California
In California, progress is … complicated
Thursday, January 14th, 2010
Last year, a severe budget crisis in the country’s most populous state made California the site of a lively – and unexpected — debate over reviving offshore drilling.
Now Governor Schwarzenegger has drafted a new budget, which does indeed include proposals to revive drilling in a large and controversial site, known as the Tranquillon Ridge, off the coast of Santa Barbara. It’s a site that by some estimates could generate $4 billion in revenue for the California. It seems a budget crisis is just what was needed to trigger serious policy discussions about offshore drilling as a source of new revenue.
Of course, as we’ve said again and again, we’re all for healthy debates that might lead to more coastal waters being opened to responsible exploration and production. Still, it is difficult to watch this particular debate unfold without being reminded of how far we still need to go, at least in some parts of the country.
Out west, the prospect of additional drilling is too often regarded as a move of last resort rather than a logical energy and economic policy. Schwarzenegger says that revenue from the Tranquillon site will go directly toward the state’s parks, sparing them additional cutbacks. In addition, it appears broad support for the project hinges on an agreement from the project’s developer to stop oil production there after 14 years.
If you think this all sounds a little funny — dangling the future of the state’s parks systems in order to win approval for the project, while exchanging oil now for no more oil in the future — you’re probably right. Some critics have equated the terms of this proposed project to blackmail.
This is not to say that a happy conclusion is out of the question. If it takes state budget crises to get states interested in their offshore resources, that’s a good thing. Even opponents of the project may come to support it once they see the economic upside.
But it shouldn’t have to be so complicated. Hopefully, when other offshore projects come up for review around the country, it won’t be.
Tags: budget crisis, California, domestic energy, drilling, offshore drilling, oil and gas, santa barbara, tranquillon ridge
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While you were toasting…
Wednesday, January 13th, 2010
CEA’s recent year in review offered a long list of achievements in public policy, technology and public opinion that all helped advance our goals of fostering a strong domestic energy industry and economy.
We also noted that there was a lot more work to be done.
Indeed, word came down on New Year’s Eve that 11 states had committed to following California’s lead in adopting a Low Carbon Fuel Standard, essentially a wildly inaccurate measure of the carbon footprint left by various fuels. We’ve noted before that such standards are less likely to reduce emissions and more likely to increase imports of Middle East crude oil. Yet, because the standard has a nice ring to it and may appear to offer the sort of simple solutions people crave, it is catching on quite quickly.
It is heartening to see pockets of opposition, such as this one out of Pennsylvania that notes that the premise of carbon accounting on which the policy is based is, at best, challenging to calculate, and at worst, just like we said, inaccurate.
But from where we stand now, too many lawmakers are taking the sound byte over the hard science and signing on to what could be a devastating policy for the future of domestic energy and our dependence on foreign resources.
As we outline our goals for the New Year, educating lawmakers, businesses and the general public about this not-so-low carbon standard must be a top priority. The future of many domestic energy suppliers and refiners will be riding on the outcome.
Tags: California, carbon footprint, crude oil, domestic energy, emissions, Low-Carbon Fuel Standard, Middle East
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A sweet deal for foreign oil importers
Thursday, October 1st, 2009
Anyone who has worked in the oil industry for a while understands that there’s another meaning to “light sweet,” besides the low-fat dessert the words might first bring to mind. Light, sweet is a kind of crude oil, named for its comparatively low sulphur content, the ease with which it flows out of the ground, and apparently, its sweet taste as well.
Heavy crude oil, sometimes also described as sour, tends to have a more viscous quality. This makes it harder to get out of the ground and barrel for barrel, heavy crudes typically produce less refined fuel than lighter grades.
All crude oils, in other words, are not created equal.
Now, if there was an infinite supply of light, sweet crude oil in the world, oil companies might never have bothered going to the trouble of producing the thicker stuff. Fact is, there’s significantly more heavy crude oil in the world, and a substantial amount in the U.S., particularly California. Because heavy crude is typically a lot cheaper than light crude, companies often find it economical to produce, despite its lower quality.
Factor in all the transportation costs that are saved by producing oil domestically, and that heavy stuff starts to look even more appealing.
That brief primer in crude oil economics offers a sense for why some new emissions policies being proposed are misguided. Specifically, a Low Carbon Fuel Standard being considered by Congress would effectively favor light crudes across the board, no matter where they came from and how much it would cost to produce them.
You can read more about the problem with this overly-simplistic approach to reducing emissions on the site Secure Our Fuels, which offers a scenario of how laws passed in Washington would affect the worldwide crude oil trade:
Saudi crude wins out over Canadian crude. Nigeria beats Colorado. And Libya wipes the floor with California. Just because North American crude happens to be deeper, denser and a little bit more remote than our competitors’ oil.
It might seem inconceivable that a well-intentioned policy could actually increase our dependence on foreign oil, but that is the risk you run with sweeping policies that fail to address the complexity of oil economics that we’ve hinted at above.
When it comes to achieving a balanced energy policy that is good for the environment, the economy and the country, good intentions aren’t enough. They may do more harm than good.
Tags: California, CEA, Consumer Energy Alliance, drilling, gas, heavy crude, light sweet, ocs, oil, Secure Our Fuels, viscous
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Talk about thinking outside the box, check out Chevron’s latest project
Thursday, August 27th, 2009
Traditional power meets alternative energy and Big Oil meets Silicon Valley in Chevron Corp.’s new project to use solar power to produce oil at a field in California.
Using solar energy to produce oil might sound odd, but it makes a lot of sense in places like California, where much of the oil is especially viscous in quality and flows better when warm. The common practice is to use natural gas – often straight from the producing field – to heat the oil wells, but producers often regret having to consume so much fuel in the production process. When fuel prices are high, it can seem especially wasteful. Sunny California is the ideal setting for a solar solution.
Chevron’s solar-powered oil field in Coalinga, Calif. comes through a partnership with Brightsource Energy, an Oakland, Calif. company that develops solar power plants and has raised substantial funding as many investors moved their money out of high-tech and into alternative energy.
Clearly, a lot of investors these days are interested in alternative energy; a persistent challenge, however, has been demonstrating that these power sources can execute on a large scale and can be applied to all sorts of traditional industries that run on traditional fuel.
Think oil production is traditional enough? As news reports of the story suggest, the Chevron deal offers BrightSource an opportunity to deploy its technology on a grand scale.
Other solar companies have also awakened to the potential of operating on oil fields. Ausra, a Mountain View, Calif. maker of solar energy systems, recently broke ground on a plant near oil-rich Bakersfield, Calif. The project has been described as the company’s own proof of concept that solar power has widespread industrial applications.
Since it does on occasion rain in California, Chevron says it doesn’t expect the solar project to eliminate its need for natural gas to heat its oil wells. But adding solar to the mix could significantly improve its efficiency. Like the ageing oil fields of California, where extracting oil can be like scraping peanut butter off the bottom of a jar, many other fields around the world use steam to optimize production. Producing that steam at a lower cost could even make production in particularly expensive fields more economically feasible.
If the Chevron/BrightSource deal is a case of old meeting new, and the dreamers meeting the skeptics, they seem to be coming together on some very practical territory right in the middle.
Tags: Bakersfield, Brightsource Energy, California, CEA, chevron, Consumer Energy Alliance, oil, silicon, solar panel
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Not for everyone, but a (virtual) necessity for some
Wednesday, June 10th, 2009
As General Motors Corp. files for bankruptcy and faces an uncertain future, it is easy to blame the company’s focus on SUVs and other large cars for alienating the American consumer. The real story behind the demise of this legendary company is, of course, far more complex, and the size of the cars it made may have surprisingly little to do with it.
After news of the bankruptcy filing broke on June 1, Reuters did some reporting from the streets of Houston, where it found many people, usually people with big, busy families, who said their SUVs served them well as they transported their children to school, soccer games and whatnot. They had no plans of downsizing.
Now, it’s fair to ask why minivans and SUVs have widely come to be seen as essential for today’s families, when a couple of generations ago, much larger families made do on sedans and station wagons. It’s also reasonable to suggest that Houston is not the typical American city (although there’s no shortage of SUVs on California’s freeways either).
But there’s a larger point in this story that is not made often enough. Car buying decisions, particularly for families, are often made on the basis of lifestyle, rather than economics and fuel efficiency. Since so many middle-class American families have two cars, it’s quite common for them to pour all of their environmental and economic concerns into one of those two cars, and buy something compact that’s perfect for running errands around town. Their second car reflects a different set of concerns, about comfort and convenience, and keeping the peace on long road trips with the help of individual video screens on all the seat backs.
This hardly means that fuel efficiency is irrelevant. After all, families of limited means struggling to maintain a middle class lifestyle are often the ones hit hardest by rising fuel prices, buying affordable homes in distant suburbs or exurbs and spending massive amounts to commute.
But as GM and other beleaguered carmakers finally get serious about making cars with better gas mileage, they’re likely to focus on technology as much as car size and continue to turn out some decent-sized family models.
Tags: California, Car buying, carmakers, commute, General Motors, Houston, Reuters, Sports Utility Vehicle, SUV, Texas
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