmill farms are the most immediately applicable green energy source. However, wind turbines are not yet very effective energy generators. Over 9000 wind turbines would be needed to generate enough electricity to supply a city the size of Tallahassee. One square mile can house approximately 60 turbines. So to provide Tallahassee’s energy needs with wind power, a wind farm of 150 square miles would be required. In addition, some traditional gas or coal-fired generating stations would be necessary to provide power on days with too little wind.
Likewise, solar panels are not very efficient at generating electricity, and are currently not practical for large-scale generation.
Wind and solar generated electricity can help reduce the demand for fossil fuel generated electricity. Wind turbines should be installed where feasible and research should be funded to encourage improved generating efficiencies. However, until these technologies become much more efficient, they will contribute very little to reducing our actual energy demand.
Encourage Domestic Oil, Gas and Coal Exploration and Development
As discussed in part 1 of this series, the US has large undeveloped reserves of coal, oil and gas. However, much of those reserves are in areas where drilling or mining activities are restricted by State or Federal regulations. These restrictions are usually justified on the basis of protecting the environment. However, the energy industry has a remarkable record of safe and environmentally friendly drilling. New mining technologies and reclamation technologies have made that industry much more safe and environmentally friendly than in the past as well/
Even when conducting drilling and mining operations in areas where it is legal, the energy industry are often hit with nuisance lawsuits filed by various environmental groups. These lawsuits are typically baseless and are often thrown out. However, the real aim of these lawsuits is to delay the energy companies and add to their costs. The fact is however, that these added costs are passed on to you at the gas pump and your electric bill.
To reduce U.S. dependency on imported oil, it is necessary to open remove these legislatively mandated restrictions and allow drilling. We must also take steps to reduce the number of nuisance lawsuits filed by the environmental lobby. Once a company has an approved environmental impact study, they should be allowed to conduct their operations without the added delays and costs of lawsuits.
Encourage Refinery and Pipeline Upgrades and New Construction
As discussed, much of the Nation’s oil and gas refining and transportation infrastructure is old and operating at a level near their capacity. To minimize the impact of a potential interruption in our refining and transportation network, it is important to upgrade and add to our current infrastructure.
As with drilling operations, refinery and pipeline upgrades or new construction are often halted or stopped by nuisance lawsuits. The lawsuits can add ten or more years of delay and costs before any upgrades can finally occur. These delays leave us vulnerable to a major price increase due to temporary shortfalls of oil and gas such as was experienced after Hurricane Katrina. And, as with all added costs, they are passed on to you the consumer
Although new and upgraded refineries and pipelines will not reduce U.S. dependency on imported oil, they will help ensure that our energy supply remains reliable. It is necessary to streamline the permitting of refinery upgrades and new construction. As wit drilling and mining, we must also take steps to reduce the number of nuisance lawsuits filed by the environmental lobby.
Encourage Construction of clean-burning Gas & Coal fired Electric Plants
New technologies in coal and gas sourced power generation can provide cost-efficient and clean energy. For example, coal-gasification type electric power generation along with geologic sequestration of the CO2 could efficiently generate electricity with near zero emissions.
Your legislatures should be looking at ways to encourage construction of additional clean power plants rather than making construction of new plants punitively expensive. Remember, our economy is dependent on the availability of reliable low-cost energy.
New and upgraded power generation plants will help ensure that our energy supply remains reliable. It is necessary to promote production of domestic coal and gas resources to ensure that these plants, as well as our existing plants, can generate the power we need.
Encourage Construction of Nuclear-powered Electric Plants
According to the Energy Information Administration nuclear energy currently provides 8.5% of our energy needs. Ever since the Three Mile Island reactor accident in 1979, most Americans have been strongly opposed to nuclear energy. Since 1979, the industry has demonstrated a near flawless safety record.
If we are ever to significantly reduce our need for imported oil, it will be essential to build more nuclear reactors. To do so, we must streamline the permitting process and indemnify those companies from losses due to permitting delays and changes, particularly those resulting from nuisance law suits.
The Demand Side
It is not enough to simply increase the supply of energy fuels, we must also reduce demand to ensure that the supply and demand equation remains balanced. Aside from reducing your personal consumption, there are three strategies for reducing demand that should be implemented.
Improve Metropolitan Mass-transit Systems
Light Rail or mono-rails can go a long way to reducing automotive-based commuting. Many cities in Europe have effective mass transit systems, as do many Asian Cities. In addition to an extensive commuter train network, Kuala Lumpur Malaysia has a monorail system that serves the central portion of the city. Bangkok Thailand has one of the most modern and effective elevated train systems in the world. If these cities can build effective, safe, and fun mass transit systems, why can’t cities in the US do so?
Construction of mass transit systems similar to Bangkok’s Skytrain® will go a long way to reducing gas consumption as well as relieving traffic congestion and pollution. Construction of elevated rail systems similar to the Skytrain® can be done over existing highways such that they do not require acquisition of new land. Funding should be supported at the Federal level with the recently approved Stimulus Funds.
Promote Fuel Efficiency
Promoting fuel efficiency and developing electric “plug-in” technologies for already energy-efficient hybrid vehicles could result in a marked rise in effective gasoline mileages (up to 180 MPG) that could markedly decrease reliance on foreign oil. They will also result in marked reductions in emissions, from the transportation sectors. Although fuel efficiency standards need to be promoted, the currently proposed changes to the CAFÉ (Corporate Average Fuel Economy) standards mandating changes will place unacceptably high cost burdens on car manufacturers.
It would be better, and more cost-effective to encourage people to buy energy efficient cars by remove tax incentives for low mileage vehicles and providing new tax incentives for high mileage vehicles.
Promote Fuel Cell and Hydrogen Technology Development
Natural gas vehicles, fuel cells and other hydrogen technologies could someday significantly improve mileage efficiency as well as reduce pollution. With the exception of Natural Gas Vehicles, the technology for widespread use of fuel cells and hydrogen technologies are a long way off. For Natural Gas Vehicle to be practical for individual use, then many more natural gas filling stations will need to be built.
Funding for Fuel Cell and Hydrogen Technology research should be increased. Fleet cars and city busses can be converted to run on both natural gas and regular gas. To encourage this, the government should provide tax incentives to those companies or municipalities that undertake such conversions. Companies that add natural gas pumps to their stations should receive incentives to offset the costs.
The U.S. is at a critical junction. It can continue to restrict domestic access to energy supplies and pass laws to significantly increase the cost of your energy. Or, it can take steps to help increase the supply of domestic energy and reduce domestic demand. The first option will mean that you, as a consumer, will no longer have access to low-cost and reliable energy. That in turn will increase your cost of living and reduce your standard of living.
The choice is yours. Let your State and Federal legislatures know which option you prefer.
