The pundits were out in force this weekend talking about the Keystone XL pipeline. One went off the deep end while another used common sense.
For the New York Times’ Tom Friedman, Keystone XL opened up a pipeline of wackiness. He wants anti-energy activists to “go crazy.” We’re talking “chain-themselves-to-the-White-House-fence-stop-traffic-at-the-Capitol kind of crazy.”
Hmmm… didn’t 350.org’s Bill McKibbon, the Sierra Club’s Michael Brune, actress Daryll Hannah, and others do this a few weeks ago? It didn’t stop the State Department from issuing a draft report stating that the pipeline would not have a significant environmental impact. It’s funny, but I don’t recall hearing about Friedman chaining himself to the White House fence and getting arrested. I guess that's not in a pundit's job description.
Friedman figures that if the President approves the pipeline it should be so politically painful that he’ll have to impose more energy-crushing rules. The columnist wants to “cue up the protests, and pay no attention to people counseling rational and mature behavior” so regulators can “order reductions in CO2 emissions from existing coal power plants and refiners by, say, 25 percent.” Talk about crazy. This would wipe out an entire category of electricity production, making the grid less reliable.
Contrast Friedman to Fareed Zakaria. In TIME magazine, he backs the pipeline and counters the false claim that stopping Keystone XL will keep Canada’s oil sands in the ground:
The U.S. Department of State released an extremely thorough report that tries to answer this question. It concludes, basically, that the oil derived from Canadian tar sands will be developed at about the same pace whether or not there is a pipeline to the U.S. In other words, stopping Keystone might make us feel good, but it wouldn't really do anything about climate change.
On his CNN Sunday show, Zakaria confronted guest, Michael Brune, executive direct for the Sierra Club on this point: “You’re arguing against the State Department and you’re arguing against the history of capitalism that when there is so much demand for a product, supply finds its way.”
Calling Charlie Rose, if the Paul Krugman-Joe Scarborough clash was good television bring Friedman and Zakaria to duke it out over Keystone XL.
At the IHS CERAWeek conference in Houston, Bill Gates made a pitch for nuclear power:
"The only way to solve the climate challenge is have some source of energy that's economic," Gates told the gathering on Thursday evening.
Expanding the nuclear option, he said, outweighed any notion of wind or solar energy as large-scale storage systems for both remained unproven.
"You can site [a nuclear reactor] where the power is needed," Gates said. "Unless you think there is a miracle hidden in storage."
Gates is an investor in Terra Power which is developing a type of reactor fueled by non-fissile uranium and would produce less waste.
While this design is in the future, today, nuclear power can play a role in the electricity generation mix. However, this will require the federal government to live up to its legal obligation and establish a nuclear waste repository. And if it doesn't--the administration had stopped licensing and construction of the Yucca Mountain facility-- it should stop charging utilities (and ratepayers) for waste disposal.
In at the last few years, natural gas has flooded the market making it a valuable fuel for electricity generation, but we live in a global economy where commodities trade across borders and new technology constantly spring up. Fuel prices and availability fluctuates. To prevent price spikes and maintain reliable generating capacity, electricity producers need energy diversity--natural gas, coal, nuclear, hydro, solar, and wind. On Tuesday, the House of Representatives Energy and Power Subcommittee held a hearing on this subject.
American Electric Power (AEP) Executive Vice President for Generation Mark McCullough warned Members,
[P]olicies that could prevent the construction of new baseload generating units or force the retirement of existing coal-fired capacity could cause significant shifts to this balanced energy mix; reduce capacity diversity; and hinder our ability to provide reliable and affordable electricity to our communities and customers.
McCullough added that proposed greenhouse gas regulations targeting coal-fired plants would "effectively prohibits the construction of any new coal-fired power plant." He concluded:
Due to these regulations, as well as numerous other challenges facing nuclear energy, our nation’s electric grid will become increasingly reliant on natural gas for new generation capacity, likely eliminating both diversity and flexibility in new power plant builds. Federal policy should support fuel diversity, not preclude it.
John McClure, Vice-President and General Counsel of the Nebraska Public Power District (NPPD) also testified on the need for fuel diversity. While the NPPD generates nearly 60% of its electricity from coal it also employs nuclear, hydro, wind, and natural gas. He explained to the Members of Congress:
While the supply and price of natural gas has been a game-changer and is a critical part of a diverse fuel mix, it is not the silver bullet. What many do not realize is coal remains a more competitively priced fuel for certain regions of the country due to the proximity of supply, especially in the central and western U.S. Natural gas may be a great option if your power plant is located near a robust network of gas pipelines, but unfortunately many of the existing coal plants do not have access to pipeline capacity to convert from coal to natural gas.
McClure added, "[F]uel choices go in and out of vogue, and that a diverse mix of fuel is important to deal with the economic and policy swings that can happen over a longer period of time."
Reliability needs fuel balance and diversity. Good policy should support that and not attempt to drive a vital fuel source like coal from the market.
A Congressional Research Service report finds that the administration deserves zero credit for America’s oil and gas boom. The increase in oil production has been from state and private lands:
On non-federal lands, there were modest fluctuations in oil production from fiscal years (FY) 2008-2010, then a significant increase from FY2010 to FY2012 increasing total U.S. oil production by about 1.1 million barrels per day over FY2007 production levels. All of the increase from FY2007 to FY2012 took place on non-federal lands, and the federal share of total U.S. crude oil production fell by about seven percentage points.
In the case of natural gas, while production has increased by 20% since 2007, “production on federal lands (onshore and offshore) fell by about 33%.”
Part of the problem is the slow process which raised the time it takes to get a permit by over 40% from 2006 to 2011. The report states that the Bureau of Land Management explains that this increase is due to the “complexity of the process.” The report concludes: “A more efficient permitting process may be an added incentive for the industry to invest in developing federal resources, which may allow for some oil and gas to come onstream sooner.”
In a press release, House of Representatives Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) said, "Where the states have been in charge, we have seen energy development boom in a safe and responsible way, but under federal control we have seen a sharp decline in production."
I've been harping on this for some time so it's always good to get additional evidence. We should also remember that by failing to develop federal lands, we're missing out on federal revenue and economic output:
The Institute for Energy Research released a study by Dr. Joseph Mason, a professor at Louisiana State University, in response to a Congressional Budget Office report from August that analyzed the benefits of opening up federal lands and waters that are restricted by law or administration policy from leasing.
“Even conservatively estimated, the economic effects of allowing access to U.S. energy resources are significant,” Mason told reporters over the phone.
The CBO found that opening up federal lands would generate a total of $7 billion in revenues during the first decade — $5 billion from ANWR and $2 billion from areas of the outer continental shelf. The CBO projected revenues from opening more lands to be between $2 billion and $4 billion from 2023 to 2035.
Mason found that opening up more federal lands would generate as much as $24 billion annually in taxes over seven years for the federal government in addition to lease revenues estimated by the CBO. In the long-run, $86 billion annually would be generated in federal taxes from more activity on federal lands and in federal waters.
States and local governments would see huge gains in tax revenues as well — $10.3 billion annually over the next seven years and $35.5 billion annually after that.
Also, watch this video by U.S. Chamber’s Senior Vice President for the Environment, Technology & Regulatory Affairs Bill Kovacs on why these permitting delays to energy projects hurt job creation.
Today in Houston, energy experts from across the globe are meeting at the annual HIS CERAWeek conference. FuelFix reports:
A lot has happened in the past year. [Conference chairman Daniel] Yergin and CERAWeek co-founder and co-chair James Rosenfield said the 2013 conference reflects that, including sessions on growing cybersecurity threats facing energy companies and facilities, the continuing boom in production from shale and other unconventional plays, and navigation of the recovering economy.
“There is a growing recognition that unconventional gas and oil is here to stay,” said Rosenfield, senior vice president at IHS. “The shift from gas to oil, and tight oil in particular, and the emphasis on liquids.”
Unconventional gas and oil from hydraulic fracturing has caused a record-setting year for American oil and gas development. The U.S. Energy Information Agency (EIA) reported that crude oil production hit a 20-year high last November and December. The American Enterprise Institute’s Mark Perry noted that if North Dakota and Texas--where much of America’s oil production growth is taking place--were its own country, it’d be the “9th largest oil-producing nation in the world.” Also, EIA noted that natural gas production set a record in 2012.
Yergin told Politico Pro the oil and gas boom has changed the energy discussion: “Energy policy for almost four decades has been dominated by the notion of scarcity. We’re not floating out in a sea of oil and gas, but there’s a sense that the U.S. position is much, much better than had been thought.”
While the U.S. is in a great position, many in Congress think it would be smart to “fix” the sequester, across-the-board spending cuts, by targeting energy producers with higher taxes. Former Mississippi governor Haley Barbour rejects this idea:
The oil and gas industry is already the highest-taxed industrial sector in the country, pumping about $86 million a day of taxes and fees into federal coffers. That’s $31 billion annually. A completely arbitrary tax hike on the energy industry would not only reduce industry growth, it would squelch job creation and pass higher energy costs along to consumers.
Instead of trying to weigh it down energy with taxes, let’s encourage American oil and gas development to create more jobs and boost economic growth.