[ This session is unusual in that the words “peak oil” are spoken several times, and M. King Hubbert, James Howard Kunstler, and Matt Simmons are lauded. Gal Luft points out that “10 years ago, Osama bin Laden predicted that oil would be $144 a barrel. Everybody laughed at him. Oil was only $12 a barrel at the time. He was right.”
Pickens ideas about running transportation on natural gas so far haven’t worked out so far. It was hoped that 20% of trucks would be running on natural gas by now, but only 3% are, for many reasons that I explain in my book “When Trucks Stop Running: Energy and the Future of Transportation.
At least Pickens realizes that it is heavy-duty transportation, especially trucks, that are the most important. Yet cars dominate discussions and the lion-share of funding for “energy solutions. And guess what, people drive more miles when cars get more efficient, undoing the oil saved. Even if people drove less, so what? Trucks, trains, and ships BURN DIESEL. Cars burn gasoline. Diesel engines can’t run on gasoline (or ethanol, diesohol and many other fuels). Diesel engine are just as important for our high level of civilization as the diesel they burn because they’re twice as efficient than a gasoline engine and far more powerful, lasting up to 40 years and a million miles.
Alice Friedemann www.energyskeptic.com ]
Senate 110-1023. July 22, 2008. Energy security. An American imperative. U.S. Senate hearing.
Excerpts from this 175 page hearing follow:
T. BOONE PICKENS, Founder & CEO, BP Capital Management
We had produced 1 trillion barrels of oil at the turn of the century. It is interesting because if you look at King Hubbert’s extension, peak oil, and what would happen, the guy was great, in my estimation. I am a disciple. I don’t think there are 2 trillion barrels of oil. You may say take the oil shale on the western slope and this and that and everything. You can add up a bunch of stuff. When you add it up, it is going to be very expensive oil. But in looking at conventional oil—I live and you live and everybody in this room lives in the hydrocarbon era, and that era started with the automobile in 1900.
Half of the oil that I see out there had been produced by the year 2000.
Now, we have another trillion barrels, and you say, well, that is another hundred years. No. You started slow, ramped up, and now the next trillion is going to go out of the system within the next 50 years. So you are going to be forced to abandon the hydrocarbon era.
Can you imagine researchers 500 years out that come back and look at us? They are going to say, ‘‘That was a strange crowd. They lived on oil as a fuel.’’
We are going to have to make it to the next fuel. But what is going to happen, if I am right on what I am trying to do, I am going to awaken the American people, and they are going to see what they are up against. When they walk out of a room, they will turn off the lights. They do not do that now.
The Pickens Plan starts with harnessing wind and building solar capabilities. We are blessed with some of the best wind and solar resources in the world. The plan substitutes electricity generated by natural gas-fired plants with wind-generated electricity. Natural gas-fired is 22 percent; the wind is going to replace that 22 percent. The natural gas freed up is directed to transportation needs of the country. The natural gas is cheaper, cleaner than gasoline, and its supply is plentiful. And, most of all, it is American.
But natural gas is nothing more than a bridge to the next fuel because when you get to 2050, we are pretty well maxed out on hydrocarbons as a transportation fuel. I almost think it is divine intervention to have natural gas show up at such a critical time for this country, and to be able to use it as a bridge to the next fuel in the next 20 or 30 years.
And 70% of the oil is used for transportation. When a barrel of oil comes to the United States today, it will be moved to a refinery, refined, then go into marketing, then go into our cars, and in 4 months it is gone. It is gone. We burn it up. It is out of here. And so we have to get a hold of this situation.
Senator COLLINS. How much of the solution also should encompass energy conservation?
Mr. PICKENS. Oh, it has got to be on page 1, of course. We have got to conserve. There is no question about that. We have been very wasteful. But in our defense, we had cheap oil. And as long as we had cheap oil—I don’t know whether you have seen Jim Kunstler. I went over to Southern Methodist University (SMU) and heard him the other night. He is worth hearing. He is a generalist, but he tells us where we made the mistakes. We did not develop our rail system. You look at the world today, we go places and we want to ride on a 200-mile-an-hour train. We have to go to a foreign country to do that. We don’t have that. Why don’t we have it? Because we had cheap oil. It didn’t make sense for us to. It was expensive. We were going to subsidize it. And we built too far away from our work. He says you are going to move to your work now because of the cost of energy. And it was really interesting because this was 2 years ago and the guy nailed it. I listened to what he had to say. I watched what has happened, and he was right on.
If you go with my plan and get 400,000 megawatts of wind in the central part of the country, you have helped the economy. Now, what is the cost of your energy? I am guessing in 10 years you are going to be a long way down the track to an electric vehicle. But, remember, an electric vehicle does not do heavy duty. So you are going to have to continue to use natural gas with heavy duty vehicles.
Ethanol is a light-duty fuel. Ethanol cannot work for heavy duty. But natural gas can. So I am approaching it with the view that natural gas would be for heavy duty, first and all. Mandate to the fleets that they have got to go to natural gas. 38 percent of the fuel used in America is used to move goods. And that is done by trucks.
Geoffrey Anderson, President & CEO Smart Growth America
The real opportunity out there right now is to allow people to drive less and to be able to do more. We can do that by building more walkable and complete communities. A lot of the growth in oil use has been as a result of spread out landscapes that have no options besides driving. There is a real move now to create more walkable communities where homes are closer to jobs, shops are closer to work, and all of these things can be reached either on foot, by bike, with transit, or by shorter car trips.
Real estate and our research indicate that about a third of the market is interested in having more walkable communities, more compact communities. The fact is that for the last 50 years, we have essentially built drive-only communities, so the two-thirds of the market that really is interested in that product is well provided for.
Work trips only account for 25 to 35% of trips a household takes. Denser communities mean kids can walk to school (50% used to, just 11% now), and daily errands require shorter trips. The current way we are building communities is locking in oil dependence in the transportation sector.
Senator Lieberman. The near total dependence of our economy, the energy sector of it—and particularly the transportation sector—on oil is weakening our Nation’s position in the world while enriching and strengthening a lot of countries in the rest of the world, many of them volatile and some of them just plain hostile to the United States of America. For well over a generation, America’s leaders have seen this growing dependence on foreign oil but essentially sat back and watched passively as trillions of dollars of our American, hard-earned wealth has been used to buy that oil and thereby go to countries abroad. And during that more than a generation, America’s leaders have done little or nothing about that problem. Apparently, it took $4-a-gallon gasoline to wake up the American people and their leaders here in Washington, to make all of us angry and anxious enough to get serious about breaking our national dependency on foreign oil.
Senator Collins. Beyond the impact on countless families struggling with high costs, our growing dependence on foreign oil is a threat to our national and economic security. One of our witnesses, Mr. Pickens, has vividly illustrated our ever-increasing dependence on foreign sources of oil in the Middle East and Venezuela. We are impoverishing ourselves while enriching regimes that are in many cases hostile to America. Ending our dependence on foreign oil and securing our own energy future is an American imperative. Our Nation must embrace a comprehensive strategy to reduce, and ultimately eliminate, our reliance on Middle East oil. We must expand and diversify American energy resources, and while doing so, improve our environment.
Our Nation missed an enormous opportunity on another October day 35 years ago. On October 17, 1973, the Organization of Arab Petroleum Exporting Countries, the predecessor of the Organization of Petroleum Exporting Countries (OPEC), hit the United States with an oil embargo. The immediate results were soaring gasoline prices, fuel shortages, lines at filling stations, and an economic recession. Unfortunately, after the immediate crisis passed, the long-term result was a steady increase in oil imports and a dependence that worsens each day. The 1973 embargo was a wake-up call that we failed to heed. The current crisis is a fire alarm that we must not ignore.
It also requires action by government. From establishing a timeline for energy security to undertaking critical investments to stimulate research in alternatives to expanding the production and conservation tax credits, government has a critical role to play.
Mr. Pickens. In 1945, we were exporting oil to our allies. By 1970, we were importing 24% of our oil. By the 1980s, it was 37%. And in 1991, during the Gulf War, it was 42%. Today, we are approaching 70%. Much of our dependency is on oil from countries that are not friendly, and some would even like to see us fail as a democracy and as the leader of the free world. I am convinced we are paying for both sides of the Iraq war. We are giving them tools to accomplish their mission without ever having to do anything but sell us oil. This is more than a disturbing trend line. It is a recipe for national disaster. It has gone on for 40 years now. This is a crisis that cannot be left to the next generation to solve, and it is a shame if we do not do something about it. And we can, without bringing our economy and way of life to a halt.
I will tell you what [the American people] do understand. They know it is something very bad about energy. They do not think they are being told the truth about energy. And it is confusing to them. I think when we come out of this, by the time we get—I want to elevate this into the presidential debate, and it is not there yet. OK. Elevate it there. By the time we get the elections over, whoever wins, the American people are going to demand they know the truth about energy, they know what they are up against, and they will respond. We will see the energy use go down dramatically when they see what it is going to cost. They can see that it does not have anything to do with Exxon or Chevron or anybody else running up the price. It does not have anything to do with some speculator on Wall Street. That is not what we are faced with. We are faced with 85 million barrels a day of production in the world, and we are using 25 percent of it, with 4 percent of the population, and we only have 3 percent of the reserves. In the United States, we have nothing to do with the price of oil. We only have 3 percent of the reserves.
SENATOR VOINOVICH. Wind produces about 1.5 percent of our energy in this country. I think renewables are about—let’s see, about 9 percent, most of it is hydroelectric. How can you ramp that up over a quick period of time? And, second of all, as you know, down in Texas you have had some times when the wind just kind of stopped and you have had some reliability problems. And if you are going to use wind, you know that if you are going to have reliability, you are going to have to back up that wind with some ordinary baseload energy generation.
SENATOR DOMENICI. You are so right that we must get the people to understand; that the United States is sending so much of our resources to foreign countries just to acquire crude oil; that it should be doubtful in the minds of intelligent people as to whether America can continue this kind of exportation of our assets, of our resources to foreign countries for 5 or 10 years. I actually do not believe we can. I believe we will become poorer and poorer and poorer as we send $500 to $700 billion a year overseas for crude oil. We are in a real mess. You are not against us opening more of the offshore assets of the United States where there are 85 percent that are locked up in a moratorium of one type or another and you cannot drill even if you wanted to. Are you on the side of those who say lift those and start drilling in an appropriate——
Mr. PICKENS. I am saying do everything you can do to get off of foreign oil, is what I am saying.
Senator DOMENICI. And that is one.
Mr. PICKENS. That is one. It is not going to do it. It is not big enough. You do not have enough reserves in the offshore to do it. I think you are going to get a rude awakening as to value of the east and west coast when it is opened up and when it is put up for sale. When those tracts are put up for sale, I think you are going to be surprised at the [low] price you get for the tracts [ because most of the remaining oil is in the Gulf ].
There is no question that if I am right on the peak oil at 85 million barrels, in 10 years we are going to have less than 85 million barrels available to the world. Now, the question is: What is the demand? I have to think in 10 years the demand for oil— because the price now is going up. In 10 years, you are going to have $300 a barrel oil. Maybe higher, I don’t know. But this is really— it is a tough question to look out 10 years on this one. But I can tell you this: In 10 years, if we continue to drift like we are drifting, you are going to be importing 80 percent of your oil. And I promise you, it will be over $300 a barrel.
Senator VOINOVICH. I went to some war games at the National Defense University, and they talked about the vulnerability that we have. And some folks out at Stanford said that in the next 10 years there is a 80-percent chance that the cut-off of oil will bring our economy to its knees. So we have a certain urgency that we have right now to get on with this.
GAL LUFT, PH.D. EXECUTIVE DIRECTOR, INSTITUTE FOR THE ANALYSIS OF GLOBAL SECURITY, AND CO-FOUNDER, SET AMERICA FREE COALITION
When we talk about national security, we need to realize that 63% of the world’s natural gas reserves are in the hands of Russia, Iran, Qatar, Saudi Arabia, and United Arab Emirates. These countries are now in the process of developing and discussing the establishment of a natural gas cartel. So shifting our transportation sector from oil to natural gas is like jumping from the frying pan into the fire. This is a spectacularly bad idea for us to shift our transportation sector from one resource that we do not have to another that we do not have. And we only have 3 percent of the world reserves of natural gas. The situation is very similar to our situation with regards to oil.
Just to remind the Committee that 10 years ago, Osama bin Laden predicted that oil would be $144 a barrel. Everybody laughed at him. Oil was only $12 a barrel at the time. He was right, and as a result, we are exporting hundreds of billions of dollars. This is the first year that we actually are going to pay foreign countries more than we pay our own military to protect us.
In order to understand what should be the road to energy security, we must first understand why we are where we are. There are many reasons why we have the oil crisis now. Of course, strong demand in developing Asia, speculation, geological decline, geopolitical risk, all of them have contributed their share. But, in my view, by far the main culprit is OPEC’s reluctance to ramp up production. This cartel owns 78 percent of the world’s proven reserves, and it produces about 40 percent of its oil production.
Our energy security problem stems from the fact that our transportation sector is dominated by petroleum. And while being in a hole, we continue to dig.
We put on the road annually 16 million new cars, almost all of them gasoline only, each with an average street life of 16.8 years. A Senator elected in 2008 will witness the introduction of 102 million gasoline-only cars during his or her 6- year term.
This means that neither efforts to expand petroleum supply nor those to crimp petroleum demand through increased Corporate Average Economy Fuel (CAFE) standards will be enough to reduce America’s strategic vulnerability. Such non-transformational policies at best buy us a few more years of complacency, while ensuring a much worse dependence down the road when America’s conventional oil reserves are even more depleted.
[ Luft then goes on with solutions for CARS: ethanol, methanol, open fuel standards, electric – whether Pickens plan makes sense or not, at least Pickens understand it is heavy –duty transportation that needs to be kept running. Clearly Luft hasn’t read Matt Simmons “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy”, which makes the case that the Saudi’s and other Middle Eastern oil producing nations greatly exaggerated their reserves. And why should the Saudi’s produce oil as fast as we want them to, when they’d prefer for their oil to last many more generations. Also, producing oil at too fast a rate can damage the oil field and reduce the ultimate amount of oil extracted – indeed, it’s thought that before the U.S. and British oil companies in the Middle East that got kicked out did this before they left ].
HABIB J. DAGHER, PH.D., DIRECTOR, ADVANCED STRUCTURES AND COMPOSITES LABORATORY, UNIVERSITY OF MAINE
I would like to start this testimony by acknowledging… the inspiring role of Matt Simmons, who is well known for alerting our country to peak oil and peak oil issues.
You have heard about T. Boone Pickens’ wonderful plan, but we sit in the corner of the country, and we are not very close to the wind belt that runs up and down from Kansas to Texas. So what do we do? T. Boone Pickens’ plan utilizes the wind corridor from the Dakotas down to Texas to generate anywhere from 200 to 400 gigawatts, depending on how much you want to generate. But that leaves us out, if you wish, on the east coast and on the west coast unless we build very expensive transmission systems. The majority of the U.S. population, actually close to 28 States, utilize more than 70 percent of the Earth’s electricity around the coasts of the United States. So the major demand for electricity is around the perimeter of the country. There are line losses that take place, and, of course, there are transmission costs, and building transmission lines in heavily populated areas is very expensive as well from a permitting viewpoint and so forth. And if you look at the population centers on the east coast, for example, the Midatlantic States and up in the New England area, it would be very costly to build transmission lines in those areas.
Wind speed is actually high when we need it. We need to heat ourselves in the State of Maine and in the Northeast, and the heating costs are our biggest issues. But in the wintertime, the wind blows twice as fast as it does in the summertime, and the power generated from the wind is the cube of the wind speed. So in the wintertime, per month, we can generate 8 times as much power as we do in the summertime. You can think of wind off the coast of Maine as a seasonal crop right now that can help us heat the State of Maine. [ What will Maine do in the summer? ]
Another hearing on Natural Gas
House 113-58. June 20, 2013. U.S. energy abundance. Manufacturing competitiveness and America’s energy advantage. U.S. House hearing.
CICIO, PRESIDENT, INDUSTRIAL ENERGY CONSUMERS OF AMERICA. The shale gas revolution and lower natural gas and feed stock costs have launched the start of the manufacturing renaissance with announced manufacturing investments of over $110 billion. This is the first wave of investment. The second wave will be from our downstream customers who will relocate to be near their suppliers and reduce their costs. The Boston Consulting Group estimates that 5 million new jobs will be created in manufacturing by 2020. Every dollar’s worth of natural gas run through our manufacturing economy creates up to $8 in added value. This is a superior economic use of natural gas than exporting LNG. The $110 billion investment will also create new natural gas demand between 7 and 9 Bcf a day, about an 11% increase. This is all good news. The most significant threat to the fulfillment of the manufacturing renaissance will be determined by the speed of LNG export terminal approvals and the volume of its shipments, which brings me to the key points of my testimony. Doing it right can be a win-win for producers and consumers of natural gas. Doing it wrong will result in spiking natural gas and electricity prices and an end to the manufacturing renaissance. We need to avoid what happened in Australia.
IECA is not opposed to LNG exports but warns policymakers that careless due diligence by the DOE on the public interest determination of LNG export applications to non-free- trade countries is a real concern. LNG terminal approvals are for 30 years. A lot can happen in 30 years.
Domestic demand is accelerating and LNG export demand is additive to that demand. For example, just six of the most likely export terminals would increase demand by 16%. The export demand would be on top of the AEO 2013 demand increase of 6% by 2020. Neither demand number includes the manufacturing renaissance of an 11% demand. Combined, this is a 33% increase. This is a huge increase in a very short time frame, and this does not include new demand that will occur from the EPA’s utility mat and EPA’s greenhouse gas regulations.
The public interest determination for approval of LNG exports to non-free-trade countries is the law. The public interest test is really important, because it is a safeguard to ensure that decisions are being made correctly and with up-to-date information.
Dean Cordle, president, CEO of AC&S, a chemical manufacturer, appearing on behalf of the American Chemistry Council. This shale gas revolution has transformed our company. We are putting steel in the ground, as we speak, we are nearing completion of a new production unit, and my focus right now on growth opportunities is certainly centered in the oil and gas industry and the downstream derivatives.
The U.S. chemical industry is highly energy intensive. We use energy inputs, mainly natural gas and natural gas liquids as both our major fuel source and feed stock. About 75% of the cost of the producing petrochemicals and plastics is related to the cost of energy-derived raw materials. Consequently, our ability to compete in global markets is largely determined by the price and availability of natural gas and gas liquids. The consulting firm IHS forecasts that the U.S. has a 100-year supply of natural gas.
This abundant and affordable supply of natural gas has transformed the U.S. chemical industry from the world’s high-cost producer 5 years ago to the world’s low cost producer today. As a result, the U.S. enjoys a decisive competitive advantage in the cost of producing basic petrochemicals. For example, it costs less than $400 a ton to produce ethylene in the United States, whereas it compares $1,000 a ton in Europe and even more in Japan. As a result of this cost advantage, dozens of companies are making plans to invest in new U.S.-based chemical production capacity.
ACC estimates that more than $72 billion in new capital expenditures will be invested in the U.S. between 2012 and 2020. Roughly half of those investments will come from firms that are based outside of the U.S. The U.S. is emerging as the place to manufacture chemicals now. The supply response from shale gas will directly create tens of thousands of new jobs in the U.S. chemical industry. Policy will play an important role if we are to optimize our competitive
Andre de Ruyter, senior group executive for Sasol Limited. Sasol is an integrated international energy and chemicals company. We employ about 34,000 people in 38 countries worldwide. We operate large-scale fuel and chemical plants throughout the world, and we are listed on the Johannesburg and New York stock exchanges.
NOTE: At this time Sasol was going to build a $22 billion dollar GTL facility in Louisiana that could make 96,000 barrels a day of 30% naptha and chemicals, and 70% diesel (67,000 barrels/day or .3% of daily oil consumption). But due to the low price of natural gas, this plant isn’t being built. A year before Sasol cancelled this GTL plant, Royal Dutch Shell plc abandoned plans also canceled a GTL plant in Louisiana because it was too expensive – the initial cost ballooned from $12.5 billion to more than $20 billion.
While natural gas is a major energy source for global power generation, it has up to now lacked the versatility to embrace transportation needs. With our proven GTL technology, we can fundamentally alter the chemistry of natural gas so that we can convert it to approximately 100,000 barrels per day of gas-to-liquids diesel for use in transportation.
Unlike other alternative fuels, GTL diesel is fully fungible with conventional diesel and requires no adjustment to engine technology or to distribution infrastructure. Diesel will continue to be the workhorse of the global economy for the foreseeable future with demand expanded to grow 65% by 2040 (ExxonMovil. The outlook for energy: a view to 2040, Irving, Texas: march 2013).
GTL diesel’s high quality makes it highly suitable for use as a blend stock by crude oil refineries to upgrade their products into high quality fuels; however, when gas-to- liquids diesel is used neat, it has the added benefit of leading to lower emissions of particulates and other pollutants as a result of the fact that it contains essentially zero sulfur and very low aromatic compounds.
With our partner, Qatar Petroleum, we have produced more than 45 million barrels of diesel fuel for export into the international market since the commissioning of our ORYX gas-to-liquids facility in Qatar in 2007.
We have also supplied GTL jet fuel to the Department of Defense, who uses it for experimental purposes.
Mr. WHITFIELD. I notice today the Federal Reserve board yesterday, I guess, said they are going to kind of stop our easy money policy, so we may see interest rates start edging up soon. So the policies that the U.S. Government adopts are going to have a dramatic impact on the cost of energy. And energy costs are a key component for continuing to grow our manufacturing base and create jobs. And so when we talk about that, we are talking about the regulations, we are talking about an all-of-the-above energy policy, which many of you talked about specifically in your testimony, but I would remind everyone once again that the Obama administration says an all-of-the-above, but they systematically are trying to eliminate some fossil fuels, particularly coal. And I notice—I was reading the Federal Register footnotes on the proposed greenhouse gas new source performance standard for new electric generating units. And in the register, it says the Department of Energy National Energy Technology Laboratory estimates that when that rule becomes final, that the technology that the coal industry would have to use to meet the emissions standards would add 80 percent to the cost of electricity; that one standard, 80 percent increase. So we are all excited now and we feel good about these low energy costs, but as we move forward, we have to think about the policies and the impact, because I, for one, as many of you said in your testimony, do believe we need all of the above.
Green energy alone is not going to get it done.
Mr. SCALISE. I think the fact that we are here in a committee hearing in Congress talking about how technology and energy is revolutionizing our country, and not only creating tens of thousands of really good high-paying jobs, which is something that we ought to be focused on every single day, but also allowing our country to be energy independent. Here is one case where we have got the opportunity to reduce our dependence on, in many cases, Middle Eastern countries who don’t like us, where we are spending billions of dollars to countries who use that money against us, to kill Americans in many cases. And so the revolution in energy is, I think, one of the most important things if we want to get our economy back on track, get our country moving again, create jobs and create the energy security I think that Americans expect and deserve.
If we want everybody to live in squalor and poverty, you know, then we go with the old economy. If we actually want to create jobs and manufacture, make things in this country so that we can create jobs and increase everybody’s lifestyle, not just in America, but in other countries, it starts with energy, and safe and secure energy, and that is what this is all about.
Mr. MCNERNEY. How is the natural gas mostly used? Is it used as a chemical, as a solute? Is it used to create heat through burning, or is it used to create electricity?
Mr. CORDLE. In two primary ways. We use natural gas to fire our steam boilers in our chemical production facility. And the overall lowering of that cost has certainly helped us dramatically. In the overall chemical manufacturing industry, it is a raw material, it is an ingredient in what we make in terms of our products. Natural gas, when it comes out of the ground, has several components: ethane, propane, and a few others. Ethane is the key raw material that is cracked and turned into ethylene, ethylene oxide, and then eventually it comes into polyethylene in the plastics that we use every day.
Mr. MCNERNEY. What is the energy balance of the GTL liquids; that is, energy in your product, divided by energy into the process and energy in the natural gas? What does the balance look like?
Mr. DE RUYTER. We use about 9.5 Bcf per day to produce 100,000 barrels of diesel per day. So you could work out the balance from that. It is a ratio between natural gas in and diesel out on the other side of the process.
Mr. JOHNSON. There is a nearly an almost limitless supply of natural gas, if the Federal Government doesn’t mess up the opportunity, and from a manufacturing perspective, if we aren’t forced to use gas for power generation instead of cheaper coal. I would suggest your time and the time of your members would be better spent helping us make sure that the administration doesn’t stamp out the coal industry, which is the most cost affordable, reliable form of energy on the planet.