Assumptions about America’s energy policy are rapidly being called into question, due to four recent or ongoing events, including:
• The potential serious disruption of oil supplies from the increasingly tumultuous middle east. Iran has repeatedly threatened to close the Straits of Hormuz to dissuade the west from taking firm action against that nation’s nuclear weapons development, as well as engaging in activities meant to interfere with Iranian allies such as Syria.
• The tepid state of the American economy, made worse by increasing energy prices. Exceptionally high unemployment is one of the prime examples of this, as is the trade deficit of $39,147 Million (as of July 2013.) The United States Balance of Trade averaged $-32,055.49 Million from 1992 until 2013.
• Recent revised climatological information (including that contained in a leaked preview of an upcoming United Nations report about global warming) which indicates that for the past two decades the problem has been overestimated; and
• A dramatic increase in discovered domestic energy resources.
These events render it necessary to take a renewed look at U.S. energy policy. Partisan views, from industry and consumers on one hand, and environmentalists on the other, make it difficult to have an objective discussion on the topic.
THE PRESIDENT’S VIEWS
The President has taken positions which have been mostly praised by environmentalists, but soundly criticized by those favoring lower prices and American energy independence. In an often quoted 2008 newspaper interview, then-candidateObama stated: “Under my plan, electricity rates would necessarily skyrocket.”
When George W. Bush left office, gasoline cost consumers $1.78 per gallon. The current average price is $3.89, according to the US Energy Information Administration.
Since 2008, the average price for electricity for individuals, commercial enterprises, and industrial users have all risen, despite a weak economy and the discovery of vast new energy resources.
The White House has been criticized for failing to open federally owned lands for energy exploitation. The U.S. government owns and manages 650 million acres of land.The White House response has been that “Domestic oil and natural gas production has increased every year President Obama has been in office. In 2012, domestic oil production climbed to the highest level in 15 years and natural gas production reached an all-time high.”
Critics respond that the increases have all come from private land outside of the federal government’s control. According to the Heritage Foundation, The President has impeded access to a treasure trove of supply on federal lands. Heritage notes: “America is one of the few nations to put known domestic supplies of oil and gas off-limits to exploration. Harsh restrictions aimed ostensibly at protecting the environment place oil, coal, and natural gas out of favor…Moreover, because of a broken regulatory process and no legitimate solution to spent fuel management, we are not building nuclear plants at the rate we could be…”
The Administration has clearly stated its opposition to the use of coal. According to an article by Nicolas Loris in the Yale Environment 360 publication,
“Phasing out coal, electricity prices would increase 20 percent and cause a family of four to lose more than $1,000 in annual income…significantly reducing coal as a source of energy would destroy more than 500,000 jobs by 2030. All of this economic pain would come with no real impact on the climate.”
Mr. Obama has come under pressure from many of his own supporters to ban hydrofracking, based on scientifically incorrect rumors of problems, mostly disproved by science (but endorsed by Hollywood.)
POLICY CHOICES BASED
ON INCORRECT ASSUMPTIONS
The President predicated his 2008 desire for fuel cost increases based on supply and environmental assumptions that have turned out to be incorrect. Dramatic increases in supply, not even counting known but untapped resources such as those in Alaska or offshore, have been discovered. Earlier this year, it was revealed that the US has three times the amount of natural gas, and twice the amount of oil, as previously thought.
According to the International Energy Agency, America has the potential become the kingpin of energy supplies, producing more than either Russia or Saudi Arabia within the next 15 years. By 2030, the United States could be exporting energy. The net boon to the economy in employment and particularly eliminating the approximately $450 billion spent on imported oil, would be vast.
However, the combined net effect of keeping resources on federal lands untapped, “waging war” on coal, implanting strict (critics say unnecessary) regulations in energy production, and limiting hydrofracking could produce a far different result.
THE KEYSTONE PIPELINE
In July, the President minimized the employment benefits of Keystone. His comments drew outrage from pipeline advocates, who noted that studies from his own State Department directly contradicted his comments. It is believed that the White House has decided to strategically hold the project “hostage” as a means of forcing Congress to agree to other energy-related matters.
The sweeping proposals are the result of the President’s June 25 Memorandum to EPA on “Power Sector Carbon Pollution Standards,” part of the White House’s overall enivronmental proposals. Similar to other instances which the Administration feared Congresssional dissent, Mr. Obama maintains the plans do not require Congressional approval. The President stated that he “didn’t have time for a meeting of the flat earth society.”
The President’s position has been endorsed by organizations such as the National Resources Defense Council, which maintains that “The EPA has both the authority and responsibility to reduce pollution from these plants under the Clean Air Act.”
According to the Environmental Defense Funds’ Gneral Counsel, Vickie Patton,
“The sooner we get these protections in place, the clearer the signal [will be] that new power plants must do their fair share in addressing the heavy burden of carbon pollution on human health and the environment.”
U.S. Senator Joe Manchin (D-W.Va.) condemned President Obama’s proposals, which he believes impose unreasonable restrictions that will have disastrous consequences for not only the coal industry, but also American jobs and the economy.
According to Sen. Manchin, “The regulations the President wants to force on coal are not feasible. And if it’s not feasible, it’s not reasonable. It’s clear now that the President has declared a war on coal. It’s simply unacceptable that one of the key elements of his climate change proposal places regulations on coal that are completely impossible to meet with existing technology.
“The fact is clear: our own Energy Department reports that our country will get 37 percent of our energy from coal until 2040. Removing coal from our energy mix will have disastrous consequences for our recovering economy. These policies
punish American businesses by putting them at a competitive disadvantage with our global competitors. And those competitors burn seven-eighths of the world’s coal, and they’re not going to stop using coal any time soon.
“It is only common sense to use all our domestic resources, and that includes our coal. Let’s make sure that government works as our partner, not our adversary, to create a secure and affordable energy future, and let’s invest in technology which will have the ability to burn coal with almost zero emissions.”
House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) also responded quickly.
“EPA is doubling down on its economically destructive plan to essentially end the construction of new coal-fired power plants in America. The proposed standards would require the use of expensive new technologies that are not commercially viable. We are the Saudi Arabia of coal, but this impractical rule restricts access to one of our most abundant, affordable, and dependable energy sources. The consequences will be more job losses and a weaker economy. These stringent standards will actually discourage investment and the development of innovative new technologies that can help us meet the world’s future energy and environmental challenges. The right policies should embrace our energy abundance as part of the solution. The committee will soon hold a hearing on this latest regulatory grab as part of our ongoing effort to protect Americans and jobs from unnecessary and costly red tape,” said Upton.
“President Obama and his EPA have once again moved forward with an extreme regulation that makes it illegal to build a coal-fired electricity plant in America. This move is another attempt to bankrupt the coal industry to fulfill a campaign promise to radical environmentalists. For example, the cleanest coal-fired electricity technology available is known as ultra-supercritical. EPA’s extreme regulation sets an emission limit that not even an ultra-supercritical plant can meet,” said Whitfield. “Sadly, electricity consumers will pay the price, making our economy less competitive in the global market place. Even though the president is taking these extreme steps, they do nothing to curb global greenhouse gas emissions, which even his own EPA administrator acknowledged in my hearing earlier this week. As Chairman of the Energy and Power Subcommittee, I intend to hold hearings to examine every aspect of this regulation. If it is as bad as we think it’s going to be, I, along with other Republicans and Democrats in the United States Congress, wilin the United States Congress, will take every step possible to prevent this regulation from taking effect. We simply cannot afford to place America at an economic disadvantage, particularly when CO2 energy-related emissions are at their lowest levels in 20 years.”
Senate Minority Leader Mitch McCOnnell (R-Ky) described the White House action as a “just the latest Administration salvo in its never ending War on Coal…The EPA has already stifled the permitting process for new coal mines; the agency has done this so dramatically that they have effectively shut down many coal mines through illegitimate, dilatory tactics…In the year President Obama took office there were over 18,600 employed in the coal industry in my state. But as of September 2013, the number of persons employed at Kentucky coal mines is only 13,000… And the picture is getting worse instead of better. This week, a major employer announced 525 layoffs in its eastern Kentucky mines.
In addition to displaced workers, coal industry companies, and state governments concerned over the loss of jobs and revenue, those advocating U.S. energy independence and lower energy costs are expected to vigorously oppose the EPA proposal.
The timing is somewhat ironic, as new reports indicate that global cooling may have more of a scientific basis than global warming. In response, advocates of stricter controls on energy production have amended the phrase “global warming” to read “climate change” instead, but have not yet responded to how this significant change affects plans to cut greenhouse gases.
In what some media outlets are describing as “climategate 2,” (The original climategate involved approximately 1,000 emails from the University of East Anglia indicating that climate scientists manipulated data to boost global warming claims) United Nations scientist are attempting to explain why global warming has slowed down over the past fifteen years at the same time that greenhouse gases have been increasing.
PRIMARY ENERGY SOURCES
Far too frequently, the debate over U.S. energy policy has been one in which facts have played a second hand role. Examining how America uses each primary source of energy provides a clear picture of the challenges and opportunities that face the nation’s future.
According to the U.S. Energy Information Administration petroleum use accounts for 36% of total use; natural gas, 27%; coal, 18%; renewable energy (primarily hydropower) 9%; nuclear, 8%.
The use to which each source of primary energy is put varies widely. For example, 71% of petroleum is used for transportation purposes. 91% of coal is used to generate electricity. Along with nuclear power, which supplies 21% of all electrical power, coal and nuclear account for the lion’s share of electrical power used throughout America.
The United States has increased oil production from 5.0 million barrels per day in 2008 to 6.5 billion barrels in 2012. This is the result of technological advances, particularly in extracting shale and other “tight” oil formations, as well as the incentive of high prices. Prices could rise even higher as world-wide events, including the possibility of a military clash in the Middle East or Chinese disruption of sea lanes in the Pacific, make an impact.
This is a significant production increase considering a number of governmental handicaps imposed. Most federal lands (Washington owns 650 million acres of land) continue to be kept off-limits for exploitation, and regulations from the Environmental Protection Agency continue to tighten.
If American oil producers are allowed to make appropriate use of domestic resources, there is a continued possibility that the United States could become a net exporter of liquid fuels.
The United States could become a net exporter of natural gas within three years.
According to the industry publication “Energybiz,” “The revolution in drilling technology that has made fracking a household word has changed the American energy policy discussion. Just a few years ago the focus was on dwindling fossil fuels reserves. Now the U.S is debating what to do with all this extra natural gas we have laying around. According to the Associated Press, up to 40% of the U.S. production of liquefied natural gas (LNG) could be exported if all of the current energy company export requests are approved by the government.”
As the NEW YORK ANALYSIS previously described in depth, the Obama Administration continues to engage in efforts that will have the effect of sharply increasing the cost of coal use. Since the use of coal continues to be an important factor in U.S. energy production, particularly in electrical generation, costs benefits from increases in other energy sources could be offset if those policies continue, to the detriment of power consumers.
According to a 2011 assessment by the World Nuclear Association, “The USA is the world’s largest producer of nuclear power, accounting for more than 30% of worldwide nuclear generation of electricity. The country’s 104 nuclear reactors produced 821 billion kWh in 2011, over 19% of total electrical output. There are now 100 units operable and three under construction. Following a 30-year period in which few new reactors were built, it is expected that 4-6 new units may come on line by 2020, the first of those resulting from 16 license applications made since mid-2007 to build 24 new nuclear reactors.”
However, in the intervening period, much has changed. During 2013, five nuclear plants have been closed, and expansion efforts at a number of others were halted. Further, 38 older reactors may be shut down early, according to the Vermont Law School Institute for energy & the Environment. A decrease in the availability of nuclear power could have a significant effect on already high power prices, particularly for electricity. Nuclear power provides some of the least expensive energy in the U.S. Proponents note that it is environmentally friendly, providing few emissions. They also note that an ideal safety record in terms of injuries or deaths resulting from its use.
The Manhattan Institute performed a case study on the potential impact of closing the Indian Point nuclear power plant, which is located 40 miles north of New York City. In its study,The Manhattan Institute concluded that:
“… closing IPEC would increase average annual electric expenditures in New York State by $1.5 billion-$2.2 billion over the 15-year period 2016-30. For a typical residential customer, this would mean an increase in the household electric bill of $76-$112 each year. The average increase for a commercial customer would be $772-$1,132 per year. The average increase in industrial customers’ electric bills would be $16,716-$24,517. The largest increase would be for transportation customers, such as the subway system, which would see increases of $1.26-$1.85 million per year. The effects of these higher electricity costs absorbed by customers would ripple through the New York economy, leading to estimated reductions in output of $1.8 billion-$2.7 billion per year over the 15-year period 2016-30. The resulting loss of jobs in the state could range from 26,000 to 40,000 per year, depending on the alternative chosen to replace IPEC.”
Difficult federal roadblocks to the disposal of waste products continue to hamper future prospects.
To many, including President Obama, renewable energy-wind, solar, hydropower, biofuels– is the holy grail of energy production. But how much of America’s energy supply can renewables actually provide, and at what cost?
One source of renewable energy that has long been in use is hydroelectric power. According to the Institute for Energy Research,”In 2012, hydropower represented 2.8 percent of the total energy consumed in the United States-much lower than the level it reached in 2011. Hydroelectricity is dependent on amount of participation and will vary somewhat over time…In 2012, renewable energy accounted for 12 percent of the total net electricity generated in the United States Hydropower accounted for 56 percent of that total.”
It is projected that the share of American electrical production will grow, but only from the current 12% to 6% in 2040. Even that modest increase will require a significant increase in the power grid infrastructure, according to the energy collective.com site.
As Congress and the President engage in the annual battle over the federal budget, the massive subsidies given to renewable energy must again be examined. According to theHeritage Foundation “solar and wind receive subsidies of over $23 per megawatt hour compared to $1.59 for nuclear, $0.44 for conventional coal, and $0.25 for natural gas.
The United States has abundant sources of energy, sufficient to make it a net exporter within the forseeable future. However, federal regulations and environmental concerns could prevent that from ocurring, as well as keeping prices comparatively high for consumers.