U.S. Needs Realistic Energy Policy

By Greg Jarrard

Americans are living on an energy “razor’s edge,” according to John Hofmeister, president of Shell Oil USA. He made that comment at a recent breakfast at the Salt Lake Chamber. His address was part of a series of appearances at various U.S. cities to drum up support for energy policy changes and to educate Americans about the seriousness of the energy crisis.

Hofmeister described events following the double whammy the U.S. Gulf Coast received just two years ago when first Katrina and then Rita slammed into the southeast U.S. He noted that until four or five years ago, the United States enjoyed “a sturdy [energy] supply. But what we face today is clearly a tipping point, one that we can deal with proactively or ignore at our peril -- our economic peril and our lifestyle peril. Because available affordable energy has enabled us as a nation to build the world’s most prolific economic model that’s ever been known to mankind and to adopt lifestyle choices that our grandparents could not have even imagined.”

An enormous amount of U.S. oil capacity was shut down by Katrina and Rita, said Hofmeister. “Crude oil was shut down, refining was shut down, chemical processing was shut down and indeed pipelines were shut down through loss of electricity.”

In the United States, said Hofmeister, the land of plenty, “this nation was essentially on the edge of not having enough gasoline to [get] to work Monday morning for much of the nation because of the possibility of panic buying. That’s the razor’s edge. That’s the tipping point on which today we continue to operate.”

Hofmeister said he is concerned about America’s energy security. He believes America has natural resources to spare — if only politicians had the will to develop them. His opinion is that it’s policy, not availability, that puts the country on the razor’s edge. Shell’s definition of energy security “is defined as having available and affordable energy as far into the future as possible as anyone could imagine … as long as our grandchildren’s grandchildren have what they need, or time without end … or the delivery of affordable until we don’t need it anymore.”

That security is being threatened not only from extraordinary events like Katrina and Rita, but the daily situation of demand overreaching supply. This is epitomized, he noted by  “the fluctuation of the prices we saw this year [which was] a direct reflection going back to the same issues, the same concerns that affect consumers in the United States today, and that is, the demand has overreached the supply. It is a day-to-day catchup. A day-to-day question, will this refinery be up and running? Will that refinery be shut down? Will that refinery that had an unplanned shut down be able to get started by a certain day? Every day of the week our supply people are looking at balancing a very tough supply situation in order to meet the needs of local people.”

It doesn’t take a hurricane to push a state or region over the edge. Hofmeister described the situation in South Dakota this summer where “in the heat of the summer, in the heart of the agriculture season, there wasn’t a single gas tank in South Dakota that was full — not a storage tank, not a gasoline tank, except for maybe a few car tanks. South Dakota was just about out of gasoline and diesel at a time when farmers and visitors and tourists all needed fuel.”

All aspects of the economy depend on a reliable supply of energy, not just the motoring public, Hofmeister said. He pointed to a recent meeting he and a group of Shell executives had with their counterparts from Microsoft. As part of their long-range business plan, Microsoft envisions building six new information centers in the northwest. However, their challenge is having enough electrical energy to power those centers, the equivalence of a 250 megawatt power plant; given current policies in Washington State, they were at a loss as how to get that power, he said. In Washington, pulverized coal is outlawed; hydro power is at its limit; natural gas is scarce. They wanted to talk to Shell about coal gasification because they could not see how energy growth could keep up with their business growth. Microsoft’s conclusion was that they were energy insecure. And that is just one example of one industry’s challenges. The problem is the continuance of demand growth against the scarcity of supply.

Ironically, according to Hofmeister, the United States doesn’t have a natural resource problem; “in fact” he said, “we have 100 billion barrels of oil right in our own backyard, in the outer continental shelf and on federal land; we just can’t get at it — public policy prevents us from doing so. As a result 66 percent of the oil we use in this country is imported.”

He listed, one by one, different forms or energy resources currently available but not being utilized: oil shale, tar sands, gasified coal and the 100 bbl of conventional oil and gas on the outer continental shelf and on federal lands off limits to producers thanks to public policy (only 15 percent may be explored, drilled or processed).

Oil shale, for example, offers a great opportunity, especially in Utah, Wyoming and Colorado. According to Hofmeister, there is the potential of 1.6 trillion barrels of oil (and the equivalent in gas) in oil shale along in the three Rocky Mountain states. He said that Shell has been working for the past 20 years at a research site in Colorado to release hydrocarbons in gaseous or liquid form from oil shale (instead of mining it) and the results look promising, although not yet commercially viable. He insisted that the risks and the environmental consequences can be managed.

In Alberta, Canada, there are vast reserves of oil sands or tar sands, an immense deposit, Hofmeister said. This is a natural sediment soaked in hydrocarbons to the tune of about another trillion barrels. The Alberta and Canadian governments have the stated strategy of developing that resource as a national priority, according to Hofmeister. In Canada, as opposed to the United States, enablers have been put in place, instead of barriers. Currently, Shell and others are producing about 150,000 barrels a day from tar sands in that area with the possibility of doubling that to 300,000 barrels a day. Together, oil sands and oil shale offer the promise of substantial, unconventional reserves.

Additionally, tremendous coal assets exist in this country. Despite its “uncleanliness,” Hofmeister pointed to technology to reduce the risk of environmental degradation by gasifying coal, rendering it as “clean” coal. It is an entirely different technology with an entirely different outcome than just burning it. The process takes coal from a pulverized form to a substance similar to the consistency of talcum powder which is then introduced into a gasifier at a 1,000 degrees Fahrenheit at 1,000 psi; the result is the reduction of the carbon molecules to a gaseous state — they don’t burn, he said. With the addition of nitrogen and hydrogen, this gasified coal is then used to turn a turbine, a very efficient, clean process to produce electricity. The output of CO2 can be managed and rendered in a more productive form rather than just expelled to add to the problem of greenhouse gases. And, by the way, he noted, the United States has more coal than any other country in the world.

Liquified natural gas is another potential energy source thanks to natural gas fields around the world that lack natural markets locally. Through cooling and pressurizing, natural gas can be liquefied and transported. But there is a stumbling block: Too many communities, he explained, object to the storage tanks or regasification terminals being located in their neighborhoods. A prime example: a regasification project planned for the eastern seaboard called Broadwater originally planned for the Long Island area that cannot find a home. Despite local energy needs, elected officials in that area said: “Take it to Maine.”

Another energy source is bio-fuels, a huge opportunity for the United States. But, there is a tradeoff when foodstuffs like corn are used to create ethanol. Hofmeister suggested using the corn stalks or cellulose materials or nonfood-based ethanol as opposed to the edible portions of plants. Cellulosic ethanol is a better alternative than corn ethanol, in Shell’s opinion. The process uses enzymes to break down the corn stalk — or any kind of bio-mass — into usable form to ferment and produce ethanol. Pilot plants have demonstrated this process works, but it is not yet commercially applicable.

He also mentioned wind and solar power, but neither is dependable all the time Wind and solar do represent an opportunity for CO2-free forms of electricity. And, hydrogen fuel cells offer a solution down the road; Shell is conducting research currently on H2 fuel cells and runs a fleet of hydrogen-powered vehicles in Washington, D.C. They are a technical reality, but not yet a commercial reality.

With the application of all these alternative and unconventional energy sources — oil shale, tar sands, gasified coal, liquefied natural gas, wind, solar and hydrogen — is the United States energy secure? Not yet, Hofmeister declared. As part of its mission, Shell also has established these priorities:

Improve the management of greenhouse gases: Shell admits that “we are not climatologists; we are not prepared nor are we equipped to debate the topic of global warming.”  But, the company does see the management of greenhouse gases as a critical part of its business model and a key to the company’s energy security. Continuing to produce more CO2 and push it into the environment is in no one’s best interest, in Shell’s view. That’s why the company supports caps on emissions and favors the use of trading “carbon footprints” and other greenhouse management strategies as possible solutions and why it joined the National Climate Action Partnership

Make increased efficiency of energy usage as a national priority.  Hofmeister pointed out that “the molecule that is not used means it is available for the future.” So, he noted, many small savings can add up. One example is the incandescent light globe. It used 3 percent of its energy to make light; the other 97 percent is wasted as heat. Even gasoline engines are inefficient — 20 percent is used for mobility; 80 percent is wasted as heat.  If we could move from these inefficient levels where so much energy is wasted, then we could move to a solution, according to Hofmeister. And, these are just two examples, he pointed out.

Educate Americans about energy. Very few Americans know very much about energy, and yet it is the most critical element and foundation of our society and our lifestyle. Hofmeister observed most of us take our energy abundance for granted. He said that “it could be said we have taken it for granted for a very long time, and then when we have a crisis we don’t understand the nature of the crisis. And we get angry and we lash out at those who produce the energy, the utility, the coal company or the oil and gas company. We lash out at them for their failure to somehow produce the energy that we expect. And yet, we have no appreciation for what energy is all about, where it comes from, how it is produced, what are the implications of the societal costs of energy.” That’s why, Hofmeister said, “Shell is calling for a national agenda for the education of our young people and our citizens as part of our dialogue with one another.” Part of that educational process is the company’s new Web site, “Energize Your Future.” Students and teachers can now load a semester full of education to learn about energy from that site, he said. The material was produced by Scholastic as a “brand neutral” information source, he said.

Of the three key aspects of Shell’s mission, clearly the third — educating the public about energy — appeared to be uppermost in Hofmeister’s mind, given the woeful understanding the American people have about this all-important topic.

Greg Jarrard is a veteran ad man, writer and publisher best known for running paid ad campaigns for Republican candidates. He is now in the publishing business, running a small-press publisher serving the natural foods industry. His recent book, "A Jack Mormon's Travel Guide," is available at Deseret Book. He resides in South Jordan where he digs weeds and claims it is a garden.