By Andy May
On November 9, 2017 Heartland held their “America First Energy Conference” in Houston, Texas. It was held in the JW Marriott Hotel next to the Houston Galleria. The venue and food were both very good. As a former employee (and sometime consultant) in the energy industry, I was very interested in what they had to say. In this post I will discuss what I considered the most important “take-aways” from the conference. There were two rooms and two simultaneous speakers at the conference most of the time, so this post only covers the talks I listened to.
Joe Leimkuhler, VP drilling for LLOG, breakfast key note speaker
Mr. Leimkuhler discusses whether the United States can dominate energy, as President Trump has said he wants us to do. Leimkuhler says the Trump administration has defined energy dominance as:
- Meet all our domestic demand/needs.
- Export to markets around the world at a level where we can “influence the market.”
He concluded that the U.S. can dominate in oil if the shale revolution is real, sustained and supported. In natural gas we can dominate, at least in the short term. Longer term it depends on finding more reserves, which he notes we can probably find if the government allows the industry to explore in more areas. Short term, coal has a problem exporting to the existing market because there are no coal exporting facilities on the critical U.S. west coast. This is because Washington, Oregon and California have prevented their construction by passing laws or delaying permitting. But, if this political situation changes or if the industry starts exporting through Vancouver, B.C., which has an existing coal export terminal, the problem will be fixed. The largest potential customers are in Asia, so to shipping to them requires a west coast shipping terminal. Once a solution is found, the long-term prospects for coal dominance are good. The U.S. has the largest coal reserves in the world, a 381-year supply. Further, our coal is much cheaper to produce and generally of higher quality than their existing suppliers can provide. So, if we could get the coal to market, we could dominate world coal exports. Our Wyoming coal mines could realize $5/ton more profit on their coal if they could export it to Asia.
Conventional nuclear power relies on uranium and the U.S. uranium reserves are miniscule, the U.S imports 89% of its nuclear fuel. Strict mining rules may account for, at least part of, this problem. It is unlikely that the U.S. will dominate nuclear power for this reason and because of our excessively long permitting and construction times. If newer technologies become commercial (fusion or thorium reactors for example) then this might change.
What about renewables, including hydro, wood/waste, biofuels, wind and solar? Hydro is maxed out in the U.S., there are few possible sites for more dams. Wind is facing increasing push-back because it is unsightly, noisy, and kills birds and bats. He notes that in 2009 ExxonMobil was fined $600,000 after 85 migratory birds (ducks, grebes, ibis, passernines, owls, martins and one hawk) died of exposure to hydrocarbons at a natural gas facility they owned. None of the birds were endangered. Yet, the wind industry has killed 888,000 bats/year, 573,000 birds/year, including 83,000 raptors and has paid little in compensation, see Smallwood, 2013 here for details. PacificCorp Energy, a wind electricity producer in Wyoming was fined $2.5 million after it was found to have killed 38 golden eagles, among other birds, with one of its wind farms, but there are few other examples. Certainly, companies should be held responsible for the damage they do to migratory or endangered birds, but every company should be treated the same.
Biofuels essentially means wood and ethanol from corn. These are marginally economic as it is and may be a net energy loss, see the Cornell University study here. When ethanol is mixed with gasoline it reduces the miles per gallon that can be achieved. Likewise, harvesting and transporting wood to be burned may actually use more energy than can be obtained from the wood and may produce more harmful particulate pollution than the equivalent amount of coal due to the high water content of wood (see here for a discussion and data).
Mr. Leimkuhler computed the amount of CO2 produced using the current sources of electricity in the U.S. and finds it is 2 pounds/kWh. A Tesla requires 16.6 kWh to travel 50 miles according to the Tesla website, this represents 33 pounds of CO2. He then found that driving a 35 mpg Honda Accord would produce only 28 pounds of CO2 to drive the same distance. If CO2 production is a priority, the Honda Accord is the obvious choice.
Economically, solar and wind make no economic sense. Mr. Leimkyhler presented the graph shown in figure 1 to illustrate this point.
Figure 1, source: Joe Leimkuhler
Figure 1 shows the price of household electricity versus solar photovoltaic (PV) and wind generation capacity for several countries and California. Notice the USA does very well in this graph with a cost of about 12 Euro cents per kWh, California at 18.3 Euro cents per kWh, not so well. He also notes that California imports 70% of their electricity, this may not be a wise thing for other states and countries to do. Denmark and Germany are the highest cost countries and have the highest PV+wind capacity.
So, where can the U.S. dominate in energy? Mr. Leimkyhler’s score card is shown in figure 2.
Figure 2, source: Joe Leimkuhler
Generally, the U.S should be able to dominate in oil and natural gas short term. Longer term, we can dominate in coal, but we need access to a Pacific port facility to do so, the large customers are in the Asian Pacific.
Energy and Prosperity
Mr. Paul Driessen tells us that modern coal and gas powerplants occupy about 300 acres and produce 600 MW of power 95% of the time. Indiana’s Fowler Ridge Wind Farm requires 50,000 acres and produces 600 MW of power about 30% of the time. If these figures are scaled up to supply the world electricity demand of 25 billion MWh, it would require 100,000,000 wind turbines, each would take 15 acres for a total land area of 1.5 billion acres, about 80% of the size of the contiguous 48 U.S. states. The cost of the raw materials for these wind mills is astronomical. Further, it is unlikely that wind mills can produce enough electricity even to manufacture another wind mill. In other words, fossil fuels are required to produce the wind mills, transport them and make them operational. The whole exercise is futile.
Wind mills do not operate when the wind isn’t blowing within their wind speed range. If battery backup is used to supply power for seven consecutive windless days, 5 trillion 100 kWh Tesla lithium battery packs would be required. Just the space to store these batteries would cover a land area 1.5x the size of the United States. This does not include the impact of charging more electric cars.
Mr. Driessen was followed by Nick Loris who remined us that the Clean Power Plan mercury regulations would save the U.S. about $5 million at a cost of the coal industry. Then Dr. Roger Bezdek reminded us that fossil fuels are, and will remain for the foreseeable future, essential for economic growth and jobs. To reduce 2050 greenhouse gases to 80-95% of 1990 levels, as proposed, will reduce our living standards to the levels of the 1800s. World per capita GDP will be reduced to those of the most impoverished nations, such as Bangladesh or Haiti. He quoted Bill Gates who once said in 2010:
“If you could pick just one thing to reduce poverty, by far you would pick energy.”
Energy and National Security
In the session on energy and national security, Admiral Hayward noted that the “green fleet” program under President Obama cost $58 billion dollars. This was a plan to fuel 50% of the fleet, temporarily, on biofuels. The money for this silly political exercise was taken from the critical spare parts budget and was one reason so much of our fleet and naval aircraft became disabled due to the lack of spare parts.
Shale Oil and Gas
In the section on the shale oil and gas revolution, Mr. Isaac Orr noted that the U.S. produces more natural gas than Russia and is close to producing more oil than Saudi Arabia, and may achieve this notable milestone next year, in fact on a monthly basis we may already be there. The shale revolution has resulted in 1.7 million jobs and lower prices for energy consumers. Mr. Joe Leimkuhler noted that the earthquakes seen in Oklahoma and elsewhere, are due to waste water injection and not hydraulic fracturing. In many areas of the country, like Wyoming and in the east coast Marcellus shale gas field, waste water is being processed and either recycled or re-used on the surface as a better alternative to injection, to minimize the water pumped back into the ground. Ms. Betty Grande mentioned that when the protesters at the DAPA pipeline were finally removed and the pipeline was finished it resulted in an additional one million dollars per day in revenue for the state of North Dakota.
The future of coal
In the session on the future of coal Dr. Weinstein and Mr. Heath Lovell told us that dozens of coal companies were driven to bankruptcy under the Obama administration and tens of thousands of jobs were lost. The coal boom was initiated by President Carter, who encouraged the power industry to switch to coal from diesel because the U.S. was (and is) self-sufficient in coal. From the Carter administration to now coal has gone from producing 17% of our electricity to 30%, but currently it is declining due mostly to low natural gas prices. Coal use is not growing in the U.S., but is growing rapidly in Asia. Unfortunately, the U.S. does not have a coal shipping terminal on the west coast and building one is being prevented by the coastal states. Fortunately, Canada has one in Vancouver and we may be able to use it.
Excessive government regulations
In the session on excessive environmental regulations we learned, from Mr. John Nothdurft, Mr. Richard Trzupek, Dr. Peter Hartley, and Mr. Isaac Orr that the most burdensome regulations from the Obama administration are the Clean Power Plan (CPP), the 2015 revised regulatory definition of the Waters of the United States act (WOTUS) and the CO2 endangerment finding. Currently, U.S. air pollution is down 73% from 1970 and the U.S. is back to 1990 levels on CO2 emissions, mostly due to the switch to natural gas. Clearly these new regulations are not actually needed and were only put in place to destroy the coal mining industry. We lost 36,000 jobs in the coal industry from 2010 to 2016. Dr. Peter Hartley (Rice University) has determined that there are 674 regulations that favor the wind energy industry and 977 regulations that favor the solar industry.
Mr. Richard Trzupek is an expert in EPA regulations and advises companies in how to navigate them when they want to build a new facility. Permitting a new power plant takes 510 to 930 days. Many companies cannot afford to wait that long and often give up during the permitting process which costs jobs and economic growth. During the permitting a process the public can raise any objection to a plant that they want and the Sierra Club and other environmental organizations take full advantage of the provision, since every public concern must be addressed, no matter how silly it might be. The Sierra Club, alone, brags that they have killed 192 power plant projects, which has cost the U.S. more than 100 GWs of power capacity and an untold number of jobs.
Energy and Agriculture
In the energy and agriculture session we learned from Dr. Craig Idso that a $150 per ton of emitted CO2 tax will reduce food intake an average of 150kCal per person around the world. This will raise the number of malnourished people by 300 million. In contrast, a 300 ppm increase in CO2 will increase the amount of available food by 33%. It varies by plant, but for example legumes will increase by 44%, roots and tubors will increase by 48%. Increasing CO2 increases the root to shoot ratio since the plant can get by with less leaf area when the concentration of CO2 is higher. If CO2 continues to rise as it has been, the world will see a $10 trillion benefit by 2050. Additional CO2 is responsible for 70% of recent global greening.
Michelle Smith is a farmer and lawyer and noted that cheap energy is a huge benefit for farmers, they also benefit from fertilizer made from natural gas. Farmers comprise 17% of the U.S. workforce and total 24 million jobs. 97% to 99% of farms are family owned and average 442 acres in size. Oil and gas mineral rights are a very significant source of income for farmers and have kept many farms from bankruptcy.
The conference was very well done, except for a few early audio-visual problems, and very informative. I learned a lot, even though I have worked in the oil and gas industry for 43 years. The central themes, mentioned many times, were that the EPA CO2 endangerment finding must be overturned and that Trump’s efforts to role back Obama’s excessive regulations are having a very positive effect on our economy and jobs. Every effort must be made to not only remove these regulations but make the removals as difficult to overturn as possible. The other important findings were that the only measurable effect of addition CO2 is the significant greening of the Earth, a very good thing. Somehow, the public must be made aware that additional CO2 in the atmosphere is good, not bad. If it does have a detrimental effect on the Earth, we have seen no evidence, other than computer models, of it.
President Obama’s assault on ten million fossil fuel jobs with the Clean Power Plan and 24 million agricultural workers with the 2015 Waters of the United States regulations must be completely rolled back and the CO2 endangerment finding reversed. There is no doubt in my mind that these regulations and many other over-reaching regulations created by the Obama administration played a key role in electing President Trump. Threatening 34 million families with job loss, is a lot of votes. Essentially the radical left-wing environmentalists and their Democratic partners have only themselves to blame.
One would think that the CO2 endangerment finding would be easy to reverse, but it is a “heavy lift” legally apparently. Below is the view of Steve Milloy, here.