Getting Off the Oil Dependence Treadmill

By JIM DIPESO, REP’s policy director

AN HISTORICAL DOCUMENT: Jim delivered this speech at the annual meeting of REP’s New Mexico Chapter in Albuquerque, on January 27, 2007.

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Thank you for bringing me here to New Mexico, the Land of Enchantment and Ph.D.s.

New Mexico is in the unusual position of having both its senators chair and serve as ranking member of the Senate Energy & Natural Resources Committee. New Mexico’s congressional delegation is in a strong position to influence how the nation’s energy script will be rewritten over the next several years.

Let’s hope that they work hard and smart at it, because we have to make big decisions very soon and we have to get them right.

In his 2006 State of the Union speech, President Bush said, “we’re addicted to oil.”

On Tuesday night, in the 2007 State of the Union speech, the president correctly stated that we need to diversify our energy supply and confront the serious challenge of global climate change.

He set a goal of cutting gasoline consumption 20 percent by 2017, mainly by more than quadrupling production of ethanol and other alternative fuels.

It sounded ambitious. I just wish that he had followed the lead of those 10 corporate executives on climate policy and agreed to put a price on carbon emissions. That would establish a market for carbon emissions reductions, which in turn would stimulate expanded use of energy efficiency technologies, renewable and nuclear energy, cleaner transportation fuels, and cleaner ways of using coal.

Carbon emissions carry a cost. Until markets tell the truth about that cost, low- and zero-emissions technologies will be hard pressed to compete with conventional oil and coal.

How we solve oil dependence and the related problem of global warming will determine the type of country – and world – that our descendants in the 21st century and beyond will inherit.

The problem won’t be easy to fix. Oil is embedded in the foundation of modern human society. Oil is a concentrated, portable form of energy that has permitted us to scale up our economy and manufacture consumer conveniences in ways that would have been unimaginable to our ancestors.

Oil has a shadow side, however. Pick a problem – Middle Eastern violence, high energy costs, our rising trade deficit, and climate change – and a trail of oil leads to every one of them. Our high energy demand puts upward pressure on prices, which benefits Iran, Venezuela and other rogue regimes.

Climate change, in particular, is the elephant in the living room. Oil use is a significant contributor to the buildup of greenhouse gases in the atmosphere.

So, where do we start? Let’s start with the president’s gasoline reduction goal.

Who wants to guess how much gasoline is used in the United States every year?

The total is about 140 billion gallons – enough to fill a tank one-half mile wide, one-half mile long and one-half mile high.There are good reasons for cutting that consumption. Motor gasoline accounts for almost half of our nation’s oil consumption. About 60 percent of the oil that we use comes from other countries.

But here’s an important point to remember. Even if we didn’t buy a drop of oil from the friendly neighborhood petroleum grocers in the Middle East, we’d still have a problem. Because oil is traded globally, anything that happens anywhere in the world that perturbs the global oil market is going to show up in pump prices here in Albuquerque or wherever you happen to live.
While prices have fallen from last summer’s highs, the oil market’s vulnerability to such events has not.

As the president mentioned Tuesday, our dependence on oil leaves us vulnerable to hostile regimes, civil unrest, and terrorism in those parts of the world where the largest remaining conventional oil reserves are located.

All it would take to create a price shock would be for one suicide bomber to get lucky in Saudi Arabia.

So we need to get off the oil treadmill. Before we turn to ethanol, the likeliest of the alternatives for replacing gasoline, let’s cruise around the fossil fuel neighborhood and see what else may be available.

We’re told that we have a lot of coal and shale oil in this country. Which is true. For example, the estimate of 1.5 trillion barrels of shale in the central Rockies is equal to nearly 200 years worth of conventional oil at present consumption rates.

Present consumption rates. That’s the fine print to watch out for. You have to remember the power of exponential growth. A resource that would last 100 years at present use rates will last only 55 years if consumption grows by only 2 percent per year. So, keep that in mind when politicians and media talk about hundreds of years worth of fossil energy reserves.

There has been increasing talk in DC in the past few weeks about coal-to-liquids – using our country’s abundant coal reserves to manufacture hydrocarbon fuels.

The coal-to-liquids push has brought together two senators to sponsor legislation, Jim Bunning of Kentucky and Barack Obama of Illinois, who have absolutely nothing in common except that they hail from coal-producing states.

Coal-to-liquids is not a new technology. Back in the 1920s, two German scientists named Fischer and Tropsch developed a process for turning coal into a usable liquid fuel.

The Fischer-Tropsch process has an unsavory political pedigree. During the 20th century, it was used by two coal-rich, oil-poor countries for solving their transportation fuel problem – Nazi Germany and South Africa’s apartheid regime.

If you’ve seen the movie “Patton,” you may recall scenes in which Patton’s tanks ran out of gas.

What the movie didn’t show was that Patton didn’t wait for the Army brass to fix the problem. He drained the coal-based fuel out of captured German tanks, poured them into his own tanks and continued pushing into Germany.

However, coal has some significant issues. Like oil, coal has a shadow side.

My family has a little bit of history with coal. Right after he emigrated from Italy, my Grandpa Boggio worked for a time as a coal miner in Pittsburg, Kansas. He could hardly speak a lick of English. But he was a hard worker.

One day, the mine boss gave him a job to work “ahead of the air” for $1.25 a ton and another $1 for every foot he expanded the tunnel. Grandpa would repeatedly breathe a lungful of air, hold his breath, run into the tunnel, dig until he couldn’t stand it anymore, run out, let the air out, suck in another lungful of air, hold his breath, and go back in. Over and over and over.

Well, Grandpa decided the coal business wasn’t for him. He enrolled in a correspondence course to improve his English, moved to Los Angeles, and took a job as a meat cutter.

I tell this family story to illustrate that coal has a shadow side of hidden costs. Past and present, it has left a legacy of disease and disfigured landscapes. Acid rain. Mercury. Mountaintop removal. And of course, carbon dioxide, since coal is the most carbon-rich of the fossil fuels.

Carbon is a huge issue with using coal to produce liquid fuel. Throughout the fuel cycle, coal-derived fuels result in nearly twice as many carbon emissions as conventional gasoline from crude oil.

Coal fuels may make sense from an energy security standpoint, but not if we’re trying to reduce carbon emissions. If we’re going to go the coal fuel route, we’ll have to find ways to reliably store the emitted carbon underground for centuries.

So, let’s find out if ethanol is the answer to our oil dependence and greenhouse gas emissions problems.

Ethanol is a hot commodity. With production costs below oil prices, money is pouring into biorefineries. Midwestern farmers love it. Midwestern politicians love it. And it doesn’t hurt that ethanol gets a 51-cent a gallon subsidy.

A word about subsidies. Every form of energy you can name is subsidized – coal, nuclear, renewables, all of them. The important question is whether those subsidies help us achieve the goals we need to achieve.

The energy law passed in 2005 calls for producing 7.5 billion gallons of ethanol by 2012. We’re more than halfway there already and likely will meet the goal ahead of schedule.

You may have what’s called a “flex fuel” car – able to burn any combination of gasoline and ethanol. There are several million such vehicles on the road today. Many drivers are not aware they have flex-fuel capability – if you can find ethanol pumps.

In Minnesota, there are nearly 300 stations where you can buy E85 – 85 percent ethanol, 15 percent gasoline – to put into your flex-fuel car.

In New Mexico, there are only four such stations, all on the I-25 corridor. If you live in Roswell or Farmington, you’re out of luck.
Almost all of the ethanol used for fuel today comes from fermenting sugars derived from corn starch. But for all the corn we grow in this country, we don’t grow enough to help us kick the oil habit. Dedicating every kernel of corn grown anywhere in America could produce about 30 billion gallons of ethanol. Not enough to fully replace gasoline.

Plus, growing corn takes a lot of energy You need natural gas for fertilizer and natural gas is used for the heat needed for distillation. That’s a tradeoff. Who here is up for drilling gas wells in Otero Mesa for ethanol refineries?

Bottom line is that corn is not an ideal ethanol feedstock. Sugar cane is much better. You get twice as much ethanol per acre from sugar cane as you do from corn. Anyone try to grow sugar cane in New Mexico? It’s a tropical crop. Brazil gets about 40 percent of its motor fuel from sugar cane, but Brazil is a tropical country that can grow a lot of sugar cane.

So, producing corn-based ethanol will help displace gasoline in the short run, but it’s not a long-term answer.

Which President Bush knows. That’s why in his speech Tuesday he talked about grasses and farm waste as alternative ethanol feedstocks.

The president was talking about cellulosic ethanol – fuel derived from low-value plant materials containing cellulose. These feedstocks could, in theory, yield far more ethanol than corn with less energy.

A good example of such a crop is switchgrass, a hardy perennial that requires little fertilizer and grows like a weed, which is what it looks like.

For cellulosic ethanol to work, there is a biochemical nut that has to be cracked – separating the cellulose fibers containing fermentable sugars from lignin. You need bacterial enzymes to do the trick, and getting the bacteria to cooperate is not easy.

How much gasoline could cellulosic ethanol displace? In 2004, the National Commission on Energy Policy – a bipartisan group of business, science, and government leaders – estimated that half of today’s gasoline consumption – that’s 70 billion gallons – could be replaced with cellulosic ethanol, and only 7 percent of U.S. farmland would be needed to grow the necessary crops.

That could be accomplished with improved switchgrass yields and – this is critically important – doubling motor vehicle fuel economy.

The indispensable prerequisite for replacing gasoline with biofuels is greater fuel efficiency. The less liquid fuel needed, the less gasoline must be replaced.

Fuel efficiency will set the table for ending America’s oil addiction and reducing greenhouse gas emissions.

President Bush proposed raising fuel economy standards by 4 percent per year through 2017. That works out to 34 miles per gallon for new. Not a bad start, but it’s only a start.

In its 2004 study, the National Commission on Energy Policy included a study by two automotive engineering firms, which estimated that mileage standards could be raised 10 to 20 miles per gallon from the current overall average of 24 mpg – with no impacts on safety, convenience, or styling.

To achieve a fleet mileage performance exceeding 40 miles per gallon will, at least in the near-term, mean widespread use of hybrid-electric vehicles. Toyota is selling Priuses like crazy, but they still make up only a small fraction of the total vehicle market.
The market, fortunately, is moving faster in the direction of more efficiency. The domestic automakers are seeing the weakness of their business model of depending on heavy trucks and SUVs to generate profits. Consider, for example, Ford’s record-breaking 2006 loss of nearly $13 billion.

At the recent Detroit auto show, GM unveiled an interesting concept car, the Volt, which would run 40 miles on a battery charge and include a small gasoline engine to keep the battery topped up.

The next big thing in the auto world is the plug-in hybrid car. Eighty percent of Americans drive fewer than 40 miles per day.

Which means you could drive on the battery, put the car in the garage overnight, plug it in, charge it up, and you’d almost never need to buy liquid fuels.

Plug-in hybrids are not yet commercially available, however. There are battery cost and weight issues to be overcome. The National Renewable Energy Laboratory, which we toured at our annual meeting last year, is working to overcome those problems.
A question that often comes up is this: would we produce more carbon emissions if we’re plugging in all those cars into the electric grid. The answer is no. The California Air Resources Board, which sets air quality standards in that state, and the Electric Power Research Institute, estimate that replacing conventional cars with plug-in hybrids would reduce overall pollution and carbon emissions by half.

Of course, those emissions would be even less if more electricity were generated with low or zero-carbon resources.

Wind generation is continuing its rapid growth. New Mexico is number seven among the states in total wind power capacity. However, wind still has a very tiny share of the nation’s total generating capacity. Assuming that wind technology continues to improve and costs continue falling, how much wind power could be installed in the U.S.? Are there practical limits?

The Minnesota Legislature ordered up a study that found that with the right policies, utilities can handle a resource mix of up to 25 percent wind without harmful impacts on grid reliability and with only minimal additional costs.

That’s great. But let’s pull back, look at the big picture and cut to the chase. What would it really take to cut oil dependence and stabilize greenhouse gas emissions by mid-century? Do we really have the technology to get the job done?

A Princeton engineering professor studied this question, concluded that we can accomplish those goals, and came up with an interesting strategy for doing so. It’s called the “wedges” strategy.

Essentially, he broke the problem down into bite-size chunks. Or, as he put it, we need to “decompose a heroic challenge into a limited set of monumental tasks.”

A wedge is a technology that avoids the emission of a billion tons of carbon per year. To stabilize the atmosphere’s carbon load at a level that doesn’t take undue climate risks, we must implement seven of those wedges by the middle of the century.

Unlike federal fiscal management, the wedges strategy requires a balanced budget. If one wedge doesn’t work, you have to find another that does in order to meet the carbon load stabilization goal.

Another rule is that wedges must be technologies available today that can be scaled up. No bye and bye, pie in the sky technology.

Building efficiency can yield up to two wedges. At our annual meeting last year, we heard from architect Ed Mazria in Santa Fe, who estimated that building energy use could be cut in half, and the buildings would still be comfortable and do everything we expect buildings to do.

Only five wedges to go. Double the mileage of 2 billion cars from 30 to 60 mpg and that’s another wedge.

Four to go. Where would the fuel for the cars of tomorrow will come from? How much biofuel creates one wedge? Worldwide, we would need about 100 times current U.S. ethanol production – about 400 billion gallons.

Three to go. What about nukes? Double today’s nuclear capacity and use the new nukes to replace coal. That’s another wedge.

Don’t like nukes? Expand wind energy by a factor of 50 and solar by a factor of 700. That gives you two wedges. Still one more to go.

There are other possibilities. Storing carbon in soil through improved farm and forestry practices yields a wedge.

Of course, all energy technologies, have issues. Biofuels won’t take off unless we find cost-effective ways of producing them from abundant feedstocks that don’t compete with food crops. Coal has issues. Nuclear raises proliferation concerns. Some people think wind turbines are ugly.

Well, guess what. Nobody said it would be easy.

But the wedges strategy tells us that our oil dependence and carbon emissions problems are manageable. It takes away excuses. It creates business opportunities. It provides a sense of hope.

But none of this is likely to take place unless a price tag is attached to carbon emissions, through a mechanism like the McCain-Lieberman bill’s cap-and-trade program or a carbon tax that accomplishes the same result.

This gets back to what the President left out of his speech Tuesday night. However, I’m glad that he acknowledged that climate change is a serious challenge that we must confront.

His statement gave a gentle nudge to the political momentum that is gathering for climate legislation. CEOs of the nation’s leading corporations are asking for a national climate policy. Sooner or later, Congress and the president will have to listen.

To find good solutions, we need to find a way to ensure that markets tell the truth about the real costs of our energy habits. Essentially, what that really means is that we have to tell the truth to ourselves. Once we do that, the answers we need to find will follow.

Thank you very much.

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