Herschel Specter, President RBR Consultants, Inc. mhspecter@verizon.net 1

U.S. ENERGY POLICY:A CALL TO ACTION

Herschel Specter, PresidentRBR Consultants, Inc.

mhspecter@verizon.net

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1. The Problem 2. Oil and the Economy 3. Oil and the Environment 4. Multiple False Starts 5. This is Not Your Typical Recession 6. Towards a Bright Future 7. Policy Directive

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Seven Areas of Discussion

The problem is that there are two energy- related pathways to economic and environmental catastrophe and we are on both of them.

This challenge is displayed in Figure One, a qualitative analysis first published 30 years ago. We haven’t solved this problem yet.

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THE PROBLEM

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Figure 1-Pathways to Environmental Catastrophe

Insufficient oil can lead to regional and even global warfare.

Burning fossil fuels can lead to climate change.

We must simultaneously solve both of these environmental and human challenges; not one at the sacrifice of the other.

We must do this now, but how?

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Figure One Explanation

Develop a long lasting, affordable, sufficient, low carbon electric power system.

Develop long lasting, affordable, sufficient, low carbon sources of liquid fuels.

OK…but how do we get there?

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LONG TERM SOLUTIONS

These long term solutions are within reach of present technologies.

The challenges to implementation have been mostly ideological, political, and institutional.

The result of failing to overcome these challenges is that we still do not have an enduring national energy policy and this has created enormous national risks. We can not be a great nation without resolving our energy dilemma.

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STATUS

Oil is both our leading energy-related national security threat and our leading source of greenhouse gas releases.

If oil is not phased out we may never: a. Overcome high unemployment b. Reduce our national debt c. Protect the environment d. Have national security So let us examine oil more closely:

economically and environmentally.

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ORDERLY PHASE OUT OF OIL

Imported oil represents up to half of our negative balance of payments.

Major oil shocks have disrupted world energy markets five times since 1973.

Oak Ridge National Laboratory: “Most of the oil shocks were followed by an economic recession in the United States.”

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Oil and the Economy

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Figure 2- Oil and the Trade Deficit (WTRG Economics)

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Figure 3- Cost of Oil Dependence,1970-2009 (ORNL)

Assume constant oil consumption at 18.8 MB/D, average cost of $120/barrel in 2008 dollars over next 25 years.

Add in cost for non-combat national defense and cost of health effects. Total national cost for next 25 years for domestic and imported oil comes to at least $25 trillion (2008) dollars. About a trillion dollars per year.

About $35 trillion (2008) dollars when recessions are included, based on ORNL data.

There may be little to no funds available for renewable energy or for the prevention of climate change.

There may only be limited funds available to explore and develop new sources of oil.

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If We Continue “Business as Usual”

“Business as Usual”, with its steady supply of oil, is optimistic. Supply interruptions of critical resources are very expensive.

Example: The U.S. electric power system is 99% reliable. The 1% unavailability is due to power outages and degraded voltage. The National Renewable Energy Lab calculates that this 1% decrease in reliability costs the nation between $119 to $188 billion dollars per year, far more than the cost of the electricity, if it were available.

Oil disruptions are also very expensive.

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Economic Collapse

OK… We agree that oil represents a huge economic and national security issue. Should we support the Keystone pipeline from Canada and develop oil from tar sands, and/or oil from the Arctic, and/or from offshore oil projects?

But how do we resolve national security issues and simultaneously deal with climate change?

Without an energy policy and implementation plan it is difficult to answer these questions in a balanced and informed way.

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What About the Climate Change Challenge?

Burning oil creates air pollution, causes health effects.

Largest source of GHG in the U.S. The International Panel on Climate Change

(IPCC) calls for the phasing out of all fossil fuels by about 2050.

IPCC analyses were incorporated into H.R. 2454, the “American Clean Energy and Security Act of 2009” (now dormant).

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Oil and the Environment

EPA was tasked with analyzing H.R. 2454 and it produced Figure 5.

EPA was only given a few weeks to complete this very important analysis.

Because time was short, EPA relied on energy projections from DOE which did not show any significant decrease in oil use for decades.

Almost 20% of the GHG releases do not come from burning fossil fuels. To meet H.R. 2454 limits for year 2050, almost all fossil fuel use would have to end.

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GHG Limits in H.R. 2454

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Figure 4 EPA plot of H.R.2454

A review of the EPA analysis of H.R. 2454,using DOE projections showed that H.R. 2454 won’t achieve its goals by 2030, even if there were no coal or natural gas. See Figure 6.

Note the wide disparity between GHG limits in H.R. 2454 and GHG releases estimated by the Department of Energy in its Annual Energy Outlooks.

Congress, EPA, and DOE are not on the same page.

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EPA Analysis of H.R. 2454

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Figure 5 -Burning Oil Defeats Goals of H.R. 2454

There is plenty of oil if we just “Drill, Baby, Drill”.

We could be an all renewable energy country in just 10 years.

Let’s rely on DOE’s Annual Energy Outlook. Let’s hope for a decrease in World Oil

Demand.

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Multiple False Starts

Despite a near tripling of world oil prices, non-OPEC production, about 60% of the world output, has not increased significantly since 2004.

The largest oil discovery in the last 40 years, about 8.5 billion barrels of oil off of Brazil, would only be enough for about 100 days of world consumption.

“Drill, Baby, Drill” won’t work…or will it? More later.

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Don’t Expect “Drill, Baby, Drill” to Save Us

The International Energy Agency’s 2010 world crude oil projection indicates that conventional crude oil production has already peaked.

Crude oil has to increasingly come from discovered oil fields, which are not yet developed and from oil fields that have not even been discovered, let alone developed.

This is a very uncertain world oil future.

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World Oil Projections are Grim

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Figure 6-IEA’s 2010 World Oil Projection

Examples: (1) Solar thermal energy electric power plants are to increase by 3,300 in ten years… but these power plants would be in the desert and there is no water heat sink there. (2) More wind power in 10 years than what the American Wind Energy Association says would take 23 years.(3) Wind power is intermittent, the sun does not shine at night and is only about half as strong in the winter as in the summer.

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Don’t Expect an all Renewable Country in 10 Years

DOE doesn’t promote extreme energy scenarios like “Drill, Baby, Drill” or an all renewable country in 10 years. They do worse… they use a business as usual model that neither addresses national security issues nor climate change. In 2009 actual oil imports were 9.44 MB/D; DOE projection for 2035: 9.11 MB/D in oil imports. In 2009, 5447 million metric tons of CO2 was actually released. DOE projection for 2035: 6310 million metric tons. Neither the left or the right side of Figure One is addressed by DOE energy use projections.

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Don’t Expect DOE Energy Use Projections to be Accurate

Don’t Expect a Decrease in World Demand For Oil

Country 2007 ConsumptionBarrels/day

2010 Population, in thousands

B/D per person

USA 20,680,000 309,556 0.0668China 7,578,000 1,338,240 0.0057India 2,722,000 1,182, 487 0.0023Brazil 2,372,000 193,117 0.0123Russia 2,858,000 141,927 0.0201Total 36,210,000 3,165,327 0.0114

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If the average oil consumption in China matched the average in the United States, it would require more oil than the world now produces.

The large oil consumption per person in the United States is an indication of our great vulnerability to oil prices and supply interruptions.

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Supply and Demand Perspectives

With rising demand for oil and a flattening of oil production, it was inevitable that the margin between supply and demand would go to zero.

This happened in 2008, precipitating a world-wide recession.

This latest recession created a temporary margin between supply and demand.

Rising demand could cause another zero margin recession. IEA estimate of world production in 2011 was ~90.0 MB/D, world consumption ~89.0 MB/D. Margin only ~1.0 MB/D.

Will there be another oil-related recession in the next Presidential term?

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A Collision was Inevitable

Prior oil related recessions were largely politically initiated (Oil embargo, Iranian revolution, Iran/Iraq war, Gulf war).

Recessions caused drop in oil demand and then lower oil prices.

Lower oil prices acted like a stimulus package, without adding to the national debt. As economy improved, oil demand and prices went up, starting the cycle again. However, no “free” stimulus package this time.

Recession in 2008 was started by a physical initiator; essentially ZERO margin between oil demand and supply.

With growing demand and an uncertain oil supply, we face future zero oil margin situations with severe economic and national security consequences. Some predict another zero margin situation in just a few years.

Physically initiated oil-related recessions start differently than politically initiated ones and end differently.

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This is Not Your Typical Recession

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Figure 7-World Oil Production Capacity vs. Demand

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Figure 8- Political Initiators, 1947-2011, (WTRG Economics)

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Figure 9 -High Unemployment Lingers (McKinsey Quarterly)

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Figure 10-U.S. Recessions, Oil Prices & Employment (WTRG Economics)

We now have physically initiated oil recessions, but

We still have possible politically initiated oil recessions, e.g., the Strait of Hormuz challenge.

We have been severely weakened by the present recession. Back-to-back recessions would be very harmful.

Hence a “Call to Action”.

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The Next Oil-Related Recession

We can achieve full employment by re-industrializing the United States, much of which would be in energy related products and lower energy bills.

We can have a positive balance of payments, a much smaller national debt, and secure sources of energy for many generations to come.

Implementing a balanced energy plan could lead to over 11 trillion (2008) dollars in oil savings over the next 25 years.

We can have clean air and do our part to prevent climate change.

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Towards a Bright Future

Emphasize conservation. 1st generation conservation: Better

insulation, more efficient appliances and cars, district heating, co-generation, etc.

2nd generation conservation: extract far more electricity from present electric power system by using energy storage systems to flatten demand profile.

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First step-Now

Shift coal out of electricity generation into making methanol to displace gasoline.

Expand natural gas to make methanol. All new LDVs should have flexfuel engines. First, develop plug-in hybrid cars with flexfuel

engines, then develop plug-ins with high compression methanol engines.

Build an onshore methanol infrastructure to displace oil and to support a future “methanol economy”.

Investigate biomass/nuclear hybrid technologies to produce ethanol.

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Second Step- Near Term

Build offshore platforms to convert dissolved CO2 in seawater into methanol.

No net CO2 would be generated. Methanol supply could last thousands of

years and supply platforms could be located worldwide.

Use high temperature nuclear plants/ geothermal sources to provide energy for the CO2/H2O to methanol conversion process.

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Third Step- Longer term

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Figure 11- Offshore Methanol: No Net GHG, Sustainable Supply, Worldwide Locations

First- Use coal and natural gas to make methanol.

Develop onshore methanol distribution system. Make all vehicles, including plug-ins, with flex-

fuel engines. Develop high compression methanol engines. Second- Develop offshore methanol sources. Third – Replace onshore fossil based sources of

methanol with offshore, sustainable methanol, with no net GHG, worldwide locations.

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Building the Methanol Infrastructure

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Figure 12- Evolution Towards a Methanol Economy

Complete the phase out of fossil fuels by replacing natural gas electric power plants with evolutionary nuclear power plants and renewable energy.

Reduce costs for nuclear energy by using South Korean and Chinese manufacturing and construction practices. Nuclear manufacturing factories located in the USA, using American workers.

Expand nuclear power to be a source of hydrogen and high temperature gases, including steam.

Investigate offshore geothermal energy to make methanol.

Integrate ethanol and methanol sources, distribution networks.

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Fourth Step

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Figure 13-MIT Natural Gas Study

MIT natural gas study phases out fossil fuels by around 2065.

MIT analysis would not meet 2050 fossil fuel GHG release limit built into H.R. 2454. To do so would require a more aggressive use of nuclear power and renewable energy to meet 2050 limits.

Use of South Korean/Chinese manufacturing and construction technology would slash nuclear costs and make meeting the 2050 GHG date more likely. Share costs/ technology with South Koreans/ Chinese and build “nuclear factories” in the US with a fixed price per KWelectric.

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Comments on the MIT Study

Pull together and develop a new vibrant America or continue our divisive ways and spiral downward.

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The Choice is Ours

The President should convene a 4 to 6 month task force to report on how to establish a methanol economy as soon as possible.

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Policy Directive

Thank you. I hope that this has been useful to you.

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Conclusion

Additional slides covering: The Environment Economics Politics Oil Use in the USA

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Supporting Material

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Figure 14-Insufficient Energy Destroys the Environment:Vienna Woods During Coal Shortage, Post WWI

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Figure 15-Sources of USA GHG, 2007

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Figure 16 - U.S. RECESSIONS AND IMPORTED OIL PRICE (WTRG Economics)

Once buried, nuclear wastes do not migrate even over hundreds of millions of years.

See: “What does nature tell us about nuclear waste disposal?”

http://www.nuclearfaq.ca/enf_section E.htm See Section E.2

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Risks From Buried Nuclear Wastes Are Essentially Zero

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New Nuclear Power Plants Need Not be Overly Expensive

Severe accidents are very unlikely. Consequences of nuclear accidents from

extreme natural phenomena (Tsunamis, category 5 hurricanes, huge tornadoes, massive earthquakes) are tiny compared to the non-nuclear consequences of these destructive forces.

Ongoing studies (SOARCA program) at the Sandia Nat’l. Lab show that LWRs act like large, passive filters during severe accidents. Releases are far smaller, greatly delayed.

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USA LWRs Have Very Low Risks

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USA Energy Legislation

Assume oil use similar to that in EPA,DOE, and NAS “Business as Usual” type projections, calculate GHG releases from oil, place on EPA plot of H.R. 2454.

Even with zero use of coal and natural gas, oil alone defeats H.R. 2454 by around 2030. With 20% of today’s coal and gas use, H.R. 2454 defeated 5 years sooner. (See Figure Four) With 50% of today’s coal and natural gas use, H.R. 2454 defeated in less than 10 years.

Climate change limits can not be achieved unless oil use is phased out.

Coal and natural gas do not present significant national security or economic challenges. Therefore phase out oil use first. Use coal and natural gas as transition fuels towards long term solutions.

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Burning Oil Defeats H.R. 2454

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Oil Reserves

Total petroleum consumption: 19.2 MB/D Transportation = 69.7%, 13.4 MB/D Cars and light trucks = 8.6 MB/D Medium trucks = 0.5 MB/D Heavy Duty Vehicles = 2.3 MB/D Other transportation = 2.0 MB/D Non-transportation uses = 5.8 MB/D

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Petroleum Usage in the United States in 2010

See: “Biofuels Done Right: Land Efficient Animal Feeds Enable Large Environmental and Energy Benefits”

B.F. Dale, et al, Environmental Science and Technology, 2010, 44, pgs.8385-8389

Test this concept in a well constructed demonstration program.

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What about Ethanol?