Develop a Meaningful National Energy Policy
- Present U.S. Energy Policy
- The present energy policy of the United States is an incredibly
simplistic hodgepodge of items wholly inadequate for a subject
as complex and as important to the wellbeing of this country as
energy supply. For all practical purposes, present policy can
be summarized as follows:
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- The federal government has a long history of imposing
unrealistic regulations on the oil and gas industry from
such things as the 1938 Natural Gas Act, the 1954 Phillips
decision of the Supreme Court, the Powerplant and Industrial
Fuel Use Act of 1978, and the 1978 Natural Gas Policy
Act. Counterproductive distortions in the supply of natural
gas caused by these policies are still affecting us today.
- Through ineffective and excessive regulations on permitting
and construction and by neglect in the area of nuclear
waste disposal, the federal government has ensured the
demise of the nuclear power industry in the U.S. Meanwhile,
unprocessed radioactive powerplant wastes pile up, and
other industrialized nations forge ahead harnessing the
power of the atom, often with U.S. technology.
- The federal government places entirely too much emphasis
and reliance on the Strategic Petroleum Reserve as the
cure-all to prevent and/or deal with all future supply
disruptions and threats to oil imports. This is irresponsible
and naive in view of the increasing dependence of the
nation on foreign oil which already exceeds 50% of U.S.
supply.
- The final key ingredient to existing U.S. energy policy
is low oil and natural gas prices. Somehow, the natural
market place laws of supply and demand are supposed to
automatically solve whatever energy problems the preceding
measures do not address. What this fails to recognize
is that U.S. energy supply and demand are part of world
supply and demand over which U.S. market forces do not
have control. Low oil and gas prices will not last forever,
but while they last, they make effective long term development
of domestic oil and gas resources as well as development
of alternative energy supplies marginal or uneconomical.
- The Energy Policy Act of 1992 and the President's Domestic
Natural Gas and Oil Initiative rank high on good intentions,
but are woefully lacking on meaningful action. The Clean
Air Act Amendments of 1990 will have a far larger impact
on energy than either of these policies.
- As demonstrated in the past, it can be expected that when the
next energy "crisis" arises and all of the above fail, the federal
government will react by implementing comprehensive new federal
regulations on the oil and gas industry to legislate the country
out of the crisis. Certainly the most advanced nation in the history
of the world can formulate a more responsible and effective policy
than demonstrated so far.
- Needed in U.S. Energy Policy
- Though not intended to be comprehensive, the following is a
list of some of the most crucial energy policy inadequacies that
need to be effectively addressed in a comprehensive U.S. energy
policy.
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- Petroleum
- Insufficient incentives and even financial disincentives
in the tax laws for oil and gas exploration continue to drive
U.S. petroleum investments overseas.
- Inconsistent offshore drilling policies (i.e., all out development
off the coasts of Texas, Louisiana, Mississippi, and Alabama
with drilling banned everywhere else
but off Alaska) have a debilitating impact on developing new
supplies of our most flexible energy resource.
- Nuclear Power
- Constantly changing regulatory requirements and institutional
obstacles have essentially killed the future development of
nuclear power in this country while most of the world continues
to exploit and improve this energy source. Realistic and stable
regulatory requirements combined with streamlined approval
of standardized designs, and definitively resolving the safe
disposal of nuclear wastes could restore public confidence
in atomic energy and revitalize the nuclear power industry.
Additionally, if nuclear power is to have a long term role,
the commercialization of the fast breeder reactor is necessary
to stretch nuclear fuel supply from about half a century to
a couple of centuries.
- Energy Conservation
- Official concern for energy conservation disappeared with
the last gasoline station lines. Energy conservation standards,
targets, etc. should be strengthened, not eased. Having the
most voracious energy consuming appetite in the world dictates
that a continued commitment to the gradual long term reduction
of energy requirements is essential for long term prosperity
and security.
- Coal
- The abandonment of a concerted drive to develop a synthetic
fuels industry due to low oil prices ensures both higher overall
energy prices in the future and dependence on unreliable foreign
sources. It's a good thing aviation pioneers did not wait
for air travel to become more economical than the train to
establish the aviation industry or air travel would still
be available only to the rich and powerful. Coal is the nation's
most abundant energy resource. At one time ships and trains
burned coal and could once again. Cars and airplanes cannot
burn coal, but they could burn liquid fuels from coal. For
environmental, economic, and other reasons, it is not feasible
to convert to coal the schools, businesses, stores, homes
and much of industry that utilize natural gas or fuel oil;
on the other hand, they could use synthetic gas or oil from
coal. For those industries that could feasibly convert to
direct combustion of coal, transportation access and costs
would often present crippling obstacles due to lack of coal
slurry pipeline legislation.
- Fusion
- Ultimately, the technology that will free the world from
its bondage to limited economical energy will be nuclear fusion.
The recent retreat from the already feeble nuclear fusion
research effort amounts to negligent disregard of our children's
long term energy future.
- Impediments to Developing Responsible Energy Policy
- Development and implementation of a responsible energy policy
requires short term (up to ten years) trade offs for the long
term (ten to twenty years or more) good. Unfortunately, our Washington
leaders are elected politicians and their perception of the long
term, with few exceptions, is the next election, be it two years,
four years or six years. These disparate, short planning horizons
produce an inherent conflict, yielding a predicament in which
the few Washington politicians who realize what needs to be done
are unwilling to risk the political heat of singularly pushing
legislation that entails consequential cost and/or sacrifice for
benefits that will be realized after the next election, much less
beyond that period.
- Promoting Sound Policy
-
- The key to developing and implementing a successful energy policy
is to coalesce a broad base of support by convincing as many diverse
interests as possible that sound energy policy benefits them and
their states. To accomplish this, the interests of environmentalists,
conservationists, coal states, oil and gas states, producers,
consumers, etc., all have to identify with the policy.
- A national energy policy cannot just be implemented in oil and
gas states or just energy producing states. If natural gas is
to be pushed to replace other fuels to clean up the air in our
polluted cities while there is a surplus supply of gas, then some
serious plans must be made about what to do when gas returns to
a short supply situation - other than diverting gas supplies away
from industry in the gas producing states.
- In the past when energy issues have been debated, Louisiana
has always been cast in the image of a rich producing state floating
in a sea of oil and gas that is being inequitably shared with
the consuming states.
- Often misunderstood or overlooked is the fact that about two
thirds of the production from the state is in the federal OCS
(Outer Continental Shelf) territory and, hence, produces no revenue
for the state while at the same time incurring great cost to the
state in terms of damage to the wetlands and funding of onshore
public works support infrastructure necessary to facilitate OCS
exploration and production.
- Also often overlooked or not explained is the fact that though
Louisiana is the 2nd highest energy producing state in the nation
(5th if OCS production is excluded), Louisiana is 3rd highest
in per capita energy consumption and 6th highest in total energy
consumption. Therefore, Louisiana is more of a consuming state
than 44 other states! This story is never told, nor are Louisiana's
difficulties as a key consuming state given much concern at the
federal energy policy level.
- Additionally, Louisiana is consuming most of this energy as
a through-processor of energy supplies for the rest of the nation,
consuming colossal amounts of energy for their benefit. For example,
Louisiana nitrogenous fertilizer manufacturers who employ less
than 1500 people use approximately 20% of all natural gas consumed
in the state, to transform natural gas into ammonia and urea,
98% of which is shipped out of state for use as fertilizer. With
about one third of the entire U.S. ammonia and urea capacity located
in the state, who is going to be the worst hit when poor energy
policy results in these plants not being able to obtain sufficient
and/or affordable natural gas feedstock - the nation's farm belt
or Louisiana? Perhaps hundreds of thousands of out of state agricultural
jobs and tens of millions of food consumers are dependent on this
single energy intensive Louisiana petrochemical industry, yet
how often have the "consuming" states been concerned about the
cost and availability of natural gas in Louisiana?
- Another example of how Louisiana is consuming its resources
into oblivion for the primary benefit of other states is petroleum
refining. The energy equivalent of 10% of Louisiana's entire petroleum
product consumption is required just to fuel the processes that
refine crude oil into gasoline, diesel fuel, jet fuel, heating
oil and other products consumed out of state. The oil refining
industry employs less than 13,000 workers in the state; whereas
tens of millions of jobs throughout the country are dependent
on the affordability and availability of the products from the
continued operation of these refineries and associated petrochemical
facilities in Louisiana.
- Many other examples could be cited of the numerous energy intensive
natural gas and oil derived chemical products Louisiana (and also
Texas, Oklahoma, and California) through-processes for the rest
of the U.S. Per unit of output, these industrial processes in
Louisiana are characterized as capital (equipment), energy, raw
material, and pollution discharge intensive, and low in labor
requirements and dollar value added, essentially the opposite
of the out of state industries that upgrade these chemicals into
ultimate end products.
- Conclusion
- The essence of this discussion is that the rest of the country
needs to realize that Louisiana is as much, or even more of, a
consuming state as they are. Moreover, since Louisiana's consumption
is primarily that of a through-processor of fuel derived products,
the rest of the country needs to understand that their economies
are indirectly as dependent as the oil and gas states on sound
energy policy that fosters the economic and available supply of
energy in Louisiana and the other oil and gas producing states.
- Implementing an effective energy policy that will ensure net
long term affordable and available energy supplies does not come
without short term costs. Those short term costs consist of the
adequate funding of substantial advanced energy research to develop
new technology and the financial incentives to expand domestic
energy production and to commercialize existing technology that
is not economical with short term low world oil prices and low
natural gas prices.
- Economic incentives through an effective national energy policy
can resuscitate the ailing oil and gas industry while at the same
time encourage energy conservation, solar energy, renewable fuels,
clean coal technology, synthetic fuels from coal, and national
energy security. With all of this diversity, certainly a broad
base of support can be mustered under the leadership of Secretary
O'Leary and the President.
- Epilogue
- It has been said by great philosophers and leaders that a nation
that fails to learn lessons from history is doomed to repeat the
mistakes of the past. This will be this nation's epitaph if a
responsible energy policy is not soon implemented.
Submitted to
U.S. Department of Energy
for the
STATE OF LOUISIANA
by
JACK McCLANAHAN
Secretary of Natural Resources
For Consideration at the January 13, 1995
New Orleans Public Meeting on
Development of the
1995 National Energy Policy Plan
Prepared by
T. MICHAEL FRENCH
Director of Technology Assessment
Technology Assessment Division
Louisiana Department of Natural Resources
P.O. Box 94396
Baton Rouge, LA 70804-9396
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