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Despite Focus on Renewables, Fossil Fuels Not Going Anywhere
The Washington Diplomat / January 2010

By Larry Luxner

Like it or not, the fossil fuels that powered America's rise to prominence — oil, natural gas and coal — will keep this country running for a long time, despite solid evidence that all of them contribute to global warming.

Expensive PR and lobbying campaigns, funded by record profits, will also ensure things stay that way, say supporters of "green" alternatives likely to be showcased Dec. 7-18 at the UN climate change conference in Copenhagen.

The American Petroleum Institute is the oil and gas industry's leading national trade association, representing some 10,000 U.S. companies that provide equipment, services, supplies and engineering support for oil exploration, drilling and refining operations. The API is currently fighting efforts by Congress to slash emission of greenhouse gases that are believed to cause temperatures to rise and Arctic ice to melt, thereby raising sea levels.

An API-funded analysis of the American Clean Energy and Security Act, which narrowly passed the House of Representatives in June, shows that oil refining capacity will shift overseas if that bill — and the Senate's version of it — becomes law.

According to API, production at U.S. refineries would drop while production at refineries in countries that do not limit their own greenhouse gas emissions would rise. The impact on global refinery CO2 emissions would be minor, as reductions in U.S. emissions mostly would be offset by increases in emissions elsewhere.

"This study clearly shows the devastating impact this legislation could have on U.S. jobs and U.S. energy security," said the organization's president and CEO, Jack Gerard, speaking about the House legislation (also known as the Waxman-Markey bill).

"Climate legislation should not come at the expense of U.S. economic and energy security. Congress needs to analyze carefully the impact of any climate policy on ordinary Americans, American jobs and American companies," said Gerard. "A deep decline in U.S. refining activity would have a ripple effect throughout the economy; steelworkers, construction workers, even the shopkeepers, schoolteachers and waitresses working in communities where refineries operate would feel the pinch."

The API study claims refining activity could drop by as much as 25 percent (4.4 million barrels a day), while investment could fall by up to $90 billion (a drop of 88 percent) by 2030 if a version of Waxman-Markey becomes law.

For now, oil companies are not exactly suffering — especially when it comes to the money they have available for lobbying efforts.

According to the Center for Responsive Politics, the oil industry spent $129 million lobbying Congress and federal agencies in 2008; that's up 73 percent from two years earlier, and compares to the $50 million to $60 million the oil industry spent annually on lobbying between 1995 and 2005.

Combined, the three largest U.S. oil companies — Exxon Mobil, Chevron Corp. and ConocoPhillips — spent about $22 million on lobbying in the first quarter of 2009, up from $12.4 million in the last quarter of 2008.

"They're under attack, they're ramping up their operations and they've got money to spent," said Tyson Slocum of Public Citizen, a Washington-based watchdog group, in recent comments to the Associated Press. "They're in much better position than other industries to draw upon financial resources for their lobbying effort."

America's coal industry isn't too happy about pending climate-change legislation either.

"The reality is that coal is abundant, efficient, and less expensive than most other energy options and will remain an important part of our energy future," says Foster Wheeler Inc., a global engineering and construction firm that does big business with utilities. "Coal accounts for about 50 percent of electricity production in the United States and remains the lowest-cost energy source for U.S. residences."

Robert Murray is chairman, president and CEO of Murray Energy Corp., the largest independent coal producer in the United States. He calls the Waxman-Markey bill and similar efforts in the Senate "a misguided attempt to address climate change" that will cost U.S. citizens $2 trillion over the next eight years, with little or no environmental benefit.

"The most abundant, and by far the least expensive energy source, in this country for generating electricity is coal, rivaling the energy potential of Saudi Arabian oil," he said. "Unfortuntately, this proposed climate-change legislation forces America to throw away this tremendous resource — and our low-cost electricity with it."

Murray said such legislation sets what he calls "an unattainable cap on carbon dioxide emissions by 2020, with the first reductions due by 2012" — thereby forcing utilities to switch from lower-cost coal to natural gas or other more expensive energy sources. That, he claimed, would cost each American family an average $3,000 per year.

Likewise, the chief executive of one of the nation's leading utilities recently testified before Congress that "the 25 states that depend on coal for more than 50 percent of their electricity will have to shut down and replace the majority of their fossil-fuel plants as a result of the climate change legislation."

Whether such dire predictions are merely scare tactics remains to be seen. But it's clear that not only lobbying efforts that will keep the United States addicted to fossil fuels for the foreseeable future.

For one thing, alternative sources like solar energy and wind power just aren't that lucrative as long as oil and natural gas remain relatively affordable. And nuclear power plants — while they don't contribute to global warming — carry their own obvious safety risks, not to mention the enormous capital expenditures required to build them.

In 2008, when oil prices reached a record $147 a barrel, the wind industry was booming and 8,900 megawatts of wind energy capacity was installed in North America. This represents 40 percent of all total new capacity. Yet interest in wind energy has declined along with oil prices.

Earlier this summer, a grandiose plan by conservative Texas oilman T. Boone Pickens to invest $10 billion in a Texas wind farm fell apart after he pulled out of the project, citing lower fuel prices and "the collapse of the capital markets."

Pickens' plan was to build the world's largest wind-energy project, which was to have powerd up to 1.3 million homes. It was part of his vision to slash oil imports by 30 percent over the next decade by replaicng oil with natural gas in cars and trucks; wind power, in turn, would replace natural gas as a source of electricity. But after spending $60 million promoting the project, he couldn't get a loan to finance it — and eventually gave up.

At the same time, oil may not be running out as some people speculate. That scenario would make alternative energy sources even less attractive than they are now.

Leonardo Maugeri, senior vice-president of Italian oil giant Eni and a visiting scholar at the Massachusetts Institute of Technology, claims there's a lot more petroleum under the ground than the seven to eight trillion barrels of conventional oil sources estimated by the U.S. Geological Survey.

Maugeri, author of the book "The Age of Oil" ( 2006) and of the upcoming book "Beyond the Age of Oil: The Myths and Realities of Fossil Fuels and their Alternatives" (2010), argues that the 21st century "is very likely to overflow with oil" thanks to the discovery of new fields and techniques to exploit those resources.

"New technologies allow us to extract much more oil than initially assumed. Today, we recover on average less than 35 percent of the oil contained in known fields, up from 20 percent in 1980," he wrote in a recent opinion piece for the Wall Street Journal. "Even the most mature oil country, the United States, still holds huge volumes of unexploited oil underground. Although the country's proven oil reserves are now only 29 billion barrels, the National Petroleum Council (NPC) estimates that 1.124 trillion barrels are still left underground, of which 374 billion would be recoverable with current technologies."

Enhanced oil recovery (EOR) technologies — which involve injecting an oil reservoir with chemicals, heat, steam and heavy gases such as carbon dioxide and nitrogen — are highly effective but very expensive. So while oil was cheap, EOR technologies were rarely used. But that's changing as oil prices rise, and most EOR technologies become profitable once oil hits $50 a barrel.

In addition, said Maugeri, only one-third of the planet has been sufficiently explored for discovery of new oil deposits — also because until recently, such big, sophisticated exploration campaigns didn't make economic sense.

"Critics may argue that there may actually be plenty of oil left underground, but easy and cheap oil is gone forever. This view is partially true," he wrote. "But it is also true that today's difficult oil will turn into tomorrow's easy oil, thanks to cost reductions due to large-scale application of currently expensive technologies. In the 1970s, North Sea oil was considered among the most difficult and expensive oil on our planet. But a decade after initial production had begun, the cost of extracting it had been cut in half."

Maugeri predicts that by 2030, more than 50 percent of the world's known oil will be recoverable. At the same time, the amount of known oil will have significantly grown by then, and a larger portion of unconventional oils will be commonly produced, bringing the total amount of recoverable oil reserves to something between 4.5 trillion to 5 trillion barrels. Even accounting for the 1.6 trillion barrels the world will have consumed by then, he said, "if my estimates are correct, we will have plenty of oil for the 21st century."

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