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David Holt: Oil and Water, Why Offshore Drilling and Environmental Protection Are More Compatible Than You Think

David Holt, President of Consumer Energy Alliance, submitted the following Op-Ed to EnergyBlogs.com on September 15, 2009. View here.

Oil and Water: Why Offshore Drilling and Environmental Protection Are More Compatible Than You Think

One of the most naïve and potentially harmful forms of modern day environmentalism has to be the staunch opposition to oil drilling in the U.S. It’s a view promoted by a lot of not-in-my-backyard types who find a false sense of comfort in the notion that what they don’t see won’t hurt them.

To their credit, many of those same people who consider an offshore oil platform a blight on the environment are doing their part to leave a lighter footprint. They swap their SUVs for a Prius, a Smart Car, or even a bicycle and imply that if everyone else did the same, it would be enough. The problem with this line of reasoning is that the United States and all its residents could do everything in their collective power to curb fossil fuel consumption and, short of bringing the entire American economy to a grinding halt, the country would still remain hugely dependent on oil for decades to come. Like the giant tankers that come to feed our addiction from the Middle East, the North Sea and South America, the country’s oil policy can’t shift course overnight.

Addressing climate change and making serious investments in alternative sources of power are worthy national objectives. But from where we stand today, even under the most optimistic estimates, alternative energy and conservation won’t be able to get us off oil any time soon. The International Energy Agency estimates that alternative energy currently accounts for 7% of our total energy consumption, and will increase its share to 9% by 2030. For the sake of argument, let’s just say the estimate is way too low. Go ahead and double the estimate and you still have a country that needs a lot of oil. You might call it an inconvenient truth.

As long as oil remains the fuel of our modern economy, the question we should really be debating is where we get it. Today, the U.S. consumes one quarter of the world’s oil, but produces only 10% of it. Of the countries that sell us the rest, at least a few share relations with us that are, at best, tense. Many are literally half a world away, resulting in huge financial costs, and a not insignificant global environmental footprint in transporting the oil. (It takes oil to ship oil). Right now we are at a critical time for determining whether or not we set the right course for our economy and our country’s energy development policy for years to come.

We are just two weeks away from the Obama Administration closing a comment period, the results of which will help make a decision that could potentially reverse a moratorium on new offshore leasing that has been in place since 1983. All around the country, as the economy goes south people are starting to recognize that oil is not just a fuel, but a major industry that supports jobs, as well as stability in energy prices. And with today’s new and improving directional technologies, it’s possible to group many wells together allowing multiple subsurface locations to be reached from one platform, which reduces environmental impact.

Voicing your support for the federal government’s “Five-Year Program” – which determines the areas in the U.S. that may be leased for offshore oil and natural gas drilling – is one way to ensure that energy used by Americans is also produced by Americans. If an area is not included in this program, it cannot be leased and is considered off-limits. Therefore, it is imperative that everyone get involved by telling President Obama today that the U.S. needs to responsibly develop its own offshore energy resources. (If you are interested in getting involved, please visit the CEA website, www.consumerenergyalliance.org, or send in a comment by clicking here. The comment period closes September 21, 2009.)

It’s tempting to frame this debate as one between economic and environmental interests. But serious environmentalists understand that you can’t protect the environment by building a fence around your own backyard. Air pollution from China, after all, is showing up in California. Since the U.S. has some of the strictest laws in the world for drilling and producing oil, you have to ask how we are serving the global environment by encouraging – by default – sloppier drilling in places like Russia and Nigeria, which have fragile ecosystems of their own.

Should we then, just throw open the whole country to drilling? Or course not. From the Alaskan tundra to the California coastline and Florida’s sandy beaches, the country has so much natural beauty precisely because of regulations that were put in place to protect it. Any future projects should proceed with great caution, and not commence before thorough reviews conclude the project will not ravage the environment and will yield a substantial volume of oil and/or natural gas.

Decades of improvements in technology that make it possible not only to drill deeper wells but to do so without spills and seepage suggest that at least some locations would meet those criteria. You have to wonder if our not-in-my-backyard attitude toward oil has fueled not just our addiction to foreign oil, but our dangerous indifference to that addiction. We are all more likely to treat our natural resources with the respect they deserve when we understand the process and the effort that goes into developing them.

Our dependence on oil is not going to go away overnight, but when we take more responsibility for what we consume, we’ll be more likely to consume with care. It would be a big improvement from the Out of Sight, Out of Mind attitude about oil that prevails today.

Back to school … wear comfortable shoes

CEA has in the past highlighted the problem volatile fuel prices pose to people on fixed incomes, but what about those on declining incomes?

What about schools?

With cash-strapped schools around the country being forced to eliminate physical education and arts programs and cut down to the bone in core academic fields, it was only a matter of time until they turned the knife on their transportation budgets. This Michigan school is one of many around the country that is cutting back school bus service to save money. Under the new system in the Michigan town of Portage, children as young as five who do not have parents available to drive them to school and/or pick them up at the end of the day, will have to walk up to a mile to and from school. School bus transportation, in fact, is at its lowest level in more than a decade, largely because more and more school districts are looking to save money on fuel.

Now, it’s easy to dismiss this matter of school bus transportation as one of the lesser problems faced by schools which are also struggling to pay teachers decent salaries and stock basic supplies. There’s probably even a joke to be made about students getting their exercise on the way to school, now that there may no longer be physical education in school. And wasn’t trudging to school five miles in the snow at one time considered a right of passage in this country?

In all seriousness, this growing lack of transportation to school, at a time of many two-income households where neither parent is available to drive, poses a real problem for many families.

More to the point, the costs of fueling school buses is often just the tip of the iceberg for school districts that also, of course, have to heat their buildings all winter long. This 2008 story about the double-digit increases in heating costs many schools faced pointed out that budgets were so tight that 30% of schools around the country were eliminating or modifying teaching positions. And that was last year, before the worst of the recession hit.

At a time of such drastic cuts in education budgets, you have to wonder how high and unpredictable fuel prices are making a tough situation even worse.

David Holt: Does Mineral Policy Law Need Reform?

The following op-ed from David Holt, President of Consumer Energy Alliance, appeared on the National Journal website here, in response to the discussion question “Does mineral policy law need reform?”

September 15, 2009   This bill as proposed will add a great deal of regulatory burden and costs on the energy industry. At a time in our country when we need access to all energy resources readily available, and when we need to pay special attention to the economic hardships that consumers are currently experiencing, this is the wrong approach.

The U.S. House Natural Resources Panel recently met to discuss pending bipartisan legislation that aims to increase domestic offshore energy exploration and production. Their approach – one that eases decades old restrictions on American energy production — is the right approach. Their approach takes into consideration the current economic climate in which we are operating, while also helping to pave the way for an economic rebound.

Legislation that includes provisions for accessing domestic offshore energy sources, without overly burdening the industry, translates into legislation could help create millions of jobs, billions in local revenue and pave the way for long-term energy affordability.

CEA Praises House Panel’s Efforts to Address Offshore Energy Production as Part of Balanced Strategy

WASHINGTON – September 9, 2009   Earlier today, the U.S. House Natural Resources panel with primary jurisdiction over federal offshore energy policy met to discuss pending bipartisan legislation that aims to increase domestic offshore energy exploration and production. David Holt, president of Consumer Energy Alliance (CEA), a non-profit, non-partisan organization that advocates an “all of the above” approach to securing, reliable energy, issued this statement:

“Today’s hearing focusing on strong bipartisan legislation that aims to ease decades-old restrictions on American energy production offshore was particularly timely. In less than two weeks, the Interior Department’s public comment period regarding the upcoming 5-year outer continental shelf (OCS) plan will close, and the fate of domestic energy production for the next several years, and possibly well beyond that, will in part be determined.

“American consumers are facing difficult economic times right now – and many are being forced to make choices that no one should have to make. At minimum, they should be able to depend on their government for access to the energy resources they own – energy that, if harnessed, could create millions of new jobs, billions in local revenue, and the prospect of long-term energy affordability.

“Of course, offshore energy development is only one leg of our energy policy stool – but it’s an important one if we have any expectation of making our way back to prosperity. Along with it, we must work to increase the availability of energy in all forms – wind, solar, oil, natural gas, biofuels, nuclear – and use what we have more wisely at the same time.

“The dialogue during today’s hearing generally echoed this approach. CEA is optimistic that Secretary Salazar takes today’s hearing into mind, as well as the overwhelming support of the American people for increased offshore energy production, as his department prepares to release its new 5-year plan.”

For more information, visit www.consumerenergyalliance.org.

David Holt: Refining away affordable fuel

David Holt, President of Consumer Energy Alliance, submitted the following Op-Ed to The Washington Times on September 8, 2009.

Refining away affordable fuel

It doesn’t matter where you buy it. It doesn’t matter what you drive. It doesn’t even matter which octane you choose. Every gallon of gasoline combusted in our vehicles emits a chemically consistent 19.4 pounds of carbon dioxide. Congress wants to change that — and it isn’t about to let a silly thing like fuel science stand in its way.

You’ve heard of cap-and-trade. Now meet the low-carbon fuel standard (LCFS) — its younger, quieter but just-as-harmful kissing cousin. Cooked up in a California political laboratory over the past decade and being advanced on Capitol Hill by powerful members of both chambers, LCFS has as its goal to force refiners to start producing fuels with a lower-intensity carbon profile. Same price, same power, just with less carbon dioxide coming out of the tailpipe.

Who can be against that?

The laws of science, for starters. It turns out that, short of engaging in outright alchemy, tweaking the molecular profile of refined fuel products isn’t done easily, safely or well. But if an LCFS can’t actually effect a chemical change in the carbon makeup of our fuels, how can its supporters claim it will reduce the amount of carbon dioxide they emit?

The answer is that LCFS isn’t about making the fuels on which we rely today better, cleaner or more energy-efficient. It’s about making those fuels scarcer, more expensive and less available to those who need them. Achieve that, the logic goes, and the alternative energy technologies that can’t compete right now — for one, because they don’t exist in commercial quantities, if at all — will have a fighting chance in the future of gaining market share from the reliable, all-too-affordable energy sources that dominate our markets today.

But, having established that an LCFS can’t simply decree low-carbon fuels into existence, how would a program like this actually work?

Here’s how: First, bureaucrats gather up separate samples of the feedstock involved in producing fuel — crude oil. Each sample is assigned a carbon score, not based on how much carbon is in the oil (remember, that’s constant), but how much energy (and therefore, carbon) it’s estimated was used to bring that oil to market.

Heavy crudes require more energy to produce than light crudes and therefore receive a higher (read “worse”) “life-cycle” carbon score. Oil sands from Canada and oil shale from the American Intermountain West are treated even more harshly under this system. And corn-based ethanol? The way the bureaucrats see it, ethanol is even worse than the rest because farmers in developing countries likely will have to cut down more of their trees to grow corn because Americans are using so much of theirs for fuel. Follow all that?

Once the carbon scores are tallied up, fuel producers are presented with a fairly straightforward choice: Stop using heavier forms of crude to refine into gasoline or start buying up “credits” from the federal government for the right to remain in business. Sound familiar? It’s the exact same transfer mechanism involved in cap-and-trade legislation recently passed by the U.S. House of Representatives. It’s also the exact same mechanism that will result in your paying a lot more for a gallon of gas in the short term and perhaps even losing your job after that.

But an LCFS is even more sinister than that. Consider: An LCFS, by definition, is set up to discriminate against some forms of crude and benefit others. As it turns out, the forms against which an LCFS discriminates happen to be the ones most readily and affordably available to us — homegrown oil from California and Colorado; Mayan crude from Mexico; and oil sands from Canada, our most important economic and strategic ally in the hemisphere.

Who’s got all the light crude — the kind an LCFS scheme is rigged to favor? The vast majority of the world’s lightest, sweetest crudes happen to be controlled by some of the world’s least reliable and most unstable regimes.

How would turning over an even larger share of our nation’s fuel and energy markets to Middle Eastern energy producers impact American national security? LCFS proponents don’t have a whole lot to say on that front.

The vast majority of Americans have never heard of an LCFS, just as its proponents prefer — and even the ones who have heard of it struggle to remember what the less-than-descriptive acronym stands for. Now you know: An LCFS means higher prices at the pump, fewer good-paying jobs for Americans, complicated Wall Street trading schemes and expanded dependence on energy from unstable regions of the world.

Sounds a lot like cap-and-trade, right? We’d be so lucky.

Lining up to talk to the Manufacturing Czar

With American unemployment now at a 26-year high and much of the job loss a result of well-paying manufacturing jobs being “shipped overseas” as they say, the country’s newly-appointed Manufacturing Czar Ron Bloom clearly has his work cut out. Constituents from all over the country are no doubt lining up to make pleas for some sort of badly-needed assistance.

Here’s our take. We applaud the President’s recognition that the country’s manufacturing sector lies at the core of its economy and we hope this newly-created position will help reverse the loss of jobs seen in recent years and offer a long-term vision for strengthening the country’s manufacturing base. While all sorts of businesses are in dire need of assistance at the moment, we hope the Manufacturing Czar goes beyond quick fixes to adopt policies that will foster new innovation and sustained production. We need to look out for our rising entrepreneurs as well as our more mature industries.

How to do this?

First, consider the way fuel prices factor into businesses’ overall operating expenses. While high fuel prices clearly equal high operating costs, volatility can be almost as bad, making it impossible for businesses to project their expenses from one month to the next and leaving them reluctant to commit to high levels of output. The Manufacturing Czar should work with the Department of Energy and other groups to consider ways to keep oil and gas prices affordable, and at least somewhat predictable.

Second, go on the offensive. Too often, manufacturing is equated with steel and other “older” industries that are considered passé. Steel, of course, is hardly passé, but more to the point, it’s not just these mature manufacturing industries that are seeing jobs move overseas. Take wind power. The American Wind Energy Association notes that barely half of industry’s wind turbine equipment is made in the U.S. Much of the rest comes from China. Wind is commonly considered one of the industries of the future, yet even there, the U.S. has too often failed to embrace the manufacturing component. The Manufacturing Czar should not focus so much on preserving existing jobs, that he loses sight of the potential of up-and-coming industries to keep our economy strong in the future.

Modern Gushers

Last week we wrote about Peak Oil propaganda and how predictions of the death of the oil industry were grossly exaggerated. Later that week, BP Plc announced a major, major find in deep waters in the Gulf of Mexico expected to eventually yield 300,000 to 400,000 barrels of oil per day, or about half the capacity from all of Alaska’s North Slope.

Those are heady numbers, even for an industry accustomed to dealing in very large volumes. So here’s another way to wrap your head around the magnitude of BP’s gusher: Early estimates are placing the total reserves at at least four billion barrels of oil and natural gas. Assuming a reasonable 35% recovery rate, this single site  could account for about 5% of BP’s total proven oil reserves worldwide.

The fact that it is coming from a region often considered past its oil-producing prime offers a tantalizing sense for how much oil may still be out there waiting to be found.

BP owes this game-changing discovery to an aggressive commitment to explore for new oil, advanced technology that has in recent years enabled it to dig deeper, and government policies that have helped oil companies bear the cost.

Indeed, the newly-discovered oil is 36,000 feet below the Gulf floor, or as described by the Houston Chronicle, nearly a mile deeper than Mount Everest is high.

Not really a gusher at all, this is oil that will require a lot more work and investment to get anywhere close to the earth’s surface. It will likely not be a producing field for more than a decade. The daunting challenge of reaching oil trapped so far beneath the ground has often led critics to argue that it is just not economically feasible to produce. As BP’s massive discovery shows, even the most expensive projects may be cost effective when the volumes being produced are large enough. No one, after all, is suggesting now that BP should walk away from this find.

In the earliest days of oil, most fields were found just a few hundred feet below ground, so shallow that when oil was struck it literally gushed to the surface like a geyser. 3-D seismic drilling technology led to wells dug at 10,000 feet or more below ground. And in 1995, President Bill Clinton recognized the need for new policies for a rapidly-changing industry. He signed the Deep Water Royalty Relief Act to ease the burden of royalties on oil produced at great depths in order to encourage further exploration and development.

Just as the earliest oil producers could not have conceptualized the technology that would transform their industry, they probably could not have predicted the need for government policies such as royalty relief to spur continued exploration and innovation. Those who go around promoting Peak Oil are often blind to the industry’s real potential. Reaching that potential will require a lot of hard work, friendly policies that evolve with the industry … and the ability to think big. (And deep.)

CEA Commends Construction Of New Solar Electricity System For Fuel Storage at Denver International Airport

HOUSTON – September 3, 2009   Consumer Energy Alliance (CEA) commended Denver International Airport’s plans to construct a photovoltaic solar electricity system to power its fuel-storage and fuel-distribution facility, as well as the Denver Fuel Committees’ decision to use this new solar facility as its source of energy.

“As a representative of energy consumers and end-users across the nation significantly impacted by volatile energy prices, we fully support the utilization of all energy resources to help meet demand. CEA feels that efforts by Denver International Airport and the Denver Fuel Committee to diversify their energy resources illustrates the innovative, proactive steps that private industry is taking on its own to minimize its environmental impact, without the need for financially punitive measures,” said CEA President David Holt.

“We have been working diligently with our members, other stakeholders and federal, state and local policymakers to advance solutions that will create a more sustainable and renewable energy environment while building a bridge from a traditional energy present to an alternative energy future,” added Holt.

CEA is a non-profit, non-partisan energy consumer group that has long advocated a national energy policy that focuses on creating a diverse portfolio of energy supplies, from wind to solar to biofuels to petroleum and clean-burning natural gas.

With more than 120 affiliated organizations and thousands of consumer-advocates, CEA’s mission is to expand the dialogue between the consuming and energy sectors to improve overall understanding of energy security and the thoughtful development and utilization of energy resources to help create sound energy policy and maintain stable energy prices for consumers.

For more information, visit www.consumerenergyalliance.org.

Consumer Energy Alliance Commends Construction Of New Solar Electricity System For Fuel Storage at Denver International Airport

HOUSTON – September 3, 2009   Consumer Energy Alliance (CEA) commended Denver International Airport’s plans to construct a photovoltaic solar electricity system to power its fuel-storage and fuel-distribution facility, as well as the Denver Fuel Committees’ decision to use this new solar facility as its source of energy.

“As a representative of energy consumers and end-users across the nation significantly impacted by volatile energy prices, we fully support the utilization of all energy resources to help meet demand. CEA feels that efforts by Denver International Airport and the Denver Fuel Committee to diversify their energy resources illustrates the innovative, proactive steps that private industry is taking on its own to minimize its environmental impact, without the need for financially punitive measures,” said CEA President David Holt.

“We have been working diligently with our members, other stakeholders and federal, state and local policymakers to advance solutions that will create a more sustainable and renewable energy environment while building a bridge from a traditional energy present to an alternative energy future,” added Holt.

CEA is a non-profit, non-partisan energy consumer group that has long advocated a national energy policy that focuses on creating a diverse portfolio of energy supplies, from wind to solar to biofuels to petroleum and clean-burning natural gas.

With more than 120 affiliated organizations and thousands of consumer-advocates, CEA’s mission is to expand the dialogue between the consuming and energy sectors to improve overall understanding of energy security and the thoughtful development and utilization of energy resources to help create sound energy policy and maintain stable energy prices for consumers.

For more information, visit www.consumerenergyalliance.org.

New Campaign Seeks to Educate South Dakotans on Negative Impacts of a Nationwide Low-Carbon Fuel Standard (LCFS)

CEA radio, TV ads appear across the state, remind residents that under a nationwide LCFS, South Dakota’s Hyperion refinery is toast

WASHINGTON, D.C. – August 31, 2009   Today, as part of a multi-state campaign to educate American energy consumers on the economic and national security impacts associated with a national Low-Carbon Fuel Standard (LCFS), Consumer Energy Alliance (CEA), a nonprofit, nonpartisan coalition comprised of 120 affiliates and more than 180,000 grassroots supporters, launched a major television and radio advertisement buy in South Dakota.

The ads (click HERE and HERE to view and listen), which will run over the next two weeks, highlight that if an LCFS is enacted into law, American jobs would threatened, prices at the pump would increase, and U.S. dependence on energy imports from unstable foreign regimes would expand.

An LCFS would be especially devastating for South Dakota in light of DENR’s recent decision to grant a critical air quality permit to the Hyperion refining project in Elk Point – a facility that, when complete, will receive and process 400,000 barrels of Canadian oil a day. Under an LCFS, those shipments of Canadian crude would be prevented from crossing the border – and no permit in the world will be able to save the project from elimination.

“In any form, a Low-Carbon Fuel Standard would represent a major blow to America’s economic health and strategic position,” said CEA’s Michael Whatley, a leading expert on LCFS proposals. “That’s because the energy we import daily from friends like Canada would essentially be prohibited from crossing our border. If these abundant resources are cut off, our dependence on unstable regions of the world would skyrocket, and so would the price American consumers pay at the pump.”

Added Whatley: “This campaign seeks to alert the American public of the implications of this policy, and enlist their support in ensuring it does not come to pass.”

Known as CEA’s “Secure Our Fuels” campaign, the work of enlisting the American people in support of affordable energy begins nationwide today, with radio and television ads running in several key states to engage those who stand to be most impacted under an LCFS. Efforts aimed at those initial states – South Dakota among the most important – will eventually broaden out to include many more, from the Intermountain West to the Atlantic coastline.

As part of the national launch, CEA also unveiled a new website to serve as a networking tool and information repository for its coalition: SecureOurFuels.org.

Throughout this campaign, CEA will work with and engage its regional affiliates to ensure that working families, small businesses, organized labor, and everyday American consumers understand the threat posed by an LCFS.

Visit SecureOurFuels.org to view our latest television and radio ads, and learn more about how an LCFS will increase energy costs for American consumers and expand our dependence on foreign, unstable regions of the world to fuel our economy.

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