Once upon a time Congress knew an energy crisis was coming

Extracts from the 2005 Senate hearing “High Costs of Crude”

[ In Mason Inman’s outstanding biography of M. King Hubbert, “The Oracle of Oil”, he shows five different models Hubbert used to predict the continental peak of U.S. production that all came up with roughly the same, correct answer.

Here are some other forgotten predictions from a 2005 Senate hearing “High Costs of Crude”:

  1. James R. Schlesinger, former U.S. Secretary of Defense predicted that “by about 2010, we should see a significant increase in oil production as a result of investment activity now under way. There is a danger that any easing of the price of crude oil will, once again, dispel the recognition that there is a finite limit to conventional oil. “
  2. James Woolsey, former Director of the CIA said that “Even if other production comes online from unconventional sources such as shale in the American West, the relatively high cost of production could permit low-cost producers, 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-1980s”.

Quite often, electricity generating contraptions like wind, solar, and nuclear are called on as the answer to the energy crisis.  But back in 2005 it was understood why anything generating electricity wouldn’t solve the problem:

  • James Woolsey: “The current transportation infrastructure is committed to oil and oil-compatible products. And since our electricity system scarcely uses any oil, ”you can put windmills and nuclear reactors on every hilltop and you would have a negligible effect on our use of oil. For the foreseeable future, as long as vehicular transportation is dominated by oil as it is today, the Greater Middle East, and especially Saudi Arabia, will remain in the driver’s seat.”
  • James Schlesinger: Advocating the construction of nuclear plants may be desirable, but it does not confront the critical issue of the liquids crisis. The intractable problem lies in liquid fuel for land, sea and air transportation.

So here we are now, the energy crisis forgotten, lots of excitement about wind, solar and nuclear despite their irrelevancy, electric cars, cellulosic ethanol, and other non-solutions.

And tight “fracked” shale oil is getting its ass kicked by the Saudi’s as Woolsey predicted.  Yet both Houses of Congress proclaim a century or more of energy independence, with the most recent energy bill expediting the export of U.S. natural gas (LNG) at a time when the fracking bubble appears to be bursting (shalebubble.org).  Ten years ago, congress was having meetings on the alarming shortages of conventional natural gas looming in the not too distant future.  Fracked NG delayed that crisis a few years, but won’t be able to in the future, since fracked natural gas wells only produce for the first few years before rapidly declining to low levels of production.

So here is a refreshing Senate hearing back when our dependence on oil was acknowledged, and our leaders knew and cared that an energy crisis was coming. First a few remarks, and then more excerpts from the hearing.

Indiana Senator Richard Lugar: In the long run our dependence on oil is pushing the U.S. toward an economic disaster of lower living standards, increased risks of war, and environmental degradation. When we reach the point where the world’s oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict than it already is.

James R. Schlesinger, Former U.S. Secretary of Defense.  In the decades ahead we shall reach a plateau or peak, beyond which we can’t increase production of conventional oil worldwide. The day of reckoning draws nigh.

A growing consensus accepts that the peak is not that far off. It was a geologist, M. King Hubbert, who outlined the theory of peaking and correctly predicted that production in the United States would peak around 1970.

Sometime in the decades ahead, the world will no longer be able to accommodate rising energy demand with increased production of conventional oil.  We need to … begin to prepare for that transition.

We have a growing gap between our discoveries and production, which will continue to increase unless we discover oil, we will not be able to produce it. Most of our giant fields were found 40 years ago and more. Even today, the bulk of our production comes from these old and aging giant fields. More recent discoveries tend to be small with high decline rates and are soon exhausted.

The energy bill … doesn’t  deal with the long term problem that for two centuries we have been dependent on the growth of our economies and on the rise of living standards from the exploitation of a finite resource: oil.

The public does not really get interested in energy problems until the price of gasoline runs up. Other than that it is indifferent. We move as a country from complacency to panic. Gasoline prices are high at the moment, and it has gotten the public’s attention. Other than that, ]the public only pays attention] when there are supply interruptions and [long] gasoline lines, as we had in 1973 and 1979. That gets the public’s attention.

Pointing to the reality [of the end of] vast discoveries of super giant oil fields] in the Middle East doesn’t do it, until such time as there’s some impact. I hesitate to mention to you, gentlemen, that politicians don’t usually like to be associated with bad news. And that is bad news and it is very hard to persuade people to emulate Jimmy Carter, and go out there and say there’s a problem coming.

One additional point needs to be made. When gasoline prices are rising, public anger rises at least correspondingly. Public anger immediately draws the attention of politicians—and here in the United States it elicits a special type of political syndrome: Wishful thinking. It is notable that in the last election both candidates talked about ‘‘energy independence,’’ a phrase that traces back to the presidency of Richard Nixon and to the reaction to the Arab oil embargo. One should not be beguiled by this forlorn hope.

The transition [from oil] will be the greatest challenge this country and the world will face— outside of war. The longer we delay, the greater will be the subsequent trauma. For this country, with its 4 percent of the world’s population, using 25 percent of the world’s oil, it will be especially severe.

Senator HAGEL, Nebraska. Maybe the answer is, as you said earlier in your remarks, there has to be a crisis –a big crisis.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation, 2015, Springer]

Senate 109–385. November 16, 2005. High costs of crude: the new currency of foreign policy.  U.S. Senate Hearing.    

Excerpts from this 39 page hearing follow (out of order, some paraphrasing).

RICHARD G. LUGAR, U.S. SENATOR FROM INDIANA.

The committee meets today to examine the effects of U.S. oil consumption on American foreign policy and on our wider economic and security interests. High oil prices have hurt American consumers at the gas pump, and record revenues flowing into oil producing nations are changing the world’s geopolitical landscape. Increasingly, oil is the currency through which countries leverage their interests against oil dependent nations such as ours.

Oil is not just another commodity. It occupies a position of singular importance in the American economy and way of life. In 2003, each American consumed about 25 barrels of oil. That is more than double the per capita consumption in the United Kingdom, Germany, and France and more than 15 times that of China. With less than 5% of the world’s population, the United States consumes 25% of its oil.

In the short run, our dependence on oil has created a drag on economic performance at home and troubling national security burdens overseas. In the long run, this dependence is pushing the United States toward an economic disaster that could mean diminished living standards, increased risks of war, and accelerated environmental degradation.

Up to this point, the main issues surrounding oil have been how much we have to pay for it and whether we will experience supply disruptions. But in decades to come, the issue may be whether the world’s supply of oil is abundant and accessible enough to support continued economic growth, both in the industrialized West and in large rapidly growing economies like China and India. When we reach the point where the world’s oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict than it already is.

Since 1991, we have fought two major wars in the oil-rich Middle East, and oil infrastructure and shipping lanes are targets for terrorism. In addition to the enormous dollar cost we pay for the military strength to maintain our access to foreign oil, our petroleum dependence exacts a high price in terms of foreign policy and international security. Massive infusions of oil revenue distort regional politics and can embolden leaders hostile to U.S. interests. Iran, where oil income has soared 30% this year, threatened last month to use oil as a weapon to protect its nuclear ambitions. At a time when the international community is attempting to persuade Iran to live up to its nonproliferation obligations, our economic leverage on Iran has declined due to its burgeoning oil revenues. Similarly, the Chavez government in Venezuela resists hemispheric calls for moderation, in part because it has been emboldened by growing oil revenues. Russia uses its gushing oil and natural gas income and reserves as leverage over new democracies in East Europe. Globally, critical international security goals, including countering nuclear weapons proliferation, supporting new democracies, and promoting sustainable development are at risk because of dependence on oil. Diversification of our supplies of conventional and nonconventional oil, such as Canada’s tar sands, is necessary and under way. Yet because the oil market is globally integrated, the impact of this diversification is limited.

Our current rate of oil consumption, coupled with rapidly increasing oil demand in China, India, and elsewhere, will leave us vulnerable to events in the tumultuous Middle East and to unreliable suppliers such as Venezuela. Any solution will require much more than a diversification and expansion of our oil supply.

Despite the widening discussion of our energy vulnerability, the U.S. political system has been capable of only tentative remedial steps that have not disturbed the prevailing oil culture. The economic sacrifices imposed on Americans recently by rising oil prices have expanded our Nation’s concern about oil dependence. But in the past, as oil price shocks have receded, motivations for action have also waned. Currently, policies for mediating the negative effects of oil dependence continue to be hamstrung in debate between supply-side approaches and those preferring to decrease demand. We must consider whether the political will now exists to commit to a comprehensive strategy.

 

JAMES R. SCHLESINGER, Former U.S. Secretary of Defense

We face a fundamental, longer term problem. In the decades ahead, we do not know precisely when, we shall reach a plateau or peak, beyond which we shall be unable further to increase production of conventional oil worldwide. We need to understand that problem now and to begin to prepare for that transition.

The underlying problem is that for more than three decades, our production has outrun new discoveries. Most of our giant fields were found 40 years ago and more. Even today, the bulk of our production comes from these old and aging giant fields. Ghawar in Saudi Arabia, for example, produced 7 percent of the world’s petroleum all by itself. There are other examples. More recently discoveries tend to be small with high decline rates and are soon exhausted.

The problem is that demand and production continue to grow and the discoveries are not matching those increases. The fact of the matter is that unless we discover oil, we will not be able to produce it over time. And we have a growing gap between our discoveries and production, which will continue to increase. The consequence is that as we look to the future, and we begin to drain off those giant fields like Ghawar, like the Burgen Field in Kuwait, we are going to be faced with an oil stringency.

As the years roll by the entire world will face a prospectively growing problem of energy supply. Moreover, we shall inevitably see a growing dependency on the Middle East.

By about 2010, we should see a significant increase in oil production as a result of investment activity now under way. There is a danger that any easing of the price of crude oil will, once again, dispel the recognition that there is a finite limit to conventional oil. In no way do the prospective investment decisions solve the long-term, fundamental problem of oil supply.

Let me underscore that energy actions tend to be a two-edged sword. To some extent, the recent higher prices for oil reflect some of our own prior policies and actions. For example, the sanctions imposed upon various rogue regimes, by reducing world supply, have resulted in higher prices. Operation Iraqi Freedom, followed by the insurgency, has caused unrest in the Middle East. The consequence has been somewhat lower production and a significant risk premium that, again, has raised the price of oil. The effect of higher oil prices has been significantly higher income for producers. A much higher level of income has meant that a range of nations, including Russia, Iran, Venezuela, as well as gulf Arab nations have had their economic problems substantially eased. As a result, they have become less amenable to American policy initiatives. Perhaps more importantly, the flow of funds into the Middle East inevitably has added to the moneys that can be transferred to terrorists. As long as the motivation is there and controls remain inadequate, that means that the terrorists will continue to be adequately or amply funded. To the extent that we begin to run into supply limitations and to the extent that we all grow more dependent on the Middle East, this problem of spillover funding benefits for terrorists is not going to go away.

The United States is today the preponderant military power in the world. Still, our military establishment is heavily dependent upon oil. At a minimum, the rising oil price poses a budgetary problem for the Department of Defense at a time that our national budget is increasingly strained. Moreover, in the longer run, as we face the prospect of a plateau in which we are no longer able worldwide to increase the production of oil against presumably still rising demand, the question is whether the Department of Defense will still be able to obtain the supply of oil products necessary for maintaining our military preponderance. In that prospective world, the Department of Defense will face all sorts of pressures at home and abroad to curtail its use of petroleum products, thereby endangering its overall military effectiveness.

 

JAMES WOOLSEY, former CIA Director

The testimony I’m presenting today is in large measure of the substance of a paper by former Secretary of State, George P. Shultz, and I. We wrote and published it on the Web site of the Committee on the Present Danger, which he and I co-chair this summer.  [Today} I’m going to … point out why a pure market approach is something that will not work under the current circumstances.

First of all the current transportation infrastructure is committed to oil and oil-compatible products. So there’s no effective short-term substitutability. One simply has to eat whatever increases in oil prices come upon us. We can’t shift as we can with many other commodities.

Second, that dependence is one which operates today in such a way that the transportation fuel market and the electricity market are effectively completely separate things. In the 1970s about 20% of our electricity came from oil, so if one introduced nuclear power, or wind power, one was substituting them to some extent for oil use. Today that’s essentially not true anymore. Only 2 to 3 percent of our electricity comes from oil. Whether you’re a fan of nuclear power or wind or whatever, you can put windmills and nuclear reactors on every hilltop and you would have only negligible effect on our use of oil.

So the transportation fuel market and the electricity market today are very different. Secretary Shultz and I focused on the importance of proposals that could get something done soon. And in that regard let me be very blunt. We should forget about 95 percent of our effort on hydrogen fuel cells for transportation. We found on the National Energy Policy Commission that ‘‘hydrogen offers little to no potential to improve oil security and reduce climate change risks in the next 20 years.’’ Hydrogen fuel cells have real utility in niche markets for stationary uses. But the combination of trying to get the cost of these one-to-two-million-dollar vehicles that run on hydrogen down, at the same time one coordinates a complete restructuring of the energy industry so one has hydrogen at filling stations, and does a complete restructuring of the automotive industry so one has hydrogen fuel cells, is a many decades-long undertaking.

Hydrogen fuel cells for transportation in the near term are, in my judgement, a snare and a delusion and we should stop spending the kind of money on them that we are spending now.

The second point is that the Greater Middle East will continue to be the low-cost and dominant petroleum producer for the foreseeable future. If one looks at the coming demand growth from China and India, and the relatively high cost of production elsewhere, it is still going to be the case that the gulf—Saudi Arabia in particular—is going to be the swing producer and have a dominant influence on oil prices.

If the Saudi fields are in the negative shape that Mr. Simmons and others have suggested in some of their writings it may be a bit harder for the Saudis to increase production quickly, drop the price of oil as they did in the mid-1980s, and bankrupt other approaches.

The petroleum infrastructure is very vulnerable to terrorist and other attacks. My friend, Bob Baer, the former CIA officer, who wrote the recent book, ‘‘Sleeping With the Devil,’’ opens with a scenario in which a hijacked airliner is flown into the sulfur-cleaning towers up near Ras Tanura in northeastern Saudi Arabia. That takes 6 million barrels a day or so offline for a year or more. It sends world oil prices well over $100/barrel and crashes the world’s economy.

And that’s not to speak of some of the vulnerabilities from attacks on shipping, from hurricane damage in the gulf and all the rest. So the infrastructure of oil worldwide is vulnerable both to accidents and certainly to terrorism. But neither Secretary Shultz nor I talk in terms of just oil imports. We don’t solve anything in this country by importing a lot less from the Middle East and importing, say, more from Canada and Mexico, and then Europe importing more from the Middle East.

The possibility exists, particularly under regimes that could come to power in the Greater Middle East, of embargoes or other disruptions of supply. People sometimes say, whoever is in power in Saudi Arabia, they’re going to need to sell the oil in order to live. Well, they don’t need to pump that much of it if they want to live in the seventh century.

Bin Laden has explicitly said that he thinks $200/barrel or more is a perfectly reasonable price for oil. And we should remember that in 1979 there was a serious coup attempt in Saudi Arabia. In this part of the world, however successful or unsuccessful, our current efforts to help bring democracy and the rule of law into that part of the world are, we are looking at a decade or two or three of chaotic change and unpredictable governmental behavior in the Middle East. And that bodes concern, at the very least, for the stability of oil supplies.

Wealth transfers from oil have been used, and continue to be used, to fund terrorism and ideological support. The old Pogo cartoon line, ‘‘We have met the enemy and he is us,’’ is certainly true with respect to the funding of terrorism in the Middle East. For the ideological underpinnings of terrorism and the hate which is reflected in the al-Qaeda doctrine and related doctrines, we have only to look to the funding which takes place from Saudi Arabia and from wealthy individuals in that part of the world. Estimated generally at $3–$4 billion a year these funds go into teaching hatred in the madrassas of Pakistan, in the textbooks of Indonesia, in the mosques of the United States. We hear Prince Turki bin Faisal, the new Ambassador in Washington from Saudi Arabia and my former counterpart when he headed Saudi intelligence, say that we don’t appreciate how much the Saudis are doing in fighting against terrorism. Well, in a sense they are. They are perfectly willing to cooperate with us in fighting al-Qaeda, but it is not because the underlying views of the Wahhabis in Saudi Arabia and those of the Salafist jihadis such as al-Qaeda are different: They are not. The underlying views are genocidal for both groups with regard to Shiite Muslims, Jews, and homosexuals and they are absolutely filled with hatred with respect to Suffi and other Muslims, Christians, those with other religious beliefs, and democracy. Both are on the side of terrible oppression of women.

The current account deficits for a number of countries create risks ranging from major world economic disruption to deepening poverty, and could be substantially reduced by reducing oil imports. The United States essentially borrows about $2 billion now every day, principally from major Asian states, to finance its consumption. The single largest category of imports is the approximately $1 billion per working day that we borrow in order to finance our imported oil.

Global-warming gas emissions from man-made sources do create at least the risk of climate change, and one important component of potential climate change is, of course, transportation and oil.

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 percent 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.

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, 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-1980s.

For the foreseeable future, as long as vehicular transportation is dominated by oil as it is today, the Greater Middle East, and especially Saudi Arabia, will remain in the driver’s seat.

Biodiesel and renewable diesel. The National Commission on Energy Policy pointed out some of the problems with most current biodiesel ‘‘produced from rapeseed, soybean, and other vegetable oils— as well as . . . used cooking oils.’’ It said that these are ‘‘unlikely to become economic on a large scale’’ and that they could “cause problems when used in blends higher than 20% in older diesel engines.’’ It added that ‘‘waste oil is likely to contain impurities that give rise of undesirable emissions.’’

Senator Lugar.  Let me begin the questions by noting, Director Woolsey, that when we wrote the article 6 years ago, there was great enthusiasm. President Clinton came over to the U.S. Department of Agriculture. There was a celebration of a breakthrough of energy independence in our country. I think the enthusiasm only lasted throughout that rally at USDA. Even though we tried to make the points that you’ve made today, 6 years later we are now sobered by war in the Middle East. And we are sobered by the fact, as you suggested, that in the future, events could make oil politically unavailable.

But all the assumptions on which our economy and our security, are based have consequences on our external affairs, over which we may not have a great deal of control. Ditto for the oil wells or lines in Iraq. Even as we try to protect them, we are not bringing more oil into the world. We are struggling to get back to the levels under Saddam.

Now, I ask the two of you: What sort of shock value is required, so that we will understand the world in which we live, and so that these modest suggestions will have some hearings, some legislation?

Secretary SCHLESINGER.   The public does not really get interested in energy problems until such time as the price of gasoline runs up. Other than that it is indifferent. We move as a country from complacency to panic. Gasoline prices are high at the moment, they have risen and it has gotten the public’s attention. Other than that, to get [attention, are] supply interruptions and [long] gasoline lines, as we had in 1973 with the Arab oil embargo, and to some extent with the fall of the Shaw in 1979. That gets the public’s attention.

Pointing to the reality that we have this trend ending the period of vast discoveries of elephants [also called super giant fields], also called, in the Middle East doesn’t do it, until such time as there’s some impact. I hesitate to mention to you, gentlemen, that politicians don’t usually like to be associated with bad news. And that is bad news and it is very hard to persuade people to emulate Jimmy Carter, and go out there and say there’s a problem coming.

Mr. WOOLSEY. I would think that $3-a-gallon gasoline, preceded by 15 of the 19 people who flew the planes on 9/11 coming from the world’s largest oil producer, would have done it. But the only thing I can say is that one wants to make these steps as palatable as possible.  Both financially and in terms of people’s lifestyles.

 

Senator LugarWe could be in a situation in which the Chinese, the Indians, and the European countries finally decide they are desperate. In the past, countries that were desperate often took over other people’s territory. And we could say—well, we’re in a small world. People are fighting world wars because they don’t have energy.

Mr. WOOLSEY. This is an issue on which all us oil importers are in the same fix together. I would have thought it would have been a wonderful major topic for cooperative discussion between the President and the Japanese and the Chinese, that we could work on programs like this together. We have no reason to want China to need lots of oil. We’d rather have them happy with using their grass to drive home.

Senator Lugar. Exactly. And each one of us who travel find hotels in African countries filled with people from India, China, as well as our own country, looking for the last acre on the preemptive possibility.

Senator CHUCK HAGEL, Nebraska How do we then take everything that the two of you have talked about in a way where we can address it, find solutions for it, develop the policy needed to do the things that you’re talking about to avert the things that are coming down the track at us?

I would like to have you each address it because in your opinions does it start to address, at all, what we must deal with here, and the decisions we’re going to have to make in order to avert, I think, an international catastrophe that’s headed straight at this country.

I wonder whether the President of the United States should lift this above where we are now, and essentially put this on the same plain as a Manhattan Project which has been mentioned before. The seriousness of this I don’t think takes second place to any issue. And yet, we seem to kind of be sleepwalking through this. Yes, we passed the bill, kind of interesting, good. I voted for it, I suspect most of my colleagues voted for it. It just doesn’t, in my opinion, really address what you’re talking about.

And it is complicated. I understand that you talked to Secretary Schlesinger about, I think, 17 different blends of gasoline that our refineries have to deal with. You talk about, Director Woolsey, the Pogo quote. Much of this, I think, is self-inflicted because we have not had the courage in this country, administrations, Congresses, to deal with this. But these hearings, as important as they are, are not going to lift this up and do what we need to do to address this impeding disaster.

My question is: How do we then fix this? How do we address it? Maybe we start with the energy bill, whether that’s really relevant to what needs to be done. Should the President come up here and sit down with the leadership of the Congress of the United States, and say now we’re going to get it above this. We’re going to make this a Manhattan Project, it is the focus of this country and the energy that we’re going to harness, private public partnerships and get this done.

We hear a lot of talk about, especially politicians, energy independence. It’s in our press releases. We’re going to get this country to a point where there’s energy independence. I’d like to hear from each of you whether that’s possible. How do you do that? I didn’t hear anything too encouraging from either one of you today, about that’s going to happen.

We need friends, we need alliances, we need relationships. I think we’re destroying our infrastructure in this country because of Iraq and because of over-commitments. We’re destroying our budgets, but yet Rome burns.

 

Secretary SCHLESINGER. The first point is: No, we’re not going to have energy independence until such time as we move away from oil as our principal source of transportation fuel. We have a long-term liquids problem.

The energy bill was quite useful. But it dealt essentially with shorter term problems: The failure to build our infrastructure; the difficulty in stringing out transmission lines or pipe lines; it eased a number of those problems and that was desirable. But it doesn’t  deal with this longer term problem that for two centuries we have been dependent on the growth of our economies and on the rise of living standards of the exploitation of a finite resource which is oil.

How do we deal with that? I would hope that we can focus the national attention on this longer term problem and begin to prepare now to get through that transition that we face, 20 years out, 25 years out, I don’t know what the date is. That depends, of course, on Presidential leadership and the need to focus on the realities of that future and possibly to develop a number of what I’ll call ‘‘mini Manhattan Projects’’ because there are a range of developments that can help. Hybrid cars, plug-ins, look most promising. But that is not going to happen unless we are prepared to contravene to some extent, at least, the decisions of the marketplace. Senator Sununu’s concerns about electric power supply are appropriate. But once again until we can link up electric power and the transportation sector, we are not going to deal with the larger oil problem.

Senator HAGEL. I don’t know if there is an answer here.  But then, what do you do to get it out of neutral, and take it up somewhere where we can start to put all these pieces together, bring some leadership, resources, harness, focus policy,

And maybe the answer is, you said it earlier in your remarks, there has to be some crisis. A big crisis. And I think the margins of error today in the world are so much different than they were when you were Secretary of Energy, to recover from such a crisis, that is a very frightening prospect if we don’t get serious about this, and I think both political parties, the Congress, and the President, have this as its greatest responsibility.

Secretary SCHLESINGER. That is absolutely right, Senator. We need to have a chorus of all political, almost all political figures, in Washington and throughout the country, Governors as well, pointing to this problem, that it is something we must address. And if we don’t have that, we are not going to get on with these major adjustments that are necessary. We must remember that societies have difficulty facing distant threats.

We saw that in the case of Hurricane Katrina. For over a century we’ve known that sooner or later a CAT 4 or CAT 5 would hit a city that was below sea level. But it wasn’t today’s problem. Somebody has commented, it’s like the fella who plays Russian roulette, and he spins five or six times, nothing happens, and he puts the revolver aside and says that’s not dangerous. Well, we’ve been to two or three of those occasions, starting—possibly starting with the Suez crisis in 1956 and then, of course, with 1973 and 1979 and we’ve recovered from them and the reaction is like that fella with the revolver and Russian roulette.

 

Mr. WOOLSEY. Energy independence is really the wrong phrase. The problem is oil, as Jim suggested.

Secretary S CHLESINGER.  We must remember that we are working against the grain of the price mechanism, or the market economy. And that we are working against the predilections of the public and that’s what makes it hard.

 

Senator BILL NELSON, FLORIDA.  Some of these things can work, and we are suddenly at a position that we’re using half of the gasoline that we are using now. By a combination of all the things that you have very articulately laid out. Realistically, in what period of time would that be?

Mr. WOOLSEY. Well, a lot would have to do with how fast the fleet of passenger vehicles turns over. I think the average American passenger vehicle stays in service 10 years or 12 years

 

Senator BILL NELSON. And, as a result of that we would be, if at the end of that period of time, however long it is. We would be almost not dependent on foreign oil, and the question is: Are we going to be well on our way to that goal, or achieving that goal before the crisis comes that you mentioned, Senator Hagel? Because the crisis is coming. We just don’t know how it’s going to come. It may be that a terrorist sinks a supertanker in the Strait of Hormuz, or they blow up a refinery, or some other—maybe another major hurricane. And why we can’t get the American public and the American leadership focused on this is beyond me.  We have been seduced by cheap oil. And now it is so omnipresent in our system of distribution of energy that it’s hard to change it, and it’s going to take a crisis. It’s going to force us to change.

And that’s sad. Now this Senator’s going to continue to speak out, and I assume my colleague on the basis of your leadership, Mr. Chairman, are going to continue to speak out and let’s see if we can influence whoever’s occupying the White House for the next 3 years, and for the next years after that, whoever the new administration is, to see if we can break this stranglehold that we’re in. I don’t know what else to say.

 

Senator Lugar.  Thank you very much, Senator Nelson. This committee is declaring intellectual independence, even if we can’t declare energy independence.

But let me just say, the thing that all segments of Ukraine politics pointed to, were maps. They drew all sorts of oil lines to various countries, or gas, because of a sense of their independence conceivably being lost. The people who have the spigots and could turn them off could create a cause of war. They could create financial chaos in the meanwhile, a physical torture of the country. In other words, fortunately we are not in that condition. We are talking about a situation down the trail, but if you are in that condition as are many countries, either Ukraine or those coming to that point in this world. I stress again the international implications of our conversation today.

Even as we get our own act straightened out, and I think that we will, we must exude optimism. We must try to work with other countries, so that they do not face this crushing sense of dependence. This is critical, or we are going to be involved, I fear, in military conflict elsewhere in the world, trying to mediate either wars or disputes among others who did not work things out. And that is a very serious problem. For the moment, we’re talking about competition with the Chinese, the Indians, everybody grasping for the last barrel, with the understanding that if they don’t get it, and the dynamics of their public demand a good for their country, they may take means to get it. We have a strong need for diplomacy.

 

SENATOR RUSSELL D. FEINGOLD, WISCONSIN. As I have said many times, we must move away from our dependence on oil, most of which comes from foreign soil, if we are to truly meet our responsibility to future generations.

I would like to thank today’s witnesses, James Woolsey and James Schlesinger, for appearing before the committee. Given their active role in bringing attention to the concerns surrounding dependency on foreign oil, I look forward to hearing their ideas for avoiding future policy crises through an intelligent, well-informed non-fossil-fuel-based energy policy.

 

[From The National Interest, Winter 2005/06] THINKING SERIOUSLY—ABOUT ENERGY AND OIL’S FUTURE (By James R. Schlesinger)

The run-up in gasoline and other energy prices—with its impact on consumers’ purchasing power—has captured the public’s attention after two decades of relative quiescence. Though energy mavens argue energy issues endlessly, it is only a sharp rise in price that captures the public’s attention. A perfect storm—a combination of the near-exhaustion of OPEC’s spare capacity, serious infrastructure problems, most notably insufficient refining capacity, and the battering that Hurricanes Katrina and Rita inflicted on the Gulf Coast have driven up the prices of oil and oil products beyond what OPEC can control—and beyond what responsible members of the cartel prefer. They, too, see the potential for worldwide recession and recognize that it runs counter to their interests. But the impact is not limited to economic effects. Those rising domestic energy prices and the costs of fixing the damage caused by Katrina have weakened public support for the task of stabilizing Iraq, thereby potentially having a major impact on our foreign policy. What is the cause of the run-up in energy prices? Is the cause short term (cyclical) or long term? Though the debate continues, the answer is both. Clearly there have been substantial cyclical elements and ‘‘contradictions’’ at work. For several decades, there has been spare capacity in both oil production and refining. Volatile prices for oil and low margins in refining have discouraged investment. The International Energy Agency, which expresses confidence in the adequacy of oil reserves, urges substantially increased investment in new production capacity and has recently warned that, in the absence of such investment, oil prices will increase sharply. Such an increase in investment clearly would be desirable, but it is more easily said than done. In the preceding period of low activity, both the personnel and the physical capacity in the oil service industry have diminished—and it will take time to recruit and train personnel, to restore capacity and to produce equipment.

One additional point needs to be made. When gasoline prices are rising, public anger rises at least correspondingly. Public anger immediately draws the attention of politicians—and here in the United States it elicits a special type of political syndrome: Wishful thinking. It is notable that in the last election both candidates talked about ‘‘energy independence,’’ a phrase that traces back to the presidency of Richard Nixon and to the reaction to the Arab oil embargo. One should not be beguiled by this forlorn hope—and this brings us to the real problem for the foreseeable future. What is the prospect for oil production in the long term? How does it bear on the prospects for ‘‘energy independence’’?

THE DAY OF RECKONING DRAWS NIGH.  At the end of World War II came the period of the opening-up and rapid development of Middle East oil production, notably in the Arabian Peninsula. Both Europe and the United States embraced the shift from coal to oil as their principal energy source. The beginning of flush production in the Middle East coincided with and fostered the tremendous expansion of world oil consumption. In the 1950s and 1960s, oil production and consumption more than doubled in each decade. Annual growth rates in consumption of 8, 9 or 10 percent were typical. By contrast, no one, not even the most optimistic observers, expects a doubling of production in the decades ahead. The present expectation is markedly different. In increasing numbers, now approaching a consensus, knowledgeable analysts believe that the world will, over the next several decades, reach a peak—or plateau— in conventional oil production (Hirsch) Timing varies among these observers, but generally there is agreement on the outcome.

The implication is clear. Even present trends are unsustainable. Sometime in the decades ahead, the world will no longer be able to accommodate rising energy demand with increased production of conventional oil.

It should be emphasized that that would pose not a general ‘‘crisis in energy,’’ but instead a ‘‘liquids crisis.’’ Problems in energy other than oil are infrastructure problems, solvable through appropriate investment. To talk of a general ‘‘energy crisis’’ aside from oil is to divert attention from the central long-term problem. Advocating the construction of nuclear plants, for example, may be desirable, but it does not confront the critical issue of the liquids crisis. Basically, there is no inherent problem in generating and transmitting electric power, for which the resources are available. The intractable problem lies in liquid fuel for land, sea and air transportation.

We get clear indications regarding oil’s future from those in the industry. Though the United States and other consuming nations seem to believe that Saudi Arabia can and should increase production as demand rises, when he was asked at a recent conference whether oil production would peak, Ali Naimi, the long-time head of Saudi Aramco, responded that it would reach a plateau. It is quite telling that when, in 2004, the Energy Information Administration (EIA) projected Saudi production in 2025 of some 25 million BPD to satisfy world demand, the Saudis demurred—and quite politely indicated that such figures were ‘‘unrealistic.’’ The Saudis have never discussed a figure higher than 15 million BPD.

This is why David O’Reilly, CEO of Chevron has stated that the ‘‘era of easy oil is over.’’ Projections by Shell and by BP put that plateau several decades out. BP now says that its initials stand for ‘‘Beyond Petroleum.’’ Others, more pessimistic, suggest that the peak is much closer at hand—in the next decade. It is interesting to note, in light of the recent discussion of Chinese ambitions in acquiring oil assets, that the Chinese seem to believe that world production will reach a peak around 2012 (Pang Xiongqi).

So any indication of relative optimism is greeted with sighs of relief: The peak is not that near. For example, when Daniel Yergin of Cambridge Energy Research Associates recently stated that the peak will not come until after 2020, it was greeted with something approaching cries of elation: The threat is not that immediate!

What lies behind this now-changed view? In brief, most of the giant fields were found forty years or more ago. Only a few have been found since 1975. Even today the bulk of production comes from these old and now aging giant fields.

The Ghawar oilfield in Saudi Arabia, discovered in the 1940s, is by itself still producing 7 percent of the world’s oil. Would that there were more Ghawars, but, alas, that is probably not to be.

Moreover, the announcement by the Kuwait Oil Company in November that its Burgan field, the world’s second largest, is now past its peak output caused considerable consternation. The field’s optimal rate is now calculated at 1.7 million BPD, not the two million that had been forecast for decades ahead. In addition, that announcement has called into question the EIA’s estimate in its reference case that Kuwait would be able to produce five million BPD; it now appears likely that the emirate will not be able to produce over three million BPD.

Recent discoveries have typically been relatively small with high decline rates— and have been exhausted relatively quickly. With respect to the United States, it has been observed: ‘‘In the old days, we found elephants—now we find prairie dogs.’’

A growing consensus accepts that the peak is not that far off. It was a geologist, M. King Hubbert, who outlined the theory of peaking in the middle of the last century, basing it on the experience that as an oilfield passes the halfway point in extracting its reserves, its production goes into decline. Hubbert correctly predicted that production in the United States itself would peak out around 1970. Dissenting from that view are the economists, who have a deep (and touching) faith in the market mechanism—and a belief that over time market forces can adequately cope with any limits on oil supply.  In the extreme, some economists have regarded oil supplies as almost inexhaustible.

Administration of the Department of Energy, as well as the International Energy Agency. What lies behind it? While it is conceded that we have not been finding many new giants, it is contended that ‘‘additions and extensions’’ of existing fields will sustain growth. There is some truth in that contention—in that new technologies have been the basis of much of the additions to existing fields—and the hope is always there that we can increase overall recovery from the already discovered fields.

Optimists are buttressed in their views and are fond of pointing to the many earlier statements about ‘‘running out of oil.’’ Perhaps the most notable example was one by the director of the U.S. Geological Survey, George Otis Smith, who suggested in 1920 that we had already used up 40 percent of the oil to be found here in this country. That was a decade before the discovery in 1930 of the vast East Texas field, a bonanza that made oil supply so available that it drove oil prices below a dollar a barrel during the 1930s. A recent Chevron advertisement makes this substantive point quite dramatically: ‘‘It took us 125 years to use the first trillion barrels of oil. We’ll use the next trillion in 30.’’

Such past failed predictions are far less comforting than the journalists who cite them believe. The future may actually be different from the past. The optimists, mostly non-experts, seem unable to think quantitatively. Things are different now. In 1919 the world consumed a modest 386 million barrels of oil. Today the world is consuming some thirty billion barrels of oil each year. Statements like that of Director Smith were made before we had something approaching a billion automobiles worldwide, before we had aircraft and air transportation, before agriculture depended upon oil-powered farm machinery.

[Note: this is not true, see Inman’s “The Oracle of Oil”. Hubbert did consider technology and unconventional oil]

Hubbert’s peaking theory, based on observation of individual oil fields, was static in that it abstracted from improvements in technology. It also dealt strictly with conventional oil supplies. One notes that today those who are challenging Hubbert’s Peak are changing the rules of the game. They rightly point to dramatic improvements in technology, most notably deep-sea drilling. Somewhat less legitimately, they include in their projections all sorts of unconventional oil, like the Canadian tar sands and the prospects for shale oil. For example, of late, estimates of Canadian oil reserves have jumped by 180 billion barrels, now including the tar sands of Alberta. This is not a refutation of Hubbert’s theory (though it is frequently treated as such); it is simply a change in the rules that does not gainsay the fear that we will reach a plateau in conventional oil production.

We must bear in mind that earlier estimates suggested that there were some two trillion barrels of conventional oil in the earth’s crust. Now the estimate has grown to around three trillion. We have now consumed over a trillion barrels of oil. As indicated, we are consuming oil at the rate of thirty billion barrels a year. If one accepts Department of Energy projections, worldwide we would be consuming forty billion barrels of oil by 2025.

At such rates of consumption, the world will soon have reached the halfway point—with all that that implies—of all the conventional oil in the earth’s crust. At that point, the plateau or the peak will be near. And such calculations presuppose what cannot be assumed, that all the nations with substantial oil reserves will be willing to develop those reserves and exploit them at the maximum efficient rate. Both the Russian Federation and Saudi Arabia seem to intend to reach a plateau that they can sustain for a long time—the Russians at around ten million BPD, the Saudis up to but no more than 15 million BPD.

The inability readily to expand the supply of oil, given rising demand, will in the future impose a severe economic shock. Inevitably, such a shock will cause political unrest—and could impact political systems. To be sure, we cannot anticipate with any precision the year or even the decade that we will reach that plateau. Yet, as Justice Potter Stuart suggested, in seeking to define pornography, we shall know it when we see it.

Many economists take great comfort from the conviction that there is always a price at which markets will clear, and that the outcome determined by supply and demand is not only inevitable, but is also politically workable and acceptable. An outcome in which the price of a crucial commodity like oil rises to a level causing widespread economic disruption, along with the political consequences that flow from such disruption, turns out to be a secondary consideration, if considered at all. One is reminded of the phrase used by Wesley Clair Mitchell and Arthur F. Burns in their classic, Measuring Business Cycles (1946), when they spoke scornfully of the ‘‘Dreamland of Equilibrium.’’

That brings us to the question of the transition away from conventional oil as the principal source of energy for raising living standards of the world’s population. That transition will be the greatest challenge this country and the world will face— outside of war. The longer we delay, the greater will be the subsequent trauma. For this country, with its 4 percent of the world’s population, using 25 percent of the world’s oil, it will be especially severe.

The Day of Reckoning is coming, and we need to take measures earlier to cushion the shock. To reduce the shock, measures to ameliorate it should start ten years earlier at a minimum, given the length of time required to adjust the capital stock—and preferably much longer. The longer we delay, the greater the subsequent pain.

Both people and nations find it hard to deal with the inevitable. Even though it was long recognized that a Category 4 or Category 5 hurricane would inevitably strike New Orleans, a city substantially below sea level, Hurricane Katrina reminds us that political systems do not allocate much effort to dealing with distant threats—even when those threats have a probability of 100 percent.

We should heed a lesson from ancient Rome. In the towns of Pompeii and Herculaneum, scant attention was paid to that neighboring volcano, Vesuvius, smoking so near to them. It had always been there. Till then, it had caused little harm. The possibility of more terrible consequences was ignored—until those communities were buried in ten feet of ash.

Nonetheless, it does appropriately point to our greater vulnerability to a future period.

References

Robert L. Hirsch, ‘‘The Inevitable Peaking of World Oil Production,’’ (Atlantic Council of the United States, October 2005), which includes a range of different estimates for the peak year. For a more comprehensive analysis, see Robert L. Hirsch, Roger Bezdek and Robert Wendling, ‘‘Peaking of World Oil Production: Impacts, Mitigation and Risk Management’’   (National Energy Technology Laboratory, February 2005).

Pang Xiongqi, et al., ‘‘The Challenge Brought by the Shortage of Oil and Gas in China and their Countermeasures,’’ a presentation at an international seminar in Lisbon, 2004. One may assume that such presentations do not depart significantly from the views of the Chinese government. The optimistic view is held by the Energy Information

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I thank the committee for this invitation to discuss the quest for energy security, the implications of our heavy dependence on imported oil, the rise in oil prices, and their manifold political and economic repercussions for our Nation. In so many ways, the use of oil as our primary energy source turns out to be a two-edged sword. Actions that we take may reduce supply or add to the resources of those who are hostile to us.

The problem of energy security is of relatively recent origin. When mankind depended upon windmills, oxen, horses, and the like, energy security was not a strategic problem. Instead, as a strategic problem it is a development of modern times and reflects most crucially the turn to fossil fuels as increasingly the source of energy. The Industrial Revolution in the 19th century, strongly reinforced by the rapid growth of oil-dependent transportation in the 20th century, unavoidably posed the question of security of supply. Imperial Germany took over Lorraine with its coal fields after the Franco-Prussian War to insure its energy security. When Britain, pushed by Churchill, converted its Navy to oil early in the 20th century, it sought a secure supply of oil under its own control in the Persian Gulf, which incidentally increased its concern for the security of the Suez Canal.

For the United States, where the production of oil had started, in 1869, and for long was primarily located, the question of security of supply did not arise until the 1960s and 1970s. Since then, we have regularly talked about and sought, by various measures, to achieve greater energy security. Such measures, limited as they were, have generally proved unsatisfactory. The Nation’s dependence on imported hydrocarbons has continued to surge.

Until such time as new technologies, barely on the horizon, can wean us from our dependence on oil and gas, we shall continue to be plagued by energy insecurity. We shall not end dependence on imported oil nor, what is the hope of some, end dependence on the volatile Middle East with all the political and economic consequences that flow from that reality.

We shall have to learn to live with degrees of insecurity—rather than that elusive security we have long sought. To be sure, some insecurity will be mitigated by the Strategic Petroleum Reserve, and other emergency measures. That will provide some protection against short-term supply disruptions, but it will not provide protection against the fundamental long-term problem.

Senator Lugar, Indiana. Our weak response to our own energy vulnerability is all the more frustrating given that alternatives to oil do exist. Oil’s importance is the result of industrial and consumption choices of the past. We now must choose a different path. Without eliminating oil imports or abandoning our cars, we can offset a significant portion of demand for oil by giving American consumers a real choice of automotive fuel. We must end oil’s near monopoly on the transportation sector, which accounts for 60% of American oil consumption.

I believe that biofuels, combined with hybrid and other technologies, can move us away from our extreme dependence on oil. Corn-based ethanol is already providing many Midwesterners with a lower cost fuel option. Cellulosic ethanol, which is made of more abundant and less expensive biomass, is poised for a commercial takeoff. We made progress in the 2005 energy bill, which includes incentives to produce 7.5 billion gallons of renewable biofuel annually. I introduced legislation last week that would require manufacturers to install flexible-fuel technology in all new cars. This is an easy and cheap modification, which allows vehicles to run on a mixture of 85 percent ethanol and 15 percent gasoline. We will get even greater payoffs for our investment in oil alternatives if American technological advances can be marketed to the rest of the world. Nations containing about 85 percent of the world’s population depend on oil imports.

 

JAMES WOOLSEY, former CIA Director

Secretary Shultz and I suggested three proposed directions for policy in these circumstances. The first policy is to encourage improved vehicle mileage, using technology that is now in production. First, with modern diesel vehicles: One needs to be sure that they are clean enough with respect to emissions, but one of the main reasons that European fuel mileage is 42 miles a gallon for their fleet and ours is 24 miles a gallon, is because over half of the passenger vehicles in Europe are diesels; modern diesels.

Light weight carbon composite construction of vehicles. The Rocky Mountain Institute’s publication of a year ago, ‘‘Winning the Oil Endgame’’ (WTOE) talks about this. This is a technology that is now in place for at least racing cars. Formula 1 racers are constructed out of carbon composites that are about 80 percent of the strength of aviation composites but about 20 percent of the cost. What that does is separate weight from safety. If one is in a light weight carbon composite vehicle like a Formula 1 racer it is extremely resistant to being crushed or damaged, many times better than steel. So having light-weight vehicles that are fuel efficient, but also strong enough that you don’t have to worry that your family’s going to get crushed if they get hit by an SUV, has some real advantages.

The second policy we suggest is the commercialization of alternative transportation fuels—fuels that can be available soon, are compatible with existing infrastructure, and can be derived from waste or otherwise produced cheaply. The first is cellulosic ethanol. The chairman and I stressed it in the Foreign Affairs article that he mentioned. Ethanol of any kind can be used for up to 85 percent of the fuel in flexible-fuel vehicles.  The cost of cellulosic ethanol looks like it is headed down to well below $1 a gallon for production.

There are also new technologies for producing diesel encouraged in the Energy Act. It’s called renewable diesel rather than biodiesel, because it focuses on waste products of all kinds as we said in the Energy Commission Report.

The Toyota Priuses that are sold in Japan and Europe have a button on them, which if you push it you can drive all electric for a kilometer or so. For some reason those buttons are not put on the Priuses that are sold in the United States. But if one improves the capabilities of the batteries in a hybrid, and you can punch a button of that sort and drive for, let’s say, 30 miles before the hybrid feature cuts in—that is the movement back and forth between gasoline power and electric power—and you have topped off the battery by plugging in the hybrid overnight, using off-peak night-time power, you are driving on the equivalent of something between 25-cent and $1-a-gallon gasoline. Most cars in the United States are driven less than 30 miles a day. So, if that’s the second car in the family, the car that’s used for errands and taking kids to school and so forth, you could well go weeks or months before you visited the filling station. On the average that type of a feature makes my 50-mile-a-gallon Prius into about a 125-mile-a-gallon Prius. If you make that vehicle out of carbon composites, then instead of 125 miles a gallon you would be getting around 250 miles a gallon, because halving the weight would approximately double the mileage.

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 onboard 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’’ that ‘‘hydrogen offers little to no potential to improve oil security and reduce climate change risks in the next 20 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.

 

 

 

 

 

 

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Sex, crime, and death on the high seas. A U.S. Senate investigation of the cruise ship industry

Senate 113–642. July 24, 2013. Cruise Industry Oversight: recent incidents show need for stronger focus on consumer protection. U.S. Senate hearing. 169 pages.

Since 2011, cruise lines voluntarily reported 959 alleged crimes to the FBI, and 130 crimes that must be reported to the FBI, but only 31 crimes were reported publicly, despite the requirement that crimes be reported.

2011 crimes reported to FBI/public (# of crimes/reported publicly):

  • Deaths 3/0
  • Missing 5/0
  • Theft > $10,000 15/0
  • Sexual assault 42/13
  • other crimes 487/0

2012 crimes:

  • Missing 7/0
  • assault with serious injury 10/3
  • theft > $10,000 15/2
  • Sexual assault 29 (10 were minors)/11,
  • other crimes 342/0

Also read:

The Dark side of Cruise ships. Garbage. Sewage. And more.

Klein, R.A. and J. Poulston. 2011. ‘‘Sex at Sea: Sexual Crimes Aboard Cruise Ships,’’ Journal of Tourism in Marine Environments, 7:2, pp. 67–80.

Cruise Junkie   http://www.cruisejunkie.com

CONGRESSIONAL HEARINGS

  1. July 3, 2014. The CRUISE PASSENGER PROTECTION ACT (S. 1340): Improving CONSUMER PROTECTIONS FOR CRUISE PASSENGERS. U.S. Senate Hearing 113-488.
  2. March 1, 2012. Oversight of the Cruise Ship Industry: are current regulations sufficient to protect passengers and the environment. U.S. Senate Hearing.
  3. February 29, 2012. A REVIEW OF CRUISE SHIP SAFETY & LESSONS LEARNED from the COSTA CONCORDIA ACCIDENT. U.S. Senate Hearing 112-74.
  4. June 19, 2008. CRUISE SHIP SAFETY: Examining potential steps for keeping Americans safe at sea. U.S. Senate hearing 110-1223.
  5. March 27, 2007. CRIMES AGAINST AMERICANS ON CRUISE SHIPS. U.S. House of Representatives Hearing 110-21.

HON. JOHN D. ROCKEFELLER IV, U.S. SENATOR FROM WEST VIRGINIA

Millions of Americans enjoy taking cruises every year [for] a fun-filled, once- in-a-lifetime dream vacation. But, as we all know, sometimes cruises hit rough waters and that dream can turn into a nightmare. In March 2012, after several very troubling safety incidents occurred on cruise ships, I held a hearing in this room to get answers about why passengers sometimes find themselves in harm’s way. It was a serious attempt to get answers. The leader of the Cruise Industry Trade Association sat right there and told me, basically, to trust her that the industry was engaged in a rigorous review of safety procedures that would fix everything. I did not entirely believe her at the time, but I felt like the industry needed a fair chance to correct their course. It has now been 16 months since that hearing, and I have not seen much evidence that things have changed. Since that hearing, since those empty promises, serious incidents continue to plague cruise ships. This conduct should make us all very angry.

Consumers have the right to know what we have learned before they book their first or next dream vacation. For instance, if somebody steals your property or assaults you on a cruise ship, you cannot, obviously, call 911 and have the police there in a few minutes; you can only call the ship’s security officer, who, I think, predictably, happens to be an employee of the cruise line. That’s not a criticism, it’s just a fact. The cruise industry has fought to limit when and where passengers can file lawsuits, so it becomes incredibly difficult, if not impossible, to right these wrongs.

Under current law, cruise ship crime report data is not available to the public. That’s crime data.

When a crime occurs on a cruise vessel, it can be an entirely different story for the victim. Victims generally report crimes to cruise vessel security officers, who are employees of the cruise company. These employees do an initial investigation and determine when and whether to report a crime to law enforcement. As employees of the cruise lines, these security officers do not have the same arm’s length relationship with the cruise lines as do local and Federal law enforcement officials. Rape, Abuse & Incest National Network (RAINN) testified before the Commerce Committee about the inherent difficulties victims face when reporting a crime that occurred onboard to security officers who work for the cruise company: You won’t have any rape crisis personnel onboard to support you, let alone law enforcement officials to come to your aid. You might turn to cruise ship employees for help, only to later find that the cruise line has a vested interest in shielding themselves against negative publicity or legal jeopardy. And you might wonder how any security personnel hired by the cruise line will react if presented with any situation that might give rise to a potential conflict of interest between their employer and yourself.

Since law enforcement generally is not immediately present when a crime occurs on a cruise ship, the cruise ship security officers and sometimes the victims themselves are responsible for preserving the scene of the crime and any evidence. According to Congressional testimony, cruise lines have taken the position that they have no duty to investigate crimes. Victims groups and others have raised concerns that cruise lines have omitted basic steps such as taking witness statements and have lost, destroyed, or mishandled evidence.

Because of complex jurisdictional rules governing cruise line activities, in some cases passengers may not have the same legal protections on cruise vessels as they do in the United States. U.S. laws and protections only govern in certain circumstances and there are instances where U.S. law enforcement has limited juris diction over crimes. For example, a U.S. citizen can report a cruise crime to the FBI, but if the ship has left U.S. port the FBI is not typically in a position to act as an onboard police force immediately after the crime happens. Law enforcement may be located thousands of miles away and may have to work through a myriad of jurisdictional issues with other countries that share jurisdiction over the incident. Further, only certain crimes meet the threshold for the FBI to intervene. Theft of items valued under a certain amount or lack of evidence may result in the FBI declining to investigate an alleged crime. Even if the FBI does investigate, another country’s law enforcement agency may play the lead role in investigating and prosecuting the crime.

Ticket Contracts Limit Passenger Rights. Passengers may also find their ability to pursue legal action limited by clauses in the passenger contract that provides the terms and conditions of a cruise. For example, ticket contracts may require that a passenger has to file a lawsuit in a much shorter period than if the crime had occurred on land. Contracts also may include restrictions on the location of where an aggrieved passenger can file a lawsuit—typically requiring actions to be brought in Florida, where the major cruise lines are based. Further, cruise contracts often require mandatory arbitration or limit class action lawsuits.

The vast majority of cruise passengers are not victims of onboard crime. However, where a crime does occur, the difference between passenger resources and recourse available on a cruise vessel versus on land can be the difference between justice and injustice for a crime victim. A case in point is the account of Laurie Dishman, who testified to Congress that while she was traveling on a cruise to Mexico, a janitor who was ‘‘filling in’’ for a security guard raped her, leaving ligature marks on her neck and other physical evidence. According to Ms. Dishman’s testimony, following this incident, the cruise line personnel contaminated the scene, mishandled evidence, destroyed or ‘‘re-used’’ closed circuit television camera tapes, delayed notifying the FBI, delayed providing medical treatment, did not immediately seal the crime scene, and provided limited information to Ms. Dishman. Further, she stated that the FBI was not able to access the crime scene for several days. At the time, the FBI indicated they did not have enough evidence to further investigate the crime. The accused crew member was not arrested, and he was allowed to return to his home country.

In 2007, the FBI, Coast Guard, and the cruise lines agreed that cruise lines would voluntarily report to the FBI incidents involving serious violations of U.S. law: homicide, suspicious death, missing U.S. nationals, kidnapping, assault with bodily injury, sexual assaults, firing or tampering with vessels, and theft greater than $10,000. According to U.S. Coast Guard testimony, under this agreement, the FBI would annually compile this data and prepare a comprehensive report to share with the Cruise Lines International Association (CLIA). The Coast Guard encouraged CLIA to disclose this information to potential cruise ship passengers.

A victims group indicated it had been able to obtain these statistics through FOIA requests. However, this information was not readily available to the public. One of the ways Congress sought in the CVSSA to improve the safety of cruise passengers was to provide for greater transparency in reporting crimes that occur on cruise ships. In most major U.S. localities and foreign countries, the public can view local crime statistics based on crimes reported. The FBI views these crime statistics as an important and helpful tool. The public can use information regarding the occurrence of crimes to make more informed decisions about their travel and actions. The CVSSA includes language providing for public access to crime reports for cruise lines similar to reports the public can access regarding communities across the country.

Toward that end, the law requires cruise lines to report a specific set of crimes to the FBI that (1) occur on a vessel owned by a U.S. person, (2) involve a U.S. national, (3) that occur in U.S. waters, or (4) will depart from or arrive at a U.S. port. Additionally, the Coast Guard must make these crime statistics publicly available online. However, unlike crime reporting on land in the United States, the FBI interprets the CVSSA to require public reporting of only those incidents that are no longer under investigation by the FBI. The CVSSA also requires cruise lines to keep logs of all complaints of crimes committed on any voyage that embarks or disembarks passengers in the United States. This requirement covers a broader range of crimes than those required to be reported to the FBI. Under the CVSSA, cruise lines may voluntarily report any of the alleged incidents that do not fall under the category of incidents required to be reported, and many cruise lines have voluntarily provided this information to the FBI.

Analysis of Cruise Crime Statistics. Since CVSSA Cruise crime data reviewed by Commerce Committee staff shows that since enactment of CVSSA, the public has not been able to access complete information regarding reported crimes aboard cruise vessels. Since passage of the CVSSA, the total number of alleged crimes cruise lines reported to the FBI—including both incidents reported voluntarily and those required to be reported to the FBI by cruise lines—is 30 times higher than the number of alleged crimes reported publicly. Since 2011, cruise lines have reported 959 alleged crimes to the FBI, while the Coast Guard reported only 31 alleged crimes publicly.

HON. BILL NELSON, U.S. SENATOR FROM FLORIDA. The cruise industry is of concern to us, in my state. They have a major presence in Florida. They employ over 130,000 people. In my state, cruising accounted for $6.7 billion in total economic impact in Florida, and, last year, nearly 6 million cruise passengers departed from ports in Florida.

ROSS A. KLEIN, P H.D., PROFESSOR, MEMORIAL UNIVERSITY OF NEWFOUNDLAND IN ST. JOHN’S, NEWFOUNDLAND, CANADA

The cruise industry has received considerable attention in the media in recent years. In 2013 alone, the media has reported these problems with cruise ships: three running aground; five with fires; two collisions; 19 mechanical problems, including power loss, propulsion problems, and generator problems; 10 canceled port calls and/or changes in itinerary; cruises with delayed embarkation and/or debarkation; two cruises where passengers have been bumped; and eight ships that have failed U.S. health inspection.

In response to the negative publicity from these events and Senator Schumer’s call for greater consumer protection, the Cruise Lines International Association, in late May, issued its Passenger Bill of Rights, an obvious public relations initiative. A systematic evaluation reveals that, while many of the promises, on their face, are reassuring to cruise passengers, a deeper look indicates the Passenger Bill of Rights is filled with empty promises.

For example, the right to a ship crew that is properly trained in emergency and evacuation procedures. There is a huge chasm between being properly trained and those same crew members demonstrating, through behavior, competence in executing emergency and evacuation procedures.  Or the U.S. Coast Guard’s investigation of the fire and power loss of Carnival Splendor which found a number of instances of human error. I doubt that crew members were not properly trained, but what assurances does a CLIA Passenger Bill of Rights provide that training will be reflected in behavior, and what recourse does a passenger have when this, or any right, is not realized? Also take for example the right to disembark a docked ship if essential provisions cannot be adequately provided. What cruise passenger would not be reassured by this? But, how is this right fulfilled when a ship is dead in the water for 3 or 4 days, and being towed to port? And once the ship returns to port, who decides how quickly the disembarkation will begin, and does the passenger have any rights if it takes longer than they think is fair? Coming up with a list of rights is easy. But, as they say, the devil is in the details. Perhaps more troubling are contradictions between CLIA’s Passenger Bill of Rights and the typical cruise passenger contract. There’s no indication which takes precedence, especially given the restrictiveness of the passenger cruise contract with regard to rights held by a cruise passenger, particularly in comparison to the rights of the cruise line, and the extreme limitations on the cruise line’s liability for almost anything that happens on a cruise ship.

My written testimony systematically analyzes CLIA’s Bill of Rights and a typical cruise passenger contract. This analysis points to the need for better consumer protection of cruise passengers, much like the protections that are available to passengers on other modes of commercial transportation, including air carriers. My written testimony also provides systematic analysis of the Cruise Vessel Security and Safety Act of 2010. I look at the implications of differences between the Act, as initially introduced, and the final Act that was passed. I also look at issues that are not adequately addressed by the current Act.

One major issue is the reporting of statistics on crime on cruise ships. The original intent was that the Act would make available all reported crimes on cruise ships. In practice, there are many crimes that are neither—that are either not being reported to the FBI or which the FBI chooses not to make available to the American public. Take as just one example the fact that, for a 15-month period, the FBI reports a single case of sexual assault on Norwegian Cruise Line, but, in the legal case, in discovery, they disclosed that there were 23 sexual assaults for that same time period.

III. Consumer Rights and Cruise Ship Liability CLIA Bill of Rights

  1. The Right to Disembark a Docked Ship
  2. The Right to a Full Refund
  3. The Right to Medical Care
  4. The Right to Timely Information
  5. The Right to Trained Crew
  6. The Right to an Emergency Power Source
  7. The Right to Transportation
  8. The Right to Lodging
  9. The Right to a Toll-Free Number
  10. The Right to Have Published CLIA Passenger Bill of Rights and the Cruise Contract

What the CLIA Passenger Bill of Rights Does Not Include: Passenger Rights , Cruise Line Rights, Issues of Liability, Illness Outbreaks, Independent Contractors, Medical Care Shore excursions, Sexual Assaults, Limit of Liability

Appendix 2 lists cruise ships having two or more incidents between January 2009 and June 2013 (withs 353 incidents involving mechanical problems and accidents). The obvious question is how such events can be so common. A February 2013 in Newsweek gives the perspective of Jim Hall, head of the National Transportation Safety Board during the Clinton administration: [He] says the industry is watched over by ‘‘paper tigers’’ like the International Maritime Organization and suffers from ‘‘bad actors’’ . . . ‘‘The maritime industry is the oldest transportation industry around. We’re talking centuries. It’s a culture that has never been broken as the aviation industry was, and you see evidence of that culture in the [Costa Concordia] accident,’’ says Hall. Ships may seem and feel American but are mostly ‘‘flagged’’ in countries like the Bahamas or Panama in order to operate outside of what he says are reasonable safety standards. ‘‘It is, and has been, an outlaw industry,’’ says Hall. ‘‘People who book cruises should be aware of that.’’ (Conant, E. 2013. ‘‘Carnival from Hell: The Warning Signs Before the Triumph Disaster,’’ Newsweek)

The Relative Absence of Reliable Data

‘‘No one is systematically collecting data of collisions, fires, evacuations, groundings, sinkings,’’ says Jim Walker, a maritime lawyer, to the New York Times. The article goes on to say: ‘‘The reason for the lack of data is that cruise lines, while based in the United States, typically incorporate and register their ships overseas. Industry experts say the only place cruise lines are obligated to report anything is to the state under whose laws the ship operates’’ (Rosenbloom, S. 2013. ‘‘How normal are cruise mishaps,’’ New York Times). As the article points out, there remains no comprehensive public database of events at sea like fires, power failures, and evacuations except the data available at my website, Cruise Junkie dot Com.

While I take this acknowledgement as a compliment, it identifies a major gap in available information. My data is based on reports available in the public media and, on occasion, reports from passengers and/or crewmembers. There are many incidents occurring that never reach the public domain. Consequently, there is no way for passengers to know the track record of an individual cruise line or the ships comprising the line. The data I have benefits greatly from the efforts of Senator Rockefeller who made public a list of casualty investigations by the U.S. Coast Guard for 2008–2012 and the Sun-Sentinel, which posted online U.S. Coast Guard data received through a Freedom of Information request. While the two datasets have considerable overlap, there are incidents on one list not appearing on the other, and incidents in my dataset that appear on neither. Making data available is more important

Persons Overboard

The number of people going overboard from cruise ships is significant: between 20 and 25 a year since 2009. It is known that in 9.5% of cases the person fell overboard, however if we trust cruise industry claims—they often say a passenger has fallen or jumped even if the assertion cannot be independently corroborated—then the percentage is much higher. With that in mind, it is curious that the original version of the CVSSA stated, ‘‘The vessel shall be equipped with ship rails that are located not less than 41/2 feet above the deck’’ (§ 3507 (a)(1)(A)). However the legislation passed set the height one foot lower at 42 inches. In retrospect, it would appear the original provision of 54 inches (41/2 feet) may be more reasonable as an impediment to passengers falling overboard.

Data also indicates there is sufficient number of cases of persons going overboard when they are intoxicated. In two known cases the person was bending over the railing while throwing-up over the side of the ship. This is further reason for raising railing height, but also reinforces the need for stringent rules for the responsible service of alcohol; not just training, but practice. One other

Another concern is the way the FBI interprets the CVSSA. International Cruise Victims Association reports they have been told by the FBI that a person overboard is not necessarily a crime and thus will not be investigated and not included in the FBI’s official statistics. It is difficult to understand how a determination can be made about whether a case of a person overboard is not a crime without a proper investigation. Even if CCTV videotapes show a person falling overboard, an investigation may be warranted to determine the conditions surrounding the incident, for example whether intoxication is an issue and whether the cruise ship was responsible in serving alcohol. Current wording of the CVSSA does not classify a person overboard as a crime.

Sexual Assaults

Contrary to cruise industry claims, sexual assaults are an ongoing problem on cruise ships. Just in the past couple of months there have been media reports of a 12-year-old girl groped on Celebrity Century by a 30-year-old male passenger, and an 11-year-old girl molested by a crew member on Disney Dream. In neither case was the perpetrator arrested or prosecuted; in the latter, the crewmember was offloaded by the cruise line in the Bahamas and flown home to India at the cruise line’s expense. Data from the FBI for October 2007 through September 2008 reveals that at least 18% of sexual assault victims are younger than age 18. The data was secured through a freedom of information request. Reliable data is hard to come by. No comprehensive FBI data has been available since 2008. The only other data available for analysis was provided in the discovery phase of lawsuits, yielding incident reports from 1998 through 2002 for one cruise line; 1998 through 2005 for another. In a recent lawsuit involving the sexual assault of a minor a cruise line was ordered by the judge to disclose to the plaintiff’s attorney all reported cases of sexual assault for the previous five years. The cruise line settled the case out of court in order to avoid complying with the court order. There is much to be learned from incident reports of sexual assault. We know that the most frequent perpetrator among crewmembers (between 50% and 77% of sexual assaults on passengers are perpetrated by a crew member) is a room steward (34.8%) followed by dining room waiter (25%) and bar worker (13.2%). We also know that the most frequent location for the assault is a passenger cabin (36.4%) and that alcohol is a factor in 36% of incidents involving minors.

Prevention. The best way to deal with sexual assault is to have methods of primary prevention. One of the most effective methods is for passengers to know the risk. That is why the initial version of the CVSSA not only required all sexual assaults to be reported to the FBI but that ‘‘The Secretary shall maintain, on an Internet site of the department in which the Coast Guard is operating, a numerical accounting of the missing persons and alleged crimes . . .’’

The number of publicly reported sexual assaults on cruise ships is grossly under-reported. The one-year data for 2007–08 reported 154 sex-related incidents. In stark contrast, the FBI dataset on the U.S. Coast Guard website (which is difficult to find) reports 11 incidents in 2012 (data for 2010 and 2011 was not accessible).

More illuminating is a recent case I was involved with. The FBI indicated that the cruise line (NCL) had one case of sexual assault in 15 months, but records disclosed in discovery indicated the cruise line had received (and we assume reported to the FBI in compliance with the CVSSA) 23 complaints. The change in the language of the Act effectively makes

Recommendation: The CVSSA should require passengers to be advised of the hours during which crewmembers may access their cabin without specific permission from the passenger. Another strategy for prevention, as well as useful for investigation, is CCTV cameras. There are two issues. One is that cruise ships often have real cameras and dummy cameras around the ship. Consequently, a crewmember may take a passenger to an area with no camera or a dummy camera and then assault them. This was the case when an 8-year-old girl was molested on a cruise ship: a cleaner led her down a hallway with the promise he would help her find her way back to her family’s cabin. He knew where there were active cameras and where there were dummy cameras.

Other Crimes

There are two crimes for which the FBI collected data in 2007–08, but that are not required to be reported under the CVSSA. One is a theft of less than $10,000— there were 89 in the one year period 2007–08. The other is simple assault—there were 115 in the same one year period. It doesn’t seem right that these crimes are not recorded and that victim rights are apparently truncated. As regards theft, there is the obvious fact that crew members know that a theft of less than $10,000 will not only not be prosecuted, but will not be recorded. This seems like an open door for a permissible level of crime. Why $10,000 rather than $9,800? The amount appears arbitrary. However, more importantly, by not collecting data there is no ability for analysis to discern patterns or trends that might inform interdiction or prevention. As well, there is no way to know whether the problem is increasing or decreasing, and whether the problem on cruise ships is greater or lesser than on land. Judge Thomas A. Dickerson

Recommendation: The CVSSA should require reporting to the FBI of all onboard crime, including thefts less than $10,000 and simple assaults.

III. Consumer Rights and Cruise Ship Liability

The issue of consumer rights was directly addressed by CLIA’s recent announcement of its Passenger Bill of Rights. This will be discussed first. I will then shift to the broader issue of liability as it applies to cruise ships and cruise lines. The CLIA Bill of Rights is as interesting for what it includes as for what it does not include. It was announced May 22, 2013 just five days before a fire on Grandeur of the Sea; probably motivated in large part by a series of problems before and following the media-focused fire on the Carnival Triumph and by Senator Schumer’s stated intent to develop a passenger bill of rights. In the month before the Carnival Triumph fire, five ships experienced propulsion problems causing delay and/or requiring itinerary changes: Carnival Splendor, Carnival Destiny, Carnival Legend, Carnival Triumph, and P&O Cruises’ Aurora (all ships operated by Carnival Corporation).

The right to a full refund for a trip that is canceled due to mechanical failures, or a partial refund for voyages that are terminated early due to those failures. Again, the Right is straightforward and sounds reasonable. If a product paid for is not delivered there will be a refund. But the Right does not indicate whether the refund is in cash and how long it will take for the refund to be processed—the passenger paid for their cruise 60–90 days in advance of the cruise so shouldn’t they be entitled to the income generated by the cruise line for the period of time it held the money on deposit? As well, how is a partial refund calculated and what mechanism is in place for a passenger to challenge the entitlement offered by the cruise line. But there is a larger issue. What is a passenger’s Right when they fly to a distant port and learn upon arrival that their ship will not depart? Will the cruise line reimburse their travel costs to the port on top of refunding the cruise fare? This is not clear from the Passenger Bill of Rights.

While the Passenger Bill of Rights appears to address canceled cruises, albeit without sufficient clarity, it does not address the much more common occurrence of port calls that are canceled. What rights do passengers have in these cases?

Baggage and Personal Effects

Even when legal action may be initiated, there are other limits. Many passenger cruise contracts limit the liability of the cruise line for lost or damaged luggage and personal effects. For example, Carnival Cruise Lines’ passenger contract states ‘‘. . . that the aggregate value of Guest’s property does not exceed $50 USD per guest or bag with a maximum value of $100 USD per stateroom regardless of the number of occupants or bags.’’ Consequently, a family of four whose luggage is lost by the cruise line is due only $100—this doesn’t even cover the cost of the luggage, much less the contents. A passenger can increase these limits by declaring a higher value and paying 5 percent of the declared value to the cruise line. In contrast, the passenger contract for an air carrier limits liability to approximately $1,500 per passenger.24 A family of four on a cruise would have to pay $280 to the cruise line for the same level of coverage provided automatically by an air carrier. Illness Outbreaks Cruise lines operating out of U.S. ports and serving U.S. ports have successfully avoided liability for illness outbreaks. This has not consistently been the case in the U.K. where there are stronger consumer protection laws. Part of the cruise industry’s defense is their mantra that ‘‘passengers bring the illness with them,’’ thereby coloring itself as an unwilling victim. As Rose Abello, vice president of Public Relations of Holland America Line stated, ‘‘The ship is not sick. There are sick people getting on the ship.’’ (LaMendola B. and T. Steighorst. 2002. ‘‘Cruise Lines Blame Passengers for 3rd Viral Outbreak on Ship,’’ Sun Sentinel). This mantra was first used in late-2002 when there was a wave of very visible norovirus outbreaks on cruise ships, and it proved effective. In 24 Coverage under the Warsaw Convention is approximately US$1,663; under the Montreal Convention US$20 per kg for loss of or damage or delay to checked baggage, and US$400 for unchecked package.

When an outbreak does happen ill passengers often are quarantined in their cabin for days; whether they receive any compensation is wholly at the cruise line’s discretion. However, cruise lines are not as innocent or defenseless as they would like to appear. In 2005 and again in 2008 I argued in my books, in response to claims by the industry that the low incidence among prove that norovirus is largely a passenger problem, that there are systemic disadvantages for crewmembers to report when they are ill. This position appears to be supported by recent CDC health inspections that have identified cases where crewmembers have continued to report to work despite being ill, including in positions of food handling and food service. The problem for passengers is that cruise lines have effectively escaped liability for illness among passengers. To my knowledge there have been no successful lawsuits in the U.S. for these outbreaks even though similar lawsuits have been successful under consumer protection laws in the U.K.

Independent Contractors

A cruise ship is populated with many independent contractors whose behavior and practice the cruise line assumes no liability. Most visibly these include medical services (physician(s) and nurse(s)), but spa and personal care services (including health and beauty staff), photographers and video diary staff, retail shop personnel, casino workers, art auctioneers, and all other concessionaires. Even though many of these people wear clothing with the cruise line’s logo, and in the case of medical personnel officer uniforms, they are not considered cruise line employees. Unbeknownst to most passengers, the cruise ship has no liability for services provided and billed to the passenger’s onboard account. The status of these groups as independent service providers over whom the cruise line has no authority, control, or responsibility (even though tacitly endorsed by the cruise line) needs to be more clearly visible to passengers. At the very least, there should be signage or formal notification to passengers of this fact.

Shore excursions are a major source of income for a cruise ship—the cruise ship retains 50—70 percent or more of what a passenger pays for the tour. These tours are sold onboard at a Shore Excursion Desk by staff members wearing the cruise line’s uniform. But when something goes wrong on a shore excursion, the cruise line is quick to remind the passenger that they are not liable; shore excursions are provided by independent contractors. Appendix 1 indicates 14 known deaths on shore excursions (these are only incidents that have been reported in the media; there are many more than this) and five robberies ashore (some at knife or gun point) on shore excursions affecting dozens of passengers—these again are only those that have been reported in the media so they underrepresent the true number. If there is an injury or death on a shore excursion, the cruise passenger’s options are limited in U.S. courts. Their options in a court in the country where the shore excursion was offered may also offer few options. The problem is that shore excursions are largely unregulated, except by the cruise line itself, and some can be quite dangerous. While the cruise line has no liability for shore excursions, they tend to dissuade passengers from taking tours that are independently available. They may talk about safety concerns for a tour that is not approved, and will often warn passengers that the advantage of the ship-sponsored tour is that if they are delayed the ship will wait for them. In contrast, the ship will not wait for a passenger delayed on an independent tour. While more and more passengers are choosing to make private arrangements for land-based tours, those who make advance plans may find they are out money when a ship alters its itinerary or cancels a port call.

The owner of a cruise vessel is required to keep logs of all allegations of crime but is only required to report certain types of crime incidents to the FBI. The owner of a cruise vessel may voluntary report other alleged crimes to the FBI. CVSSA provides that only the crimes that are required to be reported to the FBI must be reported publicly. These crimes include all homicide, Science and Transportation obtained from Coast Guard and the FBI shows that, since passage of the CVSSA, the number of alleged crimes cruise lines reported to the FBI—including crimes reported voluntarily by cruise lines—is 30 times higher than the number of alleged crimes reported publicly.

 

Congress found that ‘‘Passengers on cruise vessels have an inadequate appreciation of their potential vulnerability to crime while on ocean voyages, and those who may be victimized lack the information they need to understand their legal rights or to know whom to contact for help in the immediate aftermath of the crime.’’ Pub. L. No. 111–207, Sec. 2, (2010). Cruise Line I A, CLIA Statement: Congressional Hearing (Mar. 27, 2001) (online at http:// www.cruising.org/vacation/node/316).

CVSSA classifies as crimes required to be reported to the FBI as all homicide, suspicious death, a missing United States national, kidnapping, assault with serious bodily injury, any offense to which section 2241, 2242, 2243, or 2244(a) or (c) of title 18 applies, firing or tampering with the vessel, or theft of money or property in excess of $10,000. Pub. L. No. 111–207.

Further, with respect to the categories of crimes for which the CVSSA specifically requires cruise lines to report alleged incidents to the FBI, the number of alleged crimes that cruise lines reported is over four times higher than the number of alleged crimes reported publicly. Since 2011, cruise lines have reported 130 of such alleged crimes to the FBI, while only 31 alleged crimes were reported publicly.

Calling for Help

In the United States, when a crime occurs, a victim or a witness to the crime generally can call 911 to access police, medical, and other services. Often, within minutes, law enforcement trained to investigate and eventually help prosecute criminals is on the scene Law enforcement called to the scene is an impartial party to the investigation; they must protect the scene, take statements, and collect and preserve evidence in accordance with the law.

 

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Diesel is finite. Trucks are the bedrock of civilization. So where are the battery electric trucks?

Introduction to battery electric trucks

Heavy-duty diesel-engine trucks (agricultural, cargo, mining, logging, construction, garbage, cement, 18-wheelers) are the main engines of civilization. Without them, no goods would be delivered, no food planted or harvested, no garbage picked up, no minerals mined, no concrete made, or oil and gas drilled to keep them all rolling. If trucks stopped running, gas stations, grocery stores, factories, pharmacies, and manufacturers would shut down within a week.

Since oil, coal, and natural gas are finite, and biomass doesn’t scale up, clearly someday trucks will need to run on wind, solar, hydro, and geothermal generated electricity.  Yet even batteries for autos aren’t yet cheap, long-lasting, light-weight, or powerful enough for most Americans to replace their current gas-guzzlers with.  And given the distribution of wealth, few Americans may ever be able to afford an electric car, since two-thirds of Americans would have trouble finding even $1,000 for an emergency.

Trucks that matter — that haul 30 tons of goods, pour cement, haul mining ore, and so on can weigh 40 times more than an average car.  So scaling batteries up for heavy-duty trucks (NRC 2014) is impossible now given the state of battery technology. For example, a truck capable of going 621 miles hauling 59,525 pounds, the maximum allowable cargo weight, would need a battery weighing 55,116 pounds, and could only carry about 4,400 pounds of cargo (den Boer et al. 2013). And because a heavy-duty truck battery is so heavy and large, charging takes too long — typically 12 hours or more.

And car battery development is hitting the brick-walls of the laws of physics and thermodynamics, yet truck batteries need to be even more powerful, durable, and long-lasting.

Electric trucks do exist, mostly medium-duty hybrid that stop and start a lot to recharge the battery.  This limits their application to delivery and garbage trucks and buses.  These trucks are heavily subsidized at state and federal levels since on average they cost three times as much as a diesel truck equivalent (Table 1).

The Port of Los Angeles thought about using heavy-duty all-electric drayage trucks to improve air quality. Drayage trucks drive at least 200 miles a day back and forth between the port and inland warehouses. But it remained a thought experiment because electric drayage trucks cost too much, $307,890.  The 350 kWh battery alone is $110,880 dollars.  That’s three times as much as an equivalent diesel truck $104,360, and 100 times more than a used $3,000 drayage truck. And cost wasn’t the only problem (Calstart 2013a):

  • The range is too short because of the battery weight and size.  Drayage trucks need to go at least 200 miles a day, but at best an electric truck could go 100 miles before having to be recharged, which would take too long, and require expensive infrastructure to charge each truck several times a day.
  • The batteries/battery pack cost too much.
  • Overcoming the long time to recharge by using fast-charging may shorten battery life which would result in the unacceptable expense of a new battery pack before the lifetime of the truck ended
  • Although electricity is available almost everywhere, the quantities required for a fleet of Battery Electric Vehicle (BEV) drayage trucks are very high and could require significant infrastructure. Multiple costly high-power and/or fast-charging stations would be required
  • Roadway power infrastructure is complicated and expensive, and may be appropriate only in certain areas or applications. The impact on the grid and whether enough power could be supplied is unknown for the roughly 10,000 drayage trucks in the I-710 region
  • Large battery pack life-cycle and maintenance costs are unknown
  • Swapping stations are impractical and would require “industry standardization and ‘ruggedization’ of battery packs, as well as standardized software and communication protocols for batteries and system integration, plus many locations, and the storage space and operating space for multiple large trucks and hundreds of large battery packs.
cost of electric vs diesel trucks 2016Table 1. Electric trucks coust 3 times more than diesel equivalents (ICEV) on average. Source: 2016 New York State Electric Vehicle – Voucher Incentive Fund Vehicle Eligibility List. https://truck-vip.ny.gov/NYSEV-VIF-vehicle-list.php

Electric trucks are also not commercial yet because they have too many performance issues, such as poor performance in cold weather, swift acceleration, driving up steep hills, too short a range and battery life, they take too long to recharge, declining miles per day as the battery degrades, all of which make planning routes difficult and inefficient.

It is also much harder to develop batteries for trucks than cars because trucks are expected to last 15 years (versus 10 for cars) or go for 1 million miles.  Trucks also have to endure more extreme conditions of temperature, vibrations, and corrosive agents than autos (NRC 2015), and it is hard to make battery packs durable enough for this rougher ride, longer miles, and longevity.

Calstart interviewed many businesses about their reluctance to buy hybrid or all electric trucks, and found their greatest concerns were the purchase cost, lack of confidence in the technology, lack of industry and truck manufacturer support, lack of infrastructure, and the heavy weight (Calstart 2012).

But if the devil is in the details, then read more below in my summary and excerpts of a paper about electric trucks.  Catenary trucks, which use overhead wires, will be covered in another post.  Both electric and catenary trucks are covered at greater length in When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer

Alice Friedemann   www.energyskeptic.com  ]

Related articles

Abbreviations:

  • BEV Battery Electric Vehicle
  • PEV Plug-in Battery Electric Vehicle
  • HEV Hybrid Electric Vehicle
  • ICEV Internal Combustion Engine Vehicle (usually diesel, also gasoline engines)

What follows is a summary and then deytails of the following paper:

Pelletier, S., et al. September 2014. Battery Electric Vehicles for Goods Distribution: A Survey of Vehicle Technology, Market Penetration, Incentives and Practices. CIRRELT. 51 pages.

SUMMARY

Financial

While commercial BEVs’ energy costs can be nearly four times cheaper than ICEV equivalents, the downside is that their purchase costs are around three times higher.

A study of drayage trucks on the I-710 corridor found that $3,000 old used trucks were used to take containers from Los Angeles ports to inland facilities that paid $100 per container delivered.   “Costs for a full BEV truck are not expected to go below $250,000 even past the 2025 time frame of this report. … The same is true for fuel cells” (Calstart 2013b).

Furthermore, the cost of the equipment necessary for charging the battery can be several thousand dollars. The high cost of level 3 Electric Vehicle Supply Equipment (EVSE) is still a significant barrier to a wider adoption of fast charging. Level 2 charging equipment costs approximately $1,000 per station and installation costs approximately $2,500 to $6,000 for one unit or $18,520 for 10 units. Level 3 fast charging is not used much yet because more research needs to be done on whether this shortens battery life.

PEV and HEV vehicles typically have significant autonomy and payload limitations and involve much larger initial investments in comparison to internal combustion engine vehicles (ICEV). The battery pack is the most expensive component in PEVs and significantly augments their purchase cost compared to similar ICEV trucks.

Competing with compressed natural gas (CNG) and existing diesel (ICEV) trucks will be hard — significant improvements in ICEV efficiencies are likely in the future from the 21st Century truck partnership and other efforts to improve diesel engines.  BEVs will also have to compete with other fuel alternatives such as CNG, in which case their business case can be even harder to make.

Battery Issues

Can’t carry enough cargo: Battery size and weight reduce maximum payloads for electric vans and trucks compared to equivalent diesel trucks.  Even HEVs suffer from the extra weight of two power-trains reducing payload capacity.

Short range. Technical disadvantages include a relatively low achievable range. Typical ranges for freight BEVs vary from 100 to 150 kilometers (62-93 miles) on a single charge.

The miles a truck can travel declines over time.  In Germany and the Netherlands, the limited operating range of electric trucks caused less flexibility in planning trips and restricted ad-hoc tour planning, resulting in less efficient operations. Also, the range declined over time through battery aging, when carrying heavy loads, and in winter from heating, lights and ventilation. Furthermore, the range listed by EV manufacturers is based on measurements according to the New European Drive Cycle which, compared to real life energy consumption in urban last mile delivery, do not give a reliable indication of the expected range. The reliability of the EVs was dependent on the model; certain prototypes and conversions were judged as reliable, while others were reported as insufficient (Taefi 2014).

Short battery life. At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years.

Range is also shortened by: extreme temperatures, high driving speeds, rapid acceleration, carrying heavy loads and driving up slopes.   The efficiency and driving range varies substantially based on driving conditions and driving habits. Extreme outside temperatures tend to reduce range because more energy must be used to heat or cool the cabin. Cold batteries do not provide as much power as warm batteries do. The use of electrical equipment, such as windshield wipers and seat heaters, can reduce range. High driving speeds reduce range because more energy is required to overcome increased air resistance. Rapid acceleration reduces range compared with smooth acceleration. Hauling heavy loads or driving up significant inclines also reduces range (U.S. Department of Energy 2012b).

Long time to charge battery: It takes a long time to charge the batteries because of their low energy density.  Recharging time may take up to 4 to 8 hours, and even with quick-charging equipment, recharging a battery to 80% takes up to 30 minutes.

Charging issues:  The most common way of charging was to slow charge the vehicles over night at company premises. The in-house charging infrastructure had to be fixed several times when it was overloaded by the high capacity need of the e-trucks in Germany. Other charging related issues found were that the implementation of a smart grid and load management for large electrical fleets is not yet clarified; solutions to ensure charging in case of power outage are necessary; and charging plugs were too damageable, so only specially trained staff could handle the plug, which caused problems with replacement drivers and training issues.  The limited number of charging spots outside the cities and lack of battery swapping for larger vehicles was also an issue (Taefi 2014).

Batteries have low energy density — too low. Batteries are a critical factor in the widespread adoption of electric vehicles but have a much lower energy density than gasoline, partly caused by the large amount of metals used in their production.

Battery life too short: Lithium-ion batteries in current freight BEVs typically provide 1,000 to 2,000 deep cycle life, which should last around six years.

Some manufacturers are working on a 4,000 to 5,000 deep cycle life within 5 years, but there are often tradeoffs to be made between different lithium based battery chemistries. For example, lithium-titanate batteries already reach 5,000 full discharge cycles, but have lower energy densities than other lithium-ion technologies. Calendar life, on the other hand, is a measure of natural degradation with time and was in the 7-10 years range as of 2010 with a projected range of 13-15 years by 2020. Typical battery warranty lengths for electric trucks have been reported as being in the three to five year range.

Battery degradation. Battery health can be influenced by the way they are charged and discharged. For example, frequent overcharging (i.e., charging the battery close to maximum capacity) can affect the battery’s lifespan, just as can keeping the battery at high states of charge for lengthy periods. As expressed through deep cycle life, battery deterioration can also occur if it is frequently discharged to very deep levels . This generally implies that only 80% of the marketed battery capacity is actually usable. Using high power levels to quickly charge batteries could also have negative impacts on battery life, especially if used in the beginning and end of the charging cycle. The uncertainty regarding the effect of extreme operational temperatures on lithium batteries is another issue that should be further considered. All these potential deteriorating factors can speed up the reduction of maximum available battery capacity and shorten vehicle range and battery life.

Lithium-ion batteries.  At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years (AustriaTech 2014).

The Demands on the Electric Grid

Power Requirements to recharge batteries are high.  A battery electric truck with a 120 kWh battery would require a charging power level of 15 kW to be able to charge in 8 hours, and the same vehicle with a battery pack of 200 kWh would require a power level of 400 kW to be able to be charged in 15-30 minutes.

The impact of the high power demand from the electricity grid. This could limit the amount of vehicles in a depot which could simultaneously be charged with high power levels, potentially requiring further investments for transformer upgrades.

The stations would also need to recharge a very large amount of batteries at the same time, which could impact the electric grid.

Out of Business

Better Place was considered a fron-trunner in the battery swapping industry but it recently filed for bankruptcy (Fiske (2013)).

Some models have recently been discontinued due to manufacturers’ financial difficulties or restructuring plans; these include Azure Dynamics’ Transit Connect Electric in 2012, Navistar’s eStar in 2013, and Modec’s Box Van in 2011.

Commercial Vehicles are dependent on government subsidies

To see the New York State All-Electric NYSEV-VIF incentives, click here.

To see the California Hybrid Truck and Bus Voucher Incentive Project (HVIP) incentives, click here.

Many U.S. companies which operate battery electric trucks also have received funding from the American Recovery and Reinvestment Act.  

Plug-in electric trucks and vans (class 2 to 8 vehicles) have generally only penetrated niche applications, while remaining dependent on government incentives. They attribute this to key industry players going out of business, the conservative nature of fleet operators when it comes to new technologies, renewed interest in natural gas, and the important cost premium of these vehicles.

Sales of HEV & BEV trucks are very low

The global stock of class 2 to 8 HEVs, PHEVs and BEVs was around 20,000 at the end of 2013, versus 15 million diesel and gasoline (ICEV) trucks sold in 2013.

The vast majority of expected sales are not fully electric plug-ins, but are Hybrid Electric Vehicles (HEVs) which do not require plug-in recharging (but which are only suitable for applications that require a great deal of stopping and starting, i.e. garbage trucks, delivery vans).

One of project FREVUE’s reports identifies other factors explaining the limited use of electric freight vehicles in city logistics, namely doubts regarding technology readiness, high purchase costs, limited amount of models on the market, and rapid technology improvements themselves can be a market barrier since fleet operators fear that an electric freight vehicle purchased today could quickly lose all residual value. The uncertainties surrounding the vehicles’ residual value also limit leasing companies’ interest in electric freight vehicles.

The bottom line is that a wider adoption of Battery Electric Vehicles can only be achieved if these prove to be cost-effective.

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[ Here are more details. ]

The worst possible use of an e-truck is daily mileage less than 40 km, never needs to return to the base, has little chance of charging while on operations, needs to be charged in 20 minutes or less, carry a full load equal to a diesel truck, carries the full load all day, goes the same speed much of the day, travels on freeways, hilly terrain, and charges at peak load. The best possible use of EV is 60+ km/day, returns to the base to recharge 3 to 6 times a day for 30 minutes a day, carries half a load, has very high variations in speeds traveled in flat urban areas and only charges off-peak (AustriaTech 2014b).

Cost Competitiveness of Battery Electric Vans and Trucks

While commercial BEVs’ energy costs can be nearly four times cheaper than diesel equivalents, the downside is that their purchase costs are approximately three times higher (Feng and Figliozzi 2013).

Furthermore, the cost of the equipment necessary for charging the vehicle’s battery, which can reach several thousands of dollars, should be considered. Maintenance costs should also be significantly less than for ICEVs (Taefi et al. (2014)) and this advantage should increase as the vehicles get older (Electrification Coalition (2010)). Because of these different cost structures between ICEVs and BEVs, the only way to appropriately compare the cost competitiveness of battery electric vans and trucks for goods distribution is to study their whole life costs (McMorrin et al. 2012), according to which all costs incurred over the vehicle’s life are actualized to a net present value. Whole life costs are also referred to as the vehicle’s total cost of ownership (TCO). The following are brief descriptions of the cost structure and TCO of battery electric freight vehicles compared to their conventional counterparts.

Cost Structure: High Fixed Costs and Low Variable Costs Purchase costs for medium duty battery electric trucks offered by AMP Trucks, Inc., Boulder Electric Vehicles, Electric Vehicle International, and Smith Electric Vehicles range from $130,000 to $185,000 US, while equivalent ICE trucks go within the $55,000 to $70,000 range (New York State Energy Research and Development Authority (2014)). One way to decrease the cost premium of these larger BEVs is to be able to right-size the costly battery according to the application (Electrification Coalition 2013). However, while this measure could significantly improve the vehicles’ business case and allow for additional payload capacity, the smaller battery would require more frequent deep discharges, which could cause accelerated battery deterioration (Pitkanen and Van Amburg 2012). Another option for reducing upfront costs while also addressing fleet operators’ concerns about battery life is to lease the battery for a monthly fee based on energy consumed or distance traveled (McMorrin et al. 2012).

However, uncertainties regarding battery residual value limit many fleets’ interest in battery leasing (Pitkanen and Van Amburg (2012)), most likely because these uncertainties will be integrated into the leasing fee. Furthermore, battery leasing currently only seems available for a few battery electric vans but not for trucks, for whom it could significantly help the business case based on whole life costs (Valenta (2013)). Purchase costs for battery electric vans vary largely depending on GVWs and the availability of battery leasing. Large manufacturer products with battery leasing go for about $25,000 for GVWs close to 2,100 kg. Examples of these include Renault for its Kangoo Z.E. vans and Nissan for its e-NV200 van, with monthly battery leasing fees starting at approximately $100 per month and varying according to monthly mileage and contract lengths (Renault (2014c), Nissan (2014d)). Typical purchase costs with battery ownership range from approximately $25,000 for lighter battery electric vans (GVW starting at 1100 kg) with limited battery capacities, to about $100,000 for larger battery electric vans (GVW up to 3,500 kg) with higher battery capacities. Conventional cargo vans with GVWs close to 4,500 kg cost between $30,000 and $40,000, GVWs close to 3,500 kg are within the $25,000-$30,000 price range, and GVWs around 2,500 kg are closer to $20,000 (Nissan (2014a)).

Valuable sources for vehicle prices include Source London (2013) and New York State Energy Research and Development Authority (2014), referred to as SL (2013) and NYSEV-VIF (2014) in the tables. Some models’ prices are simply not available, most likely because, as Lee et al. (2013, p.8025) point out, “commercial vehicle prices can vary depending upon negotiation between fleet operators and truck manufacturers, and truck volumes to be purchased”. This could also imply that the prices listed here could vary depending on specific purchasing contexts. Ranges for these class 3 to 6 trucks are from 115 to 200 km (71-124 miles) depending on battery size, vehicle weight

  • $133,000 AMP vehicles 100 kWh battery, 6350-8845 kg GVW
  • $130-150,000 Boulder 500-series 72 kWh battery, 4765-5215 kg GVW, payload 1405 kg,
  • $150,000 Navistar eStar 80 kWh battery 5490 kg GVW, payload 1860 kg
  • $185,000 EVI walk-in van 99 kWh battery, 7255-10435 GVW
  • $150,000 Smith Electric “Newton” 80 kWh, $181,000 with a 120 kWh battery

Den Boer et al. (2013) state that approximately 1,000 battery electric distribution trucks were operated around the world as of July 2013. CALSTART’s report on the demand assessment of electric truck fleets (Parish and Pitkanen 2012) claims that industry experts have estimated there were less than 500 battery electric trucks in use in North America as of 2012, with most sales made in US states like California and New York, which offered incentives for these vehicles. Also, approximately 4,500 hybrid electric trucks were sold in North America as of 2012. The large majority of hybrid and battery electric trucks sold were in medium duty and vocational applications rather than long-haul class 8 applications. Stocks of freight electric vehicles (vans and trucks) as of January 1st 2012 in Europe included 70 in Belgium, 106 in Denmark, 338 in Germany, 1,566 in France, 217 in the Netherlands, 103 in Norway, 38 in Austria, 13 in Portugal, 459 in Spain, and over 2000 in London (TU Delft et al. 2013). However, most of the electric vans in the UK are old low performance vans with lead-acid batteries, with only a few hundred modern electric vans with lithium-ion batteries sold in 2012 (Cluzel et al. 2013).

As previously noted, the advantage in the cost structure of BEVs comes from their lower variable costs (i.e., energy and maintenance costs) (McMorrin et al. 2012).

However, electricity rates incurred depend on geographical location, average consumption levels, and time of use (Hydro-Quebec (2014)). Charging during off-peak hours can allow for reduced electricity rates and seasonal price variations may also occur. It is therefore necessary to evaluate the potential of lower energy costs of commercial BEVs according to one’s specific context.

Gallo and Tomi´ c (2013) provide an overview of the performance of delivery BEVs (class 4-5) operated by a large parcel delivery fleet in Los Angeles. The findings showed that in comparison to similar diesel vehicles, the electric trucks were up to four times more energy efficient, offering up to 80% lower annual fuel costs. The report estimated maintenance savings ranging from $0.02 to $0.10 per mile, finding these savings “will vary widely depending on driving conditions, vehicle usage, driver behavior, vehicle model and regenerative braking usage”(p.53). Other findings included the need for drivers to be trained to adapt their techniques to electric trucks, that a minimum utilization of 50 miles per day is necessary to recuperate purchase costs in a reasonable time span, and that incentives are still necessary at this stage to make the vehicles a viable alternative. Additionally, some repairs needed to be provided by the vehicle manufacturers because of the limited experience of fleet mechanics with electric trucks. TU Delft et al. (2013) also reported several companies having experienced a lack of available resources for quickly solving technical issues with freight BEVs. This is important to consider because in order to profit from lower variable costs, companies must have access to reliable maintenance services and spare parts.

Figliozzi (2013) compared whole life costs of battery electric delivery trucks to a conventional diesel truck serving less-than-truckload delivery routes. The BEVs are the Navistar eStar (priced at $150,000) and Smith Newton (priced at $150,000), while the diesel reference is an Isuzu N-series (priced at $50,000). Different urban delivery scenarios were designed based on typical US cities values and different routing constraints. Thus, 243 different route instances were simulated by varying values for the number of customers, the service area, the depot-service area distance, the customer service time, and the customer demand weight. Different battery replacement and cost scenarios were also studied. The planning horizon was set to ten years, with the residual value of the vehicles set at 20% of their purchase price. In spite of the fact that the electric trucks had a higher TCO in 210 out of the 243 route instances, a combination of the following factors would allow them to be a viable alternative: high daily distances, low speeds and congestion, frequent customer stops during which an ICEV would idle, other factors amplifying the BEVs’ superior efficiency, financial incentives or technological breakthroughs to reduce purchase costs, and a planning horizon above ten years. With a battery replacement after 150,000 miles at a forecasted cost of $600/kWh, the diesel truck always had a lower TCO.

The need for a battery replacement significantly decreases thee business case for BEV Trucks

Battery electric freight vehicles currently fit much more into city distribution than long haul applications because of the battery’s energy density limitations (den Boer et al. 2013). Typical daily miles traveled by urban delivery trucks are often lower than the range already achieved by electric commercial vehicles (Feng and Figliozzi 2013). With limited payloads, this makes them more viable for last mile deliveries in urban areas involving frequent stop-and-go movements, limited route lengths, as well as low travel speeds (Nesterova et al. 2013), AustriaTech 2014b), Taefi et al. 2014)). With forecasted reductions in battery costs and evolution of diesel prices are compared to electricity prices, as time goes by, BEV distribution trucks should become more competitive with equivalent ICEVs based on their own economic proposition (den Boer et al. 2013). However, commercial BEVs will also have to compete with other fuel alternatives such as compressed natural gas, in which case their business case can be even harder to make (Valenta 2013). Furthermore, significant improvements in ICEV efficiencies are expected in upcoming years (Mosquet et al. (2011)). Nevertheless, for now, the appropriateness of using delivery BEVs ultimately depends on the context of their intended use, but the high purchase cost has been extensively pointed out as a huge cost effectiveness barrier, and the need for incentives at this stage of the market seems like a recurring requirement for a viable business case.

Financial Incentives

The goal of financial incentives is to reduce the upfront costs of electric vehicles and charging equipment (IEA and EVI (2013)). One form is purchase subsidies granted upon buying the vehicle (Mock and Yang (2014)). An example of this is the California Hybrid Truck and Bus Voucher Incentive Project (HVIP) which provides up to $35,000 towards hybrid truck purchases and up to $50,000 towards battery electric truck purchases to be used in California (Parish and Pitkanen (2012)). Eligible vehicles can be found in CEPAARB (2014). Another similar program is the New York Truck Voucher Incentive Program, which offers up to $60,000 for electric truck purchases to be used New York (New York State Energy Research and Development Authority (2014)).

Companies are also eligible to receive similar purchase subsidies for participating in demonstration or performance evaluation projects (US DOE (2013b)).

Overviews of tax exemptions related to electric vehicles can be found in IEA and EVI (2013), Mock and Yang (2014), ACEA (2014), and US DOE (2012a).

Companies Experimenting with BEVs In North America, large companies using battery electric delivery vehicles include FedEx, General Electric, Coca-Cola, UPS, Frito-Lay, Staples, Enterprise, Hertz and others (Electrification Coalition (2013b)). Frito-Lay alone has been operating 176 battery electric delivery trucks in North America since 2010 (US DOE (2014b)). Fedex also operates over 100 electric delivery trucks (Woody (2012)). Many U.S. companies which operate battery electric trucks have received funding from the American Recovery and Reinvestment Act to cover a portion of the vehicles’ purchase costs (US DOE (2013b)).

BEVs in city logistics have often been used for parcel delivery, deliveries to stores, waste collection and home supermarket deliveries. A few notable private initiatives identified in the report include Deret’s 50 electric vans for last mile deliveries to city centers in France, UPS’s 12 Modec vehicles for parcel and post delivery in the UK and Germany, Tesco’s 15 Modec vehicles for on-line shopping deliveries in London, Sainsbury’s use of 19 electric vans for supermarket

Drivers expressed concerns regarding the reduction in payloads.

Delivered products include parcel, courier, textiles, fast food, bakery, hygienic articles and household articles.

Negative factors experienced included the required investments (vehicles and EVSE), reduced payloads, limited range, the effect of cold temperatures on range, imprecise marketed vehicle ranges, the lack of resources to fix technical problems, incompatibility of vehicles’ connectors with public charging infrastructure, and the need to train drivers to better adapt to the vehicles. All in all, the case studies indicated that the vehicles were found to be most adequate for last mile and night deliveries.

Electric Tricycles carrying up to 440 pounds (200 kg)

Electric tricycle

Electric tricycle

Urban consolidation centers (UCC) are logistic facilities multiple organizations use, close to the area they serve. UCCs using BEVs for last mile deliveries also often use smaller vehicles ideal for tight urban areas, which can lead to increases in vehicle kilometers per ton delivered (Allen et al. (2012)). These smaller vehicles are typically electric tricycles, which have payloads of up to 200 kg (AustriaTech 2014b) and low driving speeds. These tricycles can find parking locations more easily than larger vehicles, can often use bicycle lanes for faster access to customers in congested and pedestrian areas, and from a cost point of view are more affected by driver costs than purchase costs and utilization rates (Tipagornwong and Figliozzi 2014). Allen et al. (2007) present an example of the use of electric tricycles by a UCC. La Petite Reine used a consolidation center in the center of Paris for last mile deliveries of food products, flowers, parcels, and equipment/parts with electric tricycles with a maximum payload of 100 kg (220 pounds). The initial trial in 2003 was deemed a success, with monthly trips growing from 796 to 14,631 and the number of tricycles from seven to 19 in the first 24 months. Operations are now permanent and La Petite Reine operates three locations in Paris with over 70 collaborators, 80 tricycles, 15 electric light duty vehicles and 1 million deliveries per year (La Petite Reine 2013).

Nesterova et al. (2013) present two other cases of two phased deliveries in Paris integrating to some extent electric bikes and tricycles. The first is Chronopost International, which offers express delivery of parcels and uses two underground areas in Paris for sorting last mile deliveries. The parcels are first transported from their facility at the border of Paris to their underground areas, where they are sorted per route and distributed to customers by electric bikes and vans in inner Paris. The second is Distripolis, a delivery concept tested by road transport operator GEODIS. A depot in Bercy receives shipments from three organizations and delivers the packages under 200 kg to multiple UCCs in the city center of Paris (heavier packages are directly delivered to the receiver). From here, electric trucks and tricycles are used for the last mile deliveries of the light packages. Distripolis operated 10 light duty electric vehicles (Electron Electric truck, GVW 3.5 tons) and one electric tricycle in 2012, and aims at having 56 tricycles and 75 electric vehicles by 2015.

BESTFACT (2013) provides another case of two-phased deliveries with electric vehicles. Gnewt Cargo operates a transhipment facility for the last mile deliveries of an office supplies company in London (Office Depot). They use an 18 tons vehicle to transport parcels from the office supplies company warehouse in the suburbs of London to the transhipment center in the city, where the parcels are transferred onto electric vans and tricycles for final delivery to customers. Initially a trial in 2009, the company has permanently implanted this system because it involved no increases in operational costs, and it plans to implement similar delivery systems in other cities (Browne et al. (2011)).

Other Interesting Distribution Concepts for BEVs

An interesting experiment regarding last mile deliveries with BEVs can be found in the context of project STRAIGHTSOL, during which TNT Express integrated a mobile depot into their operations in Brussels with electric vehicles during the summer of 2013 (Nathanail et al. 2013), Anderson and Eidhammer 2013), Verlinde et al. 2014). A large trailer equipped as a mobile depot with typical depot facilities was loaded with parcels at TNT’s depot near the airport in the morning. Next it was towed by a truck to a dedicated parking spot in the city center, where last mile deliveries as well as pick-ups were made with electric tricycles by a Brussels courier company, which then returned to the mobile depot with the collected parcels. At the end of the day, the mobile depot was towed back to TNT’s depot, from where the collected parcels were shipped. Challenges included gaining exclusive access to the parking location for the mobile depot, significant increases in operating costs, and decreases in the punctuality of the deliveries and pickups (Johansen et al. 2014), Verlinde et al. 2014).

They could find a niche application in short haul port drayage operations (CALSTART 2013b). One example of this practice is found at the Port of Los Angeles, where 25 heavy duty battery electric drayage trucks manufactured by Balqon were tested for operational suitability. In exchange for the purchase of the trucks, Balqon agreed to locate its factory in L.A. and pay the port a royalty for future sales (EVI et al. (2012)). The Port of L.A. also tested similar heavy duty battery electric trucks from Transpower and U.S Hybrid, as well as a fuel cell heavy duty truck (Port of L.A. 2014).

Incentives still play a critical role in the business case of these vehicles, but the long-term unsustainability of certain financial incentives and recent trends suggest their imminent phasing out (Bernhart et al. 2014) will require that these vehicles be cost competitive independent of such incentives. One could argue that these vehicles are not ready for this challenge, in view of current cost dynamics, recent financial setbacks of key industry players, often resulting in discontinued vehicle models (Schmouker 2012), Shankleman 2011), Truckinginfo 2013), Everly 2014), Torregrossa 2014)).

The market take-up of electric vehicles in urban freight transport is very slow, because costs are high compared to conventional vehicles and companies are still uncertain about the maturity of the technology and about the availability of charging infrastructure.

The worst possible use of an e-truck is daily mileage less than 40 km, never needs to return to the base, has little chance of charging while on operations, needs to be charged in 20 minutes or less, carry a full load equal to a diesel truck, carries the full load all day, goes the same speed much of the day, travels on freeways, hilly terrain, and charges at peak load. The best possible use of EV is 60+ km/day, returns to the base to recharge 3 to 6 times a day for 30 minutes a day, carries half a load, has very high variations in speeds traveled in flat urban areas and only charges off-peak.

Financially at least 50% public subsidies pay for it

At present, lithium ion batteries are most often used in electric freight vehicles with a current battery lifetime of 1000 to 2000 cycles (approximately 6 years). Also, the kilometer range declines over time, which may reduce peak power capacity and energy density. For these reasons electric vehicles are currently most suitable for daily urban distribution activities as the battery energy density is too low for regular long haul applications. At the moment, lithium ion batteries last for four years; however, practical experience has shown that the average period of use is only two years. Improvements in battery powered trucks are expected within five years in terms of the cost and durability of batteries.

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Posted in Batteries, Electric Trucks | Tagged , , , | 8 Comments

California oil EROI dropped from 6.5 to 3.5 by 2005

Brandt, A. R. October 12, 2011. Oil Depletion and the Energy Efficiency of Oil Production: The Case of California. Sustainability 2011, 3, 1833-1854

[ Brandt estimates the energy return on investment (EROI) dropped from ~6.5 in 1955 to ~3.5 fifty years later in 2005, mostly due to enhanced oil recovery, and the secondary effects of oil depletion.

California oil production reached its peak in 1984 at 1.2 Mbbl/d, and is in terminal decline [20]. Per-well yearly production rates are currently less than 5,000 bbl/well, down from a peak of about 24,000 bbl/well in 1930. Over 17% of California oil production in 2008 was produced from stripper wells—defined by the California Department of Oil, Gas, and Geothermal Resources as wells producing less than 10 barrels per well per day. Some 59% of operating wells in California are now classified as stripper wells [21].

Excerpts (out of order) from this 22 page paper follow. Figures/tables not included]

Abstract: This study explores the impact of oil depletion on the energetic efficiency of oil extraction and refining in California. These changes are measured using energy return ratios (such as the energy return on investment, or EROI). I construct a time- varying first-order process model of energy inputs and outputs of oil extraction. The model includes factors such as oil quality, reservoir depth, enhanced recovery techniques, and water cut. This model is populated with historical data for 306 California oil fields over a 50 year period. The model focuses on the effects of resource quality decline, while technical efficiencies are modeled simply. Results indicate that the energy intensity of oil extraction in California increased significantly from 1955 to 2005.

This resulted in a decline in the life-cycle EROI from˜6.5 to˜3.5 (measured as megajoules (MJ) delivered to final consumers per MJ primary energy invested in energy extraction, transport, and refining). Most of this decline in energy returns is due to increasing need for steam-based thermal enhanced oil recovery, with secondary effects due to conventional resource depletion (e.g., increased water cut).

As the quality factors declined in favorability in the California oil industry (e.g., more water must be lifted for each unit of oil produced), the increase in technical efficiencies did not fully compensate for these reductions in quality. This trend caused the energetic returns to oil extraction to decline significantly over the modeled time period.

A transition in oil production has been occurring for decades: the fuels that consumers put into their automobiles are being produced using increasingly energy-intensive production methods, and from resources other than “conventional” oil.

This oil transition will cause growing tension in the coming decades: a transition to low-quality oil resources will reduce our ability to improve the environmental profile of energy production—an imperative for the 21st century—but increasing demand for fuel from developing countries could increase market instability and competition over constrained oil resources.

This transition is the result of three trends occurring worldwide:

  • Output from existing oil fields is declining
  • New fields are not as large or productive as old fields
  • Areas with conventional resources are increasingly off-limits to investment by independent oil companies.

These trends are inducing investment in substitutes for conventional petroleum, such as the Alberta tar sands, or synthetic fuels from coal or oil shale [1].

The most common substitutes for conventional oil have been low-quality hydrocarbons, such as the heavy oils in California and bitumen in Alberta. These resources are more difficult to extract than conventional petroleum, are more difficult to refine into finished fuels, and are more expensive. Much of this increased cost and difficulty is due to larger energy demands for extraction and refining.

For example, in California, thermally-produced heavy oil requires the injection of steam to decrease the oil viscosity and induce flow within the reservoir. Also, refining heavy oil is more energy intensive due to the fact that it is hydrogen deficient and often impurity-laden.

The nature of oil depletion is understood mostly by studying aggregate statistics such as regional production curves [2–4]. Due to the lack of publicly available data, little research has been performed on the specific effects of depletion on oil operations (e.g., effects of depletion on required capital investment versus operating expenses). Also, only a small amount of attention in the peer-reviewed literature has been paid to the energy efficiency impacts of oil depletion [5,6].

This paper seeks to explore these energy efficiency impacts by building a detailed model of California oil production over time. First this paper presents a history of California oil production, focusing on changing oil resource quality and resource depletion. Next, methods for calculating energy inputs and outputs from oil production are described. Using these energy inputs and outputs, energy return ratios are computed using methods of life cycle assessment (LCA) and net energy analysis (NEA). Lastly, results from these calculations are presented and their broader significance is discussed.

An Industrial History of California Oil Production: Resource Quality, Depletion, and Innovation

Early Oil Production Before 1900. Pre-commercial use of oil in California included use by Native Americans for coating, sealing and adhesion [7]. Early commercial production was concentrated in the San Joaquin valley of California, where low-quality surface oil was mined in pits and tunnels [8]. The first refinery—a simple still for batch processing with a capacity of 300 gallons—was constructed near McKittrick in 1866, but it soon failed due to poor economics and high transport costs [7].

By the 1890s, surface mining had declined in importance and the cable tool rig had become the standard drilling method in California. Power for the cable tool rig was provided by a steam engine, and drilling power increased rapidly: Drake’s famous rig generated 4.4 kilowatts (kW) in 1859, and by 1900, steam boilers were rated at 29 kW, and the attached steam engines were rated at 18 kW [7].

Oil became a socially and economically dominant industry in the San Joaquin Valley with the discovery of the Kern River field in May of 1899. The proximity of this field to Bakersfield allowed the shipment of oil via rail to San Francisco. By 1903, Kern River production increased to 17 million barrels per year, or˜ 70% of California’s production. No gushers were ever found in the Kern River field, due to its low initial pressure (1.2–3.8 megapascal (Mpa) and heavy viscous oil (0.96–1.0 specific gravity, and up to 10, 000 centipoise viscosity) [11]. Early oil production was inefficient and wasteful, due to a combination of poor knowledge of geological principles and poor ability to control production. Early producing wells often declined rapidly, particularly in the Los Angeles basin [7]. This is because producers would withdraw and often vent or flare the associated gas, depleting the reservoir drive. These depleted wells, generally producing only a few barrels per day, were often sold off by their operators. Industrious producers would buy up contiguous depleted wells and apply technology to increase production. Operators would commonly attach a central oil-fired pumping unit to serve numerous wells simultaneously [7]. This represents an early example of self- consumption of oil by producers to offset the effects of depletion.

Early 20th Century Production: 1900–1940. The first recorded attempt at thermal enhanced oil recovery (EOR) was by J.W. Goff in 1901 [ 7]. He injected steam, air, and steam-heated air into wells and achieved a small amount of incremental production, but depressed oil prices stymied his early attempt at EOR [7].

An important technological development in the early 1900s was the advent of the rotary drilling rig as a replacement for the cable-tool rig by Standard Oil in 1908. Early rotary rigs were powered by steam engines, which were replaced by internal combustion engines by the 1930s. Rotary drilling eventually dominated oil well drilling, as it was faster and more effective. Efforts in the late 1920s and 1930s focused most visibly on attempting to drill deeper. Deep oil had been found at Kettleman hills: 635 m3/d (4000 bbl/d) from a single well, 2133 m deep, producing valuable light oil (0.74 specific gravity) [12]. This encouraged others to drill deeper wells in existing fields. Thermal methods were also experimented with briefly in this period, with the Tidewater oil company injecting hot water into the Casmalia field in 1923 (Casmalia oil is dense and viscous, having a specific gravity as high as 1.015 [11]).

These early attempts at enhanced oil recovery were not successful, as ample production from high-quality light oil fields at the time made these operations costly and unneeded. Per-well yearly production rates peaked in the 1930s, reaching ˜ 24,000bbl/well in 1930 and declining thereafter to less than 5,000 bbl/well in the current day.

The Modern Era of California Oil Production: 1940 to 2000. In the post-war period, discovery of large new fields declined. Research attention focused on ways to extract a larger share of California’s vast heavy oil resources. Knowing that heat reduces the viscosity of crude oil, in 1956 engineers attempted to light a fire downhole in the Midway-Sunset field by injecting air and using a novel electric ignition system. This method is called in situ combustion or “fireflooding”. The ignition system was unnecessary, as injected air caused spontaneous combustion [13].

Other companies utilized bottom hole heaters. These heaters took heat generated at the surface and transmitted it to the formation using a heat exchanger. Engineers concluded that heat conduction from the bottom hole heaters was slow and ineffective, and that more effective thermal production would require injecting heat-conducting fluid into the reservoir body.

The first modern steam injection project recorded in California was in April of 1960. Many steam injection projects were built quickly: in 1964 and 1965 more than 50 steam injection projects were initiated each year [14]. Production increased significantly in fields where steam injection was instituted.

Oil production continued to increase in the 1960s. Production increased to over 1 Mbbl/d in the mid 1960s, reaching a plateau that lasted about 20 years [15]. Simultaneously, production per well dropped, reaching 25 bbl/well-d in 1963 and never rising above this level again [15]. This is because much of the incremental production in this period was not from new large fields or gushers, but instead from increasing the intensity of extraction in depleted fields using advanced recovery technologies.

A Bottom-Up Model of Energy Inputs and Outputs. Our process model includes three process stages: primary energy extraction, upgrading of primary energy into forms usable by consumers (in this case refining), and consumption of refined energy in non-energy sectors. Both direct and indirect consumption of energy in oil extraction is accounted for as the flow of refined product back into the system (e.g., the model includes both refined fuels used directly in oil extraction, such as diesel fuel used in drill rigs, as well as those fuels consumed indirectly, like diesel fuel used during steel manufacture). This model formulation—with self-consumption included— accounts for the fact that a fraction of the primary energy produced is used to extract more primary energy.

Calculating Energy Return Ratios. Oil has been the subject of a number of NEA studies that have calculated energy return ratios [5,6,30–32], but previous analyses have generally been based on high-level datasets (e.g., national datasets). There are a number of energy return ratios used in NEA. Defined most simply, the net energy output from an energy extraction and refining process is the energy made available from a natural resource in useful, refined form less that energy consumed in extracting, upgrading and converting it to that form [24]. Energy return ratios of various types can be constructed, generally with a measure of energy output in the numerator and a measure of energy consumed in the denominator. The most common energy return ratio is the net energy ratio (NER), also called the energy return on energy invested (EROI) [33]. Other metrics include the external energy ratio (EER)

The EER compares energy inputs from outside the system to net outputs from the process. It reflects the ability of a process to increase energy supply to society. The NER compares all energy inputs to net outputs. It is therefore a better metric for understanding environmental impacts from producing a fuel (e.g., GHGs) [34]. There are two possible system boundary configurations when deriving EER: refined fuel consumed by the system itself can either be considered an internal or external energy source. For example, diesel fuel used to power drilling rigs could either be considered an internal energy source, (“loose” system boundary) or could be considered a final energy product that is diverted back into the process (“tight” system boundary). For the EER calculated here, the model uses the tight system boundary. This choice is made because the refined fuel leaving the refinery gate is used for final consumption, so its diversion back into oil extraction is classified as an external energy input.

A difficulty with this bottom-up modeling approach is that there is no clear way to separate the oil energy extraction chain completely from other extraction chains such as coal production. For example, some of the final products from oil and gas extraction will in fact go to other energy extraction sectors either directly or indirectly, not to non-energy end consumers. This is a related problem to the general system boundary problem in LCA: determining where your “system” begins and ends is not trivial and there is no unambiguously correct approach to doing so. These complexities are ignored for the first-order model created here.

Energy return ratios give insight into the quality of the resource: a high quality resource will require less energy to extract and upgrade than a low-quality resource. These ratios also give some sense of the efficiency with which industry is able to extract resources. Over time, as technologies become more efficient and their usage is systematically improved through research and development, the energy return ratios will improve for a given level of resource quality. Energy return ratios are only partially correlated with other metrics of interest, such as the cost of a resource and the its environmental impacts [24]. In their favor, however, they can illustrate fundamental qualities of the resource that can be obscured by economic or environmental metrics.

Clearly then, the energy requirements of crude oil extraction and refining depend both on the quality of the resource and the technical efficiency with which industry extracts and refines the resource. For example, quality factors might include the volumes of water lifted per unit of oil produced, or the depth of fields accessed over time. Efficiency factors might include the efficiency of pumps or the refining energy intensity.

The uncertainty in model results is significant. EROI values actually achieved in the California oil industry over time are fundamentally unobservable: many of the required data inputs are not publicly available or were likely even lost over time due to neglect. This lack of data causes fundamental difficulties in assessing the uncertainty.

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Posted in EROEI Energy Returned on Energy Invested | Tagged , , , , | 1 Comment

Hall and Lambert: EROI of different fuels and the implications for society

[ Excerpts from the Hall, Lambert, and Balogh EROI paper. You may want to read the original paper here since I’ve left out charts, figures, and text.  In my opinion, EROI is important because it is  due diligence – society ought to find out if there is any energy resource that can replace oil for transportation, since without transportation you can not build electricity-producing contraptions and you’re wasting rare earth minerals, steel, fossil fuels, and other finite materials making them.  It is unlikely transportation can be electrified for reasons explained in my book When Trucks Stop Running: Energy and the future of transportation

If decreasing numbers of trucks, rail, and ships will be running if oil can’t be replaced or heavy-duty vehicles electrified, our remaining energy should be used to clean up nuclear waste, superfund sites, the half million leaking mines, and other messes since future generations won’t have the energy to do so, lower our population ASAP to get within the carrying capacity of a non-fossil-fueled civilization (Plan B is bullets and disease), change our culture from one of consumption to one of sharing, teach different skills in schools to prepare the youngest generation, and prepare for going back to the age of wood (i.e. more insulation, gravity based water and sewage infrastructure that doesn’t require electric pumps where possible, and so on).    Alice Friedemann   www.energyskeptic.com ]

Charles A.S. Hall, Jessica G. Lambert, Stephen B. Balogh. 2014. EROI of different fuels and the implications for society. Energy Policy 64 (2014) 141–152

In the nations examined, the EROI for oil and gas has declined during recent decades. Lower EROI for oil may be masked by natural gas extracted/used in oil production. The EROI trend for US coal is ambiguous; the EROI for Chinese coal is declining.

All forms of economic production and exchange involve the use of energy directly and in the transformation of materials. Until recently, cheap and seemingly limitless fossil energy has allowed most of society to ignore the importance of contributions to the economic process from the biophysical world as well as the potential limits to growth.

This society must have an energy surplus for there to be division of labor, creation of specialists and the growth of cities, and substantially greater surplus for there to be wide-spread wealth, art, culture and other social amenities. Economic fluctuations tend to result, directly or indirectly, from variations in a society’s access to cheap and abundant energy

Today, fossil fuel re and economic expansion are eventually constrained by these higher prices (Jones et al., 2004). Economic growth and stability is dependent on not only the total quantity of energy accessible to society but also the cost of this energy to different sectors of that society.sources are among the most important global commodities and are essential for the production and distribution of the rest.

Economic production, exchange and growth requires work and consequently a steady and consistent flow of energy to do that work. Longer intervals of sustained economic growth in countries and the world have been punctuated by numerous oscillations; i.e. there are periods of economic expansion but also recession. In general, the growth of real GDP is highly correlated with rates of oil consumption (Murphy et al., 2011). Four out of the five recessions experienced since 1970 can be explained by examining oil price shocks (Hamilton, 2009; Hall and Groat, 2010; Jones et al., 2004). During periods of recession, oil prices tend to decline, eventually encouraging increased consumption. Alternatively, during periods of expansion, oil prices usually increase and higher energy consumption and economic expansion are eventually constrained by these higher prices (Jones et al., 2004).

Economic growth and stability is dependent on not only the total quantity of energy accessible to society but also the cost of this energy to different sectors of that society increases in the economic cost of energy (e.g. from five to ten percent) result in the diversion of funds from what is typically devoted to discretionary spending to energy acquisition (Hall and Klitgaard, 2012). Consequently, large changes in energy prices influence economies strongly.

Energy return on investment (EROI) is a means of measuring the quality of various fuels by calculating the ratio between the energy delivered by a particular fuel to society and the energy invested in the capture and delivery of this energy.

Much of the current EROI analysis literature tends to focus on the net or surplus for a given project, industry, nation, fuel, or resource, for example recent discussions on the “energy break even” point of EROI for corn based ethanol, i.e. whether the EROI is greater than 1:1. The apparently different results from this seemingly straightforward analysis generated some controversy about the utility of EROI. But, the variation in these findings is mostly the result of the choice of direct and indirect costs associated with energy production/extraction included within the EROI calculations: i.e. the boundaries of the denominator (Hall et al., 2011). The possible boundaries of the various net energy assessments evaluated in this study are illustrated in Fig. 1.

These and other boundary issues are addressed in Murphy et al.’s recent paper, Order from Chaos: A Preliminary Protocol for Determining the EROI of Fuels (Murphy et al., 2011). We clarify further the boundaries used in the EROI calculations given here into the following categories derived

Our research and that of Dale (2010) summarizes EROI estimates for the thermal energy delivered from various fossil fuels and also the electric power generated using fossil fuel and various other energy technologies. These initial estimates of general values for contemporary EROI provide us with a beginning on which we and others can build as additional and better data become available. We have fairly good confidence in the numbers represented here, in part because various studies tend to give broadly similar results.

Values from different regions and different times for the same fuels, however, can give quite different results. Given this, we present these values with considerable humility because there are no government-sponsored programs or much financial support to derive such numbers.

EROI values for our most important fuels, liquid and gaseous petroleum, tend to be relatively high. World oil and gas has a mean EROI of about 20:1

The EROI for the production of oil and gas globally by publicly traded companies has declined from 30:1 in 1995 to about 18:1 in 2006 (Gagnon et al., 2009).

The EROI for discovering oil and gas in the US has decreased from more than 1,000:1 in 1919 to 5:1 in the 2010s, and for production from about 25:1 in the 1970s to approximately 10:1 in 2007 (Guilford et al., 2011).

Alternatives to traditional fossil fuels such as tar sands and oil shale (Lambert et al., 2012) deliver a lower EROI, having a mean EROI of 4:1 (n of 4 from 4 publications) and 7:1 (n of 15 from 15 publication) (Fig. 2).

It is difficult to establish EROI values for natural gas alone as data on natural gas are usually aggregated in oil and gas statistics.

The other important fossil fuel, coal, has a relatively high EROI value in some countries (U.S. and presumably Australia) and shows no clear trend over time. Coal internationally has a mean EROI of about 46:1 (n of 72 from 17 publications) (see Lambert et al., 2012 for references). Cleveland et al. (2000) examined the EROI values for coal production in the United States. They found a general decline from an approximately 80:1 EROI value during the mid 1950s to 30:1 by the middle of the 1980s. Coal, however, regained its former high EROI value of roughly 80:1 by 1990. This pattern may reflect an increase in less costly surface mining. The energy content of coal has been decreasing even though the total tonnage has continued to increase (Hall and Klitgaard, 2012). This is true for the US where the energy content (quality) of coal has decreased while the quantity of coal mined has continued to increase.

The maximum energy from US coal seems to have occurred in 1998 (Hall et al., 2009; Murphy and Hall, 2010).

Meta-analysis of EROI values for nuclear energy suggests a mean EROI of about 14:1 (n of 33 from 15 publications)(see Lambert et al., 2013 for references). Newer analyses need to be made as these values may not adequately reflect current technology or ore grades. Whether to correct the output for its relatively high quality is an unresolved issue and a quality correction for electricity appears to contribute to the relatively high value given here.

Hydroelectric power generation systems have the highest mean EROI value, 84:1 (n of 17 from 12 publications), of electric power generation systems (see Lambert et al., 2012 for references). The EROI of hydropower is extremely variable although the best sites in the developed world were developed long ago (Hall et al., 1986).

We calculate the mean EROI value for ethanol from various biomass sources using data from 31 separate publications covering a full range of plant-based ethanol production e.g. EROI of 0.64:1 Pimentel and Patzek, 2005 for ethanol produced from cellulose from wood to EROI of 48:1 for ethanol from molasses in India (Von Blottnitz and Curran, 2007)). These values result in a mean EROI value of roughly 5:1 with an n of 74 from 31 publications (Fig.

Diesel from biomass is also quite low (2:1 with an n of 28 from 16 publications) (see Lambert et al., 2012 for references). The average is skewed in a positive direction by a handful of outliers (four EROI figures are above 30:1)

Wind power has a high EROI value, with the mean perhaps as high as 18:1 (as derived in an existing meta-analysis by Kubiszewski et al., 2010) or even 20:1 (n of 26 from 18 publications) (see Lambert et al., 2012 for references). The value in practice may be less due to the need for backup facilities.

We believe that outside certain conditions in the tropics most ethanol EROI values are at or below the 3:1 minimum extended EROI value required for a fuel to be minimally useful to society.

It should be noted that several recent studies that have broader boundaries give EROI values of 2 to 3:1 (Prieto and Hall, 2012; Palmer, 2013; Weissbach et al., 2013), although these are not weighted for the higher quality of the electricity when compared with thermal energy input.

A positive aspect of most renewable energies is that the output of these fuels is high quality electricity. A potential drawback is that the output is far less reliable and predictable. EROI values for PV and other renewable alternatives are generally computed without converting the electricity generated into its “primary energy- equivalent” (Kubiszewski et al., 2009) but also without including any of the considerable cost associated with the required energy back-ups or storage.

Poisson and Hall found that the EROI of conventional oil and gas has decreased since the mid-1990s from roughly 20:1 to 12:1, a 40% decline. The EROI of conventional combined oil-gas- tar sands has also decreased during this same period from 14:1 to 7.5:1, a decline of 46% (Poisson and Hall). Poisson and Hall’s estimated EROI values for Canadian oil and gas are about half those calculated by Freise and their rate of decline is somewhat less rapid (Freise, 2011; Poisson and Hall).

Poisson and Hall ‘s estimate of the EROI of tar sands is relatively low, around 4.5 (a conservative (i.e. high) estimate, using only the front end of the life-cycle); incorporating tar sands into total oil and gas estimates decreases the EROI of the oil and gas extraction industry as a whole (Poisson and Hall). These estimates would be lower if more elements of the full life-cycle (e.g. environmental impact) were included in the calculation.

Are studies at the regional level comparable to those at the national level and how do these “size up” when presented next to “international” studies that include a small subset of representative countries?

Energy analysts are not in agreement on what indirect costs should and should not be included in an EROI assessment. When complete systems are analyzed for solar PV installations, their financing, their operations and maintenance costs and their backups are included the energy costs are about three times larger than for just the modules and inverters. One very contentious indirect cost is the inclusion or exclusion of the energy cost of supporting human labor.

New work on the EROI for oil and gas produced by horizontal drilling and rock fracturing indicate that the EROI can be very high, in part because it is not necessary to pressurize the fields (e.g. Aucott and Mellilo 2013; Moeller and Murphy personal communication; Waggoner personal communication) but that these high values are likely to decline substantially as production is moved off the “sweet spots”.

The EROI for coal production in the US declined from 80:1 in the 1950s to 30:1 in the 1970s (Cleveland et al., 1984). During this time period, coal was mined almost exclusively in the Appalachian mountain region areas of the US using a combination of room and pillar mines with conventional and continuous mining methods. The coal initially extracted from these locations was a combination of anthracite and high quality bituminous coal, coal with high BTUs/ton. As the best coal was used first, the EROI for coal decreased over time.

The EROI of US coal returned to 80:1 by about 1990. This pattern reflects a shift in the quality of coal extracted, the technology employed in the extraction process and especially the shift from underground to surface mining. A shift in mining location, from Appalachia to the central and northern interior states of Montana and Wyoming and extraction method, from underground to surface mining (area, contour, auger, and mountain top mining techniques) have resulted in less energy required to mine and beneficiate coal. The energy content of the coal extracted, however, has decreased. The coal currently mined is lower-quality bituminous and sub-bituminous coal with much lower BTUs/ton (Hall et al., 1986; Hall and Klitgaard, 2012) The increased efficiency of surface mining seems to just about compensate for the decline in the quality of the coal mined.

Discretionary spending decreased with the energy price increases from 2007 to the summer of 2008. Oil prices hit an all time high of $147 per barrel in the summer of 2008 (Read, 2008). This extra 5-10% “tax” from increased energy prices was added to the US (and other) economy as it had been in the 1970s, and much discretionary spending disappeared (Hall et al., 2008). Speculation in real estate (in the US) was no longer desirable or possible as consumers tightened their belts because of higher energy costs (Hall and Klitgaard, 2012). The stock market crashed in September 2008 reducing market value by $1.2 trillion and forcing the Dow to suffer its “biggest single-day point loss ever” (Twin, 2008), and most Western economies have essentially stopped growing since.

Much of the discussion about “peak coal” (e.g. Patzek and Croft, 2010) involves changing mining technology and capacity, rather than the quantity and quality of coal that remains available for extraction. Peak coal will likely have the greatest impact on the world’s largest coal user, China. Nations with abundant untapped coal resources (i.e. the US, Australia and Russia) are likely to be less affected. The total recoverable coal estimated for the US alone is approximately 500 billion tons.

US coal production in 2009 was about one billion tons. Although it is difficult to predict future production technology, environmental issues, consumption patterns and changes in EROI, it appears that coal may be abundantly available through the next century.

Renewable energy sources: are not sufficiently “energy dense”, tend to be intermittent, lack transportability, most have relatively low EROI values (especially when corrections are made for intermittency), and currently, lack the infrastructure that is required to meet current societal demands.

If we were to replace traditional nonrenewable energy with renewables, which seems desirable to us in the long run, it would require the use of energy-intensive technology for their construction and maintenance. Thus it would appear that a shift from nonrenewable to renewable energy sources would result in declines in both the quantity and EROI values of the principle energies used for economic activity.

Although wind, apparently relatively favorable from an EROI perspective and photovoltaic (PV) energy, are currently the world’s fastest growing renewable energy sources, they continue to account for less than one percent of the global energy portfolio (REN21, 2012). Nevertheless there are many informal reports of PV reaching “price parity” with fossil fuels and to many the future of PV is very bright.

Proponents of EROI assessments using actual operational installations (rather than laboratory estimates) believe that, in order to portray renewable energy technology accurately, it is necessary to make note of the fact that these technologies are dependent upon (i.e. constructed and maintained using and therefore subsidized by) high EROI fossil fuels. Higher EROI values found in conceptual studies often result from assumptions of more favorable conditions (within simulations) than those actually experienced in real life. For example, English wind turbines were found to operate considerably fewer hours per month than anticipated (Jefferson, 2012).

Kubiszewski et al. (2010) infer that variations in EROI values, in the case of reported EROI values for wind energy, (between process and input output analyses) stems from a greater degree of subjective system boundary decision-making by the process analyst, resulting in the exclusion of certain indirect costs.

Also of concern is that wind and PV technology are not “base load technologies”, meaning that future large scale deployment, beyond 20 percent of the grid capacity, will likely require the construction of large, energy intensive storage infrastructures which, if included within EROI assessments, would likely reduce EROI values considerably. In the case of wind, the cost for inclusion within a wind EROI analysis requires not only the initial capital costs per unit output but also the backup systems required for the 70 or so percent of the time when insufficient wind is blowing. Thus, the input for an EROI analysis of wind and PV technology is by and large “upfront” capital costs. This is in sharp contrast to the less well known “return” over the lifespan of the system. Therefore, a variable referred to as “energy payback time” is often employed when calculating the EROI values of wind and other renewable energy sources. This is the time required for the renewable energy system to generate the same amount of energy that went into the creation, maintenance, and disposal of the system.

The boundaries utilized to define the energy payback time are incorporated into most renewable EROI calculations. Other factors influencing wind and PV EROI values include energy storage, grid connection dynamics and variations in construction and maintenance costs associated with the installation location. For example, off-shore turbines, while located in wet salty areas with more reliable energy-generating winds, require replacement more often. Turbines located in remote mountainous areas require long distance grid connections that result in energy loss and reduced usable energy values (Kubiszewski et al., 2010).

Policy implications

In conclusion, the EROI for the world s most important fuels, oil and gas, has declined over the past one to two decades for all nations examined. It remains possible that the relatively high EROI values for the natural gas extracted during, and often used for, the production of oil may mask a much steeper decline in the EROI of oil alone. Declining EROI is probably already having a large impact on the world economy (Murphy and Hall, 2010; Tverberg, 2012). As oil and gas provide roughly 60-65% of the world’s energy, this will likely have enormous economic consequences for many national economies. Coal, although abundant, is very unevenly distributed, has large environmental impacts and has an EROI that depends greatly on the region mined.

The decline in EROI among major fossil fuels suggests that in the race between technological advances and depletion, depletion is winning. Past attempts to rectify falling oil production i.e. the rapid increase of drilling after the 1970 peak in oil production and subsequent oil crises in the US only exacerbated the problem by lowering the net energy delivered from US oil production (Hall and Cleveland, 1981). Increasing prices, thought by most economists to negate depletion through increasing incentives for exploitation, cannot work as EROI approaches 1:1, and even now has made oil too expensive to support the high economic growth it once did. It would be tempting

from a net energy perspective, to recommend that we replace fossil fuels with renewable energy technologies as the EROI for fossil fuel falls to a level where these technologies become competitive. While EROI analyses generate numerical assessments using quantitative data that include many production factors, they do not include other important data such as climate change, air quality, health benefits, and other environmental qualities that are considered “externalities” to these analyses.

The energy intensive carbon capture and sequestration (CCS) required to reduce fossil fuel emissions to levels equivalent with that of wind or PV electricity production would reduce the final coal EROI value considerably ((e.g. Akai et al. 1997 in Dale, 2010 and Lund and Biswas, 2008). EROI figures do not take into account the high life-cycle greenhouse gas emissions from thermal electricity production, and coal fired systems in particular (Raugei et al., 2012). This could, with difficulty, be worked into future, more comprehensive EROI calculations.

Most alternative renewable energy sources appear, at this time, to have considerably lower EROI values than any of the non-renewable fossil fuels. Wind and photovoltaic energy are touted as having substantial environmental benefits. These benefits, however, may have lower returns and larger initial carbon footprints than originally suggested (e.g. the externalities associated with the mining of neodymium and its subsequent use in wind turbine construction). The energy costs pertaining to intermittency and factors such as the oil, natural gas and coal employed in the creation, transport and implementation of wind turbines and PV panels may not be adequately represented in some cost-benefit analyses. On the positive side, the fact that wind and PV produce high quality electricity needs to be considered as well.

Thus society seems to be caught in a dilemma unlike anything experienced in the last few centuries. During that time most problems (such as needs for more agricultural output, worker pay, transport, pensions, schools and social services) were solved by throwing more technology investments and energy at the problem. In many senses this approach worked, for many of these problems were resolved or at least ameliorated, although at each step populations grew so that more potential issues had to be served. In a general sense all of this was possible only because there was an abundance of cheap (i.e. high EROI) high quality energy, mostly oil, gas or electricity. We believe that the future is likely to be very different, for while there remains considerable energy in the ground it is unlikely to be exploitable cheaply, or eventually at all, because of its decreasing EROI.

Alternatives such as photovoltaics and wind turbines are unlikely to be nearly as cheap energetically or economically as past oil and gas when backup costs are considered.

In addition there are increasing costs everywhere pertaining to potential climate changes and other pollutants. Any transition to solar energies would require massive investments of fossil fuels.

Despite many claims to the contrary- from oil and gas advocates on the one hand and solar advocates on the other-we see no easy solution to these issues when EROI is considered.

If any resolution to these problems is possible it is probable that it would have to come at least as much from an adjustment of society’s aspirations for increased material affluence and an increase in willingness to share as from technology.

Unfortunately recent political events do not leave us with great optimism that such changes in societal values will be forthcoming.

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How the Catholic Church and politics helped cause overpopulation and overshoot

[ All of what follows is from the article below.  Mumford makes the case that: “Had the recommendations of NSSM 200 been implemented in 1975, the world would be very different today. The prospects would have improved for every nation and people to be significantly more secure. There would be less civil and regional warfare, less starvation and hunger, a cleaner environment and less disease, greater educational opportunities, expanded civil rights, especially for women, and a political climate more conducive to the expansion of democracy.”  

In other words, we wouldn’t be over the carrying capacity of the United States when fossil fuels are scarce (100 to 150 million).  Climate change is likely to reduce carrying capacity even further.  Global population would be much less than 7 billion and the number of organisms going extinct would likely be less, and the risks of nuclear war over remaining resources less as well. 

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation, 2015, Springer]

Mumford, S. D. February 5, 2012. Excerpts from: The Life and Death of NSSM 200: How the Destruction of Political Will Doomed a U.S. Population Policy. Church and State

“Editor’s note: Given this November’s U.S. Presidential election and the Catholic Church’s immense stake in the outcome, we are publishing a series of articles by our chairman Dr. Stephen D. Mumford, founder and President of the North Carolina-based Center for Research on Population and Security. The following article draws from selected passages of Dr. Mumford’s seminal book, The Life and Death of NSSM 200: How the Destruction of Political Will Doomed a U.S. Population Policy (1996). It reveals the anti-democratic and anti-American machinations of the Vatican that killed the United States’ National Security Study Memorandum 200 (NSSM 200) report and succeeded in destroying American political will to deal with the overpopulation problem. This article is as relevant and revealing today as it was when it was first published by Focus in 1998.

The 1960s saw a surge in American public awareness of the world population problem. The invention of the contraceptive pill in 1960 stimulated broad public debate on birth control and the need for it.

When Pope John XXIII created the Papal Commission on Population and Birth Control in 1963, he gave the world hope that the Church was about to change its position on birth control. After all, why would the Vatican study the issue if the Church was not in a position to change its teaching on birth control?

In 1968, Paul Ehrlich published his book, The Population Bomb, the most successful book of its kind, ever.[1] That same year, the journal Science published one of its most controversial articles ever, an essay by Garrett Hardin titled, “The Tragedy of the Commons,”[2] which sparked much discussion of the overpopulation threat.

Among mainstream protestant denominations, the Presbyterians were one of the first to call for a forthright response to the problem. In 1965, the General Assembly of the Presbyterian Church (U.S.A.) urged “the government of the United States to be ready to assist countries who request help in the development of programs of voluntary planned parenthood as a practical and humane means of controlling fertility and population growth.”

In 1971, it recognized that reliance on private, voluntary decisions:  “will not be sufficient to provide the necessary limitation of population growth unless there is a radical and rapid change in the attitudes and desires. The Church must commit itself to effecting this change. The assumption that couples have the freedom to have as many children as they can support should be challenged. We can no longer justify bringing into existence as many children as we desire. Our corporate responsibility to each other prohibits this. Given the population crisis we must recognize and teach, beginning with ourselves, that man has an obligation to limit the size of his family.”

And in 1972, the Presbyterians called on governments “to take such actions as will stabilize population size…. We who are motivated by the urgency of over-population rather than the prospect of decimation would preserve the species by responding in faith: Do not multiply—the earth is filled!”[3]

This kind of increasing out cry for action made it safe—almost compelling—for American political leadership to identify with the concept of population growth control and to call for new programs to deal with the problem.

It was in this climate of rising concern that President Nixon sent to Congress his “Special Message on Problems of Population Growth.” Special messages to the Congress are exceedingly rare and this was the first such message on population. This action punctuated the beginning of the peak of American political will to deal with the mounting population crisis. The message, for the first time, committed the United States to confronting the population problem. Also rare, this special message was approved by the Congress. Its passage was bipartisan, indicating broad political support for American political action to combat this problem. The message was a water shed development, yet few recall it.

The most important element of the Special Message was its creation of the Commission on Population Growth and the American Future. During the signing of the bill establishing the Commission, President Nixon commented on the broad political and public support: “I believe this is an historic occasion. It has been made historic not simply by the act of the President in signing this measure, but by the fact that it has had bipartisan support and also such broad support in the Nation.”

The 24 member Commission was chaired by John D. Rockefeller 3rd. It ordered more than 100 research projects which collected and analyzed data that would make possible the formulation of a comprehensive U.S. population policy. After 2 years of intense effort, the Commission completed a 186-page report titled, Population and the American Future which offered more than 70 recommendations. The recommendations were a bold but sane response to the challenges we faced in 1973. For example, they called for: passage of a Population Education Act to help school systems establish well-planned population education programs; sex education to be widely available for all, including minors, at government expense if necessary; vastly expanded research in many areas related to population-growth control; and the elimination of all employment of illegal aliens.

The recommendations represented the conclusions of some of the nation’s most capable people. The scientists who completed the Commission’s 100 research projects were among the best in their fields. These recommendations are included in this book because it is important for the reader to know what the U.S. response to the population problem could have been and should have been. On May 5, 1972, at a ceremony held for the purpose of formally submitting the Commission’s findings and conclusions, President Nixon publicly renounced the report.[4] This was 6 months before the President faced re-election and he was feeling intense political heat from one particularly powerful, foreign-controlled special interest group—the hierarchy of the Roman Catholic Church. Nothing happened toward implementation of any of the more than three score recommendations that collectively would have created a comprehensive U.S. population policy. Not one recommendation was ever adopted. To this day, the U.S. has no population policy, one of the few major countries with this distinction.

Had these 70 carefully reasoned recommendations been adopted as U.S. population policy in 1973—or if even a dozen or so of the most important ones had been adopted—America would be very different today. We would be more secure, subjected to less crime, better educated now with even greater educational opportunities ahead, living with less stress in a healthier environment, with more secure employment and greater employment opportunities, with better medical care, all in a physically less crowded America.

We would have set an example for the world, and we have good reason to believe that much of the world would have followed. Ironically, the American people were better prepared to accept these recommendations in 1973 than in 1994, even though world population during this brief period has mushroomed a horrendous 43 percent. For the past 20 years, all of us have been subjected to an intense disinformation program staged by the opposition to raise doubts in each of us regarding the seriousness of the population problem.

Despite the intense opposition President Nixon encountered in the wake of the Rockefeller Commission Report, his assessment of the gravity of the overpopulation problem and his desire to deal with it evidently remained unchanged. On April 24, 1974, nearly 18 months after his re-election, in the single most significant act of his presidency regarding the population crisis, Mr. Nixon directed, in NSSM 200, that a comprehensive new study be undertaken to determine the “Implications of World Population Growth for U.S. Security and Overseas Interests.” The report of this study would become one of the most important documents on world population growth ever written.

In NSSM 200, National Security Advisor Henry Kissinger, acting for the President, directed the Secretaries of Defense and Agriculture, the Director of the Central Intelligence Agency, the Deputy Director of State and the Administrator of the Agency for International Development (AID), to undertake the population study jointly. The report on this study was completed on December 10, 1974 and circulated to the designated Secretaries and Agency heads for their review and comments.

On August 9, 1974, Gerald Ford succeeded to the presidency. Revisions of the study continued until July, 1975. On November 26, 1975, the 227-page report and its recommendations were endorsed by President Ford in NSDM 314: “The President has reviewed the interagency response to NSSM 200…,” wrote the new National Security Advisor, Brent Scowcroft. “He believes that United States leadership is essential to combat population growth, to implement the World Population Plan of Action and to advance United States security and overseas interests. The President endorses the policy recommendations contained in the Executive Summary of the NSSM 200 response…”

President Ford, recognizing the gravity of the situation, directed NSDM 314 not only to the Departments and Agencies cited above. He also directed it to the Secretaries of Health, Education and Welfare and Treasury, the Director of Management and Budget, the Chairmen of the Joint Chiefs of Staff, the Council of Economic Advisers, and the Council on Environmental Quality. He made it clear to all of the relevant Departments and Agencies of the United States Government that he intended this to become the foundation of population policy for our government.

Mr. Ford assigned responsibility for further action to the National Security Council (NSC): “The President, therefore, assigns to the Chairman, NSC Undersecretaries Committee, the responsibility to define and develop policy in the population field and to coordinate its implementation beyond the NSSM 200 response.” To this day, the policy set forth in NSDM 314 has not been officially rescinded.

NSSM 200 itself is a 227-page document. The report requested in NSSM 200 bears the title, NSSM 200: Implications of Worldwide Population Growth for U.S. Security and Overseas Interests. It consists of a 29-page Executive Summary and a two-part report 198 typescript pages in length. The report was never printed or published. It was typewritten, double-spaced.

The potential importance of this document to U.S. security and the security of all nations was and remains immense. Both the findings and the recommendations have become increasingly relevant and urgent over the years. For this reason I have included the complete document here.

The NSSM 200 study details how and why continued rapid world population growth gravely threatens U.S. and global security. It also provides a blueprint for the U.S. response to this burgeoning problem, reflecting the deep concern of those who produced the report. Their strategy is complex, raising difficult questions. Some suggested policies are necessarily bold and the report’s authors urged that it be classified for five years to prepare the American public for full acceptance of the goals proposed. However, it remained classified for 14 years for reasons that are unclear.

The intense concern of the authors is clearly evident. NSSM 200 reports:

There is a major risk of severe damage [from continued rapid population growth] to world economic, political, and ecological systems and, as these systems begin to fail, to our humanitarian values.”[5] “…World population growth is widely recognized within the Government as a current danger of the highest magnitude calling for urgent measures.”[6] “…It is of the utmost urgency that governments now recognize the facts and implications of population growth, determine the ultimate population sizes that make sense for their countries and start vigorous programs at once to achieve their goals.[7]

NSSM 200 made the following recommendations, to mention a few:

  • The U.S. would provide world leadership in population growth control.[8]
  • The U.S. would seek to attain its own population stability by the year 2000.[9] This would have required a one-child family policy for the U.S., thanks to the phenomenon of demographic momentum, a requirement the authors well understood (the Chinese did not adopt their one-child family policy until 1977).
  • Have as goals for the U.S.: making family planning information, education and means available to all people of the developing world by 1980,[10] and achieving a 2-child family in the developing countries by 2000.”[11]
  • The U.S. would provide substantial funds to help achieve these goals.[12]

But, as in the case of the Rockefeller Commission Report, the implementation of recommendations made in NSSM 200—approved by President Ford, with his approval communicated to all relevant Departments and Agencies in our government—was halted mainly through the influence of the same opposition that had precluded adoption of the Rockefeller Commission recommendations.

Had the recommendations of NSSM 200 been implemented in 1975, the world would be very different today. The prospects would have improved for every nation and people to be significantly more secure. There would be less civil and regional war fare, less starvation and hunger, a cleaner environment and less disease, greater educational opportunities, expanded civil rights, especially for women, and a political climate more conducive to the expansion of democracy.

Excerpts from: Chapter 5: “What Happened to the Momentum?”

November 26, 1975 marked the end of the peak of American political will to deal with the overpopulation problem. This was the day that President Ford approved NSDM 314, committing the U.S. to a bold policy of population growth control. The peak lasted less than 6 years and then the momentum plummeted and our commitment has since diminished every year.

As noted in the Introduction, when Mr. Nixon received the report, Population and the American Future, from Mr. Rockefeller in May 1972, the President publicly rejected it—just six months before he faced reelection. In his book, Catholic Bishops in American Politics, Timothy A. Byrnes, assistant professor of political science at the City College of New York, states,

Hoping to attract Catholics to his reelection campaign, Nixon publicly disavowed the pro-choice findings of his own presidential commission on population in 1972. He communicated that disavowal in an equally public-letter to Cardinal Terence Cooke [of New York], a leading spokesman for the bishops’ opposition to abortion…. The Catholic vote was especially important to Nixon and his publicists in 1972. They referred to Catholic support of the Republican ticket in order to refute the notion that Nixon had formed his new coalition by cynically appealing to the baser motives of Southern whites. They relied on Catholic participation in the new majority, in other words, as proof that the “social issue” was much more than repackaged racial prejudice. As one of these publicists, Patrick Buchanan, put it: “Though his critics were crying ‘Southern Strategy,’ the President’s politics and policy decisions were not going unnoticed in the Catholic and ethnic communities of the North, East, and Midwest.[13]

Nixon was convinced that if he were to win in 1972, he must carry Southern whites and northern Catholics. He looked to the Catholic bishops for their support. Byrnes goes on to say, “Regardless of what it is based on, however, a perception that the bishops can influence votes has been enough to make candidates sensitive to the bishops.” And as the saying goes, in politics perceptions often create their own realities. He continues,

The bishops have more than just access to Catholic voters, of course. They also have virtually unparalleled institutional resources at their disposal. ‘If you are a bishop,’ Walter Mondale’s 1984 campaign manager said to me, ‘you’ve got some pretty substantial organizational capabilities…. You’ve got a lot of people, you’ve got money, places to meet…. You’ve got a lot of things that any good politician would like to have at his disposal.’ You also have the ability, if you are the Catholic hierarchy collectively, to create or fortify movements in support of your preferred policy positions.[14]

Byrnes argues that: the bishops are able to bring virtually unrivaled resources to any cause or effort they decide to support; the bishops committed those resources to the fight against abortion in the 1970s; in the process they played a key role in the creation and maintenance of a large social movement. This movement was the so-called Religious New Right movement. This movement was still in its infancy at the time of Nixon’s reelection bid in 1972 but the bishops were highly organized, single minded and prepared to deal. In his letter to Cardinal Cooke, Nixon made it clear that he too was prepared to deal. Nixon was reelected with the bishops’ support.

During the year that followed the presentation of the Rockefeller Commission Report, it became clear that there would be no further response to the Commission’s recommendations. In May, 1973 a group of pioneer population activists acknowledged this inaction and asked Ambassador Adolph Schmidt to speak with his friend, Commission Chairman John D. Rockefeller 3rd. They met in June, 1973 at the Century Club in New York City. Schmidt noted his own disappointment and that of his colleagues because no program had been mounted as a result of the Commission’s recommendations. What had gone wrong? Rockefeller responded: “The greatest difficulty has been the very active opposition by the Roman Catholic Church through its various agencies in the United States.”[15]

In 1992, one Rockefeller Commission member, Congressman James Scheuer (D-NY), spoke out publicly for the first time on what had happened: “Our exuberance was short-lived. Then-President Richard Nixon promptly ignored our final report. The reasons were obvious—the fear of attacks from the far right and from the Roman Catholic Church because of our positions on family planning and abortion. With the benefit of hindsight, it is now clear that this obstruction was but the first of many similar actions to come from high places.”[16]

None of the Commission’s more than 70 recommendations was ever implemented. It is most disturbing that the American people were kept in the dark about this undemocratic and unAmerican intervention by the Vatican. It simply was not considered newsworthy because the press chose not to make it so. I believe both Catholic and non-Catholic Americans would have strongly rejected such interference in the American democratic process had they been aware of it. The quality of life for all Americans has been diminished by this unconstitutional manipulation of American policy, undertaken for the purposes of protecting papal interests.

Excerpts from: Chapter 6: “Why Did our Political Will Fade Away?”

How Population Growth Control Threatens the Papacy

Why is the Catholic Church obliged to halt legalized abortion and contraception despite the strong wishes of Americans? When our government legalized contraception and abortion, it pitted civil authority against papal authority. The Vatican demands supremacy over civil governments in matters of faith and morals, but our government has rejected this concept. Thus, while the Church is saying that family planning and abortion are evil and grave sins, our government is saying they may be good and should be used. Obviously, most American Catholics are accepting morality as defined by the government and rejecting morality as defined by the pope. As a result, papal authority is undermined.

There are a number of Catholic countries in Latin America which have abortion rates 2 to 4 times as high as the U.S. rate. But the bishops ignore abortions there. Why? Because they are illegal abortions, not legal ones. They do not threaten papal authority! Only legal abortions do, because their legalization establishes their morality. Thus, the bishops take no significant actions to halt abortions in Latin America.

In Papal Power: A Study of Vatican Control Over Lay Catholic Elites,[35] published by The University of California Press in 1980, Jean-Guy Vaillancourt, Associate Professor of Sociology at the University of Montreal, closely examines the sources of papal power and how it evolved. He found that papal authority is vital to the maintenance of papal power. This power is derived in significant part from papal authority. If the pope’s authority is diminished, papal power is diminished. However, some authority is derived from papal power and if papal power is diminished, then authority is undermined. The relationship is circular. Less authority means less power which means even less authority. With diminishing power, survival of the institution of the Roman Catholic Church in its present hierarchical form is gravely threatened. Thus, the very survival of the Vatican is threatened by programs of population growth control.

In his book, Persistent Prejudice: Anti-Catholicism in America, published by Our Sunday Visitor in 1984, Michael Schwartz summarized the position of Catholic conservatives on the abortion issue:

The abortion issue is the great crisis of Catholicism in the United States, of far greater import than the election of a Catholic president or the winning of tax support for Catholic education. In the unlikely event that the Church’s resistance to abortion collapses and the Catholic community decides to seek an accommodation with the institutionalized killing of innocent human beings, that would signal the utter failure of Catholicism in America. It would mean that U.S. Catholicism will have been defeated and denatured by the anti-Catholic host culture.[36]

In April, 1992, in a rare public admission of this threat, Cardinal John O’Connor of New York, delivering a major address to the Franciscan University of Steubenville, Ohio, acknowledged, “The fact is that attacks on the Catholic Church’s stance on abortion—unless they are rebutted—effectively erode Church authority on all matters, indeed on the authority of God himself.”[37]

This threat to papal authority was recognized decades ago by the Papal Commission on Population and Birth Control. The two tiered commission consisted of a group of 15 cardinals and bishops and a group of 64 lay experts representing a variety of disciplines. The Commission met from 1964 until 1966. According to commission member Thomas Burch, the pope himself, Pope Paul VI, assigned the commission the task of finding a way of changing the Church’s position on birth control without destroying the pope’s authority.[38]

After 2 years of studying the dilemma, the laymen voted 60 to 4 and the clerics 9 to 6 to change the Church’s teaching on birth control even though it would mean a loss of papal authority because it was the right thing to do. The minority also submitted a report to the pope.

In 1967, two newspapers published without authorization the full texts of the Papal Commission’s report. Thus the world knew that a substantial majority of the double commission had recommended liberalization on birth control.[39] The commission, of course, failed to find an acceptable way to accomplish this, and the result was the publication In 1968 of the encyclical, Humanae Vitae, which banned the use of contraception.

It was not until 1985 that Thomas Burch, in the 1960s a professor at Georgetown University and more recently chairman of Western Ontario’s Sociology Department, revealed to the world the real assignment of the commission. When Pope Paul issued Humanae Vitae, he admitted to the world that the Church cannot change its position on birth control without undermining papal authority—an unacceptable sacrifice. However, it was not until 1979, when August Bernhard Hasler published his book, How the Pope Became Infallible, that the world was given the text of the minority report which persuaded Pope Paul VI to reject the majority position.[40] Hasler was a Catholic theologian and historian who served for five years in the Vatican Secretariat for Christian Unity. During this period, he was given access to the Vatican Archives where he discovered numerous documents, which had never been studied before, that revealed the story of Vatican Council I. Dr. Hasler died suddenly at age 43, four days after writing a critical open letter to Pope John Paul II and six months after completing the second edition of this book.[41]

“The Declaration of Papal Infallibility” was a product of Vatican Council I, which preceded Vatican Council II more than a century ago, and was considered vital to the continuation of papal power. According to Vaillancourt,

During the Middle Ages and under feudalism, when the Catholic Church was a dominant institution in society, papal power grew in importance, relying often on force to attain its ends, which were political as much as they were religious. The Crusades and later on, the Inquisition, stand as the two most notorious of these violent papal ventures. But with the decline of the Portuguese and Spanish empires, with the advent of the Reformation and of the intellectual, democratic, and Industrial revolutions, the Catholic hierarchy lost much of its influence and power. Unable to continue using physical coercion, the Papacy was led to strengthen its organizational structure and to perfect a wide range of normative means of control. The declaration of papal Infallibility by the first Vatican Council (Vatican I), in 1870, was an important milestone in that direction. The stress on the absolute authority of the pope in questions of faith and morals helped turn the Church into a unified and powerful bureaucratic organization, and paved the way for the establishment of the Papacy-laity relationship as we know it today.[42]

Pope Paul VI was faced with the prospect of personally destroying the concept of papal infallibility, a concept vital to the continuation of papal power. Hasler notes, “But for Paul VI there already were infallible declarations of the ordinary magisterium on the books concerning contraception. And so, unlike the majority of his commission of experts, the pope felt bound to these declarations by his predecessors.” Thus the pope was forced to agree with the minority report of the commission.

Hasler quotes from that report:

If it should be declared that contraception is not evil in itself, then we should have to concede frankly that the Holy Spirit had been on the side of the Protestant churches in 1930 (when the encyclical Casti conubli was promulgated), in 1951 (Pius XII’s address to the midwives), and in 1958 (the address delivered before the Society of Hematologists in the year the pope died). It should likewise have to be admitted that for a half century the Spirit failed to protect Pius XI, Pius XII, and a large part of the Catholic hierarchy from a very serious error.

This would mean that the leaders of the Church, acting with extreme imprudence, had condemned thousands of innocent human acts, forbidding, under pain of eternal damnation, a practice which would now be sanctioned. The fact can neither be denied nor ignored that these same acts would now be declared licit on the grounds of principles cited by the Protestants, which popes and bishops have either condemned or at least not approved.[43]

Hasler concludes, “Thus, it became only too clear that the core of the problem was not the pill but the authority, continuity, and infallibility of the Church’s magisterium.”

This is at the very core of the world population problem. The papacy simply cannot survive the solutions—i.e. contraception, abortion, sex education, etc. The Vatican believes, probably correctly, that if the solutions to the population problem are applied, the dominance of Vatican power will soon wither. Grasping the implications of the principal of infallibility are crucial to understanding the underlying basis of the world population problem.

It is most important to understand that the Vatican leadership can visualize a world where it no longer exists. It was this chilling vision that drove the conservative members of the Vatican leadership and Pope Paul VI to reject the majority report and accept the minority report of the Papal Commission on Population and Birth Control in 1968. This vision has driven Vatican behavior on family planning ever since. Thus, the security survival of the papacy is now pitted directly against the security-survival of the United States. The Vatican simply cannot accommodate U.S. security interests.

This is not the first time our security interests have been in conflict. There are many examples of the American Catholic hierarchy supporting papal security interests at the expense of U.S. security interests. One example is the Spanish Civil War between the democratic constitutional government and the Vatican supported fascist Franco. Byrnes states, “The bishops also broke with Roosevelt over the issue of the Spanish Civil War…. The bishops instinctively supported Franco in the war…. Caught between mainstream views on foreign policy and the interests of their church, the bishops…opted for defense of the international church.”[44]

It is institutional survival that governs the behavior of the Catholic hierarchy in all matters. The claim that “morality” governs its behavior in the matters of family planning and abortion is fraudulent. The hierarchy has a long history of determining which position is in the best interests of the papacy—including the survival of the papacy—and then framing that position as the moral position. Father Arthur McCormack was for 23 years the Vatican consultant to the UN on development and population, leaving that post in 1979. In 1982, he went public with his conclusion that the Vatican position on family planning and population growth control is immoral.

American political will to deal with the overpopulation problem fell victim to the Vatican’s inexorable position. In the next chapter we will discuss how the Vatican achieved this vital objective, as it set about protecting its security interests.

Excerpts from: Chapter 7: “What was the Role of the Vatican?”

Did the Vatican succeed in changing U.S. policy on family planning, abortion and population growth control? Time magazine concluded that it most certainly did. The headline on the cover of the February 24, 1992 issue of Time magazine was “Holy Alliance: How Reagan and the Pope conspired to assist Poland’s Solidarity movement and hasten the demise of Communism.”[48] The cover article was written by Pulitzer prize-winning journalist Carl Bernstein. Bernstein listed Reagan’s “Catholic team,” noting that “The key administration players were all devout Roman Catholics—CIA chief William Casey, [Richard] Allen [Reagan’s first National Security Advisor], [William] Clark [Reagan’s second National Security Advisor], [Alexander] Haig [Secretary of State], [Vernon] Walters [Ambassador at Large] and William Wilson, Reagan’s first ambassador to the Vatican. They regarded the U.S.-Vatican relationship as a holy alliance: the moral force of the Pope and the teachings of their church combined with…their notion of American democracy.”

How the Catholic church

The Pope Called the Tune

In a section of his Time article headed “The U.S. and the Vatican on Birth Control,” Bernstein included three revealing paragraphs:

In response to concerns of the Vatican, the Reagan Administration agreed to alter its foreign-aid program to comply with the church’s teachings on birth control. According to William Wilson, the President’s first ambassador to the Vatican, the State Department reluctantly agreed to an outright ban on the use of any U.S. aid funds by either countries or international health organizations for the promotion of…abortions. As a result of this position, announced at the World Conference on Population in Mexico City in 1984, the U.S. withdrew funding from, among others, two of the world’s largest family planning organizations: the International Planned Parenthood Federation and the United Nations Fund for Population Activities.

‘American policy was changed as a result of the Vatican’s not agreeing with our policy,’ Wilson explains. ‘American aid programs around the world did not meet the criteria the Vatican had for family planning. AID [the Agency for International Development] sent various people from [the Department of] State to Rome, and I’d accompany them to meet the president of the Pontifical Council for the Family, and in long discussions they finally got the message. But it was a struggle. They finally selected different programs and abandoned others as a result of this intervention.’

‘I might have touched on that in some of my discussions with [CIA director William] Casey,’ acknowledges Pio Cardinal Laghi, the former apostolic delegate to Washington. ‘Certainly Casey already knew about our positions about that.’

Thus, Bernstein makes clear what the cadre of devout Catholics in the Reagan Administration did to protect the Papacy from the recommendations of NSSM 200. Simply put, these strategically-placed Catholic laymen, and the U.S. bishops with direct papal support and intervention, succeeded in destroying the American political will to deal with the population problem.”

References

Introduction
[1]. Ehrlich PR. The Population Bomb. New York: Ballantine Books, 1968.
[2]. Hardin G. “The Tragedy of the Commons.” Science 1968 162: 1243-8.
[3]. Beck R. “Religions and the Environment: Commitment High Until U.S. Population Issues Raised.” The Social Contract 1993:3: 76-89.
[4]. (a) Nixon, R. “Special Message to the Congress on Problems of Population Growth,” July 18, 1969. Public papers of the Presidents, No. 271, p. 521, Office of the Federal Register, National Archives, Washington, DC. 1971. (b) Commission on Population Growth and the American Future. “Population and the American Future.” Washington, DC: U.S. Government Printing Office, 1972. 176 pp.
[5]. National Security Council. NSSM 200: Implications of worldwide population growth for U.S. security and overseas Interests. Washington, DC, December 10, 1974.
[6]. Ibid., p. 184.
[7]. Ibid., p. 78.
[8]. Ibid., p. 59.
[9]. Ibid., p. 62.
[10]. Ibid., p. 148.
[11]. Ibid., p.59.
[12]. Ibid., p. 65.

Chapter 5
[13]. Brynes TA. Catholic Bishops In American Politics, Lawrenceville, New Jersey: Princeton University Press, 1991. P. 66
[14]. Ibid., p.4
[15]. Schmidt AW. Personal Communication. August 28, 1992.
[16]. Scheuer J. “A disappointing outcome: United States and World Population Trends since the Rockefeller Commission.” The Social Contract 1992; Summer: 203-206.

Chapter 6
[35] Vaillancourt JG. Papal Power: A Study of Vatican Control Over Lay Catholic Elites. Berkeley: University of California Press, 1980.
[36] Schwartz M. Persistent Prejudice: Anti-Catholicism In America. Huntington Indiana: Our Sunday Visitor, 1984. P. 132.
[37] King HV. “Cardinal O’Connor Declares That Church Teaching On Abortion Underpins All Else.” The Wanderer, April 23, 1992, p. 1.
[38] Jones A. Vatican, “International Agencies Hone Family, Population Positions.” National Catholic Reporter (reprinted in Conscience, May/June 1984. P. 7).
[39] Murphy FX, Erhart JF. “Catholic perspectives on population Issues.” Pop Bulletin 1975; 30(6): 3-3 1.
[40] Hasler AB. How the Pope Became Infallible. Garden City, New York: Doubleday, 1981.
[41] Ibid. (cover)
[42] Vaillancourt, op.cit., p. 2.
[43] Hasler, op. cit., p. 270.
[44] Byrnes, op. cit., p. 29.

Chapter 7
[48] Bernstein C. “The Holy Alliance.” Time, February 24, 1992.

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The Hidden Costs of Oil. U.S. Senate hearing 2006.

[ This post has excerpts from the 2006 U.S. Senate hearing “The Hidden Cost of Oil”.  It is a timely reminder, now that gasoline prices are low and peak oil off the radar, that we are nowhere near the American Energy Independence bragged about currently in Congress.

I’d like to remind everyone of what James Schlesinger, former Secretary of Defense said at two Senate hearings in 2005 and 2006:

By about 2010, we should see a significant increase in oil production as a result of investment activity now under way. There is a danger that any easing of the price of crude oil will, once again, dispel the recognition that there is a finite limit to conventional oil.  In the longer run, unless we take serious steps to prepare for the day that we can no longer increase production of conventional oil, we are faced with the possibility of a major economic shock—and the political unrest that would ensue.” (1, 2)

So here is a little sanity from the past.  Some highlights from this hearing:

Senator Joseph R. Biden, Delaware (now vice-president):  Does anybody think we would be in the Middle East if, in fact, we were energy independent? Is there any American out there willing to give their son or daughter’s life if in fact, we didn’t need anything that the oil oligarchs had to offer? They get that pretty quickly.

Senator Richard Lugar, Indiana, ChairmanIf we blithely ignore our dependence on foreign oil, we are inviting an economic and national security disaster. Most of the world’s oil is concentrated in places that are either hostile to American interests or vulnerable to political upheaval and terrorism.  Oil supplies are vulnerable to natural disasters, wars and terrorist attacks. Reliance on fossil fuels contributes to environmental problems, including climate change. In the long run, this could bring drought, famine, disease, and mass migration, all of which could lead to conflict and instability.

Essentially, we’re talking here about what we think is going to be catastrophe.  Somebody will say, ‘‘Why was there no vision? Why was there no courage? Why didn’t somebody rise up?’’

Maybe if we try some element of pricing that is different from what we do now, without getting into all the political hazards that Joe Biden has discussed, namely, woe be to the person that suggests a 25-cent tax. The [public] would say, ‘‘Why?’’ Or … a little more tax each year, that is even worse, because you invite a congressional candidate or a President to say, ‘‘We’ve had enough of this kind of stuff. I’m going to reduce your taxes. And we’re not going to take a look at a long-term future.’’

Milton R. Copulos, president of the National Defense Council Foundation: A supply disruption of significant magnitude, such as would occur should Saudi supplies be interdicted, would also dramatically undermine the Nation’s ability to defend itself. A shortage of global oil supplies not only holds the potential to devastate our economy, but could hamstring our Armed Forces as well. Last year marked the 60th anniversary of the historic meeting between Saudi monarch King Abdul Aziz and U.S. President Franklin Roosevelt where he first committed our Nation to assuring the flow of Persian Gulf oil—a promise that has been reaffirmed by every succeeding President, without regard to party.

Without oil our economy could not function, and, therefore, protecting our sources of oil is a legitimate defense mission, and the current military operation in Iraq is part of that mission. [My comment: golly, so it isn’t because of Weapons of Mass Destruction?]

One point we have to look at here, in terms of the argument over domestic oil/foreign oil, misses the point.  We’re going to run out of oil. That’s a given. If you take a look at global demand, I don’t care how much we produce.  The Chinese are adding 120 million cars.  If you look at Third World demand alone, in 2025, it is going to require an additional 30 million barrels a day. When you add in the rest of us, it’s 40. And there’s no ‘‘there’’ there. Can’t be done.

  1. Senate 109-860. May 16, 2006. Energy security and oil dependence. U.S. Senate hearing.
  2. Senate 109-64. June 2006. Energy diplomacy and security. a compilation of statements by witnesses before the Committee on Foreign Relations. U.S. Senate.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation, 2015, Springer]

Senate 109-861. March 30, 2006. The Hidden Cost of Oil. U.S. Senate hearing. 53 pages

SENATOR RICHARD LUGAR, INDIANA, CHAIRMAN.  The committee meets today to consider the external costs of United States dependence on fossil fuels. The gasoline price spikes following Katrina and Rita hurricanes underscored for Americans the tenuousness of short-term energy supplies. Since these events, there is a broader understanding that gasoline and home heating prices are volatile and can rapidly spike to economically damaging levels due to natural disasters, terrorist attacks, or other world events. But, as yet, there is not a full appreciation of the hidden costs of oil dependence to our economy, our national security, our environment, and our broader international goals.

We’re aware that most, if not all, energy alternatives have some externality costs. But we’re starting from the presumption that if we blithely ignore our dependence on foreign oil, we are inviting an economic and national security disaster.

With less than 5 percent of the world’s population, the United States consumes 25 percent of its oil.

Most of the world’s oil is concentrated in places that are either hostile to American interests or vulnerable to political upheaval and terrorism. More than three-quarters of the world’s oil reserves are controlled by national oil companies, and within 25 years the world will need 50 percent more energy than it does now.

There are at least six basic threats associated with our dependence on fossil fuels:

First, oil supplies are vulnerable to natural disasters, wars and terrorist attacks that can produce price shocks and threats to national economies. This threat results in price instability and forces us to spend billions of dollars defending critical fossil fuel infrastructure and shipping choke points.

Second, finite fossil fuel reserves will be stressed by the rising demand caused by explosive economic growth in China, India, and many other nations. This is creating unprecedented competition for oil and natural gas supplies that drives up prices and widens our trade deficit. Maintaining fossil fuel supplies will require trillions in new investment, much of it in unpredictable countries that are not governed by democracy and market forces.

Third, energy-rich nations are using oil and natural gas supplies as a weapon against energy-poor nations. This threatens the international economy and increases the risk of regional instability and even military conflict.

Fourth, even when energy is not used overtly as a weapon, energy imbalances are allowing oil-rich regimes to avoid democratic reforms and insulate themselves from international pressure and the aspirations of their own people. In many oil-rich nations, oil wealth has done little for the people, while ensuring less reform, less democracy, fewer free-market activities, and more enrichment of elites. It also means that the United States and other nations are transferring billions of dollars each year to some of the least accountable regimes in the world. Some of these governments are using this money to invest abroad in terrorism and instability or demagogic appeals to anti-Western populism.

Fifth, reliance on fossil fuels contributes to environmental problems, including climate change. In the long run, this could bring drought, famine, disease, and mass migration, all of which could lead to conflict and instability.

Sixth, our efforts to facilitate international development are often undercut by the high costs of energy. Developing countries are more dependent on imported oil, their industries are more energy intensive, and they use energy less efficiently. Without a diversification of energy supplies that emphasizes environmentally friendly options that are abundant in most developing countries, the national incomes of energy-poor nations will remain depressed, with negative consequences for stability, development, disease eradication, and terrorism.

Each of these threats comes with a short- and long-term cost structure, and, as a result, the price of oil dependence for the United States is far greater than the price consumers pay at the pump. Some costs, particularly those affecting the environment and public health, are attributable to oil no matter its source; others, such as costs of military resources dedicated to preserving oil supplies, stem from our dependence on oil imports. But each dollar we spend on securing oil fields, borrowing money to pay for oil imports, or cleaning up an oil spill is an opportunity missed to invest in a sustainable energy future.

Certain types of costs are extremely difficult to quantify, and we understand that many national security risks are heightened by our dependence. But how, for example, would we assign a dollar figure to Iran’s use of its energy exports to weaken international resolve to stop its nuclear weapons program? Yet, we should do our best to quantify the external costs of oil so we have a clearer sense of the economic and foreign policy trade-offs that our oil dependence imposes upon us.

As the U.S. Government and American business consider investments in energy alternatives, we must be able to compare the costs of these investments with the entire cost of oil. Public acknowledgment of the billions of dollars we spend to support what the President has called our, ‘‘oil addiction,’’ would shed new light on investment choices related to cellulosic ethanol, hybrid cars, alternative diesel, and other forms of energy.

Milton R. Copulos, president of the National Defense Council Foundation.

I would like to commend Chairman Lugar for … his leadership addressing our Nation’s perilous energy dependence.

America is rushing headlong into disaster. What is worse, however, is that it is a disaster of our own design.

More than three decades have passed since the 1973 Arab Oil Embargo first alerted the Nation to its growing oil import vulnerability. Yet, despite this warning, we are now importing more than twice as much oil in absolute terms than we did in 1973, and the proportion of our oil supplies accounted for by imports is nearly double what it was then. What makes this dependence even more dangerous than it was three decades ago is the fact that the global market has become a far more competitive place with the emerging economies of China, India, and Eastern Europe creating burgeoning demand for increasingly scarce resources.

Even conservative estimates suggest that nearly 30 million barrels per day of new oil supplies will be required by the year 2025 just to service the developing world’s requirements. When Europe and the Americas are included, the requirement is closer to 40 million barrels per day. It is doubtful that new supplies sufficient to meet this skyrocketing demand will be found from conventional sources.

UNCERTAIN SUPPLIERS.  The top six sources of U.S. oil imports—Canada, Mexico, Saudi Arabia, Venezuela, Nigeria, and Iraq—account for 65.1% of all foreign crude reaching our shores and 38.9% of total domestic consumption. Of these four, Saudi Arabia, Venezuela, Nigeria, and Iraq, provide 38.2% of oil imports and 22.6 percent of total consumption. For a variety of reasons, none of the four I just mentioned can be considered a reliable source of supply.

THE CONSEQUENCES OF DISRUPTION.  The supply disruptions of the 1970s cost the U.S. economy between $2.3 trillion and $2.5 trillion. Today, such an event could carry a price tag as high as $8 trillion—a figure equal to 62.5% of our annual GDP or nearly $27,000 for every man, woman, and child living in America.

But there is more cause for concern over such an event than just the economic toll. A supply disruption of significant magnitude, such as would occur should Saudi supplies be interdicted, would also dramatically undermine the Nation’s ability to defend itself.

Oil has long been a vital military commodity, but today has taken on even more critical importance. Several examples illustrate this point:

  • A contemporary U.S. Army Heavy Division uses more than twice as much oil on a daily basis as an entire World War II field army.
  • The roughly 582,000 troops dispatched to the Persian Gulf used more than twice as much oil on a daily basis as the entire 2-million-man Allied Expeditionary Force that liberated Europe in World War II.
  • In Operation Iraqi Freedom, the oil requirement for our Armed Forces was 20% higher than in the first gulf war, Operation Desert Storm, and now amount to one barrel of refined petroleum products per day for each deployed service member.

Moreover, the military’s oil requirements will be even higher in the future. Therefore, a shortage of global oil supplies not only holds the potential to devastate our economy, but could hamstring our Armed Forces as well.

THE HIDDEN COST OF IMPORTED OIL.  While it is broadly acknowledged that our undue dependence on imported oil would pose a threat to the Nation’s economic and military security in the event of a supply disruption, less well understood is the enormous economic toll that dependence takes on a daily basis. The principal reason why we are not fully aware of the true economic cost of our import dependence is that it largely takes the form of what economists call ‘‘externalities,’’ that is, costs or benefits caused by production or consumption of a specific item, but not reflected in its pricing. It is important to understand that even though external costs or benefits may not be reflected in the price of an item, they nonetheless are real.

In October 2003, my organization, the National Defense Council Foundation, issued ‘‘America’s Achilles Heel: The Hidden Costs of Imported Oil,’ a comprehensive analysis of the external costs of imported oil. The study entailed the review of literally hundreds of thousands of pages of documents, including the entire order of battle of America’s Armed Forces and more than a year of effort. Its conclusions divided the externalities into three basic categories: Direct and Indirect Economic Costs, Oil Supply Disruption Impacts, and Military Expenditures.

Taken together, these costs totaled $304.9 billion annually, the equivalent of adding $3.68 to the price of a gallon of gasoline imported from the Persian Gulf. As high as these costs were, however, they were based on a crude oil refiner acquisition cost of $26.92. Today, crude oil prices are hovering around $60 per barrel and could easily increase significantly. Indeed, whereas, in 2003 we spent around $99 billion to purchase foreign crude oil and refined petroleum products, in 2005 we spent more than $251 billion, and this year we will spend at least $320 billion.

But skyrocketing crude oil prices were not the only factor affecting oil-related externalities. Defense expenditures also changed. In 2003, our Armed Forces allocated $49.1 billion annually to maintaining the capability to assure the flow of oil from the Persian Gulf.  Expenditures for this purpose are not new. Indeed, last year marked the 60th anniversary of the historic meeting between Saudi monarch King Abdul Aziz and U.S. President Franklin Roosevelt where he first committed our Nation to assuring the flow of Persian Gulf oil—a promise that has been reaffirmed by every succeeding President, without regard to party.

I am stressing the longstanding nature of our commitment to the gulf to underscore the fact that our estimates of military expenditures there are not intended as a criticism. Quite the opposite, in fact.

Without oil our economy could not function, and, therefore, protecting our sources of oil is a legitimate defense mission, and the current military operation in Iraq is part of that mission.

To date, supplemental appropriations for the Iraq war come to more than $251 billion, or an average of $83.7 billion per year. As a result, when other costs are included, the total military expenditures related to oil now total $132.7 billion annually.

In 2003, as noted, we estimated that the ‘‘hidden cost’’ of imported oil totaled $304.9 billion. When we revisited the external costs, taking into account the higher prices for crude oil and increased defense expenditures we found that the ‘‘hidden cost’’ had skyrocketed to $779.5 billion in 2005. That would be equivalent to adding $4.10 to the price of a gallon of gasoline if amortized over the total volume of imports. For Persian Gulf imports, because of the enormous military costs associated with the region, the ‘‘hidden cost’’ was equal to adding $7.41 to the price of a gallon of gasoline. When the nominal cost is combined with this figure it yields a ‘‘true’’ cost of $9.53 per gallon, but that is just the start.

What then can we do? The first step is to recognize that we face a two-fold problem. The first part entails assuring adequate fuel supplies for the 220 million privately owned vehicles on the road today. These vehicles have an average lifespan of 16.8 years and the average age of our vehicle fleet is 8.5 years. Therefore, we will require conventional fuels or their analogs for at least a decade, even if every new vehicle produced from this day forth runs on some alternative.

In the near term, say the next 5 to 10 years, we essentially have two options. First, to make the greatest possible use of our readily accessible conventional domestic resources, particularly the oil and natural gas that lay off our shores. We should also consider using some of our 1,430 trillion cubic feet of domestic gas reserves as a feedstock for motor fuels produced through the Fischer-Tropsch process. Indeed, we currently have 104 trillion cubic feet of so-called ‘‘stranded’’ natural gas in Alaska and a pipeline with some 1.1 million barrels per day of excess capacity. Stranded gas could be converted into clean burning motor fuel and transported in the existing pipeline to the lower 48 states.

Another point is to make sure that we do not forget to address non-transportation petroleum consumption. The fact that two-thirds of our petroleum is consumed in the transportation sector means that one-third is not. The opportunities to reduce oil consumption from non-transportation are greater than you might expect.

Take residential energy use, for example. Roughly 12% of distillate use goes to home heating, most of it imported from the Middle East. Yet, there are alternatives readily available that could totally eliminate this use, and at the same time save consumers money. For instance, a developer in Moline, IL, is currently building homes that are between 85 to 90% energy efficient, and meet their heating and cooling requirements with geothermal energy. More important, these homes are being sold for 20% less than conventional housing sold in the same area. So consumers are not only saving energy, they are saving enormous amounts of money.

In the longer term, there are other domestic energy resources that can be brought into play. We have between 500 billion and 1.1 trillion barrels of oil contained in our huge oil shale resources. We have 496.1 billion tons of demonstrated coal reserves—27 percent of the world total. We also have 320,222 trillion cubic feet of natural gas in the form of methane hydrates. This is equivalent to 51.1 trillion barrels of oil. Indeed one on-shore deposit in Alaska, alone, contains 519 trillion cubic feet of natural gas. That is equal to 82.9 billion barrels of oil.

To conclude, while our Nation is in dire peril due to its excessive dependence on imported oil, the situation is far from hopeless. We have the resources necessary to provide our Nation’s energy needs if we can only find the political will to do so.

HILLARD HUNTINGTON, Executive Director, Energy Modeling forum, Stanford University.

Tight oil markets with minimal surplus capacity have made world oil prices particularly jumpy over recent months. In the last 6 months, a series of political and natural events have cascaded around the globe and left their impact on increasingly nervous oil-consuming nations. These developments have been extremely varied and include the following:

  • A thwarted suicide attack in February at the Abqaiq oil processing facility in eastern Saudi Arabia;
  • A string of turmoil in the Niger Delta highlighted by a recent speedboat attack in January by gunmen on the riverside offices of Italian oil company Agip;
  • Antigovernment attempts to disrupt congressional elections in Venezuela culminating in an explosion at an oil pipeline connected to that country’s largest oil refinery;
  • Devastating Hurricanes Katrina and Rita in the United States in August and September.

Their sporadic nature conveys an element of unpredictability and surprise. I have recently coordinated several studies for the Energy Modeling Forum at Stanford University that relate directly to this issue. I would like to share a few observations that I think summarize the perspectives of many (but certainly not all) participants who were involved in the studies. Our forum frequently brings together the leading experts and advisors from government, business, and university and other research organizations to discuss how we can improve analysis of key energy problems that keep policymakers awake at night. In this particular case, the work was done primarily for the U.S. Department of Energy, but we were asked to invite individuals we thought were the leading people on this issue.

Our two studies focused on the risks of another major oil disruption and the economic consequences of oil price shocks. I am also submitting both reports that expand considerably over my brief remarks here today. I will also briefly discuss a third issue: Our dependence on the oil-producing cartel. Although these episodes have made oil-importing countries nervous and have imposed some very high costs on people and infrastructure, they have yet to duplicate the types of oil shocks that were experienced during the 1970s and early 1990s. As a result, their economic impacts have been more tolerable than in the past. Despite recent oil price volatility, for example, real GDP in the United States has grown strongly, by 3.5 percent annually since the end of 2001.

A number of knowledgeable experts, however, are concerned about the very real possibility of much more damaging shocks in the future. A group assembled by Stanford’s EMF thought that the odds of, at least, one very damaging shock over the next 10 years were higher than those of an oil market with some volatility but without such a shock. Although another major oil disruption is not a certainty, its likelihood is significantly high enough to be worrisome. Your odds of drawing a club, diamond, or heart from a shuffled deck of playing cards are three out of four. In the EMF study, the participants found that the odds of a foreign oil disruption happening over the next 10 years are slightly higher at 80 percent. Disruption events included surprise geopolitical, military, or terrorist turmoil that would remove at least 2 million barrels per day—an amount representing about 2.1 percent of expected global oil production. Foreign disruptions of this magnitude would have more serious effects on oil prices and the economy than we have seen with the Katrina and Rita hurricanes. Oil prices, however, would rise more and for longer than a few months or a heating season. In the study, experts estimated the amount of oil lost to the market as the number of barrels removed by the initial disruption, minus any offsets from the use of excess capacity from undisrupted regions. The experts were asked to exclude any releases from the U.S. strategic petroleum reserve, as these actions require separate decisions from the government during an emergency. The approach identified four major supply regions where disruptions are most likely. These regions account for approximately similar shares of total world oil production. Collectively, they account for about 60 percent of total world oil production. The study lumped Algeria, Angola, Libya, Mexico, Nigeria, and Venezuela as the first region, called ‘‘West of Suez.’’ Saudi Arabia was the second region, and other Persian Gulf States—Iran, Iraq, Kuwait, Qatar, UAE, and Oman—were the third. Russia and the Caspian States comprised the fourth region. The riskiest areas were the Persian Gulf countries outside of Saudi Arabia and several countries along the Atlantic Basin, such as Nigeria and Venezuela. The least risky area was Russia and the Caspian States. Although the participants found the possibility of disruptions was lower in Saudi Arabia than in several other vulnerable regions, disruptions there would tend to have larger effects.

In the second study on the economic consequences of a major disruption, we sought to understand how easily the economy could absorb such a shock. Figure 1 shows that oil price shocks preceded 9 of the last 10 recessions in the United States. The solid line indicates the path of inflation-adjusted crude oil prices since 1950. The gray bars denote periods when the U.S. economy was experiencing recessions as defined by the National Bureau of Economic Research (NBER). This finding was first advanced by Professor James Hamilton at University of California at San Diego and has been confirmed by numerous other researchers.

If a large disruption does occur, we can expect very serious economic consequences. Large disruptions, especially if they move inflation-adjusted oil prices higher than experienced recently, will cause unemployment and excess capacity to grow in certain key sectors.

Other researchers, however, think that these estimates underestimate the impacts, because they do not focus explicitly on sudden and scary oil price shocks. These other researchers think that our historical experience suggests that the level of real GNP would decline by more, at 5 percent for a doubling of the oil price. My personal view is that the higher estimate may be closer to what would actually happen if we had a major disruption. That would mean a recession.

Some people think that oil shocks may not be a problem because the Federal Reserve Board could intervene and lessen the impact. I have a great deal of faith in the Federal Reserve Board. They have done a marvelous job in controlling inflation, which places the U.S. economy in a better position for offsetting oil disruptions than in previous decades. I am not yet convinced that they can compensate the economy for a large devastating disruption. They would have to make some important decisions, very quickly, at a time when fears were running rampant. They may also find it difficult to stimulate the economy because nominal interest rates are already very low, not only here but also abroad. For this reason, I think that the United States should seriously consider other types of insurance policies that would allow the Federal Reserve Board more leeway and flexibility in controlling our inflation rates.

As a general rule, strategies that reduce our dependence on oil consumption are more effective than policies that reduce our imports. One should view the world oil market as one giant pool rather than as a series of disconnected puddles. When events happen anywhere in the market, they will raise prices not only there but also everywhere that connect to that large pool. Since reducing our imports with our own production does not sever our link to that giant pool, disruptions will cause prices to rise for all production, including that originating in the United States. More domestic supplies do not protect us from these price shocks. Unfortunately, insurance policies are never free. It will cost us something to implement a strategy that reduces our risk to another major oil disruption. But it will also cost us a lot of money and jobs if we do not adopt an insurance policy and the Nation faces another major disruption.

As a result of the 1970 oil price shocks, we shifted away from oil in many sectors in the early 1980s, but that trend has slowed considerably since then. Moreover, transportation remains strongly tied to oil use. The dependence on oil in transportation not only affects households directly through higher gasoline costs but it also raises the costs of transporting goods around the country.

Our most recent studies did not address a third issue that could influence the costs of using oil. It is sometimes argued that the United States could adopt policies that would try to minimize or break the oil-producing cartel’s control over the market. Our forum addressed this issue many years ago. Although the range of views was wide, our working group conservatively estimated that the hidden cost of oil from this source might be $5 per barrel, or 12 cents per gallon. Several years ago, the National Research Council used a very similar estimate in their review of the corporate average fuel economy standards for automobiles. That estimate is not trivial, but it is considerably smaller than various estimates for gasoline’s hidden costs due to pollution, congestion, and automobile accidents.

In summary, the Nation is vulnerable to another major disruption not because the economy imports oil but primarily because it uses a lot of oil, primarily for gasoline and jet fuel. Even if domestic production could replace all oil imports, which I am not advocating, the economy would remain vulnerable to the types of disruptions discussed here. However, it is very appropriate that this committee focus its energy on this issue. Oil-importing governments have committed significant political and military resources to the Middle East over a number of decades in order to provide regional stability that is critical to world oil supplies. Excessive exposure to oil vulnerability risks in this country increases these costs or reduces the capacity to pursue foreign policy objectives that are critical for mitigating nuclear proliferation, terrorism and other risks that reduce global security. I cannot provide you with an estimate for this political cost of using oil, but it is extremely important.

JOSEPH R. BIDEN, JR., U.S. SENATOR FROM DELAWARE.  For most of us, the costs of oil seem far from hidden. They are right up there on the signs at our gas stations, they are there in black and white on our heating bills.

Those prices conceal the hidden tax we pay to OPEC countries who use their pricing power to charge us more than they could get in an open international market for oil.  In addition, those prices conceal the costs of the security commitments we face to protect the supply of oil from OPEC and other foreign sources. And they conceal the costs to our foreign policy, which has been handcuffed for over half a century by our dependence on oil from parts of the world with very different interests from our own.

Finally, the price at the pump hides the long-term environmental damage—as well as the economic and social disruptions—that will come with global warming. The economic, social, political, and environmental costs we face today—and the costs of dealing with their repercussions in the future—will not stay hidden. There is no free lunch, as economists never tire of telling us. Somebody eventually has to pick up the tab. That is a dead-weight loss for the entire economy. Every watt of electricity from our power plants, every minute we run a refrigerator or air-conditioner, every trip to the store, everything shipped by truck or rail—all those parts of our everyday lives costs more than they should. That leaves us with less to spend on other priorities. It make us poorer—as individuals, as families, as a nation.

But there are real costs to our policies, too, of course. As hard as they may be to calculate, we must try to measure the economic costs of our reliance on oil, especially on imported oil, on oil from countries that are themselves unstable or that promote instability.

[In addition to] the costs of our foreign entanglements to secure that oil, [are] the costs we will incur to cope with the climate change that will result from our use of oil and other fossil fuels.

You and I share a concern about all of the foreign policy implications of climate change, Mr. Chairman. Climate change will alter growing seasons, redistribute natural resources, lift sea levels, and shift other fundamental building blocks of economic, social, and political arrangements around the world. It could spark massive human migrations and new wars over resources. We will pay a price for those, too.

In every one of the areas we will look at today, the near term prospects are grim. The rise of the massive economies of China and India will continue to put pressure on supply, will demand tens of billions in investments, will further complicate global oil and energy politics, and will accelerate the accumulation of carbon dioxide and other greenhouse gases.

Half the world’s population—3 billion people—live on $2 a day. Just to provide them with a little electricity to replace wood and kerosene for cooking, to pump water, to light a schoolhouse—will require more than our current energy system can provide.

SENATOR LUGAR. Let me begin with some topical references to what we’re talking about today that I culled from the New York Times this morning. Three perspectives. The first deals with the problems in Ukraine following the election, but really going back to January 1, when Russia cut off some gas lines and delivery to Ukraine. Ukraine citizens then took some gas from lines that were going across Ukraine to Europe. A 48-hour contretemps occurred. The article describes the very unusual organization that was formed by Russia. It starts with the rather bizarre thought that the head of this organization is in a remote house, and no one has ever heard of him. The problem, however, is acute for the citizens of Ukraine, even as they try to form their government. In large part because the gas was shut off, it is apparent that President Yushchenko lost a great deal of authority. He lost it in two ways, one of which was that his country was cold. People were cold, physically. Their industry, which was fledgling, was stymied. I’ve described this, I hope in not ultradramatic ways, as waging war without sending the first troops across the line, or bombing or strafing. You can ruin, decimate a country by cutting off energy.

I mention that, because this comes in the same paper with the headline, ‘‘Automakers Use New Technology to Beef Up Muscle, Not Mileage.’’  In improving fuel economy, virtually everyone agrees that there is only one way to do it. There has to be a will. ‘‘There’s no shortage of technology,’’ said a senior analyst at Environmental Defense. However, the fact is that the automobile companies have decided the most saleable product is more zoom in the cars. If you want to, at least have something that is marketable, a car that gets off the mark faster, rather than slower, is more desirable. Some would emphasize, ‘‘After all, a large car is safer.’’ So, all things considered, the technology may be there, but the market strategy is really to sell something else, which is somewhat discouraging, you know, given our parlay this morning.

Finally, there is a very interesting profile of the new president, or chief executive, of Exxon Mobil.  He said, ‘‘we are looking for fundamental changes, but that is decades away. The question is, what are we going to do in the meanwhile?’’  His suggestion is: Explore for oil and gas. And it commends finds in Indonesia, for example, which have been significant recently. But then it also points out in the article that it’s hard even for Exxon Mobil, with all of its resources, to find enough gas or oil, day by day, to replenish that which is already being produced.

And this is why the President’s statement, ‘‘We’re addicted to oil, and we have to transfer 50 or 75 percent of our needs somewhere else in a while,’’ is important, because it catches the attention of tens of millions of people all at once; whereas, we capture very few.

Essentially, we’re talking here about what we think is going to be catastrophe.  Somebody will say, ‘‘Why was there no vision? Why was there no courage? Why didn’t somebody rise up?’’ This is the attempt to do that, to have hearings like this in which these questions are raised, and hopefully people who are expert, like you, inform us, who are learners and are trying very hard to see what sort of public policy ought to be adopted, or at least advocated by some of us, understanding that you have to be patient sometimes for some of these things get through two houses and be signed.

Senator BIDEN. Gentlemen, there used to be a song that was popular back in the late fifties, when I was in high school, and I forget who sang it, but the lyrics were—I remember, the lyrics went ‘‘Tick-a-tick-atock. Timin’ is the thing. Timin’ is everything.’’ And it seems to me—and I have been of the view that there is an environmental catastrophe in the making.  But I don’t get the sense that that has been in any way absorbed by the public.

If you look at it optimistically—the idea of an environmental tax is—you first have to convince people there’s an environmental disaster in the making,

To see the correlation between a $10-a-barrel tax, or whatever the number is, and their ability to breathe clean air or have—not have their roses grow in December in New York State.  When you have this conversation at the barbeque in the backyard with your next-door neighbor, who works for the electric company or is—you know, is a salesman for whatever, I mean, what do you—how do you talk to them about it? Or do you?

Mr. COPULOS. I had a recent experience that really brought that home to me. I have an article in the current issue of the American Legion Magazine, dealing with this, and possible solutions, and I’ve had 200 e-mails from members of the legion around the country who’d read the article and responded. And, uniformly, they have expressed concern. They kind of understand it, but the problem is, they don’t know what to do about it, and that’s why they’re asking—that, plus some rhetoric about brain-dead people in Washington not addressing the issue.  It’s not that people don’t ‘‘get it.” Americans are doers. They don’t want you to preach catastrophe. They know there’s a problem. They’re not stupid. What they say is, ‘‘OK, now, what are you going to do about it?’’ We’re a practical people. If we point them in the right direction, ‘‘Look, you can do X, Y, and Z, and it makes real good sense’’. Just do these things, and you can save yourself’’— geothermal heat pumps, for example, day one of installation in every heating zone in this country, you save money if you use a geothermal heat pump.

Senator BIDEN.  What would some guy say if you said ‘‘I’ve just convinced Congress to raise the price of a gallon of gasoline at the pump 35 cents or a dollar’’? Is he going to say, ‘‘Great’’?

Mr. COPULOS. He’s going to say, ‘‘I’m going to vote against him.’’

Senator BIDEN. That’s right.

Mr. COPULOS.  There were only two times—1973 and 1979—when purchases of autos related to mileage—and they both were specifically tied to an absence of energy. We had gasoline lines, and people were shooting each other. And that gets down to a very fundamental point that we have to understand. And that is that it is the availability of energy that drives behavior, not the price. Whatever the price of energy is, we will adjust, sooner or later. The only times prices are a factor is if it’s a shocking price. In Maryland, in several other States, we see electricity prices predicted to go up 72% this summer. Consumers are up in arms, because they see this as a huge spike. But, I’ll tell you what, 6 months after it’s in effect, people will have adjusted, and they won’t have changed their behavior.

Senator BIDEN.  I hope that’s wrong, but I’m afraid  you may be right.  What I’m deliberately and intentionally asking [given] the extent of the problem, the need to deal with the problem, and the fact that those boneheads here in Washington aren’t paying attention to this, and we’re going to all say, 2, 5, 10, 12 years from now, ‘‘My God, why didn’t anybody talk about this?’’ So, we’re all on the same page on—in that regard.

One of the things that seems to sell with average people, as it relates to the notion of whether or not their behavior will be affected by anything, is: Should we be spending more Federal tax dollars investing in alternative energy sources? Should we be doing it through incentives? Should we be doing it through direct loans?

In Huntington’s statement he said strategies to reduce our dependence on oil are more effective than policies that reduce our imports. We should view the oil market as one giant pool, rather than a series of disconnected puddles. Whatever—when events happen anywhere in the market, they will raise prices, not only there, but also everywhere, that connect to the—that large pool. More domestic supplies will not protect us from these price shocks.

The oil companies and others—have this nice mantra,  that the way in which to drive down prices is, ‘‘We’ve got to go out and find more oil,’’ particularly domestic oil, and then we’re not home free, but we’re going to have a lot more control.  For example, we passed an energy bill at the time when the oil companies were having gigantic surpluses, in terms of profit —and I’m not making the populist argument, but just a factual argument. And we decided we needed to give them a $2.5 billion incentive for them to go out and look for more oil. And people here, they drank the Kool-Aid.  They said, ‘‘Yeah, it sounds right, because we’ve got to get more domestic oil.’’ Talk to me a moment about what benefit—let’s assume we were able to discover and produce three times the amount of oil we are now producing domestically—and we found it overnight—that could come online over the next 4 years. We found it in—you know, in the middle of Delaware or, in Maine, in Washington State– in unlikely places.  What would be the effect of that?

Dr. HUNTINGTON. The price is going to rise for everything, and just having more domestic supplies is not going to protect you from that price rise. More domestic supplies is going to help pull down the price of oil on the market. Just by putting that more supply on, we will help the market out that way. So, the price will be lower. And so, that would actually be beneficial. If it was economic, it would be beneficial.

The problem would come in if it was not economic. Then you’re really hiding the cost, in a way. You’re saying, ‘‘Yes, I’m putting on more supply, but it’s really costing the taxpayers a whole lot more money somehow, because we’re giving it a subsidy for it to come on.’’  [ My note: which is what happened, but not with subsidies, but with another financial bubble similar to the mortgage bubble – shale companies went $300 billion into debt. ]

Mr. COPULOS.  One point we have to look at here, in terms of the argument over domestic oil/foreign oil, misses the point.  We’re going to run out of oil. That’s a given. If you take a look at global demand, I don’t care how much we produce.  The Chinese are adding 120 million cars. You look at  just Third World demand alone, in 2025, is going to require an additional 30 million barrels a day. When you add in the rest of us, it’s 40. And there’s no ‘‘there’’ there. Can’t be done.

What we need to do is to facilitate the transition away from a reliance on oil as a motor fuel and in other areas. But to do that, we have another problem. There are 220 million privately owned vehicles on the road today. They have an average age of 8.5 years, an average life span of 16.8 years. So for a decade, because people are not going to junk their cars, you’re going to have to do something to provide them with fuel. That means you need something that can burn in those cars.

Senator BIDEN. Let me conclude by recounting a similar example. In 1974, I was a young Senator  and I got a call from a fellow named Mr. Ricardo, chairman of the board of the Chrysler Corporation, and Leonard Woodcock, the president of the UAW, and he  asked if they could come to see me. And they sat in my office and jointly told me that I could not support the Clean Air Act, because the Clean Air Act was going to put restrictions on tailpipe emissions of automobiles. I’ll never forget Mr. Ricardo looking at me—this was 1974—and saying, ‘‘You don’t understand’’ — we now have 18% of the large-car market. It is our plan, in the next 5 years, to get 35% of the large-car market.’’ So much for management vision about how they were going to move.

RICHARD G LUGAR, INDIANA, CHAIRMAN. Let me just pick up a little bit on… what is being offered to American motorists in this particular year. The New York Times story that I mentioned earlier says that the 1975 Pontiac Firebird could get from zero to 60 miles per hour in 9.8 seconds. The 2005 Toyota Camry can make it in 8.1. Now, the point they’re trying to make is that the developments in the last 30 years have been largely in terms of performance and the ‘‘zoom’’ speed.  The dilemma here is described further in the New York Times story by someone who noted that he would like to get better gas mileage, but he’s been driving  a truck for years, and he’s comfortable in a truck. He doesn’t want a Prius. He wants a truck. And, therefore, even though it does cost more, all things considered, that is his comfort level, his feeling of safety. He doesn’t want to zoom off at 5.1 for the first stretch after the stoplight, but he does really want to have safety and comfort. We’ve been talking, ‘‘Does price at the pump influence people?’’ Probably, somewhat.

Now, I want to zero in on one of the strategic predicaments. And this really has to do with the thoughts that you had, Mr. Copulos, on the Armed Forces. You point out, just historically, that in 1983 the implicit promise to protect Persian Gulf oil supplies became an explicit element of U.S. military doctrine with the creation of the United States Central Command, CENTCOM. And their official history makes the point clear, you point out, and I quote, ‘‘Today’s command evolved as a practical solution to the problem of projecting U.S. military power to the gulf region from halfway around the world.’’ And they further have refined the doctrine by saying, ‘‘Without oil, our economy could not function.’’ And, therefore, protecting our sources of oil is a legitimate defense mission. And the current military operation in Iraq really is a part of that mission.

To date, supplemental appropriations for the Iraq war come to more than $251 billion—this is supplemental appropriations, on top of our regular military budget—an average of $83.7 billion a year. As a result, when other costs are included, the total military expenditures related to oil now are $132.7 billion annually. That is a big figure.

But it’s not reflected, in terms of our market economy. The automobile companies have to make their own strategy. So do the oil companies. What I’ve suggested from the New York Times story is their strategy is to use technology for so-called performance and safety, not for what we’re talking about today with regard to disruption or the oil economy or what have you.

Some oil companies say, ‘‘Our job is performance for our stockholders, first of all, those who have invested in this place. And, second, it’s to try to think about the future, and that is getting more of whatever we sell. We’ll do a little bit of research on the side and genuflect in that direction. But that is very long term.  Not this year. We are oil people.’’  That is still, I’m afraid, the prevailing view among major players in this. What I’m trying to figure out—and I’m certain Senator Biden shares this thought—how do we get a recognition that our military doctrine, our national defense, now commits $132 billion a year to the protection of Middle East oil lines? Not just for us, but for everybody else, for that matter.

You, in your paper, even go back to Franklin Roosevelt and his original meeting with the Saudi King in which, essentially, this is the assurance that came, ‘‘If you produce it, we’ll protect it.’’

Americans have not only spent money, but they’ve lost a lot of lives defending all of this. And that is not reflected in the market situations that we’re talking about today.

Do we make an explicit foundation or endowment in which we set aside so much? Because simply to add $1.50 to the price of a barrel or a gallon or so forth may not make it. It may be that my friend, who is in the article, says, ‘‘I still want the comfort of my truck.’’ So, in terms of a market choice, I’m not sure we get there. Maybe some administration will come along and say, ‘‘Listen, folks, this is what our doctrine costs, $132 billion a year,’’ explicitly, ‘‘plus whatever lives we lose, whatever risks Americans take, to keep all this going. Do you like that, or not?’’ As Senator Biden says, our constituents are saying, ‘‘Why don’t you guys do something about $3 gas?  Why are you just sitting there in Washington, fiddling around?’’ This is the big issue out here. If I had a dollar for every Republican banquet I’ve attended in which people, in February, March, or whenever a crisis occurs, come to me and say, you know, ‘‘Why aren’t you doing anything about that?’’

That’s the politics of the country. Why? Because the public recognition of this problem is at that point, that $3 at the pump. They pay it, but they’re irritated. And they think that we ought to perform and get it down. Now, we can say, theoretically, that’s a part of the problem—it goes up, down. It’s forgotten. People go through an upset period, but then they get over it. But, here, you’re looking at climate change, which keeps it going on inexorably, whether we’re having this discussion or not. Or disruptions—you’ve illustrated those in your paper, Dr. Huntington, that are actual facts. Plus, you know, the huge problem that might have occurred in the Saudi refinery if the terrorists actually had gotten down the road and disrupted 13% of the oil supply that day. You’ve indicated we could have as much as a 5% loss in GNP. Well, we don’t have 5% gain in GNP now. That takes us to a negative figure. That takes us to a huge unemployment in our country. The same motorist who wanted the comfort of his van is unemployed, and then the whole agenda of this government changes. How do we bring compensatory payments, safety nets, retraining? What in the world do we do at this particular point? And whatever is on these charts today is sort of forgotten, but it shouldn’t have been, because this is the reason we got to that point.

As a practical matter, how do we translate the wisdom of this testimony into measures that give us some protection?

Maybe if we try some element of pricing that is different from what we do now, without getting into all the political hazards that Joe Biden has discussed, namely, woe be to the person that suggests a 25-cent tax. They’d say, ‘‘Why?’’ Or the thought that you do a little bit more tax each year, that is even worse, because you invite a congressional candidate or a President to come along and say, ‘‘We’ve had enough of this kind of stuff. I’m going to reduce your taxes. And we’re not going to take a look at a long-term future.’’

Dr. HUNTINGTON. One of the ways to look at this hidden cost is as a tax put on people’s purchase of gasoline.  You won’t see a lot of effect in the first few years. The real effect will be in the types of vehicles that people buy later on. [Consumers may not do this right away, but the auto makers will] realize that [autos] need to be more efficient…. That is the important effect.  Let’s say we’ve just decided that a tax is not the way we’re going to go, and that we need another approach. The one way I look at this hidden cost is that it’s a measure of how much you should do in an area. Suppose you want to discourage gas-guzzling vehicles in some manner, or you want to encourage a substitute fuel for gasoline. What it should tell you is that you shouldn’t go above, perhaps, $10 a barrel, or whatever.   You shouldn’t make it more costly than whatever that hidden-cost estimate is.

Senator BIDEN.   It seems to me that American business and industry is much more sensitive to price than the consumer at the pump is. If, in fact, the major or small businesses in my State, realize they can add literally a penny or two pennies to their bottom line by economically shifting to another source of fuel, they’ll do it. They’re much more price sensitive—even though they pass on the price, because they’re competing.  If that’s true, has anybody thought about strategies that deal with that smaller percent of the market, where you won’t get as big a bang for the buck, but they will be more likely to embrace the change that takes place—the incentive offered, or the disincentive? Have there been any studies done?  There seem to be two hidden costs that fall into categories the American public could understand. One is the hidden costs relating to environmental costs. The other hidden costs are defense costs. It seems to me  that the public believes that the defense costs are more real, apparent, and immediate than the environmental costs, even though I think they know there are environmental costs.

Does anybody think we would be in the Middle East if, in fact, we were energy independent?

Is there any American out there willing to give their son or daughter’s life if in fact, we didn’t need anything that the oil oligarchs had to offer? They get that pretty quickly.

So, as you think through the things that we can, or should, be doing— what about focusing on the smaller end of the consumption continuum here—that is, industry? And what about a strategy relating to making the defense piece a more palatable or understandable argument as an incentive to change behavior?

When it gets down to it, we have to come up with concrete, specific ways to fiddle. I mean, you know, it’s not like we can’t talk about this. Assuming the Federal Government has any role to play in affecting this behavior.

 

[ Scorecard on oil dependence or vulnerability mentioned above: Senator Lugar (5), Mr. Copulos (7), Mr. Huntington (4), Senator Biden (1) ]

Posted in Caused by Scarce Resources, Energy Dependence, Energy Policy, Military, Peak Oil | Tagged , , , | Leave a comment

Energy return of ultra-deepwater Gulf of Mexico oil and gas

Moerschbaecher, M., John W. Day Jr. October 21, 2011. Ultra-Deepwater Gulf of Mexico Oil and Gas: Energy Return on Financial Investment and a Preliminary Assessment of Energy Return on Energy. Sustainability 2011, 3, 2009-2026

[Excerpts from this 18 page paper follow, graphs and tables not included. A related post is “How much net energy return is needed to prevent collapse?” ]

We believe that the lower end of these energy return on invested (EROI) ranges (i.e., 4 to 7:1) is more accurate since these values were derived using energy intensities averaged across the entire domestic oil and gas industry.

Abstract: The purpose of this paper is to calculate the energy return on financial investment (EROFI) of oil and gas production in the ultra-deepwater Gulf of Mexico (GoM) in 2009 and for the estimated oil reserves of the Macondo Prospect (Mississippi Canyon Block 252). We also calculated a preliminary Energy Return on Investment (EROI) based on published energy intensity ratios including a sensitivity analysis using a range of energy intensity ratios (7 MJ/$, 12 MJ/$, and 18 MJ/$). The EROFI for ultra-deepwater oil and gas at the well-head, ranged from 0.019 to 0.022 barrels (BOE), or roughly 0.85 gallons, per dollar. Our estimates of EROI for 2009 ultra-deepwater oil and natural gas at the well-head ranged from 7–22:1. The independently-derived EROFI of the Macondo Prospect oil reserves ranged from 0.012 to 0.0071 barrels per dollar (i.e., $84 to $140 to produce a barrel) and EROI ranged from 4–16:1, related to the energy intensity ratio used to quantify costs. Time series of the financial and preliminary EROI estimates found in this study suggest that the extraction costs of ultra-deepwater energy reserves in the GoM come at increasing energetic and economic cost to society.

Introduction

Since the early 1970s, rates of domestic oil production in the U.S. have decreased, and domestic demand has been met increasingly by oil imports. Domestic oil is becoming scarcer and more difficult to produce due to reservoir depletion and a sharp decrease in the number of large, easily accessible discoveries onshore or in shallow coastal environments [1-3].

Consequently deep water and ultra-deepwater Gulf of Mexico (GoM) oil has become increasingly important to U.S. domestic oil production over the last 20 years [4]. Not surprisingly, energy extraction in the ultra-deepwater environment requires more financial and energy resources than from onshore or in shallow-water environments. Drilling costs increase exponentially with depth in the ultra-deepwater environment [5].

The increase in energy and financial costs results in decreased net energy available to society. The recent era of deep-water drilling is often associated with the notion of national energy independence and has been touted as a potential solution to decrease dependency on imports. However, proven oil reserves in the federal waters of the GoM (approximately 3.5 billion barrels at year-end 2008) are inadequate to support national domestic oil consumption for even one year [6,7].

Production of deep and ultra-deepwater reserves has become profitable in part due to the establishment of government subsidies and the increase in oil prices over the last decade [7-9].

Gately (2007) reported without explicit quantification that the energy return on investment (EROI) for deepwater and ultra-deepwater oil is low, decreases with an increase in water depth and is less than 10:1 [10]. Gately et al. [10] estimated EROI for deepwater (depths of 900 m +) GoM using production data from the Minerals Management Service (MMS, now Bureau of Ocean Energy Management, Regulation and Enforcement) combined with previously published operational dollar cost estimates [11] and energy intensity factors which allow for the conversion from dollars to energy units [12]. EROI including only direct costs at 900m+ water depths ranged from 10–27:1 for the years 2000–2004 and 3–9:1 for the same years when including indirect costs of production [10].

The energy intensity factors used in past studies may be inaccurate due to changes in technology, advances in energy efficiency, and the scale of offshore operations since they were first proposed [12,13]. Unfortunately it is impossible to verify the accuracy of Gately’s study [10] or to recreate either analysis since no data were given.

The purpose of this paper is to calculate explicitly the Energy Return on Financial Investment (EROFI) [14] of oil and gas production in the ultra-deepwater Gulf of Mexico (GoM) for 2009 and the EROFI of oil in the Macondo Prospect. We also derived preliminary EROI estimates based on a range of energy intensity ratios [14,15].

The EROFI is an estimate of the financial cost for the production of a barrel of oil or natural gas expressed as barrel of oil equivalent (BOE). EROFI is the amount of money expended by an energy producing entity divided by the amount of energy produced. An energy producing entity must produce energy at sufficient economic profit while paying off the costs of the full supply chain of labor, materials, and transport in order to maintain a profitable business [14].

Profitability is, however, related directly to the supply chain costs. The entity fails to be financially profitable when the incurred costs are greater than the price of the product being sold. EROFI analysis provides insight into the base price for which a barrel of oil must be sold in order to maintain economic profitability.

EROI analysis is a tool used to measure the net energy of an energy supply process [16]. The net energy of an energy source is the amount of energy returned to society divided by the energy required to get that energy [17]. An energy source becomes an energy sink when the amount of energy used in extraction is greater than the extracted amount of energy (EROI < 1:1).

In 1930, the average domestic oil discovery yielded at least 100 units of energy equivalent output production for every unit of input, and that oil could be produced at a return of about 30 for one. [15,18]. Today, the average net energy measured by EROI of domestic oil production has declined to about 10:1, or 10 units of output for every unit of input [15,18].

The importance of EROI to a society is that the analysis provides a measure of the surplus energy gained from an energy source that can be diverted to other sectors of the economy to produce goods and services other than those required for energy extraction.

Decreasing EROI increases the proportion of economic output that goes into the energy extraction sector of the economy leaving fewer economic and energy resources available for non-energy extraction sectors. Net energy, and the associated surplus energy to society, declines with declining EROI. The trend towards low EROI fuels affects the quantity and affordability of the fuel supply [3].

This paper presents a detailed although non-comprehensive analysis of the EROFI for ultra-deepwater oil and gas in the GoM in 2009 and potential Macondo Prospect reserves using updated financial data. In particular data that have become available in the wake of the Deepwater Horizon oil rig disaster are used to increase understanding of the EROFI for energy production in the federally regulated ultra-deepwater outer continental shelf of the GoM. Because of a lack of access to accurate, comprehensive ultra-deepwater energy input production data and a degradation of federal energy use statistics, it is necessary to use financial data and convert this to energy inputs using energy intensity ratios in order to estimate the energy return on energy investment in the ultra-deepwater GoM in 2009.

GoM Oil Production

GoM federal offshore oil production accounted for approximately 29% of total U.S. oil production in 2009. Deepwater and ultra-deepwater GoM areas contributed to 80% of total federal offshore GoM oil in 2009 [19]. Deepwater (1,000–5,000 ft.) oil production in the GoM became a major part of U.S. domestic energy production in 1998 when shallow water production began to decline. Deepwater production peaked in 2004 and has been in decline ever since. Ultra-deepwater (>5,000 ft.) production has helped to offset the deepwater production decline in a similar manner as deepwater production had previously offset shallow-water production in the late 1990s.

Federal offshore production, formerly declining, increased by 33% (over 147 million barrels) between 2008 and 2009 [7,20]. The increase in production for 2009, however, reflects not only production from the new projects that came online, but also the addition of volumes that were shut-in during 2008 as a result of hurricane activity [9]. For oil, 75-percent of the increase in production in 2009 is a reflection of shut-in volumes coming back online [9]. Approximately one third of federal Outer Continental Shelf (OCS) oil production and one quarter of natural gas production in 2009 came from ultra-deepwater (depths >5000 ft).

The production from shallow waters is projected to continue to decline into the future [4]. Shallow water discoveries have declined from approximately 44 discoveries in 2005 to four discoveries in 2009 [21]. Deepwater and ultra-deepwater production is important for offsetting the loss of production from onshore and shallow water in order to maintain the domestic oil industry in the Gulf Coast region. Operating offshore in ultra-deepwater is more complex and more capital-intensive than operating in onshore environments where fixed costs are smaller and production profiles tend to decline at more predictable rates [4], which suggests that EROI there should be lower than for onshore oil. In addition, the largest remaining oil reserves in the GoM exist in the deepwater and ultra-deepwater environments [9] and thus we would expect that EROI would be lower than for onshore production.

The economic profitability of deep and ultra-deepwater production is dependent upon the price of oil and costs associated with exploration, production, transportation, processing, and delivery to end use as well as government subsidies. Past studies [22] concluded that a discovery containing at least about 1 billion barrels recoverable is required to support an ensuing development project for ultra-deepwater oil, which may cost upwards of $1 to $2 billion dollars in up-front Capital Expenditures (CAPEX, 22). Larger reservoirs generally yield higher production rates per well, thereby increasing net energy and financial profitability because less energy and money is required to extract oil from a larger reservoir (i.e., [14]).

GoM Rig Counts

The number of oil drilling rigs in Federal OCS waters affects the energy return on financial and energy investment. Increasing drilling effort does not always lead to an increase in production [17]. An increase in the number of rigs increases the financial costs of energy extraction, as more energy, labor, and raw materials are required per unit of energy produced. So long as rigs are adding proportional supply to the total energy produced, they are able to offset the increased financial and energy costs of ultra-deepwater projects. The technological advancement in rig design over the last 20 years has allowed for floating rigs including spars, semi-submersibles, and tension leg platforms to tap into multiple wells often miles apart in order to exploit reserves more efficiently, thereby decreasing financial and energy costs [23]. A few dozen rigs were responsible for 72% of the ultra-deepwater oil production in the GoM in 2007 compared to the five thousand or so rigs in shallow water [4]. The percentage of production attributed to smaller rigs is expected to continue to decline into the future [9].

The lifespan of a rig affects the amortized cost of the rig. Rigs have a lifespan of about ten years before a major work over is required [24,25].

Most ultra-deepwater drilling rigs were constructed within the last twenty years, as was the nine year-old Deepwater Horizon. The long-term leasing contract process allows rig construction costs to be recouped over a period of years and insures rig utilization. Rigs are mobile and often produce oil from several different fields over the course of their operational lifetime.

Daily operating costs for deepwater rigs have doubled over the course of the last decade partly as a result of increasing energy costs required by production operations for larger floating rigs often located 100+ miles from shore. At the same time, deepwater and ultra-deepwater drilling operations have become profitable in the age of oil at $50+/barrel and government subsidies [21,26]. Global investment trends provide evidence for continued deepwater production and decreased shallow and mid-water production [27].

Macondo Prospect Reserves and Cost Estimates

The Macondo Prospect is an oil and gas reservoir located in Mississippi Canyon Block 252 in the northern GoM just southeast of the mouth of the Mississippi River. The reservoir is in water depths greater than 4,900 ft. (1,700 m) and located more than 17,700 ft. beneath the ocean floor. BP officials estimated that there were approximately 50–100 million barrels of oil associated with the Macondo Prospect [28,29]. Oil companies do not usually extract 100% of the oil in a field [29]. We estimated that the reservoir would yield about 30% of the total reserves or between 15 million and 50 million barrels prior to the blow out.

The Deepwater Horizon rig was valued at $560 million when delivered to Transocean Ltd. in February 2001 and collapsed into the GoM in April 2010 during deployment at the Macondo Prospect [30]. Deepwater Horizon was a fifth generation semi-submersible offshore drilling rig that required approximately three years to construct. The average construction cost of floater rigs in operation in 2009 was $565 million dollars per rig [31]. At the time of its demise, the Deepwater Horizon was leased for three years at a total cost of $544 million which equates to a bare rig daily lease rate of $496,800/day.

The average daily operations cost for U.S. GoM semi-submersible rigs, including crew, gear, and vessel support operations for 2009 was approximately the same as the daily lease rate [32]. Thus, total daily operational cost was $993,600. This estimate is consistent with industry-wide costs for similar deepwater oil rigs [33,34].

Energy Intensity Ratios

The energy intensity ratio is the amount of energy required to produce $1 of GDP (or of some component of GDP) in a given year. The energy intensity ratio allows for the conversion from financial costs to energy costs in this and other studies. The energy intensity of production is correlated to effort, one variable of which is the number of rigs employed in production [35]. Other variables affecting energy intensity include the size and energy requirements of rigs and support vessels as well as the depth of resource deposits and distance offshore. Energy intensity ratios can be used to estimate approximate costs for many fuels where economic but not energy data are available [14,17,36], which was the case for our study. Usually it is applied only to indirect investments for situations where direct energy is known, such as for other studies in this volume.

Energy intensity ratios, for the economy as a whole and for individual industrial sectors, change due to inflation, as a result of material availability, and through efficiency gains. The mean energy intensity ratio for the U.S. economy in 2005 was approximately 8.3 Megajoules (MJ) per $1 USD.

The oil and gas industry is an energy intensive sector with an estimated energy intensity ratio of 20 MJ per $1 USD in 2005, while heavy construction during the same period was estimated to be 14 MJ per $1 USD [17].

Advances in energy efficiency and the steady decline in energy intensity ratios over time provide the rationale for estimates used in this study [37]. Previous research has shown that energy intensity ratios serve as an effective proxy in determining the EROI of various energy sources [38]. Energy intensity ratios, however, are not the singular, or best, method for determining EROI. Ideally, energy inputs would be measured directly for each step in the production process. This is often proprietary data not made available to the public or unaccounted for and therefore unavailable. Because of data limitations on energy inputs for ultra-deepwater production, the use of financial investment data used in conjunction with energy intensity ratios allows for a first approximation of EROI in analyzing an extremely important issue given the limited data availability and accessibility and the failure of earlier EROI studies to provide explicit data [14].

The objectives of this study were threefold: (1) To derive estimates of the energy return on financial investment for oil and oil + natural gas in the ultra-deepwater GoM in 2009 based on production and financial cost data; (2) To derive estimates of the energy return on financial investment for oil and oil+natural gas in the ultra-deepwater GoM in 2009 based on the same data plus estimates of energy intensities; and (3) To derive an estimate of the energy return on both financial and energy investment for the estimated total oil reserves of the Macondo Prospect based on industry stated estimates of reserves and financial cost data.

Methods

The methodology employed in this paper is based on the second order comprehensive EROI (EROIstnd) protocol described by Murphy and Hall [36] and previously by Mulder and Hagens [39]. We calculated energy return on financial investment based on King and Hall [14]. The EROFI for potential reserves in the Macondo Prospect was estimated based on annual costs multiplied by the number of years it would take to extract the reserves and divided. The EROFI for total energy produced in the ultra-deepwater GoM in 2009 was determined by dividing the by the reserve volume divided by the total financial costs per operational year. EROI estimates were then estimated using energy intensity ratios established for 2005 combined with production cost data adjusted for inflation. Financial input data includes rig construction and operation costs along with exploration costs. Energy output is based on Macondo oil reserve estimates and 2009 GoM ultra-deepwater oil and natural gas production.

The Macondo Prospect is an average ultra-deepwater well with respect to depth and location [40]. Since all GoM well reserves differ in size and productive capacity, we use the Macondo Prospect field as a proxy for similar sized ultra-deepwater GoM reserves. The period of time required to extract the Macondo reserves is important to the analysis. Increased extraction efficiency decreases operating and production costs that positively impact EROFI. A constant flow rate production profile would result in a higher energy return because of a shorter time for total production. However, virtually all producing wells follow a bell-shaped production profile based on the three phases of ramp-up, plateau, and decline [4]. We calculated EROFI and EROI values for constant and bell-shaped production profiles to demonstrate this difference. The bell-shaped profiles were generated using the MMS full potential scenario forecast methods based on past deepwater GoM production wells [41-42] as follows.

For total recoverable reserves of 50 million barrels in the Macondo Prospect and 30% extraction efficiency, 15 million barrels of oil would be pumped in 600 days if a constant flow rate of 25,000 bpd is assumed. If all of the 50 million barrels were recoverable at the same constant flow rate, it would take 2000 days. Peak production is based on the estimated ultimately recoverable reserves using the MMS full potential scenario forecast equation:

Peak Rate = (0.00027455) × (ultimate recoverable reserves) + 9000 where the peak rate is in barrels of oil equivalent (BOE) per day and the ultimate recoverable reserves are in BOE [41,42].

The parameters in this equation were derived by plotting maximum production rates of known fields against the ultimate recoverable reserves of those fields, and performing a linear regression between reserves and production [41,42]. These reserve estimates are on a field-by-field basis, so MMS assumed that this relation, based on historic field trends, could be applied on a project basis [41,42]. This equation is generally applied to reserves of 200 million barrels of oil equivalents and more and assuming peak production lasts for four years. For our analysis, we assumed peak flow rates lasted two years since Macondo reserve estimates were one half to one quarter of 200 million barrels and then declined at 12%/year [9]. During the first year of operation, production was set at half its peak rate [9,41,42].

Energy output for the entire GOM study was (BOE) produced in the ultra-deepwater GoM in 2009 [19]. One BOE is equal to 5,800 cubic feet of natural gas. Ultra-deepwater GoM production in 2009, was 182 million barrels of oil and 572 billion cubic feet of natural gas [9]; equivalent to a oil+natural gas total of 291 million BOE. Production costs were based on published rig counts and rig construction costs (Table 1) [31,43]. At any given time there were 25–30 rigs producing in ultradeepwater [43]. Amortized rig construction costs are based on the number of years it takes to drill a well and extract the resource.

Table 1. Estimated 2009 production costs for the Macondo Prospect and ultra-deepwater GoM rigs. Study # of Amortized Rigs Construction Cost Macondo Prospect 1 $62.2 million per year for nine years Ultra-Deepwater 25–30 $56.5 million per GoM year for 10 years Operating Cost $1 million per day $1 million per day Exploration Cost $1 million per day for 100 days $1 million per day for 100 days Total Cost per Year $527.2 million $13–15.7 billion

Exploratory costs are operational costs associated with finding and accessing a well prior to production. Technological advancement has led to a decrease in the amount of time required to drill a well. The first wells drilled in the GOM and Brazil took 180–240 days on average [43]. Now these wells are being drilled in 90–120 days [43] so we used 100 days at $1 million dollars per day based on average production costs.

We used published energy intensity ratios to derive the EROI values from the EROFI. The energy intensities are rough estimates of the energy used to undertake any economic activity derived from the national mean ratio of GDP to energy [17]. These ratios can be used to estimate rough costs for many fuels where economic but not energy data are available [44] and are based on non-quality corrected thermal equivalents [18].

The EROI calculation is limited by available data and is an estimate at the wellhead and not at the point of end use.

Estimates of the energy intensity ratio of U.S. oil and gas extraction averaged across all domestic fields and well depths was 9.87 MJ/$ in 1997, 14.5 MJ/$ in 2002, and 20 MJ/$ in 2005 [17,45]. This increase was not due to the energy intensity per dollar increasing, but because more of the downstream energy requirements were included in the higher energy intensity values. Based on these reports, we used energy intensity ratios of 7, 12, and 18 MJ to carry out a sensitivity analysis of the impact of different energy intensity ratios on EROI.

Energy output was based on 1 barrel of oil = 6.11 Gigajoules. EROFI costs are in 2009 USD$. EROI is based on 2009 USD$ costs, corrected for inflation using a factor of 1.10 [46], and presented in 2005 USD$ in order to maintain consistency with the energy intensity ratios used in the analysis. Total energy inputs are the summation of 10-year amortized rig construction costs, 100-day exploration costs per rig, and operational costs converted to energy units using the three different energy intensity ratios. Construction, operational, and exploration costs were summed and were then converted to energy units using the three energy intensity ratios described above.

A number of costs were not included because data were not available. These included rig and operator insurance costs, costs associated with enhanced recovery techniques and costs associated with dry holes. However, these costs are substantial [47].

Results

The financial cost per barrel of ultra-deepwater oil in the GoM at the well-head ranged from $71/barrel to $86/barrel based on the number of rigs deployed in production. The EROFI for oil + natural gas at the well-head in the GoM in 2009 ranged from 0.019 to 0.022 barrels (BOE), or roughly 0.85 gallons, per dollar, based on the number of rigs deployed in production.

The financial cost at the well-head per barrel of oil available in the Macondo Prospect based on the constant flow rate production profile, was $62/barrel assuming 15 million barrels produced per day, or $45/barrel if producing 50 million barrels over 2000 days. The EROFI at the well-head was $141/barrel of oil in the Macondo Prospect if 15 million barrels were produced over 4 years, or $84/barrel if producing 50 million barrels over 8 years is.

The preliminary EROI based on financial costs and subsequent sensitivity analysis using three different energy intensity ratios. ranged from 4:1 to 14:1 for 2009 total GoM ultra deepwater oil production while the EROI for total oil plus natural gas production in the ultra-deepwater GoM in 2009 was slightly higher at 7:1–22:1. The EROI for the Macondo Prospect using the MMS full potential scenario forecast varied from 4:1 to 16:1. The EROI of the constant flow rate scenarios for producing 15 and 50 million barrels in the Macondo Prospect at 25,000 bpd

Applying the MMS full potential scenario forecast equation to Macondo field reserves yielded a peak rate of 13,118 barrels/day for 15 million barrels and 22,728 barrels/day for 50 million barrels. If 15 million barrels is recovered, the well would be completely depleted within four years and if 50 million barrels is recovered, the well would be depleted within eight years. The financial costs associated with Macondo reserves on a four-year time scale total $1.8 billion while the costs on an 8-year time scale total $3.5 billion dollars. The EROI using the MMS production equation for one well producing total reserves of 15 and 50 million barrels, respectively, from the Macondo field for four years and eight years, respectively,

Discussion

Our values for EROFI at the well-head ranged from $45/barrel to $141/barrel. By comparison, production costs for Mideast and North Africa oil ranges from $6/barrel to $28/barrel [48] and for the United States overall roughly twice that. These values for the GOM indicate that if these resources are used as the basis of US oil use the price of oil would have to be in the range of current prices, which maybe too high to sustain economic growth [14,17].

Energy intensity ratios from the literature were then used to convert these results to energy-based EROI. The sensitivity analysis yielded EROI values ranging from 4–22:1. The lower end of this range of EROI may be more accurate since these values were derived using energy intensity ratios for the oil and gas industry. Increasing rig counts and time required for extraction negatively influenced EROI for the United States as a whole. EROI for domestic oil and gas has declined from 100:1 for discoveries in 1930 and about 30:1 for production in the 1950s–1970s to about 10:1 in 2005–7 [16,18].

EROI values presented in this study are in the lower range of previously published estimates for domestic oil production, especially if our preferred high energy intensities are used. The EROI for oil and gas at the well-head in ultra-deepwater in 2009 ranged from 7–22:1, while the EROI for oil alone in ultra-deepwater was 4–14:1. Most of the variability was our choice of energy intensities used per dollar, The Macondo Prospect EROI for oil alone using the MMS production profile curve yielded a similar EROI of 4–16:1 based on estimates of varying reserve sizes and costs associated with extraction.

The constant flow rate scenario for the Macondo Prospect yielded similar results in the range of 7–20:1. These values fit the trend of decreasing EROI over time as oil was produced from increasingly expensive fields.

Our EROI values can be compared to other reports of EROI for energy production processes including 80:1 for coal, 12–18:1 for imported oil, 5:1 or less for shale oil, 1.6 to 6.8:1 for solar, 18:1 for wind, 1.3:1 for biodiesel, 0.8 to 10:1 for sugarcane ethanol, and 0.8 to 1.6:1 for corn-based ethanol [3,44].

The EROI values of this study were based on financially-derived energy costs of production at the well-head only, and did not include all of the indirect costs of delivery to end use. Thus, these estimates are conservative.

If all indirect costs were included in the EROI calculations, EROI would decrease

This underscores the need to make accessible better energy accounting information so that more refined analyses of the EROI of ultra-deepwater energy extraction can be carried out. Unfortunately, funding is being cut for the U.S. Energy Information Agency, the agency charged with providing such information to the public [49]. The lack of data availability regarding energy extraction costs in the GoM makes it difficult for the individuals, interest groups, and political representatives to make wise decisions regarding offshore energy policy. Informed decision-making on energy policy is essential to the long-term sustainability of society.

One of the energy cost factors only partially included in this study is the number of exploratory vs. development wells drilled in the ultra-deepwater in 2009. Exploratory wells are necessary for new discovery and in the period from 2004–2008, 226 wells were drilled in the ultra-deepwater GoM, 31% of which were successful [9]. The number of exploratory vs. development wells drilled in 2009 was not factored into the EROI calculations of this study due to data availability constraints. The impact on EROI would depend on how many of the exploratory wells ultimately produce oil and in what quantity. In addition, the insurance costs associated with rigs operating in ultra-deepwater were not included but are estimated by market analysts to range between 10–35% of the present value of the rig [50]. For a $500 million dollar rig, that would add between $50–$175 million in insurance costs per year of operation. If all of these costs were included it might decrease the EROI by perhaps 25 percent.

More expensive, higher capacity rigs produce higher EROI oil when producing from large reservoirs with high daily flow rates. As daily production declines from the plateau phase, the EROI of the well decreases since the same operational and infrastructural costs are being utilized to produce less oil and gas. The tendency to ramp up production early in the production process to get the maximum possible production rates, leads to more rapid decline rates of deep and ultra-deepwater wells [4,21]. High capital costs of production require fast turnaround times to bring energy to market and recoup capital expenditures. Long-term production potential is bypassed for short-term market decision-making. As profit margins decline with decreasing production, marginal wells must be abandoned so that the drilling resources can be utilized at more productive wells.

The constant need to keep rigs in profitable production requires a consistent amount of exploratory drilling and new discoveries. Regardless of oil price, the energy required to extract the resource is relatively constant and increases with depth [10]. Thus, the rate of extraction and timing affects economic profitability but the net energy remains generally the same. Technological advancement may increase efficiency of extraction over time, thereby increasing energy return on investment but technology comes at the cost of research and development funding. A difficult situation arises when drilling contractors are prevented from accessing the resource either through federal regulation, as happened in 2010, or as a result of declining oil prices and decreasing production profitability. The latter is minimized through long-term contractual obligations. At the same time, the limited number of rigs in the deepwater drilling industry helps to maintain high usage rates for rigs in existence.

Whenever a contract goes un-renewed, that rig is often moved to another basin or resource pool where the rig can be put into operation for another contractor. This optimal use of rigs tends to increase EROI. The actual price of oil at any given time is essentially the same worldwide, regardless of energy costs of producing the oil. Thus, the price for deep and ultra-deepwater oil is sub-optimal when world oil prices are low.

A factor contributing to the increased drilling in the deep and ultra-deepwater of the GoM are federal government subsidies to drilling companies. This increases financial profitability for oil companies but does not affect EROI. According to the Federal Land Policy and Management Act [51], the Department of Interior is required by law to ensure that “the United States receive fair market value of the use of public lands and their resources unless otherwise provided for by statute”.

Subsidy statutes applying to deepwater energy production, that circumvent the fair market value provision, are mainly the result of the Deepwater Royalty Relief Act (DWRRA) and the Energy Policy Act of 2005. The Deepwater Royalty Relief Act granted exploration leases issued between 1996 and 2000 an exemption from paying the government royalties on oil produced by wells that would not otherwise be economically viable. The program has been extended since its original expiration date in 2000. In addition, the Energy Policy Act put an oil-price threshold below which producers would not have to pay the government royalties thereby providing further incentive for companies to drill in the offshore GoM.

 

Numerous studies have shown royalties paid to the government for GoM offshore production are among the lowest rates paid to any fiscal system in the world [52,53]. The government is effectively subsidizing the most profitable corporations in the world at the expense of public taxpayers. These subsidies provide false market signals to continue energy supply processes that otherwise would not be competitive, thereby reducing economic efficiency [54]. This encourages oil companies to go after low EROI oil reserves that would likely not be produced without subsidies. Such subsidies further obscure reality by causing alternative energy markets to be less cost competitive [55].

Another indirect cost not accounted for in this study includes the cost of the loss of the value of ecosystem services as a result of federal offshore energy production. Air and water pollution attributed to the oil and gas industry are market externalities that in reality have costs borne by society. Ecosystem degradation in the form of wetland loss, partly as a result of oil and gas industry infrastructure, has increased the risk of natural disasters to coastal communities [56]. Batker et al. [57] carried out a partial assessment of the value of ecosystem services of the Mississippi River delta. They reported an annual value of ecosystem services of $12 to $47 billion and a minimum natural capital asset value of the delta of $330 billion to $1.3 trillion.

The damage to marine and coastal environments associated with the Macondo Prospect blowout is substantial. Commercial fisheries production and economic losses to the coastal tourism sector are expected to cost tens of billions of dollars. Including such costs in the analysis would likely cause the Macondo Prospect EROI to be negative. Ecosystem service values are largely outside the scope of the market economy, thereby discounting their importance to society.

References and Notes

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  25. Klump, E. Anadarko May Take Biggest Hit from Gulf Oil Spill. Bloomberg News Service: New . Bloomberg News Service: New 13/anadarko-may-take-biggest-hit-from-gulf-oil-spill-as-bp-s-silent-partner.html
  26. Scherer, R. What if BP taps leaking Macondo well again? Christian Science Monitor: Boston, MA, USA, 19 May 2010.   http://www.csmonitor.com/USA/2010/0519/Gulf-oilspill-What-if-BP-taps-leaking-Macondo-well-again 30. Offshore-technology.com. Deepwater Horizon: A Timeline of Events. Available online: http://www.offshore-technology.com/features/feature84446/ (accessed on 1 February 2011).
  27. Offshore Drilling Monthly. Jefferies & Company, Inc.: New York, NY 10022, January-December Issues 2009.
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http://www.rigzone.com/news/article.asp?a_id=87487

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www.gao.gov/products/GAO-07-676R

  1. USA Government Accountability Office (GAO). Oil and Gas Royalties: The Federal System for Collecting Oil and Gas Revenues Needs Comprehensive Reassessment; U.S. GAO: Washington D.C., USA. September 2008; p. 6. Available online: www.gao.gov/new.items/d08691.pdf (accessed on 16 October 2011)
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www.eartheconomics.org/FileLibrary/file/Reports/Louisiana/Earth_Economics_Report_on_the_ Mississippi_River_Delta_compressed.pdf

 

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Tar sand EROI 2013 Poisson and Hall

Alexandre Poisson, Charles A. S. Hall. 2013. Time Series EROI for Canadian Oil and Gas. Energies 2013, 6, 5940-5959

[ This is an extract from this 20-page paper. Tar sands are the hope offered by techno-optimists that a great deal of oil remains. Since I leave out tables, charts, and so much of the text, do read the published paper if this interests you. ]

Abstract

Modern economies are dependent on fossil energy, yet as conventional resources are depleted, an increasing fraction of that energy is coming from unconventional resources such as tar sands. These resources usually require more energy for extraction and upgrading, leaving a smaller fraction available to society, and at a higher cost.

Here we present a calculation of the energy return on investment (EROI) of:

  • All Canadian oil and gas (including tar sands) 1990–2008. Since the mid-1990s, total energy used (invested) in the Canadian oil and gas sector increased about 63%, while the energy production (return) increased only 18%, resulting in a decrease in total EROI from roughly 16:1 to 11:1.
  • Tar sands alone (1994–2008). We found (with less certainty) that the EROI for tar sands has been around 4:1 since 1994, with only a slight increasing trend.

My comment: Later on in this paper it states only mined tar sand EROI was calculated (not in situ). Brandt [17] found that mined oil sands have the highest EROI of 5.5 to 6. Poisson and Hall cite 4:1. I think their lower result is because Brandt didn’t include the EROI of refining tar sand oil into usable syncrude oil). Brandt et al found that in situ EROI is only 3.5 to 4. Later, Poisson and Hall imply that in situ may not be viable energetically, but that mined may be possible.  The last I looked, mined was perhaps 10% of the tar sands, which would leave 90% as unexploitable resources (though there are plans to put in nuclear reactors to make in situ possible when the natural gas runs out).

We used energy production and energy use data from Statistics Canada’s Material and Energy Flow Accounts (MEFA). We were able to quantify both direct and indirect energy use, the latter from Statistics Canada’s energy input-output model.

Finally, we analyzed underlying factors possibly influencing these trends.

Introduction

Production of unconventional oil (diluted bitumen and synthetic crude from tar sands) has grown rapidly, almost tripling between 2000 and 2011, from 0.6 mbbl/d to 1.6 mbbl/d [6], and now even surpassing that of conventional oil

Originally, tar sands production (which began in 1967) was restricted to surface mining and upgrading operations. Since approximately the year 2000, recovery of tar sands from deeper layers using underground (in situ) extraction techniques has expanded, and now represents ~50% of total tar sands production

From the perspective of energy systems analysis, the shift in energy resources from conventional to unconventional oil and gas can be described as a decrease in natural resource quality [7]. It can be quantified empirically in part by using the metric of energy return on investment (EROI), the ratio of energy output (returned) over energy input (invested) in an extraction process [8,9]. EROI captures the idea that society has to divert some portion of its existing or immediately available energy resources away from production to meet final demand, and instead invest it to extract more of the same (or an equivalent) energy resource, such as a coal deposit or an oil and gas reservoir. As such it is one index of the quality of that resource. This ratio of energy output over energy input may vary over space and time, based on many geological, technical and economic factors, including:

The initial concentration and total size of a resource, ease of access, efficiency of further conversions (e.g., chemical refining or electricity production) and depletion of the resource. As conventional oil and gas resources are increasingly depleted around the globe, the EROI of these resources are showing declining trends.

Recently, Brandt et al. [17] published the most detailed and complete energy analysis of tar sands. It uses high quality data from the Alberta government in physical units. Their data and analysis covered both in situ and surface mining, was disaggregated in terms of tracking the different types of fuel used, and spanned a wide period of time (from 1970 to 2010), at high temporal resolution (per month). It included good data on the energy used directly but did not include indirect energy uses, that is energy used off site to generate materials used on site.

Freise [16] calculated a preliminary time series EROI for conventional Canadian oil and gas from 1950 to 2010 using a monetary technique that we believe can be improved upon. Thus more accurate estimates of the EROI of Canadian oil and gas are needed to detect important trends in time, compare the extraction efficiency of Canadian oil and gas with that of other countries and compare the EROI of conventional with unconventional oil.

In this paper we present a calculation of the energy return on investment (EROI) for all Canadian oil and gas combined (including conventional oil, natural gas, natural gas liquids and tar sands) from 1990 to 2008, and similarly for that of tar sands alone, from 1994 to 2008. We compare these two results, detect any significant trends, and discuss possible underlying factors which may explain the temporal trends. Due to the high quality of the energy data derived from Statistics Canada’s database (in energy units), our study allowed for independently testing the validity of some common methodological assumptions employed in estimating energy expenditures at the national level over time. We discuss this in more detail below, and make some

Methods

Energy return (outputs, or production) data for hydrocarbons is easily available through various organizations and at different scales. However, it is usually much harder to get data on energy inputs, both direct and indirect, especially in energy units covering long periods of time [18]. In this context, direct energy is defined as the energy commodities (e.g., diesel, gas, electricity) used on sites owned by the industry for its own production [19]. In the case of oil and gas extraction, direct energy use includes the sum of energy commodities used at the site of extraction, up to the point of shipment from the producing property, during all activities in the exploration and preparation of natural gas, crude oil, natural gas liquids, and synthetic crude oil and bitumen (both surface mining and in situ extraction of tar sands). Indirect energy is defined as the energy used elsewhere in the economy for the production of the goods and services that are used by the industry in the production of that resource [7,20,21].

Since the introduction of net energy (and EROI) analysis in the late 1970s, there has been considerable debate as to the most appropriate method to use for estimating indirect energy costs, particularly the energy embedded in materials and services [7,9,19,22–26].

Traditionally, two methods have existed to estimate the indirect energy embodied in goods and services: process-analysis and input-output analysis [7,22]. Process analysis is a micro-level technique which involves tracking, at a very detailed level, all individual materials and energy flows needed to manufacture a unit of product of interest, through many stages of a complex production and supply chain. It carries the advantage of being quite precise and specific. But due to the complexity and interconnectedness of the industrial system, the analysis must eventually be truncated [29] resulting in a systematic underestimation of the energy costs by an unknown factor. The second method, energy input-output analysis, is a more comprehensive and macro-level approach. An input-output model is a complex matrix of all financial transactions in a society, aggregated in sector categories, and organized by government agencies into national input-output accounts [7,24,28]. It can be used to identify how much activity (e.g., energy commodity inputs) from all other sectors of the economy (coal, iron, paper, business services) were necessary to generate a commodity of interest (e.g., steel output).

Although it lacks precision because of data aggregation, it benefits from being very comprehensive as the boundary of analysis is essentially infinite, encompassing all upstream stages of production and supply [28,30]. Early on, Bullard et al. [23] developed a procedure to combine the advantages of both process-analysis and input-output analysis, which they termed the hybrid approach. Increasingly, a hybrid approach is being recommended to provide sufficient precision and accuracy for robust results in both net energy analyses and greenhouse gas emissions inventories [30].

Along these lines, Murphy et al. [18] provide guidelines for evaluating EROI (including time-series EROI), combining direct energy use data in energy units and information derived from industry expenditure or sales data and national energy input-output tables. We essentially follow their description of “standard” EROIstnd at the “mine-mouth”.

Energy Return: Production of Canadian Oil and Gas

We used data on production of Canadian hydrocarbons from Statistic Canada’s Socioeconomic Information Management (CANSIM) database for oil, natural gas and natural gas liquids [5,31,32]. The CANSIM production data covers the period from 1985 to 2010 (although we use only data from 1990 to 2008, to match energy use data), and provides detailed production data by province and by fuel type (in units of volume per year) (see Table 1). We converted these annual production volumes into energy units using energy content factors (heat values) from the Alberta Government (see Table 2) [33]. These numbers differ only slightly from those from other sources, such as from Canada’s National Energy Board [34]. We chose the ones provided by the Alberta government because they were more complete, including values for synthetic crude and bitumen.

EROI of Canadian Oil and Gas

We calculated the EROI time series for Canadian oil and gas in two ways, first by dividing the annual energy production (energy return) by the annual direct (only) energy used (energy invested) and second by both direct and indirect energy used (see Section 2.2). The difference in the two EROI time series shows the sensitivity of the results to a change in the boundary of analysis; from accounting only for the direct consumption of energy commodities (e.g., diesel, gas, etc.), to also including the indirect energy embodied in the equipment and services used in the oil and gas extraction sector.

EROI for Tar Sands

Because of data limitations and study scope, we restricted our EROI calculation of tar sands to surface mining and upgrading operations, and to direct energy use only (thus excluding in situ extraction and indirect energy use).

The end product of surface mining is synthethic crude oil. Bitumen from the mines is upgraded to produce a substance chemically similar to conventional crude oil (named synthetic crude, or syncrude). Our EROI analysis includes the energy required to extract the mixture of bitumen and sand from the ground, separate it, and upgrade it to syncrude oil.

For our EROI calculation, we paired the output energy data from Statistics Canada’s CANSIM dataset (1994–2008) [5] to the energy input data from CIEEDAC (1994–2001) [43] and from Natural Resource Canada’s CIPEC report (2002–2008) [42], as shown in Table 5. We also include the energy production data (million barrels of syncrude) provided in the CIPEC report for the year 2000–2008 (Table 5) [42] to illustrate uncertainties associated with combining these datasets. Unfortunately, these energy production values differ by as much as 60%, which is unusual for energy production data. This results in a high and low estimate for the EROI of tar sands from surface mining for the years 2002 until 2008. We use the average of these two EROI calculations for our final estimate, but also present the high and low estimates in the results section below.

Table 5. Energy use and production for tar sands from surface mining

Results

The EROI for Canadian oil and gas combined using both direct and indirect energy, was about 16:1 in 1997 and has declined to about 11:1 in 2008, whereas when calculated using only direct energy, it was 18:1 in 1998, and decreased to about 13:1 in 2008. The EROI for tar sands alone (from surface mining only, and considering only direct energy inputs) averaged about 4:1 throughout the period analyzed, with only a slight increasing trend.

Freise’s EROI estimates were derived by estimating energy use (investment) in the oil and gas extraction sector from financial data alone and using a constant energy intensity factor (24 MJ/$US, 2005) for the entire 60 year period of his study (see below for further discussion). We believe that the direct and indirect energy use data from Statistics Canada (in energy units) have allowed us to get a more accurate estimate of energy use and hence EROI. This allows us to test the accuracy of Freise’s EROI estimates for the period where our studies (and reported data) directly overlap (1993–2008).

There are five approaches used by Freise that we believe can be improved upon (1) he used financial data alone to estimate both direct and indirect energy use; he also (2) multiplied the annual monetary expenditure for the industry (with some correction for inflation) by a single money-to-energy conversion factor for the entire 60-year study period. This assumes that the energy use intensity (i.e., MJ per dollar of expenditure, or dollar of production) of the Canadian oil and gas industry stayed constant over more than half a century, regardless of any technology change. Furthermore, his study also (3) used a money-to-energy conversion factor (24MJ/$US 2005) from a different country than the one under study (from the US instead of Canada); (4) used a single correction factor for currency fluctuations between the US and Canada for the entire 60-year study period; and (5) used a general consumer price index for inflation correction of the monetary expenditure, instead of a sector-specific producer price index (prices of commodities in specific industry sectors vary more from year to year than the average national inflation rate, especially in the oil and gas industry).

Our EROI estimates for tar sands fall within the range of previously published studies. Brandt et al. provide the most detailed analysis of tar sands yet. They find EROI values for tar sands (from both surface mining and in situ extraction, with direct energy only) fluctuating between 2.5:1 and 4:1 during the period from 1990 to 2003, very similar to our results.

After 2003, the EROI of tar sands from surface mining increases to around 6:1, showing a gain in extraction efficiency. Our results for surface mining show less fluctuation than Brandt’s. We also detect a similar (but very small) upward trend in EROI during this same period. The data used by Brandt is much more detailed (disaggregated) than ours, and we believe their more precise EROI values are more accurate and rich for interpretation. For example Brandt et al. are able to distinguish energy investment coming from the resource itself (coke and process gas) from external purchased energy (natural gas), and with this calculate a general EROI (low, around 6:1) and an external EROI (larger, around 15:1) [17].

Thus while we find low EROI values for tar sands, Brandt et al. show that for surface mining, much of the energy invested is from the resource being exploited, not after being processed through society. And therefore, in this regard, the extraction may be expensive, but possible. The fact that we both have similar results gives confidence to our analysis, and the general conclusions we derive from it.

For oil and gas extraction, Grandell et al. [14] found a temporal pattern quite similar to ours, in the case of Norway: an increase in EROI from 1991 to 1996, and then a decline until 2008. On the other hand the absolute values, ranged between 40:1 and 60:1, are much higher than our range of between 16:1 and 10:1. Gagnon et al. [10] estimated an EROI time series for global oil and gas between 1992 and 2006, and also found an increase in EROI until 1999, flowed by a decline (with a range in values between 18:1 and 35:1). Guilford et al. [13] examined the EROI of US oil and gas over a longer period: at five year intervals since 1972, and with more sparse estimates going back to 1919. Again, they found an increase in the EROI for oil and gas from 7:1 in 1982 to 16:1 in 1992, followed by a decline to approximately 11:1 in 2007. However, the problem in comparing and interpreting these studies directly is that the quality of the data and assumptions employed (to fill data gaps) differ, with large but generally unknown uncertainties in the EROI estimates.

Interpretation and Implications

The authors of the above studies for Norway, the US, Canada and at a global scale, tend to conclude that recent declines in EROI observed globally are likely due to the depletion of the highest quality conventional oil reserves internationally, and in some cases to an increase in drilling effort not associated with an increase in output [10–16]. As easily accessible oil and gas becomes more scarce, and the international price of oil rises, investments flow to resources which are more costly to exploit, both energetically and financially. Our preliminary analysis of underlying factors in Canada seems to support this interpretation, although more in depth time-series statistical modeling is required to test the accuracy of these ideas further.

The general concern in this field is that if the EROI of our major fuels continue to decline, and if the replacement “green” energy sources (with their backups) have as low an EROI as appears to be the case at this time, there is likely to continue to be a decline in the economic surplus and economic growth that previous generations had taken for granted and that seems to be increasingly characteristic of OECD countries. Will declining EROI further stress governments increasingly unable to meet legal financial commitments such as schools and pensions?

Posted in Charles A. S. Hall, EROEI Energy Returned on Energy Invested, Oil Sands | Tagged , , , | 1 Comment

Book review of Door to Door and the amazing world of transportation

Edward Humes.  2016. Door to Door: The Magnificent, Maddening, Mysterious World of Transportation. HarperCollins.

A book review by Alice Friedemann at www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation, 2015, Springer]

I was in the transportation business for 22 years at American President Lines, where I designed computer systems to seamlessly transfer cargo between ships, rail, and trucks for just-in-time delivery.  Every few weeks I was on call 24 x 7, because if computer systems are down, cargo isn’t going anywhere.

Humes writes about the amazing complexity of transportation in delightful ways that will change how you look at the world around you.

He begins simply, with how a morning cup of coffee has a transportation footprint of at least 100,000 miles.  His 6.3 mile drive to get the coffee is just a small fraction of that journey.  The car itself embodies at least 500,000 miles when you add up how many miles the raw materials for it traveled. And when you add in other miles part of a morning routine — the orange juice, dish soap, socks — you’re talking over 3 million miles of goods moved.

After reading this book, you will appreciate how pizza arrives at your door a great deal more.  At a chain-pizza central distribution center in Ontario, California, 14 big rigs arrive at 4 am every day, 2 of them with Mozzarella in 2,736 15-pound bags traveling 233 miles.  Other ingredients/miles: 936 cases tomato sauce/278, Pepperoni and other meat/1,400,  chicken toppings/1,600, Salt/1,900 and so on.  Empty pizza boxes arrive many times a day from 33 miles away (though the pizza box store got them from 2,200 miles distant).   And that’s just the start of how that pizza eventually arrives at your door.

But pizza is nothing compared to what United Parcel Service does.  I especially liked what UPS manager Noel Massie had to say about how trucks are vital to the economy and our way of life but treated like interlopers on America’s roads. He’d like to see dedicated highway freight lanes—high-speed lanes just for trucks, isolated from passenger traffic—and greater public transportation investment to take cars off the road, making room for those freight lanes and more trucks.   “It’s simple, really. Trucks are like the bloodstream in the human body. They carry all the nutrients a body needs in order to be healthy. If your blood stops flowing, you would die. If trucks stop moving, the economy would die. People have become truck haters. They want them off the road.  People don’t know what they’re asking for.”

Massie is right — if trucks stopped running, tens of millions of Americans would die (i.e.  (1) Holcomb 2006. When Trucks Stop, America Stops. American Trucking Assoc, 2) McKinnon 2004 Life without Lorries, or 3) A Week without Truck Transport. Four Regions in Sweden).

Trucks run on diesel fuel, which is finite. I am flabbergasted that people assume the economy will keep growing and that we can continue to drive cars forever, when conventional oil production peaked in 2005 (90% of oil is conventional).  Conventional oil practically flows out of the ground unaided, unconventional oil is nasty, gunky, distant, difficult to get, and uses so much energy that far less is available to society at large.

On top of that, the transportation that matters — ships, rail, and trucks, use diesel engines, nearly as essential as the fuel they burn due to their energy efficiency (twice as good as gasoline engines) and ability to do work.  Diesel engines can last 40 years and go a million miles.  Indeed, Smil makes the case that civilization as we know it depends on diesel engines ([Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines (MIT Press)].  Replacing billions of vehicles and equipment with diesel engines before oil starts declining in earnest will be difficult.  We don’t want to throw out the trillions of dollars invested in current vehicles and the distribution system.  Ideally we need a “drop-in” fuel that diesel engines can burn.  Diesel engines can’t burn gasoline or ethanol, and can be harmed by biodiesel, so most engine warranties restrict biodiesel from nothing up to 20% of diesel fuel. Nor can diesel engines run on natural gas (CNG or LNG). Trucks are too heavy to run on batteries, and too expensive to build with dual modes of propulsion (so they can get off the electric line to go to their destination). If overhead electric catenary wires were used, how many more power plants would need to be built?   And not all “trucks” can use them, we can’t string overhead wires over millions of acres of farmland to run tractors and harvesters on, and all the other off-road trucks that mine, log, maintain the electric grid transmission wires, etc.  If the intersection of transportation and energy interests you, I recommend [ When Trucks Stop Running: Energy and the Future of Transportation (SpringerBriefs in Energy)]

Most books, including this one, assume endless growth will continue and discuss ways of reducing congestion. But not to worry — oil and other vital resources such as phosphorus will decline soon enough, because energy and natural resources are finite.  We’ve all been brainwashed to ignore that by the neoclassical economic system which denies such obvious truths as limits to growth.  A book that explains this, and which ought to be the standard economics textbook is  [Energy and the Wealth of Nations: Understanding the Biophysical Economy].  After you read it, you will understand why the economists of today will be considered as crazy as Scientologists and other religious cults in the future [Inside Scientology: The Story of America’s Most Secretive Religion].

 

Excerpts from the book

More than smartphones, more than television, more than food, culture, or commerce, more even than Twitter or Facebook, transportation permeates our daily existence. In ways both glaringly obvious and deeply hidden, thousands, even millions of miles are embedded in everything we do and touch—not just every trip we take, but every click we make, every purchase, every meal, every sip of water and drop of gasoline. We are the door-to-door nation.

The capacity to transport a supercomputer, a desperately needed medicine, or a tube of toothpaste from a factory in Shanghai to a store in Southern California or New Jersey or Duluth—and to do so 20 billion times a day reliably, affordably, quickly, and trackably—may well be humanity’s most towering achievement.

Every time you visit the Web site for UPS or Amazon or Apple and instantly learn where in the world your product or package can be found and when it will thump on your doorstep, you have achieved something that all but the still-living generations of humanity would have declared impossible or demonic.

Costco French Roast consists of a blend of beans from South America, Africa, and Asia, each component shipped by container vessel up to 11,000 miles in 132-pound loosely woven sacks of raw, green coffee beans, some across the Pacific Ocean to ports up and down the West Coast, the rest via the Panama Canal, perhaps the Suez Canal, then on to one of several East Coast ports. The complexities are so great on this routing—based on ship space, season, and the vagaries of rates and departures—that it’s difficult to trace bulk products more precisely than this. The raw beans then travel by freight train or truck (2,226 miles for the Port of Los Angeles portion) to one of the world’s largest blending and roasting plants, located at 3000 Espresso Way in York, Pennsylvania, one of six such plants in the Starbucks empire and the one identified by the company as principally serving Costco. After roasting, blending, and testing to make sure every batch smells and tastes exactly the same no matter how many times a customer buys Costco French Roast, the beans are sealed in plastic and foil composite bags with their own coast-to-coast mileage footprint. Then the packages are stacked on wooden pallets (sourced from all over the nation) and shipped another 2,773 miles back across the country to the Costco depot in Tracy, California, from which my coffee was trucked to my local Costco store. By the time I got those beans, they had traveled more than 30,000 miles from field to exporter to port to factory to distribution center to store to my house—more than enough to circumnavigate the globe.

But that’s not where the coffee mileage stops. There are the components of my German-built, globally sourced coffeemaker, which collectively traveled another 15,700 miles to reach my kitchen. My little bean grinder had a similar triptych. The drinking water I use to brew my coffee comes to my home from a blend of three sources: from groundwater pumped in from local wells about 50 miles distant; via the 242-mile Colorado River Aqueduct; and through the 444-mile California State Water Project, which moves water south from Northern California, forces it 2,000 feet straight up and over the Tehachapi Mountains, then down into Southern California. The fuel and energy required for this third leg exceeds the electricity demand of the entire city of Las Vegas and all its glittering casinos. The electricity that powers my coffee machine runs through a grid festooned with millions of transformers and capacitors, most of which are now imported across 12,000 miles from China through the ports of Los Angeles and Long Beach, a complex that is a veritable city unto itself. The natural gas that fuels the power plants that provide most of the electricity to my coffeemaker is obtained from gas fields in Canada and Texas and sometimes farther through a 44,000-mile network of underground pipelines—North America’s hidden energy transport plumbing.

At this point the collective transportation footprint on my cup of coffee is hovering at 100,000 miles minimum. And that’s not counting the seemingly smallest segment of that journey, my 6.3-mile drive to Costco in my 2009 Toyota Scion xB, which has the most massive transportation footprint of anything I own—and not because I drive it very far. I chose to buy a used vehicle on the theory that a secondhand but fuel-efficient conventional car is greener and less wasteful overall than a newly made hybrid or electric (not to mention a whole lot cheaper), and because we needed something big enough to hold our three greyhounds (which it does, barely, with two humans on board, too). The Scion was built in Japan out of about thirty thousand globally sourced components from throughout Asia and Europe, with one U.S. manufacturer contributing: the tires are from Ohio-based Goodyear, which has factories in Asia as well as the U.S. The assembled car was shipped from Japan to the Port of Long Beach in California, then trucked to a dealership in Southern California (other cars arriving by ship move by train to more distant dealers). The cumulative travels of the raw materials and parts of my car totaled at least 500,000 miles before its first test drive. The gas in its tank is a petroleum cocktail that adds another 100,000 miles to the calculation, as the California fuel mix consists of crude oil from fourteen foreign countries and four states.5 Most of this oil arrives by tanker ships at West Coast ports, then moves thousands of miles around the state and country to tank farms, refineries, fuel depots, and distribution centers via pipelines, railroads, canals, and semitrucks before finally appearing at my neighborhood gas station. Thousands of man-hours and billions of dollars in technology and infrastructure—along with the efforts of countless unsung heroes who pack, lift, load, drive, and track it all—combined to bring that cup of coffee to my lips (and my wife’s nightstand; I’m the morning person in our household). That cup of coffee is a modern miracle, magical and mundane at the same time, though we hardly if ever notice the immense door-to-door machine ticking away, making it happen with product after product, millions of them, each requiring the same level of effort and movement, day after day.

Our true daily commutes, beginning first thing in the morning with the travels of my cup of coffee—and followed by my socks and orange juice and dog food and dish soap—are more on the order of 3 million miles.

We live like no other civilization in history, embedding ever greater amounts of miles within our goods and lives as a means of making everyday products and services seemingly more efficient and affordable. In the past, distance meant the opposite: added cost, added risk, added uncertainty. It’s as if we are defying gravity.

The logistics involved in just one day of global goods movement dwarfs the Normandy invasion and the Apollo moon missions combined. The grand ballet in which we move ourselves and our stuff from door to door is equivalent to building the Great Pyramid, the Hoover Dam, and the Empire State Building all in a day. Every day. It is almost a misnomer to call this a transportation “system.” Moving door to door requires a complex system built of many systems, separate and co-dependent, yet in competition with one another for resources and customers—an orchestra of sometimes harmonizing, sometimes clashing wheels, rails, roads, wings, pipelines, and sea lanes.

We are the proud owners of roads we can no longer afford to maintain, saddling the country with an impossible $3.6 trillion backlog in repairs and improvements to aging roads and bridges—a deficit that grows every year,

How can a country that deploys insanely capable robot rovers to Mars and puts unerring GPS chips in our pockets leave us with two-ton rolling metal boxes to transport one person to work each day—boxes that kill ninety-seven of us every day and injure another eight every minute? Cars are the American family’s largest expense after dwellings, our least efficient use of energy, the number one cause of death for Americans under thirty-nine, and our least productive investment by far. The typical car sits idle twenty-two hours a day, for which privilege Americans, on average, pay $1,049 a month in fuel, ownership, and operating expenses.

These two faces of transit are often viewed and treated as two separate, even competing worlds—the frequently frustrating, in-your-face reality of how we move ourselves, and the largely hidden world of goods movement with its gated marine terminals, secure distribution centers, and mile-long trains with unfamiliar foreign names on the container cars: Maersk and COSCO and YTL. The same Los Angeles–area communities that embraced a billion-dollar bill to add a lane to Interstate 405 have successfully fought off for fifty years the completion of another north-south freeway that would connect the port to inland California with its vast web of warehouses, distribution centers, and shipping terminals. Residents oppose the building of the last five miles of this freeway, Interstate 710, because it is seen as benefiting freight, not people, as if the local Walmart stocked itself. The stream of big rigs flowing from the port instead have to take roundabout and inefficient routes on other freeways, wasting fuel and time—and adding to commuter traffic jams as well, where drivers curse the ponderous big trucks they have inflicted on themselves.

The hidden side of our commute, the flow of goods, has become so huge that our ports, rails, and roads can no longer handle the load. They desperately need investments of public capital that the nation does not seem to have. Yet it’s an investment that must be made, as logistics—the transport of goods—is now a vital pillar of the U.S. economy. Goods movement now provides a greater source of job growth than making the stuff being shipped.

New manufacturing technologies—the science fiction turned fact that is 3-D printing—are pushing in the opposition direction. This “unicorn” technology gives businesses in Brooklyn, Boston, and Burbank the power to manufacture a fantastic range of products—from surgical implants to car parts to guns—and to do it cheaper than a Chinese factory can 12,000 miles away.

The movement of these components does not include the mining, processing, and shipping of the rare earth elements that are so vital to so much of our twenty-first-century technology, or the movement of the vast quantities of energy and water needed to obtain them.

In the end, the iPhone has a transportation footprint at least as great as a 240,000-mile trip to the moon, and most or all of the way back.

The real breakthrough that makes the iPhone possible—along with most of today’s consumer goods, right down to the cheapest pair of boxers in your drawer or the salt-and-pepper shakers (and their contents) on your table—is a breakthrough of transportation.

The fleets of giant container ships that burn fuel not by the gallon but by the ton pose a growing environmental threat, with cargo vessels contributing about 3 percent of global carbon emissions now and on track to generate up to 14 percent of worldwide greenhouse gases by 2050. 15

But beyond their smokestacks, the mega-ships that now dominate cargo movement are threatening the transportation system itself, overloading ports and the networks of rail, road, and trucking that connect them to the rest of the world. The U.S. is running out of capacity at these choke points, with neither the money nor the will to increase it.

The rise of online shopping is exacerbating the goods-movement overload, because shipping one product at a time to homes requires many more trips than delivering the same amount of goods en masse to stores. In yet another door-to-door paradox, the phenomenon of next-day and same-day delivery, while personally efficient and seductively convenient for consumers, is grossly inefficient for the transportation system at large.

And yet the impact of embedding ever larger amounts of transportation in products is often minimized in public discussion, even by businesses that have embraced the business case for sustainability. Certainly they are concerned about fuel efficiency in distribution and shipping—that’s just good business—but the transportation footprint of a manufactured product is often a secondary concern at best. That’s because the most common analysis of a consumer product’s life-cycle—an estimate of its greenhouse gas footprint, which is a proxy for its energy costs—will usually find that the distribution of a product is a much smaller factor than its production. In its public disclosures on the footprint of its products, Apple states that transport accounts for only 4 percent of my iPhone 6 Plus’s lifetime greenhouse gas emissions. Production of the device, meanwhile, accounts for 81 percent of its carbon footprint—twenty times the transportation footprint. Even my use of the phone—mostly by recharging it—overshadows shipping in Apple’s life-cycle reckoning, producing 14 percent of its footprint.16 For a glass of milk, shipping produces only 3 percent of the footprint. For a bottle of California wine, it’s about 13 percent.18 Transportation accounts for only 1 percent of the carbon footprint of a jacket from eco-conscious Patagonia, Inc., even though it’s made of fabric from China and sewn in Vietnam. Production of its petroleum-based synthetic polyester is said to be the main culprit, accounting for 71 percent of the garment’s carbon emissions.

These product-by-product analyses are accurate but often incomplete—and in the end, they can distort the reality of the gargantuan impact of the door-to-door system as a whole. Viewed as a sector, the transportation of people and product is second only to generating electricity in terms of energy use and greenhouse-gas emissions (consuming 26 percent of the country’s total energy and fuel supplies,20 while creating 31 percent of total greenhouse gases).21 Transportation has a larger energy and carbon footprint than all the other economic sectors: residential, commercial, and agricultural, as well as the industrial/product manufacturing sector that figures so prominently in those life-cycle analyses.

Transportation leads all sectors in one unfortunate metric: when it comes to wasting energy, the movement from door to door tops every other human endeavor, squandering 79 percent of the energy and fuel it consumes. Finding ways to reduce that waste presents one of the great economic and environmental opportunities of the age.

Wondering if this problem is about the movement of people in cars rather than products on trucks and trains? The simple answer: it’s both. Proportionately, goods movement has the more intense carbon footprint in the transportation space, with transport by rail, truck, ship, and pipeline together generating about a third of the total transportation footprint. Freight trucks alone spew 22.8 percent of all transportation carbon emissions. Passenger cars account for 42.7 percent, while pickup trucks, vans, and SUVs contribute 17 percent. Given that there are fewer than 3 million big-rig freight-hauling trucks in America out of 265 million vehicles total,23 the fossil-fuel-powered movement of goods has a disproportionately immense carbon, energy, and environmental footprint. Miles matter.

other big recyclables—paper and plastic—degrade during the recycling process, or lose value, or end up costing more than new material, so market forces for repurposing these waste products are mixed at best. Recycled aluminum, however, is a different story: not only is it chemically and physically indistinguishable from the new stuff, but it is beyond cost competitive. Aluminum recycling uses 92 percent less energy than mining and refining aluminum from bauxite,6 and is often done near the end consumer rather than in far-off pit mines, lowering transportation costs and distance.

Much of the aluminum extracted from the earth since the 1880s is still in play, some of it recycled dozens or even hundreds of times.

Because of its light weight and the fact that it does not rust like iron and steel, aluminum is now being touted as the next big thing for reinventing ground transportation. Aluminum is so light (atom by atom it weighs less than many gases) that swapping it with steel in cars and trucks could cut the average vehicle’s weight in half, with corresponding decreases in fuel consumption and carbon emissions.

But it takes nearly twelve years on average for passenger vehicles to enter the big recycling bin known as the scrapyard (and two or three times that for planes, trains, and cargo ships), with about 11.5 million vehicles scrapped annually in the U.S. Therein lies one of the great contradictions in the aluminum story and McKnight’s sweet-spot pitch. Demand for aluminum in the transportation space has exploded—the record 504 million pounds of the metal delivered to automakers in 2014 is projected to rise to 2.68 billion pounds by 201810—but recycling alone cannot yield the required supplies quickly enough. So ever more primary aluminum has to be mined and refined to meet the demand for more efficient cars. This is how aluminum can be at once green and dirty, both a shining example of the “cradle-to-cradle” reuse economy and a coal-soaked, industrial-age relic of primitive extraction, spewing waste and toxins in its wake.

In 2014, worldwide production of primary aluminum topped 53 million metric tons. Smelting that metal required nearly 690.170 gigawatts of electricity16—more than twice the power consumption of America’s largest and most power-hungry state, California. Aluminum smelting uses more electricity than almost any other industrial process; engineers joke that the metal ought to be defined as “congealed electricity.” Alcoa has located most of its smelting operations near sources of hydropower to lower the cost and environmental impact, but globally—particularly in China, with more than half the world’s production—more aluminum is made with dirty coal-powered electricity than anything else. Domestic aluminum smelting in the U.S. alone consumes 5 percent of the electricity generated nationwide.

What this means is that aluminum’s weight advantage over iron comes at a price: iron can be produced from iron oxide in a simple, relatively compact blast furnace; the complex Hall-Héroult process requires literally acres of electrolysis cells and city-scale power plants to produce equivalent amounts of aluminum. The bottom line: a car part made from steel costs 37 percent less than the same part made of aluminum,17 although a life-cycle analysis by the Oak Ridge National Laboratory found that the overall energy and carbon footprint of a mostly aluminum car is less than a standard steel vehicle because of lower operating and fuel costs.18 The calculation changes radically in aluminum’s favor when recycled metal is used.

Because of California’s robust container deposit law, we receive a dime refund for every can we turn in, one reason why the state is the national recycling leader. Only ten states impose container deposits on beverages, however, and this explains why, nationwide, America’s recycling rate compares unfavorably with Europe’s and Japan’s. It’s also why, despite the value of scrap aluminum, 43 percent of aluminum cans used by consumers still end up thrown away instead of recycled.

As a consequence, the only way can makers can achieve the 70 percent recycled content in U.S. soda cans is by importing old cans from elsewhere in the world, mostly Europe. And so the metal in my can of lime seltzer—and every other canned beverage in America—is far better traveled than most of the consumers who buy it, as the industry is forced to outsource the metal from old cans from around the globe to satisfy our thirst. The cost of hauling scrap aluminum cans around the planet might knock some of the shine off the industry’s green credentials, but it still pencils out: even old cans transported from abroad are cheaper and have a lower energy and carbon footprint than pulling that same metal out of the mines.

Instead of questioning the very nature of the can—or the ship or the car or any other staple of the door-to-door world that has become part of daily American culture—the focus is almost always on refining the magic. Make cargo ships twice as big in the space of ten years so they can carry even more stuff door to door—but give no thought to the impact on roads, traffic, and infrastructure when all this extra cargo slams into land. Or make cars lighter with aluminum so they burn less gas and emit less carbon. But don’t question the transportation fundamentals these lighter cars will perpetuate—a country where 57 percent of households own two or more cars,23 all of them spending an average of twenty-two hours a day parked and disused.

Jay Isais is nodding and smiling as the readout comes within a percentage point of the target. He is an unabashed coffee nerd who also happens to run sourcing and manufacturing for the biggest coffee house chain in the U.S. not named Starbucks. He’s the Coffee Bean & Tea Leaf’s senior director of coffee, roasting, and manufacturing—or, in lay terms, the company coffee guy. He literally lives, breathes, and slurps coffee for a living: the company has nearly a thousand stores in thirty countries, and every one of the 8 million pounds a year the company buys is personally chosen by Isais.

What most consumers don’t realize, Isais says, is that when they buy coffee in a big can at the supermarket, it’s already stale before the first cup is brewed—even before the can is opened with its impressive hiss of a vacuum seal released. This is simple chemistry at work: along with its delicious aromas, coffee gives off copious amounts of carbon dioxide for a day or two after leaving the roaster. Stick the java right in a can, and that can will begin to bulge or even rupture from the pent-up gas pressure. Wait until the outgassing slows before sealing the can, and the problem goes away—but so does freshness. This had been the problem with American coffee since early in the twentieth century, when mass production and canning techniques were first applied to what had previously been a commodity sold fresh or even raw to the public.

Before the mass production techniques Henry Ford brought to the automobile were applied to coffee, the product was most often sold in its raw green bean state in the U.S.—the beans having been cleansed of the fruit skin, pulp, and an inner husk called the parchment, but not roasted. Coffee can stay good for up to a year in this state if kept dry and indoors. Consumers would take it home, roast it in a pan or oven, and grind it with a hand-cranked coffee grinder. The drink became somewhat popular in America during the American Revolution. Patriots wanted to supplant their previous favorite, tea, after the Boston Tea Party. Serving coffee represented a statement against British custom and rule. But coffee really took off as an American staple nearly a century later, during the Civil War. It was one of the few luxuries—as well as a welcome stimulant—offered troops on both sides, although only the Union Army had reliable supplies after the first year at war. Hundreds of thousands of men came home from the war hooked on java. Green coffee beans were part of the daily rations given to Union soldiers, who had little roasting kits in their packs or just used cast-iron skillets on the campfires. Some of the government-issue carbines had little grinders cleverly built into the rifle butts, but others just used their regular, solid rifle butts to hammer the beans until they broke up enough to brew.

Before each bag is sealed, oxygen is flushed out with pure nitrogen so the coffee cannot oxidize and spoil inside the bag. In this way, roasted coffee can be kept and retain most of its flavor for months. This is a compromise, as coffee is at its flavorful best twenty-four hours after roasting, Isais says. And yes, he admits, he can tell the difference. But it’s still a vast improvement over the old industrial canning process. The logistics for the Coffee Bean & Tea Leaf are complex: shipments take six to eight weeks to arrive via container from Africa, Indonesia, Central and South America, and Mexico. Two-thirds of the coffee shipments enter the country through the Port of Oakland, which has a preferred rate for certain commodities, coffee among them, and one-third arrives through the Port of Los Angeles.

Cars—all 1.2 billion of them worldwide—may not be the most vital component of our sprawling transportation landscape, or the most economically potent; the goods movement fleets and flotillas hold those crowns.

The price for this convenience is acceptance of vehicles that are nothing less than rolling disasters in terms of economics, environment, energy, efficiency, climate, health, and safety. Our failure to acknowledge the social and real-dollar costs of these automotive shortcomings amounts to a massive hidden subsidy. The modern car could not dominate, or exist at all, without this shadow funding. So what are the failings of our cars? First and foremost, they are profligate wasters of money and fuel: more than 80 cents of every dollar spent on gasoline is squandered by the inherent inefficiencies of the modern internal combustion engine. No part of our infrastructure and daily lives wastes more energy and, by extension, more money than the modern automobile.

There are also the indirect environmental, health, and economic costs of extracting, transporting, and refining oil for vehicle fuels, and the immense national security costs and risks of being dependent on foreign-oil imports for significant amounts of that fuel.

One out of every 112 Americans is likely to die in a traffic crash. Just under 1 percent of us.

The videos are horrifying, one crash after another in which death or major injury was avoided by luck rather than skill

PIZZA

The journey of my son’s pizza starts at 4:00 a.m. in Ontario when the first of fourteen big rigs arrives with the day’s supplies, starting with two truckloads of mozzarella. That’s 2,736 fifteen-pound bags from cheese giant Leprino Foods’ branch in Lemoore, California, 233 miles north and made from milk sourced from California dairies. Another truck arrives with 936 cases of sauce from TomaTek in Firebaugh, California, in the heart of tomato-growing country 278 miles north of Ontario. The Tyson Foods delivery brings pepperoni, sausage, ham, and salami in from the Dallas area, 1,400 miles, and chicken toppings out of Arkansas, 1,600 miles. Presliced onions and bell peppers come in from Boskovich Farms, just 100 miles away in Oxnard, California, while one of the top five toppings, mushrooms, arrives from Monterey Mushrooms in Watsonville, California, 361 miles distant. Flour originates in the wheat belt 1,500 miles away, but the mill that delivers it by tank trunk daily, Ardent Mills, a joint venture of food giants Cargill and ConAgra, is just twenty miles away in Colton. Salt is shipped in from Cargill in Wayzata, Minnesota, 1,900 miles distant, while sugar arrives from Cargill’s Brawley, California, plant, just 163 miles away.

Assorted deliveries of less frequently used toppings—garlic, anchovies, banana peppers, beef strips, and jalapeños—round out the offerings,

Multiple deliveries of empty pizza boxes arrive throughout the day from Santa Fe Springs, 33 miles away, although they’re made by a Georgia company 2,200 miles away, making them the most distant piece of the pizza puzzle other than pineapple. The various ingredients are parceled out to sections of the warehouse that are refrigerated, frozen, or kept at room temperature, where they await loading on outgoing trucks later that day.

The only freshly prepared pizza component is the dough. Everything in the Domino’s supply chain center revolves around the dough-making operation cycle, which begins when the ovens start preheating at 5:00 a.m. Domino’s pizza dough has six primary ingredients that go into one of three giant mixing bowls at the plant. Each mixing bowl holds more than six hundred pounds of dough, consisting of flour, yeast, salt, sugar, water, and oil. A secret “goody bag” with a small quantity of Domino’s proprietary flavors and dough conditioners is dumped in the mix, too, and giant stainless steel beaters go to work kneading the mixture

When the mixing is done, the giant bowl is loaded on a clanking stainless steel lift that raises the dough about eight feet in the air and then overturns it into a cutting machine that extrudes dough cylinders like Play-Doh, dumping them on a conveyor belt. The belt whisks the pasty-looking cylinders to a rolling machine that turns them into balls of dough ranging from baseball to softball size, depending on whether they are for small, medium, large, or extra-large pizzas. The dough balls shoot through a metal detector to make sure no twist-ties or bits of machinery contaminated the dough, then three line workers inspect, flatten, and pack the dough balls into one of the thousands of blue plastic trays that fill the facility in tall stacks.

By 1:30 p.m., the production phase of the day ends with the last dough run, whole wheat pizza dough for school lunches. The daily output: enough dough for 100,000 pizzas. At 2:00 p.m. the loading of the outgoing trucks begins. These are Domino-branded refrigerated big-rig trucks owned and maintained by Ryder and made by Volvo,

The trucks have been plugged in to the supply center’s electrical system and cooling down to 36 degrees all day. Even the loading dock is refrigerated to protect the raw dough. The bulk of each trailer’s interior space is taken up by the towers of stacked blue trays with their 100,000 dough balls, layered and mapped into sections based on the size of the pizza (medium and large are by far the most popular). The other ingredients—cheese, sauce, toppings, golden cornmeal to dust the pizza pans, napkins, and red peppers, in addition to cardboard pizza boxes—have to be crammed in around the all-important dough trays.

At 8:00 p.m., the first of the trucks departs for deliveries to the franchises, continuing in waves through midnight. Each truck has its own geographic area that might have twelve to fifteen stops, ranging from close-in deliveries in the LA metropolitan area, to franchises as far as the Arizona border, the Mexican border, and the ski resort at Mammoth Mountain, the most distant stop at three hundred miles and the only overnight run. The goal is to deliver the goods while the pizzerias are closed. The drivers have keys and put everything away, so the store is stocked and ready to start cooking the moment it opens for business.

We couldn’t be more contradictory about this: More than nine out of ten American voters believe it’s important to improve the country’s transportation infrastructure, and eight out of ten say it’s vital in order for America to stay competitive with other nations. Yet seven out of ten voters adamantly oppose raising the federal gas tax from its 1993 levels.11 Which is why Congress is basically cooking the books with accounting gimmicks to keep the system afloat year to year, deferring critical repairs and modernization projects year after year.

the Empire State Building weighs 365,000 tons. America moves goods equivalent to 46,575 Empire State Buildings door to door every year. If all that was loaded on just standard 53-foot semitrailers, it would require 425 million big rigs to move it, with every truck filled to the legal 80,000-pound limit. That would take about eighty times more trucks than the entire U.S. fleet of registered semitrailers.

Who rules the seas?

Cargo ships. Their purpose is not intimidating enemy targets but actually stocking Target stores, along with every other retailer, business, and home in America. Along with all their thousands of other customers, those cargo ships just happen to deliver 80 percent of the components the U.S. Navy and the rest of the American military relies upon. The Pentagon outsources as much as everyone else. When it comes to the superpowers of global shipping, the U.S. barely ranks as a bit player. In a concentration of power unlike any other sector of the transportation system, six steamship companies, none of them American, control more than half the goods in the world.2 Twenty global companies—most of which have joined forces in four immense ship-sharing alliances—control almost every product traded on earth. This has been the quietest conquest and surrender in world history, one in which the entire United States happily and somewhat obliviously participated because consumers love above all else low prices at the cash register, and there is no question that globalization has delivered that part brilliantly. The miracle of modern logistics and ultra-efficient global transportation technology has made achieving those low prices possible, although beneath the gleaming tech lies the crudest of foundations. All it took was two things: divesting America of its once-mighty cargo fleets and shipyards; and outsourcing a major chunk of consumer goods manufacturing to countries with pay, benefits, environmental practices, standards of living, and working conditions that would never in a million years be tolerated on American soil. The thrill of the checkout-line bargain masks the reality that Americans pay elsewhere for those low prices in the form of shuttered U.S. factories, lower wages, a shrinking middle class, a growing inability to pay for roads and bridges, massive public subsidies of the health and environmental costs of transportation pollution, and a nation—including its armed forces—that can no longer function without massive amounts of Chinese imports shipped aboard Korean-built vessels owned and operated by foreign conglomerates.

Of the six cargo powers that control a majority of global goods movement, Denmark-based Maersk Lines is the leader, at the top in numbers of ships, in cargo capacity, in revenues, in profits, and in constructing the biggest and most advanced cargo ships in the world. Maersk (with subsidiaries in oil platforms, oil drilling, trucking, and port terminal operations) handles nearly 16 percent of the world’s cargo all on its own.  Maersk has partnered in a mega ship-sharing alliance with the Geneva-based Mediterranean Shipping Company—the world’s second biggest container ship line. Together the two companies’ “2M Alliance” control a combined fleet of 1,119 vessels capable of hauling 29 percent of the world’s goods.3 Not a single missile, cannon, or gun bristles from this container ship fleet.

Bunker fuel, it’s called: the cheapest, dirtiest form in common use is up to 1,800 times more polluting than the diesel fuel used in buses and big rigs,15 and little more than a waste product left over after everything else useful is extracted from crude oil. It has the consistency of asphalt; a person can walk on it when it’s cool. The big cargo ships burn so much bunker fuel that they don’t measure consumption in gallons but in metric tons per hour, with the really big ships consuming two hundred to four hundred tons a day. One large container ship burning this type of fuel spews out more sulfur and nitrogen oxides—the precursors of smog and particulate pollution, as well as a major contributor to the ocean acidification that threatens fisheries and coral reefs—than 500,000 big-rig trucks or roughly 7.5 million passenger cars.16 That means just 160 of the 6,000 such mega-ships in service today pump out the same amount of these pollutants as all the cars in the world.

The cargo fleet is also a prodigious source of carbon emissions—about 2 to 3 percent of the global total.17 Although that’s only between a third and a fifth of the global-warming gases emitted by the world’s cars,18 it’s still a big greenhouse gas footprint for such a relatively small number of vessels. If the shipping industry were a country, it would be in the top ten drivers of climate change, and its billion tons of carbon dioxide and equivalents put it ahead of Germany, the world’s fourth largest economy. At current rates of growth, the shipping industry that hauls 90 percent of the world’s goods will be two and a half times its current size by 2050; absent a serious effort to become more energy efficient, it could be generating a staggering 18 percent of global greenhouse gases by then.

Through a very deceptive accounting loophole, none of these big ship emissions “belong” to any one country. They happen in international waters for the most part, and so for the purpose of calculating the greenhouse gas emissions of nations, they simply don’t exist—on paper.  They very much exist in terms of their impact on climate, oceans, and health.

Port of LAX

Each day in predawn darkness, Chavez and her crew of marine information specialists arrive at Angels Gate to chart the approaching parade of cargo vessels, gathering cryptic information received via phone, e-mail, and old-school fax from the world’s far-flung maritime shipping lines. The product of these labors is a master daily schedule for a hundred or more impending ship departures, arrivals, crossings of the two-hundred-mile international limit, and shifts to the marine terminal docks from remote harbor anchoring spots (the waterfront equivalent of the doctor’s waiting room). Once dockside, the mammoth ships need two to five days to unload and reload before leaving for their next port of call and making room for the next vessel, which means every berth has a waiting line behind it.

First, Debbie Chavez sends out the list to inform the work of the traffic controllers and Coast Guard officers at the Marine Exchange “Watch” peering at their radar and computer displays. They direct and police the approaching vessels. Then the Master Queuing List is used to schedule the port pilots who race out to meet the ships and guide the laden behemoths in and out of their berths. The list is next used to staff the day shift with the right number of crane operators, those princes of the docks who lift twenty-ton containers from impossibly tight quarters with the finesse (and pay scale) of brain surgeons. Then comes the assembly of longshore gangs to unload the goods, and the stevedores in the marine terminals who move and prepare the cargo for shipment out of the port. Finally, the Master Queuing List is used to dispatch the 40,000 or more big-rig truck trips that swarm into, out of, and around the twin ports every twenty-four hours, carrying the cargo out into the concentric circles of warehouse distribution centers, freight depots, and rail yards that make up America’s goods-movement ecology.

A third of U.S.-bound consumer goods, and far higher percentages of some, pass by the Marine Exchange. That makes Angels Gate and Debbie Chavez the one essential stop for everyone’s commute—long before you even leave the house.

The complex ballet required to move a product, any product, from door to door—and the overload that affects and infects that dance—begins most often at a port.

Once a container ship makes it out of the waiting room anchorages and reaches a container terminal, the unloading becomes another exercise in multi-ton surgery. Mammoth cranes capable of spanning the 170-foot-wide ships are positioned up and down the length of a vessel to begin the extraction of the containers. There are 140 electrically powered ship-to-shore cranes at the twin ports, a distinctive sight on the skyline, particularly when they’re idle and the boom arms are pointed skyward, like soldiers firing a twenty-one-gun salute. The bright red and blue crane towers run three hundred feet high and will soon be taller. The ports are painstakingly raising them sixty feet by giving them longer legs to accommodate larger, taller container ships, at a cost of a million dollars apiece (versus $10 million for each new crane). Almost all are imported from China; America makes neither the ships nor the equipment for unloading them, and they have to be transported already assembled on specialized cargo ships.

Crane operators at the California ports can average between twenty-five and twenty-eight containers an hour—just over two a minute. The highest paid and most sought-after operators routinely handle more than thirty cans an hour and can earn $250,000 a year with a thirty-hour workweek. They move more cargo in two minutes than the old bulk cargo stevedores could unload in an hour. And yet, even with four cranes working the bigger ships at once, and all operating at peak speeds, a 6,000-container delivery takes 54 hours to unload entirely, not counting time to reload (even when many of the outgoing containers from American ports tend to be empties).

When the crane operator’s work is done, the terminal gangs of longshoremen take over, moving the cans into temporary holding areas, where towers and pyramids of the different-colored containers amass until the proper truck or train is ready to be loaded. Marine clerks sort through the mazes of containers, some of which are difficult to find because of malfunctioning RFID devices or containers placed or logged incorrectly. The containers are moved in and out of the mountainous stacks by rubber-tired gantry cranes—smaller versions of the ship-to-shore cranes—which are mounted on inverted U-shaped frames riding on giant tractor tires instead of towers.

The terminals, many of which are subsidiaries of the shipping lines, are charged with moving those containers out of the ports as quickly as possible, but once again overload has complicated the job. Just under a third of the containers depart via dockside rail (or near dockside, after a short truck ride). The Alameda Corridor could handle twice the number of containers currently moving through it, but lack of rail capacity inside the ports represents a bottleneck limiting the number of trains moving cargo through the corridor. Plans to expand the capacity with construction of a new rail yard near the port have been stymied for years. This project, dubbed the Southern California International Gateway, faces neighborhood opposition, environmental complaints, and a lawsuit filed by the City of Long Beach against the City of Los Angeles,

Given the limits on rail movement from the twin ports, the next stage in moving our stuff door to door is all about trucks. About 70 percent of the cargo moves out via drayage trucks, the short-haul semitrailers that jam the ports and surrounding roads, each one carrying a single container. These trucks are a major source of air pollution and traffic congestion in the region. There are about 10,000 full-time and 4,000 part-time drayage drivers working out of the Long Beach and Los Angeles ports, and each day they swarm the marine terminals. It’s difficult and not always rewarding work, as picking up containers at the ports is a daily exercise in patience and dockside traffic jams even on the best of days. Drayage drivers for the most part are paid by the load, not by the hour, so idle time is a loss for them. The drayage truckers are an important link in the national goods movement system, never straying far but performing the essential service of bringing the still-containerized goods to nearby rail yards and transmodal train terminals,1 product distribution centers, warehouses, and long-haul trucking operations. Except for a few large companies with their own trucking fleets—Walmart, the big food and beverage companies—the next move after drayage for most of the goods that come to America through ports—and from American manufacturers as well—is handled by for-hire trucking fleets and logistics companies.

The next stop for most goods out of the Southern California ports are close-in distribution facilities.

In years past, businesses would make their own arrangements, hire truckers, or haggle with railroads. Some still do. But the trend now is to farm that work out. Companies such as Frontline Freight in the nearby City of Industry work for Watson’s tenants and other businesses across the nation; they are one of a new and growing breed of truckless, trackless transportation companies known as third-party logistics providers or freight forwarders.

What Frontline does—like hundreds of other companies in this growing “3PL” line of business—is arrange to receive the goods for an importer or other freight recipient (the goods can be domestic or imported, anything from anywhere is fine) and arrange to have the freight shipped to its final destination. That could be across town, the state, the country, or the world.

Next it’s on to more distant destinations in the California desert, where hundreds of square miles have been transformed into a landscape of sprawling distribution centers (think everything from Amazon to Zappos and every company in between). Next rail, air, and long-haul truckers move the goods to the rest of the nation—on to our stores, our businesses, our hospitals and schools, and through the last mile to us. To our doors.

UNITED PARCEL SERVICE

2,000 similar United Parcel Service delivery hubs around the country and the world. In the next eight hours this cycle will land 15.3 million packages on America’s doorsteps

“I am in the business of minutes,” Massie says. “It’s all about the minutes. If the plane leaves at seven, you either get there or somebody doesn’t get what they need in time.

Before packages, before sorting and bagging and loading, before driving and delivering, there is the clock,

On an average day, Massie’s Southern California employees will make 1.2 to 1.3 million deliveries in Southern California, more than 8 percent of the UPS worldwide total,

He does this with about 5 percent of the UPS workforce (which is 435,000 worldwide, moving 6 percent of the nation’s GDP).

A secret weapon makes this feat possible: a staff of 150 industrial engineers. This is the title UPS gives to the men and women whose job is to design the optimum route and order of stops that will get delivery drivers where they need to be when they need to be there while using as few minutes and miles as possible.

With more than 10,000 drivers in Southern California averaging 120 stops a day, in the most traffic-ridden, constantly changing urban sprawl in the U.S., Massie’s troops face one of the toughest choreographing challenges in the door-to-door universe. The first tool in the UPS engineers’ arsenal is the built-in “telematics” data devices every truck and driver carries. This hardware relays each truck’s performance information in real time to the engineers, who compare it to previous days on the same routes. With this data they can identify streets, turns, and intersections that are causing delays because of shifting traffic patterns, detours, or construction—even small delays drivers may not notice. The data lets them build more efficient routes for the next day.

Then there is the company’s famous no-left-turn policy, put in place in 2004, when the engineers realized that drivers waiting to turn left with engines idling were burning significant amounts of minutes and fuel. By assigning routes that avoid lefts for 90 percent of a delivery van’s turns, the company found it shaved 98 million minutes a year of idling time from its routes, which not only sped deliveries but also saved the company about 1.3 million gallons of fuel a year. Avoiding the left is also a proven safety measure, as traffic data shows that left turns are involved in ten times as many crashes and three times as many pedestrian deaths as right turns.

The industrial engineers’ newest and most sophisticated tool is a computer program called ORION (a catchy acronym for a decidedly uncatchy 1,000 pages of computer algorithm known as On-Road Integrated Optimization and Navigation). No human can consider all the possible routes with brainpower alone—the variations for one truck with 120 stops in different locations with varying drop-off and pickup times yield a number too high to have a name (trillions just won’t cut it). Rounded off, it is best expressed in scientific notation: 6.7 x 10143; if you wrote this value down in normal notation, the number of possible routes would look like this: 6,689,502,913,449,135,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000.3

ORION can crunch that big number down to a short list of optimal routes that saves both minutes and miles, mapping out turns and tweaks that are too numerous for any human driver or engineer to compare unaided.

Humans take that list, modify the routes that are supremely efficient on paper but make no sense in the real world.

Shaving just one mile off every truck’s route can save the company $50 million in annual fuel costs; UPS expects up to $400 million in savings when ORION

The company may be delivering 18 million parcels a day, but only 2.7 million are overnight air shipments. This means that, at any one time, the company is juggling 100 million or so packages (more during holidays) while they are in transit. Routing all that requires a twenty-four-hour operation. In Massie’s district—as in any UPS district—the cycle begins around 1:00 a.m., when the fifty-three-foot big rigs—“feeder trucks,” in UPS-speak—move between cities and regions laden with ground shipments. Because UPS uses a hub and spokes system for both air and ground deliveries, few trucks haul parcels beyond a five-hundred-mile radius. A feeder truck bound for Salt Lake City from Los Angeles might stop at Las Vegas and meet a truck coming in from Utah. The two drivers will unhook and swap their trailers, then turn around and go home. Longer-distance shipments out of Southern California—about 80 percent of packages and documents—arrive and leave by rail, with the faster (and pricier) air shipments headed to the company’s regional air hub at Ontario, California, the unlikely desert location that UPS has made into one of the dozen busiest cargo airports in the country. The feeder trucks, trains, and planes meet up, crisscross the country, and bring the packages toward their destinations, ultimately landing at sorting centers and delivery facilities like Massie’s Olympic Building. They are, literally, feeding the beast.

At 4:00 a.m., the night loading of the delivery trucks begins, preparation for the final stage in the package shipping process. Parcels that arrived earlier by air or feeder truck or were picked up by the delivery vans themselves are sorted, scanned, and incorporated into ORION’s route-planning calculations, which are continually updated as new pickups arrive. While the sorted packages are being put on delivery trucks, the routes are finalized and downloaded into the drivers’ tablets (UPS had deployed this tech years before the iPad came along). Then the iconic brown box trucks depart to complete their deliveries—the endpoint the customer at the doorstep actually sees. Finally the same drivers complete their pickups—three quarters of a million package pickups in Massie’s Southern California district—and return to the network of operating centers, usually between 6:00 and 7:00 p.m. There, incoming packages are sorted by destination and shipping method and sent out by feeder truck, rail, and air to the proper UPS hub, and the process begins anew, sometimes with bare minutes to spare before a plane, train, or truck departure.

He ticks off the problems that keep him up at night: failing bridges, potholed streets, congested ports, endless traffic jams. Truckers on overnight hauls can’t even find safe parking half the time. As vital as trucks are to the economy and our way of life, Massie says, they are treated like interlopers on America’s roads. He’d like to see dedicated highway freight lanes—high-speed lanes just for trucks, isolated from passenger traffic—and greater public transportation investment to take cars off the road, making room for those freight lanes and more trucks.

 “It’s simple, really. Trucks are like the bloodstream in the human body. They carry all the nutrients a body needs in order to be healthy. If your blood stops flowing, you would die. If trucks stop moving, the economy would die. That’s not hyperbole. That’s not embellishment. That’s just math. And yet—and this is what really gets me—the general public hates trucks. People have become truck haters. They want them off the road. They oppose improvements that would keep the economy moving and growing. It’s already hurting our business. People don’t know what they’re asking for. They would paralyze America if they had their way.

“I don’t know if it’s a cultural thing in America that people feel entitled to the cement and the roads without having to pay for them, without having to understand how the system works, or that our economy depends on it continuing to work,” says Noel Massie.

One additional proposal put forward by the ports and local groups tired of choking on pollution would add electric power lines overhead so that zero-emission electric trucks could traverse the 710 corridor, then switch to battery power when leaving the freeway. And all of the plans will require much cleaner trucks than the current generation of diesel big rigs, as state and federal law demands sharp improvements in Southern California’s notoriously poor air quality.

Twenty-two companies are working together on one such promising superlight experimental big rig called the WAVE—for Walmart Advanced Vehicle Experience—that uses a hybrid system consisting of a powerful battery electric motor coupled with a micro-turbine engine that together can cut emissions and fuel use by up to 241 percent. But a commercially viable version of the WAVE (that is, one that’s cheap enough) may be a decade or more off, if it’s even achievable at all.

Absent such a paradigm-shifting technological advance actually hitting the road soon and in large numbers, community opposition to any proposal that would allow more trucks or increase the freeway’s footprint has already formed.

Monorails. Flying cars. Nuclear-powered cars. A helicopter in every garage. Subway bullet trains traversing the country. Moving sidewalks. Magnetic highways to guide vehicles so drivers can relax and play board games with the kids. Rocket planes that go suborbital to cover long distances quicker. We were supposed to have all these by now, or so the predictions of the future went a couple generations ago. Traffic was supposed to have been solved. Energy and pollution, too.

It’s tempting to judge those earlier decisions harshly, to condemn the shuttering of a valuable transportation asset and the refusal to build a new one when it would have been so much easier and less expensive to lay those tracks when the freeways first went in, rather than trying to shoehorn them into a built-out urban landscape today. But were those decisions wrong? Mass transit ridership was dying in the region even before World War II. And for all the money being spent on new light rail and trolley systems now, ridership is only a fraction of what it was a century ago. Cars won. And the decisions made to reject those multimodal freeways were rational at the time. People wanted cars. They didn’t want to see America from the train. They wanted to see the U.S.A. in their Chevrolets. They wanted to drive to work in air-conditioned comfort, not walk to the streetcar or train station, then wait around on crowded platforms. All the billions spent on mass rail transit in LA in recent years, the most ambitious build-out of multiple routes anywhere in the country, has not reduced car traffic jams as hoped. It helps somewhat, but the reductions make it hard to justify the expense. This mirrors the experience nationwide, even as about 25 percent of surface transportation spending goes to fund mass transit.

Mass transit use has picked up a bit in recent years but still is lower than it was a quarter century ago and far below its absolute peak in the 1920s, when it was the best and most desirable way to get around the nation’s cities and suburbs. Indeed, suburban development followed the extension of mass transit lines back then in the era of streetcar suburbs, because the trolleys were considered a prerequisite for suburban development. Most streetcar suburbs have been absorbed into cities proper since then, and suburban development after World War II eschewed following mass transit and instead relied on car accessibility. The new mass transit spending is not enticing waves of new riders to abandon their cars and ease road traffic. The convenience of the car parked in front of the house trumps the inconvenience of getting to a train or trolley or bus. In the 1920s, Americans were not deterred by this last-mile problem.

People walked to the stop—no big deal.

The replacement of truck, bus, and cab drivers with automation will be wrenching, particularly since taxis have become an entry point into the workforce for immigrants, and truck and bus driving have provided one of the few enduring and plentiful blue-collar jobs that still provide reliable paths to middle-class prosperity. The American Trucking Associations reports that there are about 3 million truck drivers working in the U.S.—it’s the single most common job in a majority of states—and about 1.7 million of that number are long-haul truckers, who would be most vulnerable to displacement by autonomous technology.

Rail, trucking, and ships dedicated to goods movement could start reducing their carbon footprint by transitioning from bunker and diesel fuel to natural gas, then electricity and carbon-neutral biofuels as those sources ramp up. These moves would be powered by a revamped grid dominated by renewable power sources that are already price competitive with fossil fuels. Embedding more miles and energy in our products can no longer be the winning strategy.

In the business world there would be big losers in this shift—the powerful fossil fuel industry. But there would be equally big winners in renewables, in producers of electric cars, autonomous vehicles, and electrical infrastructure. Tens of millions of jobs would be created to convert homes, ports, logistics centers, military bases, and factories to solar, wind, and bio-power with built-in energy storage for round-the-clock use and charging of our vehicles.

 

 

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