[ Here are a few quotes from this 2009 Senate hearing on “Current energy security challenges”:
Eric Schwartz, member, Energy Security Leadership Council: “Air transport, long-haul freight shipping, and heavy-duty trucks are not likely to be candidates for electrification…. Despite some initial signs that consumer behavior had changed over the summer, the Council is convinced that with prices back at a more palatable level, this country will return to its profligate use of oil. Indeed, early evidence supports my assertion: new vehicle sales once again shifted in favor of SUVs in December of 2008- for the first time since February of 2008. On New Year’s Day, the Financial Times reported that U.S. sales of hybrid vehicles were down 53% in November compared to one year ago, and the decline is expected to steepen over the coming months…. Deteriorating U.S. energy security is largely due to the nearly complete absence of transportation fuel diversity…. What we must not do is continue to put off the hard choices while clinging to the tired rhetoric of ”energy independence” and the inert sloganeering of ”drill baby drill.”… To the extent that the public loses interest in energy security as a result of low fuel prices, it is difficult to sustain support for sound energy policies. Then, by the time we face a ”crisis,” it is too late to act.”
Karen A. Harbert, VP Institute for 21st century Energy: “It is a simple fact that for the next several decades much of the energy needed to power economic growth will likely be supplied by fossil fuels. Comprehensive energy reform cannot be done with an eye toward 2-year political cycles; it must be done with an eye toward the next 20 or 30 years.”
Kit Batten Ph.D., Senior Fellow, Center for American Progress Action Fund. “In 2008 two studies published in Science criticized the use of biofuels, particularly corn-based ethanol, as causing more greenhouse gas emissions than conventional fuels. The studies also note that clearing natural habitats to grow crops for biofuels generally leads to more carbon emissions, and that clearing large areas of land in general can lead to food and water shortages and reduced biodiversity….The fastest, cheapest way to reduce our oil dependence is to reduce demand…. The Apollo and Manhattan Projects are sometimes held up as models of innovation to be emulated, but the energy innovation challenge is fundamentally different because it requires the private sector to adopt new technologies that can succeed in the competitive marketplace. These were not considerations in our country’s efforts to put a man on the moon or to build a nuclear weapon.”
Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation, 2015, Springer]
Senate 111-2. January 8, 2009. Current energy security challenges. U.S. Senate Hearing. 103 pages.
Senator Jeff Bingaman, New Mexico. Obviously energy policy is very imminently interconnected with the state of our economy. I think we all know that. We see it at every turn. The historic oil price increase that we experienced last year was one of many factors that caused some of the economic difficulty we currently find ourselves in.
Senator Lisa Murkowski, Alaska. We can’t begin to fix the economy without addressing the need to run our factories. How we’re going to power our cars. How we’re going to heat our homes. While we have seen lower gas prices that have provided some relief, we recognize that it’s only temporary until we can find a long term solution to our Nation’s dependence on foreign energy sources. That’s one of the reasons we’re here this morning to consider the proposals to address the nation’s tremendous energy security challenges. We’ve got to find ways to power our lives that are cleaner, that are more efficient and of course, more environmentally protective. We know that this is not an easy task. If it was easy we would have figured it out by now.
We hope that what we will hear from you this morning will help us as we work to craft yet another comprehensive energy bill. We need to show real leadership in developing legislation that builds this bridge to our energy future while helping to right the economy here. The 2005 Energy Policy Act, the 2007 Energy Independence Security Act, they did a great deal to advance our nation’s energy policy. We championed clean energy resources, like wind and nuclear. We increased the CAFE standards. We promoted biofuels. We directed the Federal Government to lead on conservation issues. Then last year the Congress addressed production by lifting the moratorium on offshore leasing. We addressed such a magnitude of these issues in these bills that the Federal agencies are still implementing many aspects of them. We’re still waiting for the nation’s first off shore wind project to receive Federal approval. While many of the programs authorized by EPACT and ESA have not received appropriations yet, the stimulus package, which is under development, will likely fund a number of these existing authorizations, everything from making our electrical grids smarter to increasing R&D work on alternative technologies, to providing energy efficiency block grants to schools and local communities.
Eric Schwartz, member, Energy Security Leadership Council & former CO-CEO of Goldman Sachs Asset management. Our military members have commanded U.S. armed forces as they patrol the waterways and shipping lanes crucial to the global oil trade. They have been on the front lines of the battle against violent extremists, who are often funded by dangerous regimes awash in oil and natural gas revenue. And they have spent countless hours strategizing with American allies on the best approaches to safeguarding the thousands of miles of global energy infrastructure that is dangerously vulnerable to sabotage and political manipulation.
The Council’s companies ship goods and services around the world, linking together consumers and small businesses on every continent. They manage networks of data, financial and investing platforms, and they make it possible for Americans to travel easily across the country on a moment’s notice. It is because of their experience and their knowledge of the dangers posed by our energy security vulnerabilities that the members of the Energy Security Leadership Council have dedicated themselves to this issue.
In December 2006, the Council released a report entitled Recommendations to the Nation on Reducing U.S. Oil Dependence. The report laid out a comprehensive blueprint for energy security, including: demand reduction through reformed and increased fuel-economy standards; expanded production of alternatives; and increased domestic production of oil and natural gas. The Council collaborated with Senators Byron Dorgan (D-ND) and Larry Craig (R-ID) to design legislation incorporating the principal elements of the Recommendations. This resulted in the ‘‘Security and Fuel Efficiency Energy Act of 2007 (SAFE Energy Act).’’ In December 2007, Congress passed and President Bush signed into law an energy bill that honored the Recommendations by (1) dramatically reforming and strengthening fuel-economy standards and (2) mandating a Renewable Fuel Standard that will displace significant quantities of gasoline using advanced biofuels such as cellulosic ethanol.
The reality is this: our nation’s dependence on oil—much of it imported and the majority used in our transportation sector—still represents a grave threat to our economic and national security.
All of the Council’s members are acutely aware of the magnitude of the American energy challenge. We have seen first-hand how American oil dependence undermines U.S. foreign policy when our diplomats deal with oil exporters like Russia, Iran and Venezuela. We understand that America can never succeed in the war on terror as long as we fund both sides of the conflict. Speaking to you today as one of the Council’s business leaders, however, I must tell you that the threats posed to the U.S. economy by our dangerous dependence on oil are equally as dire as those posed to our national security. If we continue down the current path, economic weakness and decay at home will continue to threaten American power and influence abroad.
A typical subprime borrower with a poor credit history who bought a $200,000 house in 2006 with a 2 year/28 year ARM with a 4% teaser interest rate for the first 2 years would have seen monthly mortgage payments increase from about $950 a month before the reset to about $1,330 after the reset—an increase of about $4,500 a year. Meanwhile, the median household in America saw its household energy costs increase by roughly $1,600 a year during the same 2-year period. But this type of increase in energy costs affected all U.S. households—not just the one household in 20 that held a subprime mortgage. All of these developments stemming from higher oil prices caused a noticeable slowing of economic growth. The U.S. economy lost more than 700,000 jobs between December 2007 and the beginning of September 2008, and the unemployment rate increased from 4.5 to 6.1%—all before the financial crisis truly hit later in September. In fact, as early as last August, many economists believed the U.S. economy was already on the verge of recession, largely driven by sharply rising and volatile oil prices. This put banks and Wall Street firms in a weakened financial state, with sharply eroded profit positions, even before the credit situation reached its crisis point.
What is so striking about this series of events is its near inevitability—it was an entirely predictable disaster. Just as they warned of the impending collapse of mortgage institutions like Fannie Mae and Freddie Mac, experts also warned that global oil demand was rising unchecked while easy access to cost-effective oil supply was plateauing or falling. This basic dynamic eroded the practical buffer between world oil production capacity and daily oil consumption, leaving the oil market prone to damaging volatility. Despite these well-known dangers, the American economy continued to operate at risk, with almost no substitutes for petroleum products and very few alternatives to driving. Today, 97% of our transportation energy needs are met by petroleum, and the transportation sector accounts for 70% of U.S. oil consumption. Our mistakes have been costly. Sharply higher oil prices had a devastating effect on household, business, and public sector budgets, and effectively functioned as a tax on the economy. One recent estimate by researchers at the Oak Ridge National Laboratory placed the combined cost of foregone economic growth and economic dislocation at nearly $300 billion in 2008. Rising fuel prices also significantly weakened U.S. automakers, whose relatively inefficient but high-margin large vehicles were virtually unsellable for a period of several months.
Finally, the U.S. exported hundreds of billions of dollars to pay for imported oil. Based on initial estimates, the U.S. trade deficit in petroleum products probably reached an all-time high of $350 billion in 2008—exceeding the combined cost of the wars in Iraq and Afghanistan for that year.
This massive financial burden accelerated the deterioration of the American balance of payments and contributed to a weaker U.S. dollar. Today, oil prices are near the bottom of a record slide, $150 dollar oil and U.S. gasoline prices over $4 per gallon led to demand destruction, reinforced by the financial and economic crises and the resulting recession in which we today find ourselves. As the economy recovers, and drivers return to the roads, our dependence will once again put us at the mercy of rising oil and gas prices—particularly if the existing vehicle fleet is fundamentally the same as it is today.
Despite some initial signs that consumer behavior had changed over the summer, the Council is convinced that with prices back at a more palatable level, this country will return to its profligate use of oil. Indeed, early evidence supports my assertion: new vehicle sales once again shifted in favor of SUVs in December of 2008— for the first time since February of 2008. On New Year’s Day, the Financial Times reported that U.S. sales of hybrid vehicles were down 53% in November compared to one year ago, and the decline is expected to steepen over the coming months.
To be blunt, we can no longer be slaves to the boom and bust cycle of oil prices.
Deteriorating U.S. energy security is largely due to the nearly complete absence of transportation fuel diversity. Not only are ever-greater amounts of oil required to fuel the U.S. transportation system, which is almost entirely dependent on oil, but the world oil market increasingly relies on supplies from hostile and/or unstable foreign producers.
Electrification of transportation would allow cars and light trucks to run on energy produced by a diverse set of sources—nuclear, natural gas, coal, wind, solar, geothermal and hydroelectric. The supply of each of these fuels is secure, and the price of each is less volatile than oil. In the process, electrification would shatter the status of oil as the sole fuel of the U.S. ground transportation fleet. In short, electrification is the best path to the fuel diversity that is indispensable to addressing the economic and national security risks created by oil dependence.
Of course, the transportation sector encompasses a broad range of components that extends beyond short-haul travel.
Air transport, long-haul freight shipping, and heavy-duty trucks are not likely to be candidates for electrification.
The Council, therefore, supports an aggressive program to develop and deploy third generation biofuels—identical on a molecular level to oil-based fuels—that can be used in air transport and heavy-duty trucks. These advanced biofuels can be transported using existing infrastructure and will substantially increase the flexibility of the broader transportation sector.
Central to the success of such an approach will be the manner in which we, as a nation, manage the consequences of oil dependence while we transition to electrification. The upgrades in infrastructure and technology that are required are on the order of trillion dollar investments.
The weakest link in our nation’s electric power system is the transmission grid. The grid is currently insufficiently robust to support the unconstrained movement of power from generators to consumers, particularly location-constrained power (including renewables), and insufficiently reliable for an economy with a growing need for highly reliable power. Overburdened transmission lines increase the probability of service failures and prevent efficient redistribution of power from surplus to deficit regions. Recent studies of the transmission system have concluded that congestion on the transmission grid is costing consumers billions of dollars each year by preventing them from accessing low cost power.
Moreover, rather than constituting a national network, the transmission grid is in effect a patchwork that is not subject to the jurisdiction of any common regulator—indeed, some areas are wholly unregulated at the federal or state level. This balkanized structure makes it difficult to site and finance transmission lines.
The Council’s National Strategy suggests that national leaders must treat grid expansion as a national security imperative. Grid expansion is necessary to ensure the reliability of the grid in an environment of ever-growing demand for power, including that needed for short-haul transportation. Grid expansion also will be necessary to fully exploit the opportunities presented by wind and solar energy, production of which is most promising in sparsely populated areas distant from significant electrical loads, and nuclear power and coal with carbon sequestration, which are also location constrained, though to a lesser extent.
Shortly after the energy crisis of 1973, U.S. energy R&D soared from $2 billion annually to more than $14 billion, with public-sector investment peaking at just under $8 billion and private-sector investment topping out at nearly $6 billion. By 2004, private-sector energy R&D funding was below $2 billion and government funding had dropped to roughly $3 billion.
We not only must spend more, we must establish new institutions to help guide the spending to increase the effectiveness of our investment. Rather than channel the increased spending through the existing offices at the Department of Energy, with their attendant shortcomings, the Council supports the establishment of a new institution either inside or outside of DOE. This institution should be funded, at least in part, by an independent budget stream that avoids the annual earmarks and appropriations battles in Congress and interference by the Office of Management and Budget. Moreover, all funding should be distributed entirely on the basis of merit, while still maintaining the appropriate level of Congressional oversight. One division of the institution should be established to offer significant R&D grants-based support for early-stage research following a peer-review process that examines all grant requests on an ongoing basis. Another division of the institution should also provide financial assistance in a manner similar to a bank to support the deployment of new technologies, whether in the form of loan guarantees or other means that it deems appropriate. Without such institutional reforms, the Council remains skeptical that the United States can achieve the R&D progress necessary to transform our energy system.
If there are more severe and frequent oil price spikes, then the U.S. automobile sector cannot survive against foreign competitors positioned to offer consumers highly fuel efficient vehicles. Without change in the composition of products offered by the Detroit Three, each period of higher prices will be accompanied by an industry crisis and new demands for government intervention. At the same time, the United States has every interest in a competitive domestic automobile manufacturing sector, which cannot be easily or quickly replaced by foreign transplants in the event of the collapse of any significant portion of the domestic industry.
For the American companies to survive and make the transition to producing more fuel efficient vehicles, the public will have no choice but to provide meaningful assistance. Therefore, the National Strategy proposes an $8,000 tax credit for the first two million highly efficient vehicles sold in the United States. A similar measure was included in legislation passed by Congress in late 2008. The National Strategy also calls for direct assistance to the automakers to assist in their retooling to produce the transformative cars of the future. The Council recognizes that Congress provided some assistance last fall, but believes that additional assistance may be necessary in the future. This would not be limited to the Detroit Three, but to any automaker that produces cars in the United States.
The electrification of short-haul transport and the deployment of advanced biofuels will require a decades-long initiative characterized by a concentrated, sustained effort to improve national infrastructure and deploy advanced technologies in a market-friendly way. If properly executed, this process can produce a new U.S. transportation system that is fundamentally disconnected from oil dependence.
It will be critical for the Secretary of Transportation and the National Highway Traffic Safety Administration (NHTSA) to implement fuel-economy rules that give consideration to the seriousness of the national security threat facing the United States. By increasing standards for light-duty vehicles at a rate of 4% per year beyond 2020, U.S. oil consumption would be reduced by nearly 3.5 million barrels per day in 2030.
EISA also mandated the issuance of fuel-economy standards for medium- and heavy-duty trucks for the first time in U.S. history. This structural reform is of great importance for reducing fuel demand in the transportation sector. However, the legislation did not set specific standards for these vehicles, as it did for cars and light trucks. Instead, the bill left NHTSA with statutory authority for setting the medium- and heavy-duty fuel-economy standard as part of its rule-making process. The Council continues to recommend that NHTSA pursue an aggressive and expeditious rule-making process with regard to medium- and heavy-duty trucks as part of implementing EISA and, where possible, consolidate and streamline statutorily- required processes to result in maximum oil savings at the earliest possible date.
The proposal we have put forward represents a commitment to transforming our transportation systems. We can do this. We can end our transportation system’s reliance on petroleum.
Mr. SCHWARTZ. The issue with natural gas is with the structure required to use natural gas as the key source of fuel for transportation. We don’t have it now. It would cost trillions of dollars. But we already have broad distribution of electric power.
Over the long term, it is the Council’s position that the most effective means for achieving true energy security is the electrification of short-haul transportation. America’s cars and light-duty trucks consumed approximately 8 million barrels of oil per day in 2008, about 40% of the U.S. total. Aggressively transitioning this component of the vehicle fleet to high rates of electrification will dramatically reduce oil consumption and thereby reduce the oil intensity of the U.S. economy. The Council has outlined a number of policy steps the federal government must implement, including vehicle tax credits, increased R&D spending for batteries, and a substantial investment in electricity generation, transmission, and grid management. The Council recognizes that widespread electrified ground transport will require a dramatic shift in consumer choice, technology and infrastructure. This transformation will only be achieved if we commit to a decades-long, sustained national effort that leverages smart, aggressive public spending with private ingenuity and flexibility. If we as a nation take the necessary steps, reductions in oil consumption from electrification of short-haul travel will reach meaningful levels within the next two decades.
The global oil market is extremely susceptible to boom and bust cycles. Investment and operational decisions in key nations are uneven and inefficient, often based on short-term considerations. Therefore, the Council has long recognized the need for market-friendly standards and mandates in the United States, regardless of oil price. As long as oil prices fluctuate unpredictably, the nation faces a near-impossible investment climate for alternatives to oil and for technologies that use oil more efficiently.
Our national leadership must be mindful of the dangers of increasing electric power demand (from electrification) without providing for diverse sources of power generation. If current trends are allowed to persist, a great deal of incremental U.S. power generation could be derived from natural gas. Despite recent developments in onshore unconventional gas production, there remains a very real possibility that America will be forced to import greater quantities of liquefied natural gas (LNG) in the coming decades. We must not trade one national security risk for another.
As a general rule, greater stability and regulatory certainty are vital for businesses to thrive. According to the Baker Hughes rig count, roughly 40% of the active rigs in the world are exploring and producing in the United States, despite the fact that U.S. resources are among the most costly to develop in the world. In part, this is because the U.S. is the world’s single largest market for petroleum products. However, it is also reflective of the fact that the United States currently maintains one of the most stable, favorable regulatory and tax environments in the world for oil and gas producers. At the same time, there is probably no more important factor than oil prices in determining the output of existing domestic oil wells. Roughly 20% of U.S. oil production currently derives from stripper wells-defined as those wells which produce less than 15 barrels of oil per day. A recent analysis from Sanford Bernstein suggested that the majority of this production is likely to shut down in 2009 as a result of today’s low-price environment. Beyond the onshore stripper wells, deepwater production in the Gulf of Mexico is among the most expensive oil to produce in the world, with marginal cost estimated at $75 per barrel. In other words, oil prices at $40 per barrel put intense pressure on producers who are highly leveraged to such costly production. At a minimum, low oil prices are likely to force many operators to postpone investing in new, more costly production. It is also worth noting that the most promising growth in domestic natural gas production is derived from relatively costly shale, tight, and deep gas. As natural gas prices have collapsed in tandem with oil prices, domestic producers of unconventional gas have been forced to slash capital spending and re-evaluate future production plans. Over the long-term, the secular price trend for oil and natural gas is clearly headed upward, but there will many bumps along the road.
I would suggest that the most important thing our leaders can do is to move quickly to put policies in place that will promote energy security and safeguard the economy. We know from polling that Americans are not ideological on the energy issue. If presented with an honest assessment of the challenges we face, they support a realistic plan that balances efficiency and increased energy supply with a long-term transition away from oil and other fossil fuels to the extent feasible. What we must not do is continue to put off the hard choices while clinging to the tired rhetoric of ‘‘energy independence’’ and the inert sloganeering of ‘‘drill baby drill.’’
A truly reformed national energy system will require a sustained and concerted effort on the part of America’s political leaders. In turn, this will require the ongoing support of American voters as the nation implements an energy policy that reduces dependence on oil and makes greater use of cleaner and/or renewable fuels. No doubt, this represents a daunting challenge. It is one we have largely failed to meet to date, because after each price spike or ‘‘energy crisis’’ subsides, national attention shifts to other issues and willingness to spend money to address a problem that appears to have passed becomes a lower priority. Lower prices at the pump are a substantial part of the problem. Because of the size and the scope of the existing oil related infrastructure, solutions to our energy problems will take years to address. To the extent that the public loses interest in energy security as a result of low fuel prices, it is difficult to sustain support for sound energy policies. Then, by the time we face a ‘‘crisis,’’ it is too late to act.
Launch a weatherization program. Increasing energy efficiency in homes through weatherization is among the most cost-effective means to reduce energy consumption. Moreover, it utilizes existing technology, can begin immediately, and is labor intensive. Congress should increase funding for weatherization by $5 billion and expand eligibility for lower income households to participate in the program.
Build new transmission lines. There is broad consensus that we need to upgrade the capacity of the nation’s electrical grid and modernize its operation. Many of the obstacles to doing so, however, are not related to a lack of federal funds. One critical issue is that the existing regulatory process was not designed to plan and build a national electrical grid. The best use of federal funds to assist in upgrading the grid would be to provide funds to the federal power marketing agencies (BPA, SWPA, and WAPA) to construct new transmission lines. While most high voltage transmission lines are built and owned by private or municipal utilities or cooperatives, these power marketing agencies do, in fact, build and own transmission lines-primarily in the West. At Congress’ first opportunity, it should establish an interconnect-wide grid planning process that would develop a transmission plan, grant federal siting authority for the plan, and allocate the cost of the transmission lines built pursuant to the plan across all customers in the relevant interconnect.
Smart grid. In addition to upgrading the grid’s capacity, we need to modernize its operation. Advanced digital technology can operate the grid more efficiently and reliably, enable new demand response technologies and programs, and expand access to the grid to distributed generation and renewables. Most of the technology required to develop the smart grid can be paid for by utilities’ customers under existing cost allocation practices. However, the government should fund pilot programs that deploy new technology so that the market can more quickly determine which technologies and practices work best in the marketplace and deploy that technology in the shortest time frame possible. The government should provide at least $5 billion for such programs, which will create jobs and accelerate the deployment of critical technologies. c. Early infrastructure for electrification of transportation. In order to take full advantage of the oil savings possible through the use of plug-in hybrid electric or fully electric vehicles, drivers will need access to recharging stations not just at their homes, but also at other places where they park their cars-particularly at work. Yet, until there is a critical mass of plug-in electric or fully electric vehicles, installation of public recharging stations may not be a high priority for local governments or commercial real estate developers. Public recharging stations are estimated to cost $700 to $1,000 per outlet. Congress should establish grants to municipalities for installing outlets, provided that a minimum number of units are installed. The minimum number of units required to become eligible for the credit should be a function of city size. Congress should also provide tax credits to commercial real estate developers that install recharging facilities accessible to at least 5% of their parking spaces and make those spaces available to PHEVs and EVs. Promoting the establishment of at least one million recharging stations will facilitate the deployment of PHEVs and EVs and enhance our energy security. To be sure, an aggressive program to deploy EV charging stations may outpace widespread availability of the electric vehicles themselves. However, the Council supports this approach on the grounds that it serves stimulus job-creation goals while laying the groundwork for consumer acceptance of EVs down the road. The design of stations should be coordinated with relevant automakers.
Invest in battery R&D. The absence of batteries with sufficient capacity that can be recharged quickly and manufactured at a reasonable price is the primary stumbling block for the electrification of our short-haul transportation. The Council believes this is the most critical step the nation can take toward reducing our dependence on oil. Congress should allocate $2 to $3 billion over 3 years to fund advanced battery research.
Federal purchases of highly efficient vehicles. As the largest consumer in the nation, with a presence that extends throughout the economy, the federal government is well situated to help establish the market for electric vehicles. Either Congress, by statute, or the President, by Executive Order, should direct government agencies with a minimum size fleet to purchase either PHEVs or EVs if they are available and meet agency requirements. By doing so, the government can provide an early guaranteed market for PHEV and EV producers. This will accelerate scaling of EV production and may facilitate access to capital for automakers seeking collateralize debt. If suitable PHEVs and EVs are not available, agencies should be required to choose among the three most efficient vehicles for each class of car as defined by the Environmental Protection Agency for the purpose of calculating fuel- economy standards. Doing so will promote the development of markets for vehicles that will enhance our energy security.
Restructure tax credits for renewable energy. Because they are relatively new and are involved in a very capital-intensive industry, most renewable energy companies do not have enough taxable income to utilize existing tax credits intended to incent investments in renewable energy facilities. Moreover, the institutional investors with whom the renewable companies entered into partnerships to allow them to monetize the credits have disappeared in the recent financial crisis. Congress should establish a grant program as an alternative to the existing tax credits to allow the renewable companies to monetize the value of the tax credits. Otherwise, there is likely to be a severe collapse of the renewable industry until the economy recovers and tax equity partners are once again able and willing to partner with companies to build renewable generating capacity.
Karen A. Harbert, Executive VP & Managing Director, Institute for 21st Century Energy, Chamber of Commerce. The United States now imports roughly 60% of our oil from foreign nations, which is almost double the amount we imported in the 1970s. This has put our economy and our national security at risk. It is also a huge drain on our economic resources. In 2008, the United States sent between $400 and $700 billion overseas for imported oil. Think what could be accomplished if even a fraction of that money remained here at home.
Our nation’s energy infrastructure is a ticking time bomb. Unless we make it an immediate priority to modernize it, blackouts, brownouts, service interruptions, and rationing will become more and more commonplace, with all that implies for lost productivity.
Various U.S. laboratories and others have evaluated the weak points in our energy infrastructure and have described numerous scenarios where a seemingly modest, routine occurrence could escalate into a debilitating energy supply disruption in very short order.
The term ‘energy infrastructure’ may conjure up images of pipes, wires, transformers, and power plants, but our nation’s most important energy infrastructure are the energy industry professionals—the engineers, scientists, computer programmers, skilled tradesmen, etc.—who ensure that we have the energy we need today and in the future. Our energy industry employs millions of people today, but nearly half of this workforce is eligible to retire within the next ten years.
At the same time, our universities and trade schools are graduating fewer students in science, engineering, and trade crafts, leaving many to wonder from where tomorrow’s energy professionals will come. In the coming years, we need government at all levels to build incentives that will motivate U.S. students and adults to train for and enter science, technology, engineering, and trade careers. In the interim, we need to reform our nation’s visa and immigration policies so that the United States can retain U.S.-trained, foreign-born scientists who are now being lured to other countries with less restrictive immigration and work policies.
It is a simple fact that for the next several decades much of the energy needed to power economic growth will likely be supplied by fossil fuels. Many developing countries have large resources of coal, natural gas, and oil, and it would be naive to believe that they will not use it.
Comprehensive energy reform cannot be done with an eye toward 2-year political cycles; it must be done with an eye toward the next 20 or 30 years. This means working together in a bipartisan fashion and across the 13 federal agencies and regulatory commissions that have some responsibility for energy policy and the dozens of Congressional committees and subcommittees. It means putting the needs of the nation ahead of the desires of one particular interest group, business sector, or region of the country. It will take the government and the private sector working together. This teamwork cannot be achieved if the government issues dictates and implements burdensome regulations.
Dianne R. Nielson, Ph.D., Energy Advisor, Office of the Governor, Salt Lake City, Utah. Western Governors are concerned that the United States lacks an effective, long term energy policy. Energy security is a critical component of that. Both energy efficiency to reduce demand and a diversity of energy resources and technologies must be part of the solution. Western Governors are working individually in their states and regionally together to meet those challenges.
In the last 2 years WGA has been involved with a wide range of stakeholders in developing a number of reports including achieving greater energy efficiency in buildings, deploying near zero technologies for power plants fueled by coal resources, developing transportation fuels of the future and all of these reports are now forming the basis of work that we are doing moving forward to develop energy policy. For the past 8 months the Western Governors Association has been managing the Western Renewable Energy Zone Project in conjunction with the Department of Energy which is funding the effort. By identifying the most developable renewable resource zones within the West and the Western Interconnect, load serving entities, transmission providers and state regulators will be able to make more informed decisions about the cost of renewable power, the optimum transition needed to bring that power to consumers.
Senator BARRASSO. Wyoming is a big coal state. Right now coal is the most affordable, available, reliable and secure source of energy. It’s a source of 50% of electricity in the nation. It’s what helps keep down the cost of electricity. You talked about $100 billion dollars in clean energy projects and possibly 2 million jobs from that, about $50,000 per job. What do we tell the coal miners in Wyoming, the people that work for the trains and to transport the coal? It’s a major part of our economy as those people want to continue to develop coal and work with investments and innovative approaches to make sure that coal is as clean as possible because all of us want to properly balance energy, the economy and the environment.
Senator Mark Udall, Colorado. Energy and natural resource issues have been a passion of mine for years. I grew in the West and spent more time under the stars than under the roof of my house. I’ve climbed all of Colorado’s 54 14,000 foot mountains and I’m intimately familiar with our Western lands. In the House, I used this knowledge to work to build bridges between various stakeholders and find solutions that respect the many values of our lands. I’ve tried to do the same with energy issues.
My passion for energy and natural resource issues are one of the main reasons that I sought election to the Senate and sought to be on this Committee. The topic that brings us here today is certainly one of the most pressing challenges facing our nation.
Energy is literally what powers our economy and our lives—yet our dependence on foreign oil threatens our national security and our environment. The current crisis between Russia and Ukraine is a perfect example of how access to oil can become a national security issue. And American dependence on oil from the Middle East has certainly contributed to the terrorism threat that America faces from Al Qaeda and other extremist groups.
I think there are a lot of questions still about oil shale, the amount of energy that’s needed to produce oil shale. Do you produce more energy at the end point than you actually put in? There are also grave concerns about the amount of water that’s necessary to produce oil shale. There are at least 5 different experimental technologies being used when it comes to oil shale production. So let’s proceed, but let’s proceed cautiously.
KAREN HARBERT, Executive Vice President and Managing Director, Institute for 21st Century Energy, Chamber of Commerce. We need to find business models that reward efficiency both at the supply side out on the consumer side. On the utility side those that get their revenue from producing more electricity we need to de-couple those profits from selling more electricity and rewarding them from making efficiency investments. There are ways in fiscal policy to actually reward those investments. So that there is a tax benefit to making those investments that will then allow them to still recoup profits but to make them actually profitable for selling less electricity. We also need to look at the building environment. The built environment here in the United States consumes a tremendous amount of electricity. There are no incentives for builders whether at the residential or commercial level to build more efficient buildings. After all it’s the tenant that pays the utility bills, not the builder. So currently we have a very low threshold of efficiency requirements in commercial buildings. We should raise that. We should reward them for efficiency improvements in those buildings. Likewise, consumers, if they have the monitors in their homes where they can make smart choices. They are able to make the choice of when they’re going to spend their money or not and same with the utilities at the different levels along the line.
Senator Jeanne Shaheen, New Hampshire. In New Hampshire and New England we have some particular challenges relative to energy policy. We are very dependent on foreign oil and foreign sources of fossil fuels. About 90% of our source of energy in New Hampshire and New England comes from foreign sources of fossil fuels. We also have a higher than normal percentage of individual buildings so that our efficiency costs for our buildings is more than in most States and more than 50% of people heat their homes with number 2 heating oil. So we have some significant challenges.
Kit Batten Ph.D., Senior Fellow, Center for American Progress Action Fund. America’s dependence on oil leaves us vulnerable to energy supply disruptions and to price volatility. What’s more, climatic shifts in developing countries are expected to trigger or exacerbate food shortages, water scarcity, the spread of disease, and natural resource competition. Thus, global warming is a threat multiplier for instability and will fuel political turmoil, drive already weak states toward collapse, threaten regional stability, and increase security costs. Committing to investments in fuels that have lower greenhouse gas emissions on a lifecycle basis in comparison to traditional gasoline is imperative to reduce our global warming emissions and ultimately avoid or lessen these risks and associated costs.
In the past few years, the body of scientific research and evidence surrounding the lifecycle greenhouse gas emission of a range of alternative biofuels has also grown. In 2008 two studies published in Science criticized the use of biofuels, particularly corn-based ethanol, as causing more greenhouse gas emissions than conventional fuels. The studies also note that clearing natural habitats to grow crops for biofuels generally leads to more carbon emissions, and that clearing large areas of land in general can lead to food and water shortages and reduced biodiversity. This type of scientific analysis of lifecycle greenhouse gas emissions can help us design the most effective standards to promote only those fuels with the lowest emissions and the greatest sustainability.
The fastest, cheapest way to reduce our oil dependence is to reduce demand. Increased oil production from conventional fuels, even including the areas previously under moratorium, has the potential to increase oil supplies by about 1.8 million barrels per day in 2030. By contrast, reducing demand for oil has the potential to reduce consumption by 9 to 10 million barrels per day
The United States possesses only 2-3% of the estimated world oil reserves, but it consumes 25% of the world’s oil, and U.S. oil production has dropped relentlessly for the past 20 years. In September 2008, Congress let a long-standing moratorium on leasing and drilling for oil in certain offshore areas expire, yet this will have little effect on oil production between now and 2030. According to the Energy Information Agency, opening the areas of the lower 48 states’ outer continental shelf that were formerly closed to leasing would increase oil production by only about 200,000 barrels per day between now and 2030.
Increasing fuel efficiency for passenger and non-passenger automobiles from 25 mpg to 35 mpg by 2020, will decrease oil use by 2.5 million barrels per day by 2030.
We must reduce our dependence on oil for many different reasons, including energy security, national security, economic growth, and reducing greenhouse gas emissions. Taking steps to develop renewable and low-carbon energy resources as well as investing in low-carbon energy are key to enhancing energy security and transitioning to a low-carbon economy.
The transition to a green economy—at home in the United States, and globally— can be a source of increased business opportunity, innovation, and competitiveness; job creation; stronger, more prosperous communities; and improved energy and national security. This transition must be at the center of both America’s energy policy and each step of our economic policy—stabilization, stimulus, recovery, and growth.
Unfortunately, the pace of innovation generated by this public investment has not been sufficient given the urgency and scale of today’s energy challenge. The various measures that it has employed (including direct federal support for RD&D, indirect financial incentives, and mandatory regulations) have been developed and implemented individually with too little regard for technological and economic reality and too much regard for regional and industry special interests. There has not been an integrated approach to energy technology innovation that encompasses priority areas of focus, the responsibilities of various funding agencies, and the mix of financial assistance measures that are available. If the United States simply continues to pursue energy innovation as it has in the past, then the path to a low-carbon economy will be much longer and costlier than necessary.
The United States needs a fresh approach to energy RD&D that successfully integrates the efforts of the numerous departments and agencies that are engaged in energy-related work, including the Department of Energy, the Department of Agriculture, the Department of Commerce, the Department of Defense, the National Science Foundation, and the Environmental Protection Agency. This new approach will need to address the shortcomings that have frequently plagued energy RD&D efforts, such as the practice of spending significant resources on demonstration projects that provide little useful information to the private sector. The Apollo and Manhattan Projects are sometimes held up as models of innovation to be emulated, but the energy innovation challenge is fundamentally different because it requires the private sector to adopt new technologies that can succeed in the competitive marketplace. These were not considerations in our country’s efforts to put a man on the moon or to build a nuclear weapon. Consequently, we recommend at least doubling the size of the federal energy RD&D budget and creating a new interagency group, the Energy Innovation Council, or EIC, that will be responsible for developing a multi-year National Energy RD&D Strategy for the United States.
At best, even with carbon capture and storage if we were to capture the carbon generated by oil shale liquid fuel development, we still would have to deal with the carbon emissions that come from burning that oil in our tailpipes. The environmental pollution that results as a result of developing oil shale, whether it’s air pollution, water pollution, greater salinity deposits and the extreme electricity costs that go into oil shale production, the extreme water costs that go into oil shale production, all make it in terms of our focus, a non-viable alternative.
[ Scorecard: dependence on oil mentioned 17 times in this excerpt ]