The Eco Forum
We invite you to fully participate in on-going discussions relevant to the environmental community. Our goal is to provide a public forum to promote discussion of environmental topics, and we believe that the progress of environmental protection is furthered by healthy debate in a free society. Our only gate-keeping function is to avoid publishing statements that are libelous or not relevant to the topic under discussion.
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Please send your comments to Angela Neville, JD, REM, at aneville@stevenspublishing.com.
The Case for More Secure Energy
For decades, western economies have been supporting Middle Eastern nations that essentially have one product to offer in trade - oil. Our dependence on Middle Eastern oil is so complete that U.S. foreign policy and our national security is held hostage by the knowledge that if that region becomes unstable to the degree that oil no longer flows, Western economies collapse, energy prices skyrocket and the standard of living of the industrial world plummets. No other common energy source exists in enough quantity or form to replace oil.
In our deal with the devil to ensure stability in that region, we support governments whose state-sponsored press is very hostile to the west. A recent Gallup poll suggests many of the people in that region harbor deep anti-Western beliefs. Vast sums flow into this region in exchange for oil. This money is then made available for causes these governments find important. Governments like Iran, Kuwait, Saudi Arabia have great wealth and, because of our dependence, political power. Is this really a healthy situation? Is there a practical alternative?
We have a solution to this problem that would allow us to pay a slightly lower price for petroleum than we do today, at the same time creating a two-year economic boom for most of the world. Why hasn't it been done? Put simply, it would require the U.S. government to put into action -- the largest single construction project the world has yet seen. But with all of its benefits, and at a lower petroleum price than today's, can we afford not to?
The United States currently imports 12 million barrels of petroleum per day out of our 20 million barrel consumption. This imported oil, roughly $110 billion per year at $25 per barrel, could be replaced entirely by the most ambitious program the U.S. has undertaken since the Apollo Project, by building 'Gas-To-Liquid-fuels' (GTL) plants. This technology was used by the Germans during World War II to produce gasoline and other fuels from coal when they were cut off from their oil supplies. In short, giant plants use chemical catalysts to convert natural gas into a synthetic gas, which is further turned into refined products, such as gasoline and diesel fuel. Considerable advancements have been made in the cost and technology of these facilities over the last 60 years.
The economics of the plants are dominated by the initial construction costs, which would be just over $300 billion for 14 million-barrel-per-day facilities. Over a 20-year period, the revenues from the fuels would be over $2 trillion.
The major oil companies have teams working to be the first company to use GTL commercially. Exxon and Shell have each spent more than $500 million in the effort. Several are currently on the economic threshold, working to reduce costs and risks before making multi-billion-dollar investments. They are just years away, even without government support. Their entry, however, will not be large or fast enough to break OPEC or give us petroleum independence. Our ten largest oil companies, combined, could not finance $300 billion in new projects in just two to three years. Only the U.S. government can do this.
If a fraction of these plants were built and financed by private industry, the required price of petroleum products would be near today's prices. However, if these plants were financed directly by the U.S. government, the zero-subsidy prices of petroleum products would be lower than today's prices. In other words, we Americans could be paying the same price for our gasoline using our own GTL plants as we do now buying it from OPEC and others. At the same time, we could save our military the cost and burden of securing our oil supplies and no longer be hostage to many Gulf Arab political turns.
The price and payoffs look right, but what would it take to really do this? We need to procure several very large 'stranded gas' fields. These are immense fields of natural gas which have been discovered, but which are too far from developed gas markets to have any value. Over one thousand of the largest class of these fields are already discovered. Our government would have to forge agreements with a few, 'friendly' nations to purchase rights to produce some of this gas and convert it to liquid fuels on location. We would also require the right to protect the fields and plants on their territory with our own armed forces.
The construction of these plants would be the largest project ever undertaken -- roughly six times the construction cost of China's Three Gorges Dam. It would involve immense amounts of steel, equipment and labor. It would stretch the world's project management resources to its limit. It would also give the world a shot in the arm economically as the benefits of so much activity cascaded throughout the global economy.
The foremost benefit of such a plan is the control of our own energy supply. We would no longer rely on imported oil, nor on those countries which supply it. We as Americans, along with allies that joined the plan, would have physical control and sovereignty over the fields our petroleum was produced in, as well as the facilities used in refining it into fuels and products. We would no longer need to cater to the Saudis and other major oil producers. It is this effect, the decoupling from the Middle East and oil supply security, which will have profound political and economic benefits. Imagine how many tens of billions of dollars we could save every year in reduced military costs by no longer protecting Middle Eastern and other nations' oil reserves.
The greatest benefits come from reduced military costs and reduced costs from 'event' shocks (such as the Arab Oil Embargo of 1973, the war with Iraq, the oil price shocks of 1980-81). It is estimated that as much as a third of our military exists to secure our oil supplies abroad. Our armed forces would welcome the renewed focus on true homeland security and less Middle Eastern entanglements.
When the new fuels started coming to market, it would create a glut of oil production the world has never seen before. The worldwide price of oil would collapse to less than $10 per barrel. The extreme reduction in oil prices around the world would provide an economic boom for all nations except OPEC and other significant producers (such as Norway and Mexico) as producer prices and consumer fuel bills fall significantly. The wealth, along with the political power of OPEC nations would vanish. Extremist groups would also lose some of their larger bankrollers.
A further knock-on effect of the plan would be a cleaner environment, through several means. First, through the reduced production from the Middle East and other producers of 'dirty oil' and gas flarers. Next, through the reduced emissions from the cleaner fuels produced by the technology. The U.S. government classifies GTL fuel production as a 'green' initiative, as they reduce the level of emissions considerably. Other 'green' initiatives include other alternative energy sources, which should proceed no slower than before. There would still be plenty of demand growth and aging production to absorb any alternative energy additions.
One last opportunity is the change in our industries as we adjust to the new energy economy. This creates new opportunity for new companies and industries to participate, as this would be the largest restructuring event we have ever undergone. Whole new industries will emerge, and many established ones will fall.
Moving the project forward takes several initial steps. The government would need to immediately begin negotiations to secure the gas fields, initiate discussions with other nations to join a Fuels Alliance, prepare foreign policy for the political reshaping, and initiate planning for the construction projects.
There are alternatives to the full project that carry most of the same benefits. We could produce half of our current imports and still break OPEC, without becoming self-sufficient. We could also use coal instead of natural gas as a feedstock, which would be easier politically but cost more. If Japan or Germany does the project before us, we would not be self-sufficient but would still get the benefits of fallen oil prices from a broken OPEC. We could even choose to subsidize them directly or indirectly through promised naval support.
Does our political leadership have the courage to undertake such a monumental task? Perhaps September 11 has given them renewed strength and purpose. Given the many benefits of our own fuel supply, at lower prices than today, let's hope so.
Mike Moorehead
President, Universal Energy Consulting
V.P. Strategy and Investment, Conoco Global Power Inc., retired
Houston, Texas
Ignorance Is Not Always Blissful
As an REHS and working in California, I felt compelled to respond to Angela Neville's "From the editor" column ("Seeing Community Right-to-Know Laws in a New Light," December 2001, see www.eponline.com, under Archives) discussing community right-to-know (CRTK) laws.
In your editorial you quote two sources, the American Chemistry Council (ACC) and the Competitive Enterprise Institute (CEI), regarding the dangers of CRTK policies. While I don't dispute the challenges of how to accurately and safely keep the public informed of Haz Mat issues in their area, I totally disagree with the quote you included from CEI's director, Angela Logomasini. She claims (my paraphrase) that this information only gets used for negative purposes and to foment fear in the public. Not a big surprise to hear this kind of comment coming from a lobbying arm of the industry; in fact, the horror of September 11 only gave CEI pundits an opportunity to practice exactly what she claims the other side is doing. Her comments seems to suggest that this information should never have been provided to the public since "...we can't make heads or tails out of all this technical information..." and will only be useful to terrorists. According to her, ignorance is bliss.
First of all, her biased opinion in favor of hiding information couldn't be further from the truth - and your referencing the 1984 Bhopal tragedy represents a classic example of how ignorance leads to harm, not bliss. Sure, the chemical industry reps would like to keep their information secret - information is power, and leads to questions that industry would prefer not to answer.
Second, whether you agree with her or not, presenting only one side of the story shows a bias in your column and detracts from meaningful dialogue about the issues of CRTK vs. public security. As an editor of a popular and informative environmental periodical (as well as an attorney), you should know better than to simply present one side to this complex issue.
You would serve your readers better in the future if you provide more than one perspective on an issue.
Richard Self
Arcata, Calif.
Editor's Response: In my article, I did attempt to present several sides to what you have correctly pointed out is a complex issue. I emphasize that we must strengthen our security, while at the same time fortifying the freedoms that have made our nation great. We must not let a false choice be made between our security and the freedoms that we enjoy as American citizens.
This article originally appeared in the June 2002 issue of Environmental Protection, Vol. 13, No. 6, p. 16.
This article originally appeared in the 06/01/2002 issue of Environmental Protection.