Americans usually hear that energy-producing natural resources are in scarce supply. With regard to the current technological, regulatory, and economic context that is true. However, when industry experts discuss energy sources of the future they focus on which known resources to develop instead of whether they can find and produce more energy.
One important question for energy companies is which new energy opportunities will be more commercially viable 20+ years from now. Dana Flanders, President of Chevron Technology Ventures points to "challenged sources" like deep water drilling, oil sands, shale, geo-thermal, and oil from the Arctic region as being likely to contribute significantly to the future’s oil supply. Historically these technologies have historically not been economical to develop; however, with oil hovering around the $100 mark, they are both more feasible and necessary.
James Hackett, President of Anadarko Petroleum agrees, saying that there are still major reserves of fossil fuels that remain untapped in the U.S. For Hackett the issue is as much political as industrial because domestic producers denied the ability to drill for oil off of much of the Pacific coast, eastern Gulf of Mexico, and the Atlantic seaboard. Hackett says that America should be making better use of existing fossil fuel resources, noting that he is surprised that Congress has failed to make changing energy policy to encourage more domestic liquid natural gas (LNG) production.
Robert Kelly of DKRW Energy also believes that America has untapped energy reserves that will, when they are finally put to efficient use, last for 200 years or more. Kelly states that coal can be purified to the point that it is at least as clean as current petroleum products. Liquified coal would not negatively impact our use of coal as a source of power in coal-fired power plants, Kelly says, and its harmful byproducts such as CO2 can be captured, stored, and put to constructive use.
Aubrey McClendon, President of Chesapeake Energy, is a major proponent of LNG and he rightly points out that the purification process is a difficult one. LNG, he says, has a natural advantage over coal at the molecular level. It burns clean without any additional processing, something coal will never do. According to McClendon, if the LNG industry can tap the virtually unlimited supply of gas hydrate available in the U.S. LNG will be the fuel of the 21st century.
I recall a time not so long ago when LNG was going to be the savior of the American consumer, a clean, abundant source of domestic energy that we needed to use more of. That assessment was presumptuous, of course. The result was increased demand, production difficulties, and skyrocketing prices. America now imports about 25%, according to H.G. Kleemeier of the Independent Petroleum Producers Association, something that’s not easy to do given that it must be cooled to -256 degrees to transport as a liquid.
Kelly is quick to point out these facts. In his view the U.S. is the Saudi Arabia of coal and it’s that resource that ought to be developed into a cleaner energy source. There significant regulatory resistance to the idea of using more coal; however, as Hackett notes, either production of coal or LNG or both must take place in order to lessen demand for foreign crude oil. Interestingly, Hackett has little regard for grain-based ethanol and calls the Bush administration’s plan for massive increases in ethanol production a "wounded policy".
Can we use less energy? While the energy industry is rarely considered to be a supporter of conservation, most executives know that the importance of energy efficiency is not to be dismissed. According to Scott Nyquist of McKenzie and Company, energy conservation measures are expected to make up 30-40% of the reductions called for under the proposed Warner/Lieberman climate change control legislation. But with the U.S. population expected to grow over 20% by 2030, it’s equally clear that conservation alone will not be enough to ensure a stable energy supply.
Thad Hill, President of NRG, is the driving force behind the first new nuclear plant to be approved in America in 30 years. The plant will be built by his company in Matagorda county in Texas, despite protests by environmentalists.
Speaking about the new plant, Hill talks extensively about the safety of nuclear power, both because safety is essential for nuclear plants and because the nuclear power industry’s safety record is outstanding. Hill also notes, with a wry smile, that the Nuclear Regulatory Commission’s approval process required his company to produce a 20,000 page application to gain approval for the new plant, which will implement an advanced boiling water reactor modeled after a Japanese system that has been implemented in several locations in that country.
Nuclear power’s safety record is excellent in this country, as in others. France, for example, generates 75% of its power from nuclear facilities. We can do the same and deal with the waste products, Hill says, although currently there is no national plan to deal with radioactive waste. He notes that 60 years worth of waste for a typical plant can be stored in a facility the size of an average American home. Such waste, Hill says, is stored on-site at nuclear plants and is safe there.
Not so, responded a local anti-nuclear activist who asked not to be named. Her concern was that of a terrorist or criminal attack on what are secure but still civilian – and hence vulnerable – facilities.
Among presidential candidates, John McCain has talked about the need to re-start the nuclear power plant business here in America. One thing that McCain doesn’t mention on the telly is that the NRC puts applicants through a grueling application process that can last 42 months before approval is granted. Hardly a streamlined process.
When asked about energy independence, Hackett responded by saying that the idea, while it was attractive political fodder, was the biggest fiction ever foisted on the American people. What is needed, he says, is to reduce our dependence on foreign sources controlled by hostile regimes. Dana Flanders agreed, saying that a mixture of energy sources was needed to diversify the supply. No one source should be pushed too much into prominence, particularly the new and volatile bio-fuel industry, in part because of the dislocation that transferring crops from food to fuel production is already causing around the world. There is also the issue of the impact on the water supply because of increased grain production. There is, Hackett says, reason to be concerned about fossil fuels’ emissions. But there is even more immediate concern about using too much water on crops and not leaving enough for people.
The bottom line seems to be that the energy industry believes that America needs to remove the barriers that are keeping traditional producers from developing energy sources in areas that are currently off-limits to exploration. Contrast this belief with that of Hillary Clinton, who came to Houston to tell the oil industry that there might be a new sheriff in Washington in a few months.
Could be an interesting fight shaping up if Hillary rights her ship and wins the Democratic nomination.
Also be sure to read Marc Moore’s "Houston Energy Summit Part I."