National Debt & Deficit Spending Energy
The business of the United States is business. Energy fuels that business which in turn supports the industrial and agricultural base that feeds this nation and provides food to yet another 100 nations.
Yet, the exploitation of energy sources must be compatible with our need for clean environments and our concern for other natural resources, including our forests, rangelands, and wildlife. Protection of the natural environment for future generations remains equally as important as providing for today's well being. To this end it is incumbent on Congress to provide the appropriate incentives and oversight for development of energy sources that will ensure successful industrial and agricultural programs for the State of Wyoming.
The people of Wyoming are focused on the business of recoverable minerals and agriculture. In my 2006 campaigning I repeatedly heard candidates recalling the statewide bust of the late 70s with: "As sure as night follows day, bust follows boom."
Their memories are crystal clear. Yet I believe that the days of boom and bust are behind us. In the 1950s a noted oil industry geophysicist, M. King Hubbert, analyzed the internal United States rate of discovery of new petroleum as compared with the increase in rate of consumption of petroleum. He accurately predicted that the peak in US petroleum production would occur about 1970. The ensuing decline in US Production then drove the boom of drilling that occurred in the 70s in Wyoming.
The bust followed when that same boom developed sources of oil around the world far cheaper than Wyoming's.
The critical element in the above copy of a world-wide Hubbert Curve is that the same analysis done world-wide reveals that the world has gone through the same peak in petroleum production that the US did about 1970. This worldwide peak in petroleum production probably occurred about 2002.
The story of this curve, sometimes referred to as “Peak Oil,” is not that the end of oil is near. The story told is that oil will be found in ever deeper and more difficult to recover places. In other words its price will rise inexorably.
The situation is not the same today as in the 70s and 80s, and Wyoming now needs to re-focus its economic and labor forces into capitalizing on our Nation's critical need for multiple and in time, more sustainable sources of energy.
Petroleum is the most compact and easily transportable energy source. Demand for energy of all forms will continue to rise in a world with a voracious appetite for energy.
There are many that decry the United States addiction to oil. Yet a personal car is the very symbol of the ability of American's to do what they want when they want. This nation will not give up this freedom easily.
In recent testimony to Congress regarding energy and the chemical industry, Andrew Liveris, CEO of DOW Chemical Co., enjoined Congress: "Don't be starry eyed, progress will be evolutionary." In other words there will be no Manhattan Project that can save the day for the United States.
In this same testimony he discussed other forms of energy and, more importantly, their efficient utilization in power generation in the US. He focused here on ethane, a small constituent of natural gas that is burned as fuel (with natural gas) instead of being used as its far more valuable feedstock for the chemical industry.
He argued that this is partly a result of the presumption within environmental regulations that natural gas is clean relative to other fuels. In making this presumption environmental regulations ignore the vast improvements made in clean burning coal technology.
He similarly pointed out the safety record of the US Nuclear Industry, enjoining Congress to look at this source of energy.
The energy future of the United States is in the hands of Congress. Liveris also testified that, as presently structured, the United States has taken off the table domestic sources of energy. This in turn makes the energy needed by industry more expensive. Finally this then can cause companies that wish to remain competitive in a world market to look elsewhere and even produce elsewhere, with some companies ultimately moving offshore.
A significant part of this issue is that transportation costs either drive up the cost of resources or drive down the return to producers. Wyoming has faced this problem for its entire history. In conversation during my travels businessmen have stated that today oil produced in Wyoming sells well under the current market price. There are two reasons for this but the transportation cost to deliver it to market is a significant part of the reduced price that Wyoming producers must accept.
Many tout ethanol as a "cheap" source of energy. This is misguided since it ignores the cost of grain and sugar based ethanol. Ethanol in a large agricultural region can be an effective addition to the energy consumed locally. But the economics associated with energy consumed in its production and the need for subsidies will ultimately make it less desirable on larger markets.
There is on the horizon cellulose based ethanol that appears to be able to be made competitive in a larger market. This should be pursued and it appears that industry is interested in doing so.
The Wyoming Research Institute is developing a process to regenerate coal bed methane fields. Once the productivity of a field has become uneconomic this process can be utilized to return it to productivity. Research indicates that this can be done two, maybe three times extending the life of a given field from 20 or 25 years to probably 75 years. This must be developed and Wyoming should lead this effort nationwide.
There are many options that need to be pursued to fend off the drastic rises in the price of energy facing the United States. Today Congress has in place a system that restricts industry in its options. This is short sighted.
Most troubling to me is that the only basis of such short sightedness is a presumption of eternal pre-eminence of the United States in the world economy. As we look around the world there are many in India and China that are more than willing to compete with the United States.
The people of the United States are the brightest, most industrious, and most inventive in the world. Anyone who proposes to state that any one given government sponsored program will save this nation from its energy problems is shortsighted.
I believe that Congress must put in place an environment wherein business can develop the solutions needed. Currently Congress has only hamstrung industry with half measures in an attempt to please too many.
What must be done?
First: Congress must review environmental regulations. They must recognize the tremendous strides in clean burning coal technology and other power generation technologies and remove the non-economic structural elements of the current system that improperly incentivises the power generation industry.
For example: the present system un-necessarily pushes natural gas as a fuel for power generation. Natural gas contains about 3% ethane, which can be used as a chemical industry feedstock to produce far more valuable and beneficial products.
Second: Congress must place back on the table those energy resources that have been unavailable for many years. These resources, such as oil in Florida's coastal waters, were made unavailable for various environmental reasons. This was based on the presumption that this oil could be cheaply replaced. That is no longer true.
Advances in drilling technology offer the ability to drill many wells from a central location and with far greater protections for the environment than available even a decade ago. The current restrictions on drilling no longer make sense.
Third: Congress must rationalize laws and regulations. There has been much talk of tort reform. Frankly many senior businessmen spend more time thinking of pending lawsuits than about research and development for their field. There is a great need for individuals to be able to take on large, well-funded administrative organizations. Large organizations can crush people.
Our current system provides no other way of holding accountable these large organizations. But a way must be found to keep businessmen focused on business or those countries of the world that are willing to do the job for less will overtake the United States.
In a world where modern transportation and the internet make India and China a competitor with the corner gas station, where unnecessary limitations on shipping cause wheat farmers to use more expensive methods of shipping to get their product to market, or where innovation can be found in Shang Hai as readily as Silicon Valley, Congress must provide a legal environment that makes complying with laws, regulations, and taxes as straightforward as possible.
Complying with the welter of different laws and regulations, federal, state, and local, is a cost of doing business and distracts from innovation and research. If this nation cannot make sense of its laws and regulations we will kill the goose that laid the golden egg.