[In the future when the permanent oil crisis hits, everyone will wonder what the hell the U.S. energy policy was and why didn’t anyone tell Americans or do anything about it. This is a rather long post, and I tried to put the most interesting bits at the top, but I won’t blame you if you don’t finish reading it. Alice Friedemann at www.energyskeptic.com]
But first a brief excerpt about why EROI does not inform government policy, even though it is the only rational way to evaluate energy resources from: Murphy, David J. December 2, 2013. The implications of the declining energy return on investment of oil production. Trans. R. Soc. A 2014 372
Estimates of EROI are important because they provide a measure of the relative ‘efficiency’ of different energy sources and of the energy system as a whole. Since it is this net energy that is important for long-term economic growth, measuring and tracking the changes in EROI over time may allow us to assess the future growth potential of the global economy in ways that data on production and/or prices cannot.
A workshop in Sweden in 1974 and one at Stanford, CA, in 1975 formalized the methodologies and conventions of energy analysis. In 1974, the US Congress enacted specific legislation mandating that net energy be accounted for in energy projects. The Nuclear Energy Research and Development Act of 1974 (NERDA) included a provision stating that ‘the potential for production of net energy by the proposed technology at the stage of commercial application shall be analyzed and considered in evaluating proposals’. Further influential papers by the Colorado Energy Research Institute, Bullard et al. and Herendeen followed this requirement. Unfortunately, the net energy provision within the NERDA was never adopted and was eventually dropped.
In 1979, the Iranian revolution led to a cessation of their oil exports (the second oil shock), which precipitated another spike in the price of oil and squeezed an already strained US economy. Responding to this, and in an attempt to control deficits and expenditure, President Reagan of the USA enacted Executive Order 12291 in 1980. This order mandated that ‘regulatory action shall not be undertaken unless the potential benefits to society from the regulation outweigh the potential costs to society’. In other words, all US regulatory action had to show a net monetary benefit to US society, and the idea of measuring benefits in terms of net energy fell even further from the policy arena.
Net energy analysis remained insignificant in US energy policy debates until the dispute over corn ethanol emerged 25 years later.
Although the political emphasis had now shifted towards economic analysis, the 1980s still provided useful papers on net energy analysis. In 1981, Hall published ‘Energy return on investment for United States petroleum, coal, and uranium’, which marked the first time that the acronym EROI was published in the academic literature. Following growing concern about environmental impacts, climate change and sustainability, documented in the Brundtland Report in 1987, emphasis began to shift from energy analysis to greenhouse gas (GHG) emissions and life-cycle analysis.
Excerpts from: S. HRG. 109-412. March 7, 2006. Energy independence. U.S. Senate Committee on energy & natural resources. 103 pages.
JOSEPH I. LIEBERMAN, U.S. SENATOR FROM CONNECTICUT
Please accept my thanks for the opportunity to submit this statement as part of the record of today’s hearing in the issue of oil dependence—or, as President Bush put it, our ‘‘addiction’’ to oil. Let me be clear that I am under no illusions that our economy can be completely energy independent in the literal sense of that term. We can, however, ensure that our economy grows while becoming less and less oil-intensive. We have the technology to do it, we have the homegrown fuels to do it and, more and more, I believe we have the will to do it. And, if we succeed we will be making our economy more and more resilient against the dangers and shocks of the global oil system, while freeing our national security and our foreign policy from the very real threats and distortions that our oil-dependence imposes.
While geologists and economists can debate when the oil supply will ‘‘peak,’’ what is indisputable is that demand is now exploding as developing nations such as India and China increase consumption.
According to the IEA, global demand for oil—now about 85 million barrels a day— will increase by more than 50% to 130 million barrels a day between now and 2030 if nothing is done. The industrialized world’s dependence on oil heightens global instability. The authors of the IEA report note that the way things are going ‘‘we are ending up with 95% of the world relying for its economic well-being on decisions made by five or six countries in the Middle East.’’ The recent attack on the Abqaiq oil processing facility in Saudi Arabia reminds us not only of our dangerous dependence on foreign oil, but that that vulnerability is recognized by our enemies. Besides the Mideast, I would add that Nigeria is roiled by instability, Venezuela’s current leadership is hostile to us and Russia’s resurgent state power has ominous overtones.
We are just one well-orchestrated terrorist attack or political upheaval away from a $100-a-barrel overnight price spike that would that would send the global economy tumbling and the industrialized world, including China and India, scrambling to secure supplies from the remaining and limited number of oil supply sites. History tells us that wars have started over such competition.
Left unchecked, I fear that we are literally watching the slow but steady erosion of America’s power and independence as a nation—our economic and military power and our political independence. We are burning it up in our automobile engines and spewing it from our tailpipes because of our absolute dependence on oil to fuel our cars and trucks. We need to transform our total transportation infrastructure from the refinery to the tailpipe and each step in between because transportation is the key to energy independence.
That dependence on oil—and that means foreign oil because our own reserves are less than 1 percent of the world’s oil reserves—puts us in jeopardy in three key ways—a convergence forming a perfect storm that is extremely dangerous to America’s national security and economy.
First, the structure of the global oil market deeply affects—and distorts—our foreign policy. Our broader interests and aspirations must compete with our own need for oil and the growing thirst for it in the rest of the world—especially by China and India. As a study in the journal Foreign Affairs makes clear, China is moving aggressively to compete for the world’s limited supplies of oil not just with its growing economic power, but with its growing military and diplomatic power as well. Second, today we must depend for our oil on a global gallery of nations that are politically unstable, unreliable, or just plain hostile to us. All that and much more should make us worry because if we don’t change—it is within their borders and under their earth and waters that our economic and national security lies. Doing nothing about our oil dependency will make us a pitiful giant—like Gulliver in Lilliput—tied down by smaller nations and subject to their whims. And we will have given them the ropes and helped them tie the knots.
We can take on this problem now and stand tall as the free and independent giant we are by reducing America’s dependence on oil.
I can almost hear colleagues murmur, So, Senator Lieberman, what else is new? We’ve been hearing this for years and nothing has happened. I can’t blame you if you are skeptical. The struggle for oil independence has been going on at least since Jimmy Carter was President.
But things have changed since the days of Jimmy Carter and even since last summer. There is a new understanding of the depth of the crisis that our oil dependence is creating. Last summer’s doubling of gasoline and crude oil prices hit tens of millions of Americans with the global reality of oil demand and pricing. And Hurricane Katrina reminded us how vulnerable our supplies can become. This reality is bipartisan.
We will push harder for more and quicker production and commercialization of biomass-based fuels.
As always, there is a do-nothing crowd that says the ever-rising price of gasoline and crude oil are the cure—that with higher prices people will reduce consumption and the market will respond with greater investments in the supply of oil to bring prices down. But all that would do is perpetuate the problem. Market-driven oil-dependency is still dependency on foreign oil, driving us further down the current path toward national insecurity and economic and environmental troubles.
Some say that we can ease the crisis through greater domestic drilling—in places like the Arctic Refuge and other public lands or off our shores. But that won’t make a dent in the problem. In the world of oil, geology is destiny and the U.S. today has only 1 percent of the world’s oil reserves. And that small new supply wouldn’t matter much in the global market, since the price of oil produced within the United States rises and falls with the global market, regardless of where it is produced. We just don’t have enough oil in the U.S. anymore. And no matter how much more we drill, we will still be paying the world price of oil—not an American price.
FRANK VERRASTRO, Director & SENIOR FELLOW, Energy Program, Center for Strategic & International Studies
Analysis performed by EIA and the National Renewable Energy Lab estimates that even under optimistic assumptions, alternative transport fuels, excluding electric hybrid plug-ins, can be expected to displace or replace a maximum of 10% of conventional liquid transport fuels by 2030, leaving petroleum-based fuels, new technologies, conservation, and improved efficiency gains to deal with the remaining 90%. For purposes of comparison, a billion gallons of alternative fuels per year roughly translates to 65,000 barrels a day of conventional gasoline and maybe less depending on energy context. And we currently consume over nine million barrels a day of gas every day. In short, while contributions from alternate fuels will be helpful as a component in meeting increased consumer demand, petroleum-based fuels are likely to remain the overwhelming fuel of choice for at least the next 20 years.
At the same time, however, we cannot ignore preparations for transitioning to the inevitable post-oil world, a transition which former Energy and Defense Secretary, Jim Shlesinger, has characterized as the greatest challenge this country and the world will face outside of war.
To the extent practicable, every effort should be made to pursue policies and changes that fully take into account investment in market practices and utilize as much as possible existing infrastructure and currently available technologies.
And fuels alone are not the answer. We need radical changes to our motor vehicles, both in terms of energy and design and construction material, as well as to the way we transport goods and people.
We frequently speak about politically unstable sources of supplies from around the globe, but the largest protracted losses of global oil and gas output in both 2004 and 2005 were the results of hurricanes in the U.S. Gulf of Mexico.
My professional background also includes a variety of energy policy positions in the White House, and the Departments of Interior and Energy, as well as senior executive positions dealing with both upstream and downstream issues in the energy sector, first as Director of Refinery Policy and Crude Oil Planning for TOSCO Corporation, and more recently as a Senior Vice President at Pennzoil Company.
My concern over the continued ability of this nation to secure energy supplies from an increasing list of inaccessible, high risk or less than reliable parts of the world has prompted policymakers to once again raise the issues of both the desirability and achievability of energy independence.
Consumers have come to both enjoy and expect a healthy domestic economy, which is underpinned by an energy supply that is at once available, affordable, secure, and environmentally benign. In this new world are those criteria able to be satisfied or are they just beyond the reach of current energy paradigms and policies? Global energy demand is projected to increase by 50% over the next 25 years, yet the relative shares of the 5 major fuel groups—oil, natural gas, coal, nuclear and renewables—are expected to remain remarkably constant, with fossil fuel consumption still accounting for over 85% of total energy demand in 2025. In the developing world, that figure exceeds 90%, carrying obvious consequences for consumer competition and the environment. As we consider our energy options, I would strongly urge that we not forget the substantial contributions that conservation and improved efficiency can make to achieving our future energy goals.
In the power generation sector, it currently takes 3 to 4 units of primary energy to produce one unit of delivered electricity. Conservation, efficiency and infrastructure delivery improvements coupled with additional contributions from renewable energy sources can obviate the need for additional, incremental production of fossil fuels for power generation purposes.
Analyzing this forecasted future leads to 2 inescapable conclusions. The first is that absent major technological breakthroughs, significant changes in consumption patterns and policies, or massive dislocations that alter the course of events, the consumption trends depicted by this chart are simply unsustainable for the long term. Secondly, even assuming a significant contribution from a wide range of alternative fuels, conventional energy sources will continue to dominate the landscape for at least the next several decades.
For the past 30 years, U.S. oil policy initiatives have centered around 4 major themes: increasing and diversifying sources of conventional and unconventional energy supplies both at home and abroad; encouraging, wherever practicable and politically achievable, the adoption of improvements in conservation and fuel efficiency; the expansion of the strategic petroleum reserve; and reliance on Saudi Arabia to balance oil markets and moderate prices. For the most part, in an era of surplus supply, this strategy has largely worked. Times and market conditions, however, may well be changing. Global demand for all energy forms is accelerating, and resources are increasingly controlled by national players, whose primary national objectives may not conform to traditional market practices or concerns. It took the world 18 years (from 1977-1995) to grow global oil demand from 60 to 70 million barrels per day (mmb/d); eight years to grow from 70 to 80 mmb/d; and if current projections are correct, global oil demand will exceed 90 mmb/d by 2010. Forecasts for oil consumption in 2030 approximate 115-120 mmb/d—roughly half again as much as we currently consume. Setting aside the debate about resource availability or so called ‘‘peak oil,’’ market growth of that magnitude will require huge investments, place enormous strains on transportation and infrastructure needs, and carry significant implications for security, global geopolitics and the environment.
In addition, the entry of new market players, like China and India, with growing energy appetites and expanding economies may pose competitive threats to America’s market dominance. Added to that are heightened security concerns about threats to infrastructure and facilities posed by terrorist groups and insurgents. Taken together, these changing circumstances have the potential to re-order the marketplace and fundamentally alter the geopolitical balance that has governed the past half century. Such changes may also warrant a thoughtful recalibration of our economic, security, environmental, energy and foreign policy calculations and policy choices.
The United States is currently the world’s largest producer, consumer, and net importer of energy. We are home to roughly 5% of the world’s population and produce 17 percent of the total energy supplied.
Yet in the process of generating some 30 percent of global GDP, America consumes nearly a quarter of the world’s energy.
Projected supplies of LNG imports assume that additional regasification capacity will be permitted and constructed either within the United States or in areas proximate to U.S. borders—an uncertain assumption. In addition to environmental, safety, competition, and siting issues, opponents of additional LNG re-gas projects increasingly cite security and foreign policy concerns about exposing the U.S. electric grid system to reliance on imports from countries, many of which are oil exporters found in troubled regions of the world.
Biomass. Since only a portion of the plant material can be used to produce ethanol, issues have been raised about how to handle the residual waste material—e.g., stalks, leaves and husks. A partial answer to this dilemma has resulted in research into what is called cellulosic ethanol, but transportation and energy content issues still remain to be resolved. For example, since a gallon of ethanol contains less energy than a comparable gallon of gasoline, poorer mileage ratings and more frequent fuel stops are impediments that need to be overcome. Additionally, cold weather start problems and transport in carriers other than pipelines may complicate gasoline substitution on a national scale.
Based on current government data, the capital investment costs for most, if not all, of these synthetic fuel technologies is considerably more than that required for a traditional crude oil refinery (see page 57, of EIA’s 2006 Annual Energy Outlook). Further, for purposes of comparison, EIA estimates that there is currently some 300,000 b/d of installed corn ethanol capacity in the United States and an additional 12,000 b/d of biodiesel capacity. Additionally, excluding ‘‘pilot’’ facilities, the latest EIA statistics indicate that there are currently no commercial BTL, GTL or CTL plants in the United States. In contrast, U.S. refining capacity currently exceeds 17,000,000 barrels per day and domestic gasoline demand averages over 9,000,000 barrels per day.
Absent significant policy and regulatory changes to promote increased fuel efficiency, major technological breakthroughs, and substantial changes in consumer/ driver behavior (based on environmental, security or foreign policy considerations), petroleum based fuels will remain the overwhelming fuel of choice for at least the next 20-30 years.
Given projections for increasing fuel demand, the inescapable conclusion is that oil imports will also be with us for decades to come. In that context, we would do well to ratchet down the political rhetoric surrounding the notion of achieving energy independence and instead refocus our efforts to deal with an inter-dependent energy future and simultaneously prepare for the (longer term) transition to a post-oil world, a transition which former Energy and Defense Secretary James Schlesinger has characterized as ‘‘. . . the greatest challenge this country and the world will face—outside of war.’’
U.S. OIL IMPORTS—SOURCES AND CONCERNS. In his State of the Union address, President Bush advanced the challenge of reducing this nation’s ‘‘addiction to oil’’ and reducing by 75% our reliance on oil imports from the Middle East. At best, this line was a thinly veiled attempt to drum up domestic political support for a valiant yet difficult effort to reduce petroleum consumption. At worst, it showed a decided lack of understanding of U.S. import sources, global oil markets and reserve holders.
PITFALLS AND WARNINGS. As with any transformational change, issues surrounding the approach, time horizon and levers designed to accomplish the objective remain keys to success. Dealing with an energy transition is no less daunting. To the extent practicable, every effort should be made to pursue policies and changes that fully take into account investment and market practices and utilize as much as possible existing infrastructure and currently available technologies. Minimizing uncertainty, avoiding conflicting or contradictory policy signals, and evaluating/selecting options based on economic efficiency and merit rather than political efficacy are also are highly recommended.
Changing market and political conditions may complicate America’s policy agenda going forward, and these include:
- Energy security, broadly defined in terms of attacks on infrastructure, and greater vulnerability to imported energy supply threats, either physical or financial, due to growing production concentration;
- Market developments, particularly in alternative fuels and with respect to climate change. In the future, markets may drive policy more than policy drives markets;
- Less multilateral cooperation in the international oil trading and investment market places as governments pursue specific narrow interests;
- Increased vulnerability to supply disruptions due to growing natural gas import dependence in the power sector; and
- Political hostility to U.S. policy in specific regions as allies and friends abandon the United States to ensure their own political survival.
This almost inevitable growth in reliance on foreign supplies would, to the casual observer, seem to be a call to action, to define and implement policies that would concomitantly expand domestic supplies while setting demand management efforts in motion. To do so, however, requires a certain political will on the part of both the U.S. consumer and the government. And, to date, despite higher energy prices, real and threatened interruptions in supply, environmental damage, hurricanes and blackouts, that critical ingredient remains lacking.
All energy producer/exporters and consumer/importers are bound together by a mutual interdependency. All are vulnerable to any event, anywhere, at any time, which impacts on supply or demand. This means that the U.S. energy future likely will be shaped, at least in part, by events outside of our control and beyond our influence. Calls for energy independence, absent major technological breakthroughs and a national commitment, ring hollow, and in the near term are both unrealistic and unachievable.
In the absence of decisive political will to undertake those steps necessary to improve efficiency, promote conservation, encourage the development of domestic energy resources and renewable energy forms, learning to manage the risks accompanying import dependency may be the only reasonable course of action.
HON. EVAN BAYH, U.S. SENATOR FROM INDIANA
United States dependence on oil is the preeminent challenge of our generation. U.S. oil consumption affects more than just prices at the pump; it impacts our national security, our economy, our fiscal health and our environment. The United States uses 25% of the world’s oil but controls only 3% of the world’s proven oil reserves. As of right now, our demand from oil is only expected to grow, from nearly 21 million barrels a day now to 28 million barrels per day in 2030, of which nearly 70% will be imported. While demand in the U.S. will grow by approximately 25%, demand in China, India and other developing countries is projected to grow by 66%. To meet the projected world demand, global output would have to expand by 57% in 2025.
The Energy Information Administration’s (EIA) most recent forecast states that the price of crude is expected to remain high at $57 per barrel in 2030. The International Energy Agency (IEA) price forecast is even more dire. According to the IEA, if oil producing countries in the Middle East and Africa do not make immediate investments to increase production, the price will rise to $86 barrel in 2030. Even if the region does make the necessary investments, prices could average $65 a barrel.
These forecasts assume the current projections for supply and demand but do not address the consequences of a supply disruption caused by terrorism, political unrest or weather. Last summer, the National Commission on Energy Policy and Securing America’s Energy Future conducted a simulation called Oil Shock Wave to explore the potential security and economic consequences of an oil supply crisis. The event started by assuming that political unrest in Nigeria combined with unseasonably cold weather in North America contributed to an immediate global oil supply shortfall. This sent prices to over $80 barrel. The simulation then assumed that 3 terrorist attacks occur in important ports and processing plants in Saudi Arabia and Alaska which sent oil prices immediately soaring to $123 a barrel and $161 barrel 6 months later. At these prices, the country goes into a recession and millions of jobs are lost as a result of sustained oil prices.
This simulation almost became reality with the failed attack on Abqaiq in Saudi Arabia last month. Had the attack been successful, it would have removed 4to 6 million barrels per day from the global market sending prices soaring around the world and would likely have had a devastating impact on our economy.
One of the lessons from September 11th is that we can no longer be so dependent on places like Saudi Arabia, Russia and Venezuela for our energy supply. Yet we are more dependent on foreign oil from hostile countries today than we were on September 11th—making us more vulnerable and putting the United States in a uniquely disturbing position of bankrolling both sides in the War on Terror. This goes to the heart of our security and our sovereignty. As the world confronts the prospect of a nuclear Iran, our leverage is dramatically limited by the fact that Iran is the second largest exporter of oil. We and our allies are vulnerable to energy blackmail. A few months ago, the Russians decided they weren’t pleased with the Ukrainian elections, so they simply decided to stop exporting natural gas to them— nearly causing an economic crisis in the region.
How can we be sure that the radicals and America-haters who control the oil will never do that to us? Our economy is vulnerable to the price volatility of the oil market and we must do what we can to build resilience into our economy. Decreasing the oil intensity of our economy will help us weather price shocks and make us more secure. We can reduce oil intensity by reducing our demand for oil.
The risks faced above ground by depending on unstable suppliers and good weather are too great and to a certain extent out of our control. If the attack on Abqaiq would have been successful, there is little that we could do to moderate its impact on our economy and lower the prices which is why it is urgent that Congress and the President act now to start reducing our dependence on oil. There is no magic bullet to address a major shock to the oil market and we must take the steps necessary to reduce our dependence on oil which will make our nation stronger. We must bring the same urgency to energy security that we have on the War on Terror.
The Vehicle and Fuel Choices for American Security Act (VFCASA makes significant reductions in our oil use. We chose this title because nothing less than our national security is at stake. This bill would reduce projected oil use by 2.5 million barrels per day in 2016 and 7 million barrels per day in 2026. It also provides tools to meet these aggressive targets by improving the efficiency of vehicles and increasing the production and use of biofuels. VFCASA includes new approaches for manufacturers, the federal government, scientists and consumers, all designed to encourage greater energy security. Other Senators are Joseph Lieberman of Connecticut, Sam Brownback of Kansas, Norm Coleman of Minnesota, Lindsey Graham of South Carolina, Ken Salazar of Colorado, Jeff Sessions of Alabama, Bill Nelson of Florida, Richard Lugar of Indiana, Barack Obama of Illinois, Johnny Isakson of Georgia and Lincoln Chafee of Rhode Island. I hope that in the future we all look back on the day this bill was introduced as the beginning of a major shift in our national security strategy. I hope that history will say we saw a challenge to our national security and prosperity and then met it and mastered it.
The legislation requires that in 2012, 10% of vehicles manufactured be flexible fuel vehicles, alternative fueled vehicles, hybrids, plug-in hybrids, advanced diesels and other oil saving vehicle technologies. This percentage rises each year until 50% of the new vehicle fleet will be one of these oil saving technologies. It also provides tax incentives for U.S. manufacturing facilities to retool existing facilities to produce advanced technology vehicles which will help shift the vehicle fleet to more efficient vehicles while minimizing the job impact of an increased market share of advanced technology vehicles. The bill builds on the Energy Policy Act (EPAct) of 2005 by expanding the number of consumers that can take advantage of the tax credit available for the purchase of more efficient vehicles. It offers a tax credit to private fleet owners who invest in more efficient vehicles.
VFCASA contains robust research provisions in the areas of electric drive transportation, including battery research, lightweight materials and cellulosic biofuels. Each of these technologies hold great potential to play a key role in reducing our dependence on oil. For instance, lightweight materials, such as carbon composites and steel alloys, hold the promise of being able to double automotive fuel economy while improving safety without increasing the cost of the vehicle. Cellulosic biofuels, which the President mentioned in the State of the Union, have the promise to be cheaper than gasoline and produce 7 to 14 times more energy than is used in its production. My bill doubles the funding for bioenergy research contained in EPAct and provides additional funding for production incentives for the production of cellulosic biofuels. The average American automobile might remain in operation for 15 years or more. This means that it is essential that we begin immediately to deploy oil saving technologies.
Addressing our dependence on oil is a challenge that we can no longer ignore. Events in the world from September 11th to Hurricane Katrina to the recent attempted terrorist attack in Saudi Arabia continue to show us how urgent it is that we act immediately. I hope that this hearing today is the only the Committee’s first step in tackling the challenge of American oil dependence.
DIANNE FEINSTEIN, U.S. SENATOR from California (raise fuel economy, close SUV/light-truck loophole)
The amount of oil imported into the United States has climbed from 6 million barrels of oil per day in 1973 to 12 million barrels per day in 2004 (Energy Information Administration). And the percentage of foreign oil consumed in the U.S. has climbed from 35% in 1973 to 59% in 2004.
So while there has been a lot of talk about decreasing our nation’s dependence on foreign oil, most of it has been empty rhetoric. This week’s cover story of BusinessWeek is ‘‘The New Middle East Oil Bonanza.’’ With oil prices so high, partially due to fear of oil production disruptions in Nigeria, Saudi Arabia, Venezuela, and elsewhere, billions of dollars are going into the coffers of oil-producing nations.
I am seriously concerned about the impacts of America’s overdependence on foreign oil. This cannot continue. For foreign policy and for environmental reasons, the overdependence on oil is a real problem. With 5% of the world’s population, we cannot continue to use 25% of the world’s oil supply. Especially not with India and China developing at their current pace. There are things we could do today to reduce our dependency on oil, and yet we need the political will to get them accomplished. Specifically, we must raise the nation’s fuel economy standards. The Consumer Federation of America estimates that increasing the fuel economy of our domestic fleet by 5 miles per gallon would save about 23 billion gallons of gasoline each year, reducing oil imports by an estimated 14%. A fleet-wide increase of 10 miles per gallon would save 38 billion gallons, cutting imports by almost 20%. That is why I have introduced a very modest bill for the past three Congresses that would close a loophole in current law that allows SUVs and other light trucks to meet less stringent fuel economy standards than other passenger vehicles.
If the SUV loophole were closed, the savings would be rather dramatic. More than 480,000 SUVs were sold in the first quarter of 2005. If those SUVs achieved an average fuel economy of 27.5 miles per gallon, we would reduce gasoline use by more than 81 million gallons of a year. And that’s just for SUVs sold in the first quarter of 2005. If this bill were to pass, the United States would save 1 million barrels of oil a day and decrease foreign oil imports by 10%. Yet the automobile manufacturers continue to fight this proposal tooth and nail and for reasons I cannot understand. The technology to make these vehicles more efficient is available today and American auto companies are making vehicles to meet fuel economy standards in other countries. China, for instance, has issued fuel efficiency standards that are more stringent than ours. If American auto companies hope to make cars that will compete in China, then they will need to make them more fuel efficient. I hope the representative from Ford will be able to address this issue in her statement. If the Federal Government is not going to act, Congress should not stop the States from acting.
James Woolsey, Director of Central Intelligence, 1993-95, VP Booz Allen Hamilton
I believe that energy independence is principally an issue of oil and conventional oil. The dangers of petroleum dependence and the urgency, I think, are guided by some seven factors. First , the current transportation infrastructure is committed to oil and oil-compatible products. So major investments, whereas they may be wise, in electricity generation of different types, whether it is renewables, nuclear, or whatever, has very little impact today on oil use. They are important for other reasons, but not particularly with respect to oil use. In my judgment, hydrogen will take too long to satisfy some of the urgency that should be attached to our current oil dilemma.
A second factor is that the greater Middle East is going to continue to be the low-cost and dominant petroleum producer for the foreseeable future and hold two-thirds of the world’s proven reserves. The growth we expect in China and India and elsewhere is going to keep demand up for a substantial time and put the greater Middle East and particularly Saudi Arabia more and more in the driver’s seat. Petroleum infrastructure is very vulnerable to terrorist attacks and other types of potential cut-offs. Ten days ago, we had the attack at Abqaiq. We have hurricane damage possible in the gulf coast. We have the possibility of regime change in the Middle East. There was almost a coup in Saudi Arabia in 1979. This reliance on this part of the world is going to be a problem for us for a long time.
The possibility exists not only of a regime change and terrorist attacks, but also of financial disruption as a result of how much we are borrowing to finance our oil habits. We borrow approximately a billion dollars every working day, $250 billion a year, about a third of our overall trade deficit, in order to import oil. And over the last 30 years, some $70 to $100 billion of that has been provided by Saudi Arabia as a government and certainly more by individuals to causes such as the Wahhabi schools in Madras and Pakistan, and elsewhere in the Middle East. We found when I was chairman of the Board of Freedom House, even mosques here in the United States, very, very strongly hate literature. We are paying for that, and that is essentially the same set of beliefs that are propagated by al Qaeda. The only difference between the Wahhabis and al Qaeda is who should be in charge. But the underlying hatred of other religions, democracy and the rest, we pay for in no small measure through our borrowing for oil.
For many developing countries, oil debt is a huge share of their national debt and, therefore, of their problem of poverty. We suggest, and these suggestions were stated by former Secretary of State, George Schultz, and I in a piece last summer—we co-chaired the committee on the present danger—that one should focus on making changes that can be made within the existing infrastructure, can be made relatively soon, and which use cheap or even waste products as feedstocks. And those are the reasons why in the last several pages of testimony, Mr. Chairman, that I suggest that we concentrate—even though there are other worthy things to do—we concentrate on such things as biofuels, particularly ethanol from cellulose, which in the long run is going to be much cheaper than making it from corn or other starches, that we concentrate on diesel from waste products of all kinds, which is coming to be technologically quite feasible.
I served as Director of Central Intelligence, 1993-95, one of the four Presidential appointments I have held in two Republican and two Democratic administrations; these have been interspersed in a career that has been generally in the private practice of law and now in consulting.
Energy security has many facets—including particularly the need for improvements to the electrical grid to correct vulnerabilities in transformers and in the Supervisory Control and Data (SCADA) systems. But energy independence for the U.S. is in my view preponderantly a problem related to oil and its dominant role in fueling vehicles for transportation.
These dangers in turn give rise to two proposed directions for government policy in order to reduce our vulnerability rapidly. In both cases it is important that existing technology should be used, i.e. technology that is already in the market or can be so in the very near future and that is compatible with the existing transportation infrastructure. To this end government policies in the United States and other oil-importing countries should: (1) encourage a shift to substantially more fuel-efficient vehicles within the existing transportation infrastructure, including promoting both battery development and a market for existing battery types for plug-in hybrid vehicles; and (2) encourage biofuels and other alternative and renewable fuels that can be produced from inexpensive and widely-available feedstocks—wherever possible from waste products.
PETROLEUM DEPENDENCE: THE DANGERS: 1. The current transportation infrastructure is committed to oil and oil-compatible products. Petroleum and its products dominate the fuel market for vehicular transportation. This dominance substantially increases the difficulty of responding to oil price increases or disruptions in supply by substituting other fuels.
Substituting other fuels for petroleum in the vehicle fleet as a whole has generally required major, time-consuming, and expensive infrastructure changes. One exception has been some use of liquid natural gas (LNG) and other fuels for fleets of buses or delivery vehicles, and the use of corn-derived ethanol mixed with gasoline in proportions up to 10 per cent ethanol (‘‘gasohol’’) in some states. Neither has appreciably affected petroleum’s dominance of the transportation fuel market.
There are imaginative proposals for transitioning to other fuels for transportation, such as hydrogen to power automotive fuel cells, but this would require major infrastructure investment and restructuring. If privately-owned fuel cell vehicles were to be capable of being readily refueled, this would require reformers (equipment capable of reforming, say, natural gas into hydrogen) to be located at filling stations, and would also require natural gas to be available there as a hydrogen feed-stock. So not only would fuel cell development and technology for storing hydrogen on vehicles need to be further developed, but the automobile industry’s development and production of fuel cells also would need to be coordinated with the energy industry’s deployment of reformers and the fuel for them. Moving toward automotive fuel cells thus requires us to face a huge question of pace and coordination of large-scale changes by both the automotive and energy industries. This poses a sort of industrial Alphonse and Gaston dilemma: who goes through the door first? (If, instead, it were decided that existing fuels such as gasoline were to be reformed into hydrogen on board vehicles instead of at filling stations, this would require on-board reformers to be developed and added to the fuel cell vehicles themselves—a very substantial undertaking.)
It is because of such complications that the National Commission on Energy Policy concluded in its December, 2004, report ‘‘Ending The Energy Stalemate’’ (‘‘ETES’’) that ‘‘hydrogen offers little to no potential to improve oil security and reduce climate change risks in the next twenty years.’’ To have an impact on our vulnerabilities within the next decade or two, any competitor of oil-derived fuels will need to be compatible with the existing energy infrastructure and require only modest additions or amendments to it.
The Greater Middle East will continue to be the low-cost and dominant petroleum producer for the foreseeable future Home of around two-thirds of the world’s proven reserves of conventional oil—45% of it in just Saudi Arabia, Iraq, and Iran—the Greater Middle East will inevitably have to meet a growing percentage of world oil demand.
One need not argue that world oil production has peaked to see that this puts substantial strain on the global oil system. It will mean higher prices and potential supply disruptions and will put considerable leverage in the hands of governments in the Greater Middle East as well as in those of other oil-exporting states which have not been marked recently by stability and certainty: Russia, Venezuela, and Nigeria.
Deep-water drilling and other opportunities for increases in supply of conventional oil may provide important increases in supply but are unlikely to change this basic picture. If world production of conventional oil has peaked or is about to, this of course further deepens our dilemma and increases costs sooner. Even if other production comes on line, e.g. from unconventional sources such as tar sands in Alberta or shale in the American West, their relatively high cost of production could permit low-cost producers of conventional oil, particularly Saudi Arabia, to increase production, drop prices for a time, and undermine the economic viability of the higher-cost competitors, as occurred in the mid-1980’s.
The petroleum infrastructure is highly vulnerable to terrorist and other attacks. The radical Islamist movement, including but not exclusively al Qaeda, has on a number of occasions explicitly called for worldwide attacks on the petroleum infrastructure and has carried some out in the Greater Middle East. A more well-planned attack than the one that occurred ten days ago at Abquaiq—such as that set out in the opening pages of Robert Baer’s recent book, Sleeping With the Devil, (terrorists flying an aircraft into the unique sulfur-cleaning towers at the same facility)—could take some six million barrels per day off the market for a year or more, sending petroleum prices sharply upward to well over $100/barrel and severely damaging much of the world’s economy. Domestic infrastructure in the West is not immune from such disruption. U.S. refineries, for example, are concentrated in a few places, principally the Gulf Coast.
Last summer’s accident in the Texas City refinery—producing multiple fatalities—points out potential infrastructure vulnerabilities, as of course does this past fall’s hurricane damage in the Gulf. The Trans-Alaska Pipeline has been subject to several amateurish attacks that have taken it briefly out of commission; a seriously planned attack on it could be far more devastating. In view of these overall infrastructure vulnerabilities policy should not focus exclusively on petroleum imports, although such infrastructure vulnerabilities are likely to be the most severe in the Greater Middle East. It is there that terrorists have the easiest access, and the largest proportion of proven oil reserves and low-cost production are also located there. But nothing particularly useful is accomplished by changing trade patterns. To a first approximation there is one worldwide oil market and it is not generally helpful for the U.S., for example, to import less from the Greater Middle East and for others then to import more from there. In effect, all of us oil-importing countries are in this together.
The possibility exists, both under some current regimes and among those that could come to power in the Greater Middle East, of embargoes or other disruptions of supply. It is often said that whoever governs the oil-rich nations of the Greater Middle East will need to sell their oil. This is not true, however, if the rulers choose to try to live, for most purposes, in the 7th century. Bin Laden has advocated, for example, major reductions in oil production and oil prices of $200/barrel or more. As a jihadist Web site has just stated in the last few days: ‘‘[t]he killing of 10 American soldiers is nothing compared to the impact of the rise in oil prices on America and the disruption that it causes in the international economy.’’ Moreover, in the course of elaborating on Iranian President Ahmedinejad’s threat to destroy Israel and the U.S., his chief of strategy, Hassan-Abbassi, has recently bragged that Iran has already ‘‘spied out’’ the 29 sites ‘‘in America and the West’’ which they (presumably with help from Hezbollah, the world’s most professional terrorist organization) are prepared to attack in order to ‘‘destroy Anglo-Saxon civilization.’’ One can bet with reasonable confidence that some of these sites involve oil production and distribution. In 1979 there was a serious attempted coup in Saudi Arabia. Much of what the outside world saw was the seizure by Islamist fanatics of the Great Mosque in Mecca, but the effort was more widespread. Even if one is optimistic that democracy and the rule of law will spread in the Greater Middle East and that this will lead after a time to more peaceful and stable societies there, it is undeniable that there is substantial risk that for some time the region will be characterized by chaotic change and unpredictable governmental behavior. Reform, particularly if it is hesitant, has in a number of cases in history been trumped by radical takeovers (Jacobins, Bolsheviks). There is no reason to believe that the Greater Middle East is immune from these sorts of historic risks.
Wealth transfers from oil have been used, and continue to be used, to fund terrorism and Its ideological support. Estimates of the amount spent by the Saudis in the last 30 years spreading Wahhabi beliefs throughout the world vary from $70 billion to $100 billion. Furthermore, some oil-rich families of the Greater Middle East fund terrorist groups directly. The spread of Wahhabi doctrine—fanatically hostile to Shi’ite and Suffi Muslims, Jews, Christians, women, modernity, and much else—plays a major role with respect to Islamist terrorist groups: a role similar to that played by angry German nationalism with respect to Nazism in the decades after World War I. Not all angry German nationalists became Nazis and not all those schooled in Wahhabi beliefs become terrorists, but in each case the broader doctrine of hatred has provided the soil in which the particular totalitarian movement has grown. Whether in lectures in the madrassas of Pakistan, in textbooks printed by Wahhabis for Indonesian schoolchildren, or on bookshelves of mosques in the U.S., the hatred spread by Wahhabis and funded by oil is evident and influential. On all points except allegiance to the Saudi state Wahhabi and al Qaeda beliefs are essentially the same. In this there is another rough parallel to the 1930’s—between Wahhabis’ attitudes toward al Qaeda and like-minded Salafist Jihadi groups today and Stalinists’ attitude toward Trotskyites some sixty years ago (although there are of course important differences between Stalin’s Soviet Union and today’s Saudi Arabia). The only disagreement between Stalinists and Trotskyites was on the question whether allegiance to a single state was the proper course or whether free-lance killing of enemies was permitted. Stalinist hatred of Trotskyites and their free-lancing didn’t signify disagreement about underlying objectives, only tactics, and Wahhabi/Saudi cooperation with us in the fight against al Qaeda doesn’t indicate fundamental disagreement between Wahhabis and al Qaeda on, e.g., their common genocidal fanaticism about Shia, Jews, and homosexuals. So Wahhabi teaching basically spreads al Qaeda ideology
The current account deficits for the U.S. and a number of other countries create risks ranging from major world economic disruption to deepening poverty, and could be substantially reduced by reducing oil imports. The U.S. in borrows about $2 billion every calendar day from the world’s financial markets to finance the gap between what we produce and what we consume. The single largest category of imports is the approximately $1 billion per working day, or $250 billion a year, borrowed to import oil. The accumulating debt increases the risk of a flight from the dollar or major increases in interest rates. Any such development could have major negative economic consequences for both the U.S. and its trading partners.
If such deficits are to be reduced, however, say by domestic production of substitutes for petroleum, this should be based on recognition of real economic value such as waste cleanup, soil replenishment, or other tangible benefits.
Government policies with respect to the vehicular transportation market:
Encourage improved vehicle mileage, using technology now in production The following three technologies are available to improve vehicle mileage substantially. [We should] take advantage of diesels’ substantial mileage advantage over gasoline-fueled internal combustion engines. Heavy penetration of diesels into the private vehicle market in Europe is one major reason why the average fleet mileage of such new vehicles is 42 miles per gallon in Europe and only 24 mpg in the U.S. Although the U.S. has, since 1981, increased vehicle weight by 24% and horsepower by 93%, it has actually somewhat lost ground with respect to mileage over that near-quarter century. In the 12 years from 1975 to 1987, however, the U.S. improved the mileage of new vehicles from 15 to 26 mpg.
Hybrid gasoline-electric vehicles now on the market generally show substantial fuel savings over their conventional counterparts.
Light-weight carbon composite construction. Constructing vehicles with inexpensive versions of the carbon fiber composites that have been used for years for aircraft construction can substantially reduce vehicle weight and increase fuel efficiency while at the same time making the vehicle considerably safer than with current construction materials.
Encourage the commercialization of alternative transportation fuels that can be available soon, are compatible with existing infrastructure, and can be derived from waste or otherwise produced cheaply. Biomass (cellulosic) ethanol The use of ethanol produced from corn in the U.S. and sugar cane in Brazil has given birth to the commercialization of an alternative fuel that is coming to show substantial promise, particularly as new feedstocks are developed.
Senator DORGAN. I think a dispassionate observer living off of our planet and looking at this planet and seeing that we use what, 84 million barrels a day that we extract from the planet. One-fourth of that is used in this little spot called the United States. A substantial portion of the inventory exists in another part of the globe covered with sand. And they would look at this part of the country or this part of the planet, the United States, needing a quarter of it, 60 percent of what it needs coming from off our shores, particularly from troubled parts of the world and they would say, well, how could they not have been so concerned about that that they would have taken dramatic action, because tonight or tomorrow or next Saturday or God forbid next month or whenever, a terrorist action or some other cataclysmic action could just simply throw this country’s economy flat on its back. It will affect every job. It will affect everything we do. And so when the chairman and Senator Bingaman have a hearing that talks about the goal of energy independence, this is not just some ethereal notion about what would be nice to do. This is really an urgent priority for a country. The question is, do we have the luxury of deciding whether to try to strive for independence specifically of oil or is this an urgent requirement for this country at this point?
Mr. WOOLSEY. I think it’s extremely urgent, Senator Dorgan. I think that this could collapse on us at any time. There was almost a coup in Saudi Arabia in 1979. And Iran could cut us off for a while for its own reasons of pursuing its nuclear program, terrorist attacks in a number of places. This is something that we need to fix and we need to fix now. In my view reducing our dependence on conventional oil is an integral part of the war on terror. I believe we will be in this war for decades, much like the Cold War, and that one key to winning it is to cease funding the ideology of hatred that our enemies feed upon. We borrow $250 billion/year to import oil—an increasing share it will come from the Middle East as the years go on. The Saudis then, to take one example, provide around $4 billion/year to the Wahhabis who then use much of it to run, e.g., madrassas in Pakistan and elsewhere that teach this hatred. Indeed one could say that, other than the Civil War, this is the only war the U.S. has fought in which we pay for both sides.
Nuclear energy may be one good way to produce electricity, especially because it does not emit global warming gases. But it is largely irrelevant to the question oil addiction because only 2-3% of our electricity comes from oil.
AMORY B. LOVINS, CHIEF EXECUTIVE OFFICER, ROCKY MOUNTAIN INSTITUTE
I have studied the White House Fact Sheet on the Advanced Energy Initiative with some puzzlement. The stated purpose is ‘‘to help break America’s dependence on foreign source of energy.’’ This can only mean oil: the U.S. does not import coal, uranium is in surplus, and natural gas imports are small (although Administration policy is to increase them by several-fold, creating a new dependence). However, the section on ‘‘diversifying energy sources’’ is all about electricity, which has almost nothing to do with oil. This confusion between oil and electricity, conflating them both into ‘‘energy,’’ bemuses energy experts the world over who assume that responsible U.S. officials must understand these fundamentals; yet such jumbled formulations persist.
I don’t think we need to spend more (although more well-targeted energy R&D would certainly be valuable), but we definitely need to spend smarter. The lion’s share of both current and new energy R&D funding is going, as usual, to the least promising but most politically powerful technologies—coal and nuclear—that can by their nature contribute virtually nothing to getting America off oil. This and the ill-conceived subsidies in last year’s Energy Policy Act don’t simply divert Federal funds from best buys; they also leverage untold sums of private capital into non-solutions. These mistaken Federal energy priorities in the 1980s, in practical effect, created today’s oil crisis because of what they didn’t do and what they dissuaded private investors from doing. Today’s repetition of this policy error is setting the stage for another, longer, worse oil crisis.
The Strategic Petroleum Reserve (SPR) is useful, though I’ve heard disturbing recent reports about its ability to sustain maximum output, and I remain concerned about the vulnerability of its centralized facilities to disruption by hurricanes or terrorism.
I’d prefer greater emphasis on distributed stockpiles of refined products rather than crude oil, rotated as needed to guard against deterioration. The oil system used to have much larger product stockpiles close to its customers than it does today, because bean-counters have wrung out inventory as mere carrying-cost overhead, sapping its societal value for private gain.
Europe is generally ahead in this regard; many governments require market actors, both suppliers and major customers, to carry refined-product stocks that are already in the form and at the place where they’d be needed by final customers. With so many simultaneous disruptions in the world oil system, and strong incentive to cause more, I think the case for such distributed product stocks (duly protected against attack) is now unassailable. So is the even more powerful case for efficient use of oil. This gives the most bounce per buck by stretching existing stocks and buying more time to mend what’s broken or improvise substitutes.
The grave security problems I identified 27 years ago in our Nation’s energy infrastructure should have been fixed, but instead, most of them have been worsened. These self-inflicted vulnerabilities are an attractive nuisance for Al Qa’eda, and we should at least stop multiplying them. Current Federal energy policy perpetuates American’s expanding oil dependence, because it ranges from modest support (advanced biofuels) to inaction (natural-gas and electric efficiency) to opposition (seriously improving light-vehicle efficiency). The resulting oil dependence funds both sides of the war, impugns U.S. moral standing, has bailed out the nearly empty Iranian and Saudi treasuries, has created (in effect) such leaders as Ahmadinejad, Chavez, El-Bashir, and Putin, systematically distorts foreign policy and postures, poisons foreign attitudes, weakens competitiveness, and enhances vulnerability and fragility.
Meanwhile, Federal policy strongly favors over centralized system architecture, as seen in Katrina’s damage and in bigger, more frequent regional blackouts. It creates terrorist targets, from LNG and nuclear facilities to Iraqi infrastructure. Its centerpiece, ANWR drilling, would create an all-American Strait of Hormuz in a world that already has one such chokepoint too many. It lavishly supports expansion of nuclear power and reverses the Ford-Cheney reprocessing moratorium, thus worsening proliferation. On top of that, it sacrifices what’s left of the nonproliferation regime, painfully built over a half century, to support the nuclear bureaucracy that makes 3% of India’s electricity, while ignoring the vastly greater and cheaper potential to improve the peaceful 97%.
The Japanese have been on a steady course to conserve energy and reduce their dependence on imported energy while their GDP continues to grow. They’re turning down their thermostats and shutting off their idling car and truck engines to save energy. Opinion polls show that more than 75% of Japan’s citizens view energy conservation as a personal responsibility. Many are willing to shell out extra cash for efficient appliances and office equipment. Do you think that Americans can gain energy independence without feeling a little pain? Are American consumers willing to accept some financial pain for energy independence gain? I think most Americans hunger for leaders who engage their patriotic personal involvement in a great national project to shed our oil burden. Winning the Oil Endgame showed how to do this through entrepreneurship and innovation rather than through cost, pain, or sacrifice. But those interested—and there are many— in changing careless habits should be welcomed too, because markets work better when they’re mindful. Just please don’t confuse efficiency (which is widely called ‘‘conservation’’ in the Pacific Northwest but nowhere else in the country) with curtailment (which is what many Americans from other regions think ‘‘conservation’’ means): they should be discussed separately and in unambiguous language, not interchangeably.
We should worry not only about already attacked Saudi oil choke points like Abqaiq and Ras Tanura but also about the all-American Strait of Hormuz proposed in Alaska.
DOE policy that did not undercut DOD’s mission would shift from brittle energy architecture, the next major failure inevitable, to more efficient, resilient, diverse, dispersed, renewable systems that make it impossible. It would avoid electricity investments that are meant to prevent blackouts, but instead make them bigger and more frequent. It would stop creating attractive nuisances for terrorists from vulnerable LNG and nuclear facilities to over-centralized U.S. and Iraqi electric infrastructure. And it would acknowledge the nuclear proliferation correctly identified by the President as the gravest threat to national security is driven largely by nuclear power.
Energy independence is not only about oil. Many sources of LNG raise similar concerns of security, dependence, site vulnerability, and cost. I do not expect that Iran and Russia would be more reliable, long-run sources of gas than Persian Gulf states are today of oil.
The key to wringing twice the work from our oil is tripled efficiency, cars, trucks, and planes, integrating the best 2004 technologies for ultra-light steels or composites, better aerodynamics in tires, and advanced propulsion can do this with 2-year paybacks.
I believe the shortest path to an energy policy that enhances security and prosperity is free-market economics, letting all ways to save or produce energy compete fairly at honest prices, no matter which kind they are, what technology they use, where they are, how big they are, or who owns them.
Bigger power plants sending bigger bulk power flows through longer transmission lines tend to make the grid less stable (id.). Leading engineering analysts of electric-grid theory are reaching similar conclusions, e.g., http://www.ece.wisc.edu/~dobson/PAPERS/carrerasHICSS03.pdf
Gasoline taxes are a pretty good signal to drive less if you have alternatives, but they are a very weak signal to buy an efficient car because that price signal in the fuel is diluted many fold by the other costs of buying and running a car and then heavily discounted at consumer discount rates. So consumers really only look at the first 2 or 3 years of fuel savings. CAFE standards, are pretty well gridlocked. We found that a more effective method would be to take each size class of light vehicles and institute forward a feebate system. That is a combination of a fee and a rebate, so that within each size class separately, the less efficient vehicles pay a fee according to how inefficient they are and the more efficient vehicles get a rebate paid for by the fees according to how efficient they are. So you would have an incentive within each size class to buy a more efficient vehicle, but no incentive to buy a different size than you wanted.
I would say tripled efficiency, cars, trucks, and planes, and a diverse dispersed, decentralized resilient, invulnerable electric system [are best]. If you are asking on a policy level, I would say size and revenue-neutral feebates and encouraging the States to reward gas and electric utilities for cutting your bill, not for selling you more energy. That would free up half the gas in the country and a lot of that could be substituted back for oil.
Senator MURKOWSKI. Mr. Lovins, in looking at your testimony as well as some of the backup documentation that you have provided with it, you are arguing against producing more oil from Alaska basically from the security perspective. And I keep reading with interest the same phrase you have used, the all-American Strait of Hormuz, as well as the reference to this world’s biggest chapstick. We realize that it is a long silver thread running through the State providing a valuable resource to the country. Do you have the same issues in terms of security for a natural gas pipeline to meet that energy need for this country that you have indicated in your comments about oil?
Mr. LOVINS. I think many of the details would differ. The gas pipeline would not be hot and would not have to be above ground and very exposed. You would not have the coal restart problem that a hot oil pipeline does. That is the source of the chapstick comment. I would call your attention to the more recent article originally entitled ‘‘The Alaskan Threat to National Energy Security’’ that’s cited toward the end of footnote 5 in my prepared testimony, and it was published just weeks before 9/11 with a title change by the editor. And the annotated version of that, which is cited, details that the security issues I described have not gone away. You’ll find the scariest episode in the 30-year record you refer to, Senator, is not the drunk taking a potshot at the line. Rather it is the disgruntled engineer who was very fortunately caught months before blowing up three critical and very hard to fix parts of the line with 14 bombs he had already built and cold weather tested. And he was caught only because he involved someone else in the plot who turned him in. He was not aiming to hurt the United States. He intended to make money in the oil future’s market. But as Mr. Woolsey and I wrote in the Christian Science Monitor in 2002, that guy was an amiable bungler compared to our al Qaeda adversaries.
Basing Federal policy on sound market principles and ‘‘best buys first’’ would be a propitious change from recent tendencies. So would a clear focus on oil, rather than confusing oil with electricity.
Senator Domenici: How do you respond to those, like me, who say that an economy run entirely without oil by the 2040’s is quite difficult to believe?
Lovins: First, I would respectfully invite you to examine the analysis we presented on 20 September 2004 in Winning the Oil Endgame and its Technical Annexes, all posted free at www.oilendgame.com. Our scenario achieves half its oil displacement by substituting saved natural gas and advanced biofuels for oil.
Most R&D has been and still is misallocated to favored technologies that are already mature or show no hope of becoming competitive. The money seems to be allocated more by pork-barrel politics than by risk-adjusted public return. Second, total federal energy R&D is far too small for its actual and rhetorical priority.
I’d add that the Federal government is doing far too much to distort private markets, deliberately causing huge misallocations of private capital. I’d love to see a thorough, transparent, and defensible compilation of Federal energy subsidies—
My Institute did the first thorough analysis of Federal energy subsidies, summarized in ‘‘Hiding the True Costs of Energy Sources,’’
Nuclear power in FY84 got 34% of the subsidies (excluding Price-Anderson) but delivered 1.9% of the energy; each of its subsidy dollars delivered 1/80th as much as a dollar of subsidies to renewables and efficiency. The latest analyses by the top contemporary independent scholar in this field, Doug Koplow (www.earthtrack.net), confirm that Federal energy subsidies are still large and probably even more distortive. There is little point developing new technologies if such massive market interventions favoring rivals continue to suppress their adoption.
Alaska’s onshore methane hydrates may bubble out of the thawing tundra on their own, causing a global climate disaster. I haven’t seen a convincing argument that onshore or offshore methane hydrates can be extracted without a substantial risk of major uncontrolled releases of methane. Lacking such grounds for confidence that the operation could avoid making our planet more like Venus, I hope the hydrates stay right where they are. And we don’t need them if, more cheaply, we use energy in a way that saves money.
Regrettably, current Federal policy has only limited relevance to eliminating oil dependence, and much of its content that is relevant is unhelpful. Most of the public policy initiatives that are both relevant and helpful are coming from the States.
Coal gasification is a feasible but costly way to produce gas or liquids. It is quite carbon-intensive as normally conceived. All carbon-sequestered ‘‘clean coal’’ innovations are in my view a 4th-best approach, after energy efficiency, renewables, and combined-heat-and-power (co-, tri-, and polygeneration), so I’d give it a lower overall priority in energy R&D than it currently has. Having a lot of coal is in my view a less important reason to use it than whether it can provide energy services at least cost. R&D should be driven by cost-effectiveness, not resource bases.
Coal and nuclear generation of electricity have virtually nothing to do with displacing oil, which is the nub of the Nation’s energy security problem.
If it’s possible to stop mandating and subsidizing sprawl, or otherwise to advance the smart-growth agenda, that too would bear huge longer-term dividends by reducing vehicle-miles traveled.
Electricity reforms can save almost no oil, they are extremely important to creating a resilient national energy system—including the ability to get power to filling stations so customers can pump gas!
(The industry has stupidly redesigned its pumpheads without the old handcrank socket; as in Florida recently, a prolonged power outage therefore grounds the surface transportation system too.)
Senator FEINSTEIN. The Bush administration found that 99% of flexible-fuel vehicles on the road today never use a drop of E-85 ethanol. As a result, the administration found that this loophole actually increases America’s oil dependence by 14 to 17 billion gallons of gasoline per year. As I understand it, Ford uses its fuel economy credits for these flex-fuel vehicles to lower fuel economy standards for the rest of the automobiles so that we are not really doing much to increase vehicle economy. What would you suggest we do to really increase fuel economy? I had a bill just to bring SUVs over 10 years up to the fuel economy of the sedans which the fleet number, as you said, is 27 miles per gallon as opposed to the SUV at 20 miles per gallon. And it went down because there is really no support for that. Detroit opposes it very strongly. What do we do that Detroit could support to really rapidly increase fuel economy standards?
Ms. CISCHKE. Well, I think we have to be very sensitive to what the consumers want to buy. Right now in the auto industry, over 30 vehicles get better than 30 miles per gallon in fuel economy, yet it accounts for less than 5% of our sales. So we have a challenge in terms of putting vehicles out there that nobody wants to buy. And that is a real problem for all the auto companies. When you mentioned the E-85 usage, this is kind of a chicken and the egg type situation. We need the fuel in order to make the vehicles run on E-85, but the fuel is not going to be there unless there is enough volume of vehicles. We have to address to what our consumers are demanding and we have got to find a way to make them want to buy more fuel-efficient vehicles.
Mr. VERRASTRO. Two things. The first point is that the flexible-fuel vehicles run on about 10 to 15% ethanol, not 85%. E-85 is a totally different bird. There are evaporative emissions issues in terms of the environment. There are also massive transportation and distribution issues. You cannot put it in a pipeline. In our country on the coast, we have the greatest demand for fuels. If you grow corn or use cellulosic ethanol and then transport it to the coast and you cannot put it in pipelines, you have to find a different distribution system. Clearly in Europe, the oil companies have taken to incorporate biodiesel and biomass and other fuels at their retail stations. It is the cost of a tank and a pump. But this transition to move to E-85, I am not sure that that is the answer. Brazil, as Jim Woolsey just said, is kind of the poster child for ethanol. And over the weekend, they reduced the content of the ethanol in their fuel from 25 percent to 20 percent because they cannot produce enough of it. So to think that we are going to grow our way crop-wise into an energy solution, I think is far reaching.
STATEMENT OF THE AMERICAN PETROLEUM INSTITUTE. API is a national trade association representing more than 400 companies involved in all aspects of the oil and natural gas industry, including exploration and production, refining, marketing and transportation, as well as the service companies that support our industry.
We live in an energy interdependent world, and complete energy independence is probably unachievable and certainly undesirable.
We can no longer afford to place off limits vast areas of the Eastern Gulf of Mexico, off the Atlantic and Pacific coasts, and offshore Alaska. Similarly, we cannot afford to deny Americans consumers the benefits that will come from opening the Arctic National Wildlife Refuge and from improving and expediting approval processes for developing the substantial resources on federal, multi-use lands in the West. In fact, we do have an abundance of competitive domestic oil and gas resources in the U.S. According to the latest published estimates, there are more than 131 billion barrels of oil and more than 1000 TCF of natural gas remaining to be discovered in the United States.
Much of these oil and gas resources—78% of the remaining to be discovered oil and 62% of the gas—are expected to be found beneath federal lands and coastal waters. Natural gas, which fuels our economy—not only heating and cooling homes and businesses but also generating electricity. It is used by a wide array of industries—fertilizer and agriculture; food packaging; pulp and paper; rubber; cement; glass; aluminum, iron and steel; and chemicals and plastics. And, natural gas is an essential feedstock for many of the products used in our daily lives—clothing, carpets, sports equipment, pharmaceuticals and medical equipment, computers, and auto parts.
Unlike oil, natural gas imports in the form of liquefied natural gas (LNG) are limited by the lack of import terminals. There are only 5 operating in the United States. A number of additional terminals have been proposed but many have run into not-in-my-backyard opponents and complex permitting requirements.
There is a misperception by some about the time and costs involved in any transition to the next generation of fuels. Consider what would be involved in replacing the dominant role of oil with a substitute like hydrogen or solar power. Most experts agree that such a transition would require dramatic advances in technology and massive capital investments—and take several decades to accomplish, if at all.
Based on various studies, the energy savings from corn-based ethanol are moderate—3 to 20%—because production from corn requires significant energy input. And, judging from this past year, ethanol is higher-priced than gasoline and, measured on a BTU basis, considerably more expensive. In addition, some have estimated that the total amount of ethanol that could be produced by converting the entire 2005 U.S. corn crop into ethanol would be about 31.1 billion gallons—an amount equal to just 22.2 percent of U.S. gasoline consumption last year.
We hope that people will better understand that, in today’s global energy marketplace, U.S. ‘‘energy independence’’ is impossible. We hope they come to see that, instead, ‘‘energy interdependence’’ is essential. We hope consumers will come to recognize that their interests are best served when we can source fuels from multiple providers located both in the U.S. and throughout the world. Sourcing flexibility is one of our most powerful energy security tools. We also want others to understand that we can operate only where governments permit us to do so.
AMORY LOVINS. We are particularly concerned that FERC is making America’s power system more prone to regional blackouts by continuing to push larger, longer bulk power flows through more and bigger transmission lines, rather than allowing or, preferably, requiring fair competition (whether market or administrative) by demand-side and distributed options so as to achieve a least-cost system solution
FERC is the last bastion of central planning in the Federal Government, and last year gained new authority to site supply-side resources, or override state and local objections to them, without having to consider cheaper alternatives, ranging from end-use efficiency and demand response to micropower. This will probably result in further construction of vulnerable, terrorist-magnet, and uneconomic LNG terminals, with potentially catastrophic consequences for nearby communities and increased financial risks for investors.
Another desirable focus for FERC’s attention would be ensuring that as utilities automate distribution systems, their topology should be made bidirectional, so that distribution shifts from a tree structure (distributing centrally generated electrons to dispersed customers) to a web structure (gracefully handling power flows any which way). This is largely a State regulatory matter, but Federal standards would probably help, and State attention to this issue could be encouraged in many ways.
Still another area for FERC reform would remove the transmission roadblock facing wind developers, especially in and near the Dakotas. In essence, the incumbent lignite operators in that region aren’t allowing fair transmission access, and FERC has not yet intervened to promote it, so a cheap, climate-safe, domestic resource exceeding 300 GWe just on tribal lands in the Dakotas remains virtually unexploited. Broadly, I think State Commissions should follow Texas’s example (under then PUCT Chairman Pat Woods’ and Governor Bush’s leadership) of allowing distributed generators to ‘‘plug and play’’ freely: if the inverter meets IEEE 1547, UL, and local building code requirements, no other approval or procedure should be required. Federal policy should encourage this outcome uniformly, and should encourage State Commissions to remove artificial constraints as to feed-in generators’ unit size, the symmetry of TOU vs. flat-rate payments vs. charges, and other accounting arrangements to ensure a level playing-field for distributed resources. Federal policy should give no preference to big over small or to supply-side over demand-side resources; all should compete fairly as a central principle of Federal energy policy.
Hybrid and fuel-cell cars are worthy, and plug-in hybrids may be, but they’d all work better and cost less if combined with an apparently missing element: advanced materials that eliminate half the car’s weight and fuel use, improve its safety, and doesn’t raise its production cost.
I hope the Congress will note that much of the recent troubles at NREL—not a place one should be trying to divert or demoralize during an energy crisis—arose from ~15% of its budget’s being, in effect, hijacked by Congressional earmarks. If NREL is to do its job and retain its excellent people, such raids must cease.
I’m gratified by the Pentagon’s increasing focus on radically reducing fuel-logistics footprint in theater: if seriously implemented, this could create the industrial base that can lead the civilian vehicle industries off oil, just as DoD research transformed the civilian economy by inventing for military purposes the Internet, GPS, and the jetengine and chipmaking industries—all foundations of America’s and especially California’s economy.
It’s vital that in all countries, biofuels be done in an environmentally and socially sustainable way—unlike some recent destruction of tropical forests to make way for palm-oil plantations to produce biodiesel. Even more important is to share and greatly accelerate developing countries’ adoption of advanced end-use efficiency in all sectors.
The most comprehensive threat to national energy security today is national energy policy. This Committee should reexamine its approach, and stop energy policy from undercutting DoD’s mission.
Roughly 4-8% of U.S. gasoline or 2-4% of crude oil could be quickly saved by:
- reducing speed limits for all non-Class 8 vehicles to 60 mph in zones now above this limit under Federal (and if possible State) jurisdiction
- changing EPA rules so that HOV lanes and preferential parking now available only to Alternative Fuel Vehicles are also available to hybrid and all-electric vehicles (EPA’s inaction on this is frustrating many States that wish to make this change)
- giving so-called double-tax-credit to State and local nonprofit vehicle buyers such as public safety agencies for adopting high-efficiency hybrids
- authorizing all citizens to deduct mass transit costs on IRS Schedule A
- providing for universal approval of ‘‘parking cash-out’’ (as long practiced in Southern California) and perhaps requiring it for large employers
- for a few years, extending the Federal tax credit for AFVs, hybrids, and all-electric vehicles to far more than the current 60,000 per manufacturer
- eliminating continuing loopholes in CAFE rules
- clarifying that NHTSA does have authority to extend to cars its 23 August 2005 proposed decision to base future light-truck CAFE rules on size, not weight
- Roughly 12-18% of diesel fuel could be rapidly saved by heavy-truck reforms proposed in Winning the Oil Endgame and in our memo for Senator
Roughly 4-6% of gasoline and diesel fuel could be promptly saved by:
- immediately switching all Federal civilian (and nontactical military) road vehicle procurement to the top 5%, or at worst 10%, of efficiency in their subclass
- saving ~3% through proper tire inflation, including rental and commercial fleets as well as individual owners
- exerting Federal pressure to improve traffic-light timing on major urban streets and to speed adoption of electronic tolling (with careful controls to protect personal privacy) and of ‘‘urban box’’ congestion charges
- encouraging proper engine tuning and air-filter replacement, as well as EPA’s other gas mileage tips
- having NHTSA clarify that manufacturers and sellers of hybrid cars are allowed to advise buyers how to drive them for optimal efficiency (thus reversing the false impression, spread chiefly by Consumer’s Reports, that hybrids are inherently much less efficient than they actually are if properly driven)
- DoD initiatives to make military-platform (and -facility) energy efficiency a high priority—in doctrine, requirements-writing, acquisition, design pedagogy and practice, operations, and reward systems—should be strongly encouraged.
- targeted military science and technology investments in ultralight materials and their low-cost manufacturing could create the advanced-materials industrial cluster that is the most important single manufacturing innovation for getting off oil.
- Greater investment in improved road traffic management infrastructure in order to reduce congestion and save fuel.
The integrated approach aims at producing clear and quantifiable reductions in CO2 through a range of options (e.g. vehicle technology, alternative fuels, taxation, eco-driving, gear shift indicators, consumer information and labeling, consumer behavior and congestion avoidance).
Hydrogen fuel cell vehicles are seen by Ford and the industry as a long-term alternative transportation solution. They are clean and efficient, with zero tailpipe emissions, and use a renewable fuel source. Although FCVs are in development today, much work remains to meet the functionality, durability, and affordability demands of automotive consumers.
Automobile fuel economy has been mandated via the CAFE program for about 30 years. Most industry and government experts agree that the program has not been an effective way to reduce petroleum consumption, and that it has had dramatic competitive and economic impacts. For one thing, it takes a long time for the vehicle fleet to turn over. New CAFE standards take time to implement, and their effects take even more time to make their way through the vehicle fleet. Another problem is that higher fuel economy simply makes it cheaper for people to drive more. Vehicle miles traveled have increased substantially over the life of the CAFE program and tend to overwhelm improvements in fuel economy. Addressing our dependence on foreign oil must include taking steps to reduce vehicle miles traveled.
Automakers are already producing more than 100 models that achieve 30 mpg or more on the highway; however, the consumer demand for these vehicle models is low.
Coal gasification, followed by synthesis to liquids that are suitable for transportation fuels, is a known technology. These are large plants with substantial investment, and their long-term commercial operation must be certain. A related technology, recovery of remote natural gas with synthesis to liquid fuels (Gas-to-Liquids, GTL) is now considered economical in select cases, and several large GTL plants are now planned for Qatar, with diesel fuel to be supplied to Europe, where diesel demand now exceeds supply. Gasification of coal (Coal-to-Liquids, CTL) adds a substantial processing step compared with natural gas as the resource. So the overall efficiency of CTL will be less than GTL, with a corresponding increase in CO2 as a byproduct. The GTL path will be an issue for total CO2 emissions unless carbon capture and sequestration is implemented with the GTL plant. Carbon capture and sequestration trial projects are proceeding with good success.
At the end of this year, Ford will have already put nearly 2,000,000 Flexible Fuel Vehicles on the nation’s roads. However, applying technologies too broadly, too fast, and too soon (even those already on other vehicle lines in the fleet) can result in poor performance and ultimately customer rejection of promising technologies. Ford’s typical engineering practices require that new technologies be phased into production over several years such that there is a cycle of manufacturing and customer service experience in the field. In the case of E85 FFVs, this experience has been limited due to the lack of fuel availability. Moreover, because ethanol is a unique fuel with unique properties, these vehicles require unique hardware and engineering. For example, fuel tanks with low permeation characteristics are required. It also requires a special fuel pump and fuel lines to deliver the fuel to the engine. Unique injectors introduce the fuel into the engine where special calibrations programmed into the on-board computer determine how much ethanol is in the fuel and how best to set spark timing and fuel flow to ensure the engine operates properly and meets emission standards on all ethanol and gasoline mixtures. Because there is more than one fuel calibration within an FFV, costly development and certification testing is doubled. Many of the FFV parts and processes are patented by Ford and are the result of innovative ideas by our best engineers, and we’re proud of them. The bottom line . . . making an FFV is a significant investment for auto manufacturers.
CRAIG THOMAS, U.S. SENATOR from WYOMING (COAL-to-liquids)
We’ve been saying for decades that we need to decrease our dependence on foreign supplies of energy. The first major calls for action followed the oil embargo of 1973. In that year, we imported approximately 28% of the oil we consumed. A restriction of supply by a group of hostile nations caused prices to increase by an average of 40% during that embargo and introduced a new weapon in global conflict. In 2005, we imported roughly 59% of the oil we consumed. This trend of increased dependence is a troublesome one.
Wyoming produces roughly 10% of the nation’s primary energy, with far less than 1% of the nation’s people. We have oil, natural gas, uranium, and wind resources to name a few.
We also have coal—a resource with enormous potential for increasing our energy independence. Coal is economical and abundant. It constitutes roughly half of the electricity generated in the United States. Advancement of coal gasification technologies, carbon sequestration, and improved mining techniques reduce many of the environmental concerns that people have had in the past. And greater use of cheaper Western coal makes this fuel a much more attractive choice going forward. We have coal here in the United States and we need to use it. We continue to develop wind, we have hydroelectric dams, and we will hopefully see the construction of new nuclear plants in the near future.
We consume roughly two thirds of the oil we use in the transportation sector. Because of its large share of consumption, policy changes affecting the transportation sector can have a significant impact on reducing foreign dependence. Increased mileage standards, elimination of boutique fuels, lowered speed limits, and greater use of alternative fuels are just a few of the many ideas that have been advanced to decrease the transportation sector’s consumption of oil. I contend that coal can make a difference in the transportation sector as well. Wyoming recently announced plans to construct a coal-to-liquids plant. The National Mining Association believes that continued use of this technology could replace as much as 2 million barrels per day of oil and 5 trillion cubic feet of natural gas per day by 2025.
I believe that the bill introduced by the Chairman and Ranking Member for lease sales in the Gulf of Mexico’s Area 181 is exactly the sort of thing we need in the short term.
NORM COLEMAN, U.S. SENATOR FROM MINNESOTA (biofuels, ethanol, E85)
It is time we stopped treating foreign oil dependence as another abstract statistic whose consequence is far removed from Americans’ daily lives. The United States is going to have to face the reality that we must break our foreign energy dependence or risk losing our autonomy. Our nation’s energy dependence is undeniably one of the greatest threats to our national security and our freedom.
By 2025 it is estimated that nearly 75% of America’s oil supply will be imported. Also consider that two-thirds of the world’s proven oil reserves are in the Middle East and that terrorists have identified oil as a strategic vulnerability—increasing attacks against oil infrastructure worldwide. One can just imagine what would happen if OPEC, which currently accounts for well over 50% of our oil supplies, shut off the oil spigot. Beyond the national security implications, oil dependence also carries serious economic consequences. The total economic penalty of our oil dependence, including loss of jobs, output, and tax revenue, is estimated to exceed $300 billion annually.
One facet of this plan to reach 2.5 million barrels per day of oil savings is to promote the development and use of advanced and alternative fuel efficient vehicles. Key pieces include tax credit incentives for advanced technology motor vehicles, expansion of the consumer tax credits for advanced vehicles, loan guarantees and grants for hybrid vehicle projects, and a new federal commitment to hybrid vehicle technologies and materials. The national fuel savings generated by this bill will be immense, but if we want to free ourselves from foreign oil dependence, we must produce more fuel here at home.
I believe we need a national energy policy that increases availability of flex fuel vehicles, invests heavily in E-85 infrastructure, includes a sugar-to-ethanol program, and sets a national mandate for ethanol that matches our energy independence ambitions.
JAMES M. TALENT, U.S. SENATOR from MISSOURI
I have been a long time supporter of ethanol and biodiesel. I know that I would rather get fuel from farmers in Missouri and across the country than import it from foreign countries. I believe that the greatest provision of the energy bill was the Renewable Fuels Standard which mandated the use of ethanol in our nation’s fuel supply. The amount of biofuels to be mixed with gasoline sold in the United States is mandated at increases annually up to 7.5 billion gallons by 2012. Since the passage of the bill, 34 new ethanol plants are under construction, with 8 existing U.S. plants being expanded. And, there are more than 150 new plants in the planning stages. This construction and investment in farming will create thousands of new jobs while making us less reliant on foreign sources of oil.
While the ideas of hydrogen vehicles are exciting—they are such a long way off.
PETE V. DOMENICI, U.S. SENATOR FROM NEW MEXICO
It is clear that the United States needs to reduce our dependence on foreign sources of energy. We particularly need to reduce our reliance on oil from unstable regions of the world whose values and priorities are often in conflict with America’s initiatives and place in the world. Last year, U.S. net imports equaled 59% of our demand, with 41% of our total imports came from OPEC countries, which is 27% of the total U.S. consumption.
Dependence to this extent can determine our national security, our economic strength, and our foreign policy. In order to make necessary changes, we have to be realistic about what is possible in the near term, but certainly we have to look with real energy and enthusiasm toward the long-term. Making energy self-sufficiency the immediate goal would deny the reality of this situation and only invite discouragement and failure. This would be akin to putting all of our resources in the hopes of finding an elusive cure for a disease at the expense of taking important steps to treat and alleviate the symptoms in the interim. To that end, I have said on a number of occasions that while I support the advancement of science technology to reduce our dependence on foreign energy sources, I think we must also build a bridge to that age by accessing the oil and gas resources available in our country and we must reasonably and responsibly conserve our energy.
For example, I believe we should have acted on ANWAR a long time ago. The majority of the Senate believes that ANWAR brings us closer to achieving energy security and I would venture to say that not a single member of this body believes that continuing to block ANWAR strengthens our energy security. Blocking progress is not a substitute for substantive policy.
In my first year in the Senate, President Nixon set a goal of energy self-sufficiency by 1980. I do not know if any of you remember that. Since that time, successive administrations, scores of members of Congress from both parties, including me, have set similar goals. I believe that energy self-sufficiency is attainable, but I do not believe it is in the short term. Nonetheless, we must pursue it as a goal in my opinion vigorously.
ROBERT MENENDEZ, U.S. SENATOR from NEW JERSEY. I was not at all pleased to see the budget that came out less than a week later. A budget that did not take the serious steps towards the new technologies that we need to end that addiction. A budget that shortchanges vital energy efficiency efforts such as the weatherization program that helps reduce energy costs for our low-income families and seniors. A budget that cuts funding for some promising forms of renewable energy, cuts funding for research into vehicle technologies, and even cuts funding for a program designed to make the federal government more energy efficient. Quite simply, the president has failed to match his rhetoric with real action. OCS Even more disheartening is the continuing efforts of the administration to dig and drill their way out of dependence on foreign oil. Shortly after the budget was released, the Interior Department’s Minerals Management service unveiled their new proposed 5-year plan for the outer continental shelf, which included a plan to begin drilling off the Virginia coast. This is flatly unacceptable for my own state of New Jersey, because the ocean knows no borders, and an environmental catastrophe off the coast of Virginia would not stay confined to the waters of Virginia. The area to be leased is less than 75 miles off the southern tip of New Jersey, more than close enough to put our beaches and vital tourism industry at serious risk. The plan also shows that instead of seriously confronting our addiction, the administration would rather simply tap another vein.
CAFÉ standards. As many of our witnesses have said in the past, and will be expressing again today, the most effective way to confront our energy problems is through efficiency. We have made excellent strides in the past few decades to make our country more energy efficient, and one of the keys to that success has been Corporate Average Fuel Economy, or CAFE, standards. According to statistics compiled by the Rocky Mountain Institute, between 1977 and 1985 our oil use went down 17% and our oil imports went down 50%, and the biggest factor in that drop was the 7.6 mile-per-gallon improvement in new domestic cars over that time. But in the 20 years since then, our overall vehicle fleet has actually become less efficient. The CAFE standard for passenger cars has been stagnant for the past two decades, and the standard for light trucks is barely 1 mile-per-gallon higher than it was in 1987. Increasing fuel economy standards should be part of the energy independence solution and part of our national energy policy.
Another federal efficiency program that is part of the solution is Weatherization, which provides grants to states to allow them to make the homes of low-income families and seniors more energy efficient. This has a two-fold benefit. First, it lowers energy costs, which makes it easier for people to pay their heating or cooling bills, and reduces the amount of money that we need to spend on essential assistance programs like LIHEAP. Second, it reduces our overall energy needs. According to the Oak Ridge National Laboratory, every $1 invested in the weatherization program returns $3.81 in energy and non-energy benefits, and because of the program the country saves the equivalent of 15 million barrels of oil each year. And yet, despite this track record of success, the administration has proposed cutting the program by 33%, denying over 30,000 families—families that are on the lowest rung of the economic ladder and most desperately need help—the ability to get their homes weatherized.
We also need to shift from fossil fuels to renewable sources of energy. My own state of New Jersey has become a national leader in this field, recently enacting new incentives for the use of solar, wind, and other renewable energies, and moving towards enacting a robust renewable portfolio standard—20% by 2020. The state has put its money where its mouth is, giving over $43 million of incentives for new solar power installations over the past five years.
Senator THOMAS. I think we have a real opportunity to convert coal, which is our largest fossil resource, to diesel fuel, for example. We can do that very shortly. What do we do in the next 4 of 5 years?
Mr. WOOLSEY. Well, Senator, cellulosic ethanol is now coming on the market, Iogen in Canada, backed by Shell oil, diesel from waste products such as turkey carcasses from a Canagra slaughter house—— Senator THOMAS. Tell me about the volume of that, however. Oil from turkey carcasses obviously is not going to amount to much of anything.
Mr. WOOLSEY. No.
LISA MURKOWSKI, U.S. SENATOR FROM ALASKA. For years we’ve heard that energy independence is a pure pipe dream given that America—not counting ANWR—has just over 20 billion barrels of proven conventional oil reserves (1.6% of known world reserves), while the Middle East has 57% of the world’s known supply of conventional oil and nearly as much gas. But with rises in both oil and natural gas prices because of the exhaustion of much of the cheap ‘‘conventional oil and gas,’’ because of sharp increases in demand for energy from developing nations and because of environmental fears, we may well be moving into a period when unconventional fuels and new technology, including alternative fuels, can increase our domestic energy production and dare we say permit energy ‘‘independence.’’ The Pentagon last year began seriously funding research efforts to promote bio and synthetic fuel development to meet military needs. The Energy Policy Act of last summer provided research funding, tax incentives and policy changes to spur biofuels like ethanol, and hybrid vehicle sales to cut consumption; increased oil and gas recovery from heavy oil deposits and by use of carbon dioxide to produce more fuel from aging fields.
JIM BUNNING, U.S. SENATOR FROM KENTUCKY. I think that with energy prices at these highs, we can see clearly that our national security is threatened by our continued reliance on imported oil. I think one of our top priorities should be on our most abundant domestic fossil fuel: Coal. New technologies will make burning coal both cleaner and more efficient. We are even developing coal-to-liquid technology that can create a synthetic transportation fuel from coal. American coal reserves will be our best tool to overcome our reliance on Middle East oil. We also have other domestic energy reserves, like ANWR and the Outer-Continental Shelf. I believe we can tap these oil and natural gas reserves in an environmentally sound way. I also think we need to develop our renewable fuels, especially stimulating biodiesel and ethanol production. Many of you have focused on biodiesel and transportation fuels, but coal is our most abundant domestic fossil fuel and accounts for half of our electric generation. I believe we can lessen our dependence on imports by using clean coal power and nuclear energy to replace the imported natural gas and oil that currently goes to producing electricity.