I had one such argument with Everette DeGolyer just after World War II. he insisted that we were going to be desperately short of oil by 1956. I remember saying: ‘De, that prediction has been made almost since the beginning of the oil industry. Are you sure that you are right this time?’

He said he was sure, and I suggested we wait until 1956 and find out. In that year, we had oil running out of our ears, and I said, ‘De, what happened?’ He responded that some unforeseen things occurred, and I remember asking, ‘Isn’t it always that way?’

I have come to the conclusion it is always that way.

I thought about Marshall’s story–and the certainty of peak oilers Kenneth Deffryes and the late Matt Simmons–as I read a recent article in this week’s New York Times, ”Argentina Hopes for a Big Payoff in Its Shale Oil Field Discovery.”

Some quotations from the article speak volumes about big happenings within the pregnant fossil-fuel family:

“The importance of this discovery goes well beyond the volume,’ said Sebastián Eskenazi, YPF’s chief executive, as he announced the find. ‘The important thing is it is something new: new energy, a new future, new expectations.’”

“Exploration of similar shale fields has already begun in Australia, Canada, Poland and France. Indian and Chinese oil companies are investing in pilot projects that, if successful, could make their countries significant oil producers, possibly reshaping energy geopolitics and stemming future price rises. Ukraine and Russia are also thought to have sizable shale fields of oil and gas, as do many North African and Middle Eastern countries.”

“‘The potential is huge, on the order of hundreds of billions of barrels of recoverable reserves,’ said Michael C. Lynch, president of Strategic Energy and Economic Research, a consulting firm, who is preparing a report on global shale oil.”

“‘It could potentially be a game changer,’ said Fadel Gheit, a managing director and senior oil analyst at Oppenheimer & Company. ‘We are going to see much wider distribution of oil reserves, to the benefit of the whole world. It could rerank countries, in which the very needy might become self-sufficient. Countries like Canada and Australia could potentially become the new Saudi Arabia for energy.’”

“‘Tight oil is the new revolution in oil production, and it’s not just the U.S.,’ Mr. Fryklund said. “It’s worldwide.”

We are not running out of oil or gas. We are running into oil and gas. Predictions of peak oil and peak gas are not only being made for the wrong year and decade, but also for the wrong century.

Hydrocarbons are increasing their economic and job potential–and making the government-engineered investments in technologically insufficient renewable energy look like every bit the boondoggle that it really is. The hydrocarbon age is still young, making the technologies required for the renewable energies of the future far different than what is being touted today.

Government can and should get out of the energy planning business for reasons that are stronger today than ever. Peak, depleting government, let’s hope so; peak minerals, not so.

The Bakkan Shale Oil Field

The U.S. Geological Survey estimated the mean undiscovered volumes of oil in Bakken Shale Formation of the Williston Basin Province in Montana and North Dakota at 3.65 billion barrels .[ii] Due to the Bakken oil field, proved reserves in North Dakota almost doubled from 573 million barrels in 2008 to 1,046 million barrels in 2009 according to the Energy Information Administration.[iii]

North Dakota State University estimates that the shale oil workforce in the state jumped from just over 5,000 in 2005 to over 18,000 in 2009 and estimates now have it at 30,000. If oil production reaches a million barrels a day, it could employ over 100,000 people. Due to this oil boom,  unemployment in North Dakota fell to 3.8 percent — less than half the national rate of 9 percent- and the lowest unemployment rate in the United States.

Other Shale oil Fields

A Texas field, known as the Eagle Ford, is one of about 20 onshore oil fields that could together increase the nation’s oil output by 25 percent within a decade. The Eagle Ford field is producing more than 100,000 barrels a day and could reach 420,000 by 2015, according to Bentek Energy. In Dimmit County, Texas, the unemployment rate has fallen to half, and sales tax receipts are up 70 percent.

It is estimated that these shale oil fields could create more than two million new jobs and that tens of billions of dollars could line the coffers of states where shale oil fields are located, including Texas, Oklahoma, Colorado, California, Ohio, Michigan and Kansas. According to IHS CERA, an energy research firm, shale and other “tight rock” fields  currently producing about half a million barrels of oil a day could produce up to three million barrels a day by 2020. In 2011 alone, oil companies are investing an estimated $25 billion to drill 5,000 new oil wells in tight rock fields.[iv]

According to oil companies, oil shale is economic as long as oil prices remain above $60 a barrel. At oil prices around $100 a barrel, shale oil wells can generally return a profit within eight months — three times faster than many conventional oil wells.

Some analysts predict that within 10 years, shale oil production could help reduce oil imports by more than half as long as other actions are also realized in increasing oil production in the Gulf of Mexico and in reducing oil demand. Significant finds in Alaska could accelerate this reduction in imports, as could unconventional sources of oil and byproducts of natural gas production.  At oil prices around $90 per barrel, reducing imports could save the United States as much as $175 billion a year. Last year, when oil averaged $78 per barrel, the United States spent $260 billion for imported crude, more than half the country’s $500 billion trade deficit.[v]

Obstacles to Hydraulic Fracturing

A national campaign against hydraulic fracturing has been announced by some groups, and it has come under attack by certain journalists, including one with the New York Times, which prompted the non-partisan Energy Information Administration to issue an extremely rare rebuttal to a story which mischaracterized their analysis of natural gas resources in the United States.   Clearly, hydraulic fracturing, which is increasing our domestic oil and natural gas production, is under political attack.

Some environmentalists claim hydro fracturing pollutes drinking water even though industry experts say that it is unlikely because hydro fracturing is performed thousands of feet below the water table.   Environmental Protection Agency administrator Lisa Jackson recently told Congress she knows of no proven examples of such water pollution.[vi] But, the EPA has launched “a comprehensive research study” on the possible “adverse impact that hydraulic fracturing may have on water quality and public health” nationwide.[vii]

Additionally, environmentalists are questioning the chemicals injected in the water during hydro fracturing, believing that they may be harmful. A bill introduced in the Texas legislature is requiring drillers to disclose the chemicals they consume in the hydro fracturing process. Similarly, thoughts of such disclosure have occurred at the federal level and in other states. For example, New York, which has huge shale gas deposits, has a moratorium on hydraulic fracturing.

And, in Texas, the dunes sagebrush lizard may be named a new endangered species making some oil drillers fear that it could slow down or halt drilling in West Texas.

Conclusion

Shale oil may be following in the footsteps of shale gas now that hydro fracturing is being used to produce shale oil, bringing jobs and money to states with those resources. And those job figures are large, not the small numbers that the Obama Administration has garnered from the green technology movement that has done little to change the unemployment rate in this country despite the Administration’s stimulus spending.^[viii]

As Robert Bryce stated in his Wall Street Journal editorial, “A vibrant industrial base requires cheap, abundant and reliable sources of energy. The shale revolution now underway is the best news for North American energy since the discovery of the East Texas Field in 1930. We can’t afford to let fear of a proven technology stop the much-needed resurgence of American industry.”[ix]

And, as Michael Lind stated, “If gas hydrates as well as shale gas, tight oil, oil sands and other unconventional sources can be tapped at reasonable cost, then the global energy picture looks radically different than it did only a few years ago. Suddenly it appears that there may be enough accessible hydrocarbons to power industrial civilization for centuries, if not millennia, to come.”[x]

The White House has launched a coordinated PR campaign to argue that it is not anti-business. That is a difficult argument to make when we look at the Administration’s record on energy. Time after time the Administration has acted to make it more difficult to produce energy domestically and they are actively seeking to make energy more expensive. This only makes an economic recovery more difficult.

The Administration’s Assault on Domestic Energy Production and the Use of Energy [Partial List]

The Administration has been working around the clock to achieve President Obama’s goal of bankrupting coal companies and making electricity prices necessarily skyrocket.

Within days of taking office, the Administration cancelled 77 oil and gas leases in Utah, postponed a new 5-year plan for offshore resources, and cancelled commercial oil shale research leases. But that was just the beginning.

In the wake of the Gulf oil spill, the Administration is trying to put cap-and-trade legislation back on the agenda, calling multiple White House meetings to try to find consensus on increasing the cost of energy. And the Administration has announced a variety of other regulations that will increase the price of energy.

The most impactful new regulation is the Environmental Protection Agency’s (EPA) regulation on greenhouse gas emissions. EPA has already announced regulations on carbon dioxide emissions from automobiles. According to EPA itself, this will increase the price of automobiles by $1000 a car and reduce global temperature (the whole point of the rule) by only a maximum of 0.015 °C  90 years from now.

But that’s only one part of the Administration’s efforts to drive up the cost of producing and using energy. EPA wants to revise the Bush-era ozone rule. If EPA ratchets down the ozone level too far, many counties – even those with no industry – will fail the standard. EPA also wants to tighten particulate matter regulations and mercury regulations nationwide and it has announced a new “transport” rule to further regulate SO2, NOx, and mercury in Eastern states. Finally, the Administration is preparing a new boiler rule to regulate hazardous air pollution from boilers and process heaters.

Administration Cancels 122 Previously-Issued Permits in Texas

Besides imposing new burdensome regulations, EPA is cancelling previously-made decisions to further ratchet up the cost of doing business for domestic energy manufacturers.  In Texas, the Administration cancelled 122 previously-issued air quality permits under a program started under the Clinton Administration. E&E News reports:

According to figures touted by [Gov.] Perry and state regulators, Texas beat national averages over the past 10 years by achieving a 22 percent reduction in ozone emissions and a 27 percent drop in nitrogen oxide emissions.

…

“We are defending our flexible air permitting program because it works,” TCEQ [Texas Commission on Environmental Quality] Chairman Bryan Shaw said earlier this month. “EPA is not able to demonstrate how our program is less protective of the environment than the bureaucratic federal approach. EPA’s philosophy of more bureaucracy by federalizing state permits will not lead to cleaner air, but will drive up energy costs and kill job creation at a time when people can least afford it.”

According to industry representatives, it will cost millions of dollars for each company to change their pollution control technologies. This could cost a lot of jobs. According to a story in the Houston Chronicle:

Corporations said the decision creates uncertainty for their companies.

“Valero has six refineries operating under flex permits, employing more than 2,700 people,” the company said in a statement, noting the EPA did not object to the program when it was created. “Now, 16 years later, EPA is reversing course, and our facilities are caught in the middle, creating significant uncertainty at a time when our economy can least afford it.”

Also, one likely reason the Administration cancelled these permits now is to force these plants to get carbon dioxide permits under EPA’s new carbon dioxide regulations.

Conclusion

We need to be vigilant about air pollution, but the Obama Administration’s carbon dioxide rules, for example, have nothing to do with air pollution. The carbon dioxide regulations are supposed to address global warming, but even EPA admits (as seen above), they will have miniscule impacts on global temperature.

The President says he wants to be pro-jobs, pro-consumer, and pro-market.  If that is indeed the case, then he needs to consider holding off on his regulatory assault on the American economy. One of the reasons that unemployment rates are high and people have been unemployed for so long is because of uncertainty about future regulations and the cost of those regulations.

The American economy is hurting and this regulatory assault needs to be reconsidered for the economy to have any hope of recovering and – more importantly – for enabling the private sector to create real jobs.

WASHINGTON – Earlier today, Interior secretary Ken Salazar outlined a series of changes to federal leasing rules aimed at making it more difficult, expensive, and time-consuming to explore for and produce abundant reserves of American energy on federal, taxpayer-owned land. Subsequent to the announcement of the new rules, Institute for Energy Research (IER) president Thomas J. Pyle released the following statement:

“When it comes to paving the way for the responsible development of homegrown, job-creating energy resources, no administration in history has done more to ensure producers do less.

“It’s a superlative not achieved by accident. Over the course of a single year, we’ve seen the Interior secretary block commonsense exploration through a number of creative means – from executing a pocket veto on a sensible plan to produce offshore, to outright rescinding existing lease contracts in Utah.

“But while the means and methods have changed, the loser continues to be the American taxpayer. In 2008, the Interior Department collected 10-times the amount of revenue from lease sales than it did in 2009. Thanks to today’s announcement, that number has nowhere to go but down in 2010.”

NOTE: Back in November, IER published a detailed exposition of Secretary Salazar’s record of leasing this year as head of the Interior Department. Among the highlights from that report:

• Under the first year of the Obama administration’s 2009 oil and gas leasing program, fewer onshore and offshore acres have been leased than in any previous year on record.

• The Interior Department collected less than one-tenth the revenue from oil and gas lease sales in 2009 than it did in 2008

• For the year 2008, lease sale revenues produced a return for the taxpayer of $942 per acre leased.  In 2009, taxpayers received about $254 in return for each acre leased under the Obama administration – indicative of the quality of leasable land made available under Sec. Salazar

• More than 97 percent of the 2.46 billion acres of taxpayer-owned lands in the public domain are presently not leased for oil and gas exploration

#####

China’s Investment in Oil and Gas

China has seized on the global recession to gain access to oil and gas resources and supplies. The atmosphere is ripe for Chinese firms to invest in these resources because:[i]

• Acquisitions are now more favorable than they were in early 2008, due to lower oil prices and, hence, lower asset prices.
• China is less constrained than many of its international counterparts in terms of where they can invest (e.g. Iran).
• Financing is not a problem, because Chinese banks are willing and able to provide needed funds.
• Competition for these assets in some areas has lessened.

Not only is China investing in places like Iran, Iraq, Kazakhstan, Nigeria, Venezuela, and Argentina, but it is in the U.S.’s backyard, looking towards usurping the U.S. supply of Canadian oil sands.  China is a good customer for Canada, as Canada fears that the U.S. may introduce a low carbon fuel standard[ii] or other legislation that would restrict our purchases of oil sands from Canada[iii].  China is also looking at a possible purchase of leases in the Gulf of Mexico where Devon Energy is looking to sell its U.S. leases.[iv] The sale of these offshore leases requires the approval of the Mineral Management Service in the U.S. Department of Interior. China is willing and able to be at the forefront of any misstep other countries make to gain a foothold and secure oil and gas supplies, and the U.S. seems to be giving it elbow room.

China is also investing in oil and natural gas pipelines to ensure access to its investments and to divert some of its oil imports from the Middle East away from the Straits of Malacca. Oil pipelines are being built from Russia, Kazakhstan, and the coast of Myanmar. [v] A natural gas pipeline from Turkmenistan should be operating in the near future, and several liquefied natural gas terminals are either operating or are expected to be operating shortly.[vi]

While the total amount of “investment” loans made by China to oil and gas producing countries for guaranteed future supplies of oil and gas are unknown, China has clearly invested billions of dollars in their ‘loans for energy’ program. [vii] The main provider of the loans is the China Development Bank, and thus they are essentially Government loans. Just on Tuesday, December 8^th, for example, Nigeria’s presidential advisor for energy announced that Chinese companies have proposed investing $50 billion to buy 6 billion barrels of oil reserves in Nigeria.[viii]

China’s Oil and Gas Reserves

China is not endowed with many reserves of oil and natural gas.[ix] According to the Oil and Gas Journal, as of January 1, 2009, China had 16 billion barrels of oil reserves, 1.2 percent of the world total,[x] and its natural gas reserves totaled 80 trillion cubic feet, 1.3 percent of the world total.[xi] China gets 70 percent of its energy from coal, the hydrocarbon with the highest level of greenhouse gas emissions, and 20 percent from oil, the hydrocarbon with the second highest level of greenhouse gas emissions.[xii] China is third in rank to the U.S. and Russia in recoverable reserves of coal, with 13.6 percent of the world total.[xiii] Because of its massive use of hydrocarbons and its growing economy, China surpassed the U.S. in carbon dioxide emissions, the largest component of greenhouse gas emissions, in 2006.[xiv]

The U.S. Oil and Gas Strategy

While the Bush Administration initiated steps to bring on new leases of oil and gas, both offshore in the Gulf of Mexico and on public lands that are endowed with billions of barrels of shale oil, the Obama Administration has slowed the progress by extending the comment periods and providing other obstacles.  Examples include:

• On February 4^th, shortly after his Senate confirmation, Interior Secretary Salazar rescinded 77 oil and gas leases in Utah that could cost American taxpayers millions in lost lease bids, production royalties, new jobs, and the energy needed to offset rising imports of oil and gas.[xv]
• On February 10th, Secretary Salazar delayed for 6 months the development of the new 5-year leasing program for offshore drilling that would have set the framework for accessing newly available areas.[xvi]
• On February 25^th, Secretary Salazar canceled a new round of commercial-scale oil shale research, demonstration, and development leases in Colorado, Wyoming and Utah.[xvii]
• On February 26^th, President Obama introduced a budget that contains page after page of taxes on oil and gas totaling more than $31 billion that will reduce our domestic energy production.[xviii]
• On March 30^th, President Obama signed the Omnibus Public Lands Management Act into law, prohibiting energy production on over 3 million acres of federal land.[xix]
• On October 8^th, after rescinding 77 Utah oil and gas leases in February, Salazar announces he will lease 17 of them.[xx]
• On October 20^th, after canceling a new round of commercial-scale oil shale research, demonstration, and development leases last February, Salazar issued a new oil shale leasing program that decreases lease acreage by 87 percent, demands unrealistic timelines for investment into cutting edge research, and leaves royalty rates at the whim of the Secretary or in new regulations. [xxi]

Issues with the U.S. Renewable Strategy

The Obama Administration prefers that priority be given to offshore wind farms and wind and solar installations onshore.[xxii] They tout that these sources of “green energy” will provide needed jobs in the U.S. However, studies[xxiii] have shown that highly-subsidized renewable energy cost consumers and taxpayers more than the alternative fossil technologies[xxiv], that their component parts are largely made in foreign countries, that the jobs are mainly for the actual site construction and thus are temporary, and that the economy would be spurred more by investments made elsewhere.

Further, most green technologies are dependent on the wind blowing or the sun shining, and thus provide a lower amount of usable energy than their fossil or nuclear counterparts. Hence, many more wind farms or solar installations will be needed to provide the same amount of energy as their fossil and nuclear counterparts. And, they will also require more land area.[xxv]

What China Knows and the U.S. Doesn’t Know

All sources are needed to ensure energy will be available for future economic growth and to reduce dependence on foreign imports. Trading foreign imports of oil for component parts of wind and solar technologies does not reach any goals to which the U.S. is aspiring. To reach reductions of greenhouse gas emissions required by H.R. 2454, or other similar legislation, either nuclear power or biomass generating technologies will be needed[xxvi], which provide greater amounts of energy than wind or solar power.  That’s precisely the reason that China is investing in oil and gas resources abroad and in building power plants from hydrocarbon, nuclear, and renewable sources of energy without legal and government delays.[xxvii]

[i] Centre for Global Energy Studies, China’s Search for Energy Security, December 3, 2009, www.cges.co.uk

[ii] A Low Carbon Fuel Standard reduces the carbon intensity of transportation fuels by requiring that the mix of fuels sold reaches pre-specified targets of carbon reduction. Since oil sands yield heavier crude, more energy is required for producing and refining it, thus giving that crude a  higher carbon intensity than conventional crude.

[iii] China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/

[iv] David Pierson, “China’s push for oil in the Gulf of Mexico puts U.S. in awkward spot,” Los Angeles Times, http://www.latimes.com/business/la-fi-china-oil22-2009oct22,0,2776603.story?track=rss.

[v] Centre for Global Energy Studies, China’s Search for Energy Security, December 3, 2009, www.cges.co.uk

[vi] Energy Information Administration, International Energy Outlook 2009, www.eia.doe/oiaf/ieo/index.html

[vii] China National Petroleum Corp. received a $30 billion low-interest loan from a state-run bank to finance overseas acquisitions, Beijing’s latest bid to secure mineral resources to fuel the country’s burgeoning economy. http://www.eenews.net/Greenwire/2009/09/09/

[viii] The Wall Street Journal, Chinese Firms Propose $50 Billion Oil Buy in Nigeria, http://online.wsj.com/article/SB10001424052748703558004574583901047538032.html

[ix] Proved reserves of crude oil are the estimated quantities that geological and engineering data indicate can be recovered from known reservoirs with existing technology and current economic and operating conditions.

[x] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 23-24.

[xi] “Worldwide Look at Reserves and Production,” Oil and Gas Journal, Vol. 106, No. 48 (December 22, 2008), pp. 22-23.

[xii]Energy Information Administration, Country Analysis Brief on China, www.eia.doe.gov/emeu/cabs/China/Background.html

[xiii] Energy Information Administration, International Energy Outlook 2009, Table 9, page 59, www.eia.doe/oiaf/ieo/index.html

[xiv] Energy Information Administration, Annual Energy Review 2008, Table 11.19, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec11_39.pdf

[xv] E&E News, Oil and Gas: Salazar scraps contested Utah leases, February 4, 2009, http://www.eenews.net/eenewspm/2009/02/04/archive/1?terms=Salazar

[xvi] The Washington Times, Obama Blocks Offshore Drilling, February 11, 2009, http://www.washingtontimes.com/news/2009/feb/11/drilling-ban-revisited/

[xvii] Climate Wire, Interior: Research needed before “headlong” oil shale rush, February 26, 2009, http://www.eenews.net/climatewire/2009/02/26/archive/6?terms=Salazar

[xviii] The Hill, Oil, Gas Industry Aims to Nip Tax Hikes In the Bud, March 23, 2009, http://thehill.com/business-a-lobbying/3976-oil-gas-industry-aims-to-nip-tax-hikes-in-the-bud and Obama’s Budget: Almost $1 Trillion in New Taxes Over Next 10 yrs, Starting 2011, http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html

[xix] E&E News, Public Lands: Obama signs natural resources omnibus into law, March 30, 2009, http://www.eenews.net/eenewspm/2009/03/30/archive/2?terms=Salazar

[xx] The Wall Street Journal, 2^nd UPDATE: US Govt Proposes Delay On Controversial Utah Leases, October 8, 2009, http://online.wsj.com/article/BT-CO-20091008-715463.html

[xxi] U.S. Department of Interior News Release, Salazar Reforms U.S. Oil Shale Program, October 20, 2009, http://www.doi.gov/news/09_News_Releases/102009.html

[xxii] http://www.instituteforenergyresearch.org/2009/08/06/interior-secretary-limits-domestic-energy-production-but-fast-tracks-solar-development/

[xxiii] Wind Energy: The Case of Denmark, http://www.cepos.dk/fileadmin/user_upload/Arkiv/PDF/Wind_energy_-_the_case_of_Denmark.pdf ,and Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf, and Economic impacts from the promotion of renewable energies: The German experience, www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf

[xxiv] Germans miss out on cheaper electricity, www.reuters.com/article/idUSTRE5B02YS20091201/

[xxv] www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/ and www.instituteforenergyresearch.org/2008/09/26/facts-on-energy-wind/

[xxvi] Energy information Administration, Energy Market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009, www.eia.doe.gov/oiaf/servicerpt/hr2454/index.html

[xxvii] www.instituteforenergyresearch.org/2009/11/20/what-president-obama-should-have-learned-about-energy-policy-during-his-visit-to-china/

Now, after months of limiting access to additional sources of domestic energy, Secretary Salazar has decided to fast track taxpayer-subsidized solar energy development on federal lands. The Bureau of Land Management (BLM), an agency within the Department of Interior, announced earlier this month its intent to use 676,048 acres in six states—California, Nevada, Utah, Arizona, New Mexico, and Colorado—as solar energy study areas. The process to prepare these areas will take 2 years. The first step—soliciting comments via a Federal Register Notice—has already been completed. Comments were due by July 30, 2009. Salazar claims that this action, which will permit the construction of 13 commercial-sized solar facilities on public lands, will create 50,000 jobs.[1]

Salazar failed to mention that because solar power is heavily subsidized by taxpayer dollars, the jobs this plan creates will lead to many jobs lost elsewhere in the economy. He also failed to note that electricity generated by these plants will cost consumers 2.5 to 4 times more than generation from efficient energy sources like coal and natural gas. And solar is subsidized almost 100 times more than petroleum and natural gas, as measured on an electricity production basis (that is, in terms of dollars of subsidy per megawatt-hour produced).

Solar Power Is the Most Expensive Renewable

For decades, advocates of solar power have argued that it will soon be cost-competitive with conventional energy sources. But solar continues to cost much more than other, more efficient, sources of producing electricity. Economist Gilbert Metcalf of Tufts University compiled the table below comparing the cost of electricity from various sources.[2] The column titled “Current Law” shows the price of electricity under current law. However, current law provides for differing tax treatment for each source of electricity. To cancel out the different tax treatments for the different sources of electricity, Metcalf calculated the column titled “Level Playing Field,” which shows the cost of electricity assuming all of the sources were treated equally by the tax code. The last column shows the price if there were no taxes.

Metcalf explains that the costs of wind and solar shown here are actually too low because the cost does not reflect the fact that wind and solar work only intermittently. People demand access to electricity 24 hours a day and become frustrated when the lights go off, even for a short period. To have electricity when clouds cover the sun or the wind is not blowing requires stand-by power that can produce electricity when the renewables are not available.

Solar Power Will Continue to be the Most Expensive Renewable

According to the Energy information Administration (EIA), an independent agency within the Department of Energy, solar will continue to be the most expensive source of renewable electricity. EIA recently calculated the average cost of generating power from new fossil fuel, renewables, and nuclear energy. They estimate that by 2016 solar power will still cost 2.5 to 4 times more than the cheapest alternative, coal, which currently generates almost 50 percent of our electricity.

In reality, solar is even more expensive. EIA applied a three-percentage point increase to the cost of capital for coal-generated electricity to account for the possibility that future coal projects may need to purchase allowances or invest in other greenhouse gas emission-reducing projects to offset their emissions. This three-percent increase is similar to a $15 per ton carbon-dioxide-emissions fee.[3] On the other hand, EIA applied a two percentage point reduction in the cost-of-capital for eligible renewable technologies to take account of the loan guarantee program of the stimulus bill.

Solar Subsidies Are Huge

The federal government provides large subsidies for solar power generation in an effort to make solar more cost-competitive. Solar is eligible for a 10-percent business investment tax credit, which was made permanent as part of the Energy Policy Act of 1992. The Energy Policy Act of 2005 established a 30-percent personal tax credit, capped at $2,000 for the purchase of solar electric and solar water heating property. That tax credit was extended to 2016 by the Emergency Economic Stabilization Act of 2008, which also lifted the $2,000 cap and allowed electric utilities to qualify. [4]

To understand the significance of those subsidies, the EIA compared them to other fuels used for electric generation. The EIA calculated that federal subsidies for solar in fiscal year 2007 were over 55 times higher than those for traditional coal-fired generation and almost 100 times more than those for petroleum and gas generation, on an electricity production basis.[5] Even more stark differences in subsidies were documented by the General Accounting Office (GAO), which found that solar received subsidies over 1,200 times the subsidies provided to coal, on an electricity production basis.[6] The difference is largely in accounting, in that GAO attributes all solar subsidies to electricity generation where EIA attributes the majority of solar subsidies to residential, commercial, and industrial end users.

Solar Development Causes Job Loss Elsewhere

To judge the relevance of Secretary Salazar’s statement about job creation, let’s look at other countries that have more experience with solar technology construction. Spain, for example, requires that 20 percent of its electricity be produced from renewable energy by 2010. Its National Energy Commission estimates that 2,945 megawatts of solar capacity were installed by year-end 2008, making Spain second among nations for installed solar capacity. That capacity generated less than one percent of Spain’s electricity in 2008, and at a price per kilowatt hour that was over seven times higher than the average price of electricity. To attract investors and make renewable energy competitive against other forms of energy, Spain regulated rates and subsidized its renewable market. However, a prominent Spanish researcher found that for each megawatt of solar energy installed in Spain, 12.7 jobs were lost elsewhere in its economy. While solar energy may appear to employ many workers in the plant’s construction, it consumes a substantial amount of capital that would have created many more jobs in other parts of the economy. [7] Recently, the Spanish government decided to slash subsidies to solar power. The government will subsidize just 500 megawatts of solar projects this year, down sharply from 2,400 megawatts last year. [8]

Solar Energy Requires Massive Land Area

The land mass requirement for solar technology is large, which is why Salazar’s BLM is putting aside over 670,000 acres for it. Compared to nuclear power, for example, the acreage requirement is almost 230 times as much.[9] For this reason, some politicians are urging that the size of solar projects be limited. For example, Interior Appropriations Subcommittee Chairwoman Dianne Feinstein (D-Calif.) said solar projects are “huge” and their size should be limited so that they do not “become an enduring blight upon the land.” She said solar installations require fences, troughs, and steam plants. “That has a huge mark on land that we’re trying to conserve.”[10]

Will Energy “Alternatives” Make us Energy Independent?

Some argue we need increased electricity production from solar power to reduce our reliance on oil, coal, and natural gas. Solar currently, however, produces only 0.02 percent of the electricity generated in this country. Its increased production will not displace petroleum or make the United States more energy independent, as 99 percent of our electricity is already produced by non-petroleum sources. [11] Our demonstrated reserve base of coal will last over 436 years, at current consumption levels,[12] and much more coal is known to be available.[13] Nuclear fuel can be reprocessed and used again to generate electricity in our nuclear facilities—something other countries are already doing. And although there is great political desire to force the use of renewable energy to replace fossil fuels, it simply cannot happen anytime soon, as hydrocarbons supply 84 percent of our current energy demand[14] and 71 percent of our electricity generation.[15] The level of manufacturing capacity needed to replace a significant portion of that simply does not exist. For example, new solar installations required to replace just one percent of U.S. fossil fuel generated electricity would consume all of the world’s current solar module manufacturing capacity.[16]

As noted above, while Salazar is fast-tracking solar, in early February, his Interior Department canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether or not they were appropriate for leasing. Also in February, Salazar halted the previous administration’s oil-shale research and development leasing efforts, saying he would offer new lease terms after seeking public input.[17] In April, a federal circuit court invalidated the 2007–2012 offshore leasing program, saying the most promising sales in Alaska needed more documentation.[18] At the end of July, the court clarified that they were only requiring the Alaska OCS sales to be placed on hold, meaning the Gulf of Mexico sales could proceed. Alaskan OCS areas are the most prospective for new oil and gas discoveries because few wells have been completed there.[19]

Last year, when oil prices exceeded $140 per barrel, over twice the current price, Congress allowed the moratoria on oil and natural gas development in restricted areas in the outer continental shelf to expire.[20] However, all of the recent actions noted above reduce our ability to increase domestic production of oil and natural gas, lessen petroleum imports, and create needed jobs. The outer continental shelf—including sections which have been off limits to drilling since the early 1980s—may contain as much as 115 billion barrels of oil.  Taking full advantage of our potential offshore energy production could generate 1.2 million new jobs, $8 trillion in additional economic output and, $2.2 trillion in extra tax receipts nationwide.[21]

For decades, the federal government has restricted access to vast tracts of our domestic energy resources. Now, the government is mandating politically popular, but inadequate energy sources such as wind and solar. Taken together, these policies will create higher prices for U.S. consumers and restrict job formation. In the case of energy policy, the facts speak for themselves—our government is clearly the problem, not the solution.

[2] Source: Gilbert Metcalf, Federal Tax Policy Toward Energy, p. 22 (Oct. 2007) http://web.mit.edu/globalchange/www/MITJPSPGC_Rpt142.pdf

[3] http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/

[4] http://www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/

[5] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/execsum.pdf, Tables ES5 and ES6.

[6] General Accounting Office, Federal Electricity Subsidies, Oct. 2007, page 21, http://www.gao.gov/new.items/d08102.pdf

[7] Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf .

[8] Wall Street Journal, “Darker Times for Solar-Power Industry”, May 11, 2009, http://online.wsj.com/article/SB124199500034504717.html

[9] http://www.instituteforenergyresearch.org/2009/06/11/facts-on-energy-solar/

[10] Environment and Energy Daily, Interior: Senators grill Salazar on renewable energy siting, June 4, 2009, http://www.eenews.net/EEDaily/2009/06/04/archive/3

[11] Energy Information Administration, Annual Energy Review 2008, Table 8.2a, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_8.pdf

[12] Energy Information Administration, Annual Energy Review 2008, Tables 4.11 and 7.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec4_23.pdf and http://www.eia.doe.gov/emeu/aer/pdf/pages/sec7_5.pdf

[13] http://pubs.usgs.gov/dds/dds-077/ and http://www.eia.doe.gov/cneaf/coal/page/acr/table17.html

[14] Energy Information Administration, Annual Energy Review 2008, Table 1.1, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec1_5.pdf

[15] Energy Information Administration, Annual Energy Review 2008, Table 8.2a, http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_8.pdf

[16] The Credit Crunch’s Implications for Energy, Robert Goodof, Equity Research Analyst, February 2009. http://www.loomissayles.com/internet/internet.nsf/($DocumentID)/A9D1F278A7F6AD9485257561005A804D/$FILE/ccimplications_energy209.pdf

[17] Environment and Energy Daily, Energy policy, March 16, 2009, http://www.eenews.net/EEDaily/2009/03/16/archive/1?terms=salazar+and+OCS

[18] Environment and Energy News, Offshore drilling, April 17, 2009, http://www.eenews.net/eenewspm/2009/04/17/archive/3?terms=salazar+and+OCS

[19] The Associated Press, Offshore drilling ruling does not apply to the Gulf, http://www.google.com/hostednews/ap/article/ALeqM5ijmzoObcMDyeXXrne4t-7meTNxQwD99OC5V00

[20] http://www.api.org/policy/exploration/index.cfm

[21] The American Energy Tour, Part II, U.S. Rep. Adrian Smith, July 6, 2009, http://www.mccookgazette.com/story/1552538.html

FOR IMMEDIATE RELEASE
February 25, 2009
CONTACT:
Laura Henderson (202) 621-2951

IER: Interior Decision on Oil Shale Locks Away American Energy Resource Larger than Total Reserves of Middle East

WASHINGTON, D.C. – Institute for Energy Research (IER) president Thomas J. Pyle issued the following statement today after the Interior Department announced its plans to withdraw from consideration acreage in Colorado, Utah and Wyoming where research and development of a small portion of our nation’s homegrown oil shale reserves had previously been scheduled to take place:

“Earlier this week, Secretary Salazar suggested America’s massive and homegrown reserves of oil shale held ‘great potential.’ Unfortunately, the Interior Department’s decision today may help ensure that potential never becomes reality – in the process, locking-away an American energy resource larger than the total reserves of the entire Middle East.

“At a time of great economic uncertainty, with millions of Americans out of work and state budgets stretched beyond their breaking point, responsible development of America’s abundant shale resources could be a way out of our current condition, and a way back to a better one. The Interior Department’s announcement today effectively forecloses that opportunity.”

NOTE: In a story posted Sunday by the Salt Lake (City, Utah) Tribune, reporter Thomas Burr quoted Secretary Salazar as saying to a group of western governors gathered in Washington that oil shale had “great potential.”

More from IER on the potential and promise of America’s massive reserves of oil shale:

• Fact Sheet: Canadian Shale Resources a Critical Part of America’s Regional Energy Security

• IER Oil Shale Primer: What Is It? How Much Do We Have? What Can Be Done to Develop It?

• Nov. ’08: IER Applauds BLM on Final Rule for Shale Development

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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www.InstituteforEnergyResearch.org

FOR IMMEDIATE RELEASE
February 18, 2009
CONTACT:
Laura Henderson (202) 621-2951

IER: Embrace Canadian Energy

Washington, D.C. – The Institute for Energy Research (IER) today released the following fact sheet on the important energy trade relationship between the United States and Canada in advance of the President’s trip there tomorrow. President Obama should resist the call from some organizations to antagonize Canada, our largest and most stable trading partner. Today’s economic climate should reinforce that he instead must move to strengthen our important economic ties with our northern neighbors.

We import more energy from Canada than any other country:

• The United States imports more natural gas, refined gasoline, and oil from Canada than any other nation in the world—17 percent of our oil and 18 percent of our natural gas.
• Nearly 100 percent of Canada’s energy exports go to the United States.
• Canada supplies 2.5 million barrels of oil for the U.S. each day, which is roughly the equivalent of what we import from Saudi Arabia and Nigeria combined.
• Oil sands make up 97 percent of Canada’s total proven reserves and 13 percent of total U.S. imports.
• The United States imports 36 percent more oil from Canada than Saudi Arabia and 320 percent more than Iraq.

We export more goods to Canada than any other country:

• According to the U.S. State Department, The United States and Canada share the largest energy trading relationship in the world.
• Among other products, the United States exports 18.4 million short tons of coal to Canada.
• In 2007, 65 percent of Canada’s imports came from the United States.

Our shared resources could provide both nations with an energy and economic boon:

• Canada’s total oil sands resources could be as large as 2.6 trillion barrels.
• According to the Department of Energy, if developed, U.S. oil shale resources—which could total 2.1 trillion barrels—combined with Canada’s tar sands, could allow the U.S. and Canada to claim the largest oil reserves in the world.

NOTE: The important energy trade relationship between the United States and Canada is indisputable. Any attempt to impede on that relationship would further the economic uncertainty in the United States.

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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www.InstituteforEnergyResearch.org

Energy is the lifeblood of our economy.  As our competitors around the globe have shown us in recent years, job creation and economic growth begin with access to abundant, affordable energy supplies. 

Unfortunately, the Obama administration’s stimulus proposals are founded on the fundamentally flawed notion that we will achieve prosperity if we make coal, oil, and natural gas, which make up 85 percent [1] of the energy that fuels our economy, more expensive and less available.  Meanwhile, President Obama wishes to spend billions of taxpayer dollars on the most expensive and least efficient energy sources and force American consumers to pay more to purchase them.

Energy is, literally, “the capacity to do work.”  More energy means more work, more jobs, and more economic growth.  Less affordable energy means less work performed here at home.  Affordable energy creates jobs and stimulates investment in America.

IER supports government policies that encourage private investment, foster job creation, and provide American consumers access to the vast, proven, affordable energy supplies they own beneath the 2.3 billion acres of government lands not leased for responsible energy production.  These enormous taxpayer-owned resources, and the American jobs they would create, have been held hostage by a decades-long government policy of saying, “No, we can’t”.

Today, IER is offering a bold economic stimulus plan that will create jobs, strengthen our economy, enhance our national energy security, and make the U.S. more competitive in the world.  Best of all, it won’t cost taxpayers a dime.  In fact, it could generate hundreds of billions of dollars, along with jobs and new energy supplies for the future.

IER’s plan represents the most significant change in government energy policy in more than three decades.  We urge the Obama Administration to say, “Yes, we can” to our two-part plan, which begins by embracing the fundamental medical precept: First, Do No Harm:

• Vow to defend jobs and investments against expensive, job-killing climate regulations.  German Chancellor Angela Merkel recently stated that she would not allow EU climate regulations that “take decisions that would endanger jobs or investments in Germany.”  President Obama should follow suit and vow to defend American jobs against costly climate regulations.
• Halt EPA’s attempt to regulate carbon dioxide using the Clean Air Act. The Clean Air Act was designed to regulate regional air pollutants, not global concentrations of carbon dioxide.  President Obama needs to apply a cost-benefit analysis to EPA’s proposal to make 85 percent of the energy that fuels our economy more expensive and less available, cost Americans $7 trillion over the next 20 years, and accomplish little, if any, real reductions in global temperature.
• Renounce plans to bankrupt coal companies. As a presidential candidate, Obama said he would bankrupt coal-fired power plants with climate regulations. America currently gets 48 percent of our electricity from coal. Unlike wind and solar, coal is reliable, affordable, and proven. Wind and solar cannot power modern society’s always-on electricity needs.
• Join other policymakers in denouncing billions for “project[s] that depend on significant taxpayer subsidies while potentially doubling power costs” for American consumers and abandon all efforts to implement Federal Renewable Fuels Standards, Federal Renewable Portfolio Standards and Low Carbon Fuel Standards.

And second, say “Yes, we can” and pursue the following landmark changes in federal energy policy:

• End subsidies for all forms of energy and return the money to American taxpayers. The government should not be in the business of picking winners and losers in energy production.  Furthermore, according to the Congressional Budget Office (CBO), direct payments to individuals and cutting taxes have the fastest and most significant impacts on the economy.
• Continue our progress on the most significant change in energy policy in decades: Streamline regulations to produce energy from American resources on American lands and coastal waters.  ICF International recently released a study that shows developing America’s abundant but currently off-limits domestic energy supply would create 160,000 new jobs alone and generate $1.7 trillion for local, state, and federal tax revenue.
• Provide coastal states with 50 percent of revenue from offshore and onshore energy leasing.  Last year alone, the U.S. raised over $23 billion from energy leasing on federal lands.
• Support exploration and energy production in ANWR. According to the Energy Information Administration, ANWR “is the largest unexplored, potentially productive geological onshore basin in the United States.”  It contains a mean expected value of 10.4 billion barrels of oil. Opening ANWR would create hundreds of thousands of American jobs, generate billions of dollars in state and federal revenue, and enhance our energy security.
• Expedite job creation by waiving all regulations on federal lands for the expedited construction of the Alaska natural gas pipeline.  Congress did this in 1973 for the 800 mile-long Trans-Alaska Oil Pipeline, which was built in just three years and has since delivered 16 billion barrels of oil to American consumers. Russia, Iran, and Qatar control 60 percent of the world’s natural gas supplies. We should use our abundant supplies of natural gas, and not allow another OPEC-style cartel to limit our energy sources.
• Allow the exploration and experimentation necessary to produce affordable energy from America’s oil shale resources. The western United States is home to an estimated 800 billion barrels of recoverable oil equivalent in oil shale. This is about three times the amount of proven oil reserves in Saudi Arabia. This resource is untapped and needs research to develop economically.
• Permit the exploration and experimentation necessary to produce affordable energy from methane hydrates.  A 2007 study found that the U.S. has about 5,700 trillion cubic feet of methane hydrates—about 900 times the current annual gas consumption in the U.S. Like oil shale, this resource is untapped, and companies need to research ways to bring it to market.
• Limit frivolous lawsuits designed to thwart responsible development of American energy and the American jobs it creates. The following quote sums up this problem best.  In an interview with Dow Jones Newswires in January 2003, The Wilderness Society’s Peter Morton threatened:  “If you bid on a lease on public land, you can expect (environmental litigation).“
• Remove regulatory impediments and repeal punitive laws that make it increasingly difficult to build or expand refineries.  While existing refineries have gone to great lengths to expand their capacity to meet growing domestic demand, refinery expansions are becoming more and more difficult due in part to regulatory impediments, bureaucratic red tape and a barrage of punitive federal legislation in recent years.
• Resolve issues involving the Yucca Mountain Repository for spent nuclear fuel.  The Federal government has been studying Yucca Mountain as a fuel repository for the last 30 years.  Ratepayers have paid billions to the Nuclear Waste Fund—it’s time for the Federal government to move forward and provide a return on that investment.
• Remove regulatory barriers to building the next generation of nuclear power plants. The Federal government should not stand in the way of developing nuclear fuel reprocessing, pebble-bed reactors, or whatever forms of nuclear energy are economical.

[1] According to EIA, in 2007 39 percent of our energy came from petroleum, 22 percent from coal, 23 percent from natural gas, 8 percent from nuclear, 2.4 percent from hydroelectric, 2.1 percent from wood derived fuels, 1.0 percent from biofuel, 0.3 percent from geothermal, 0.3 percent from wind, and 0.1 percent from solar. The latest data from EIA is available here: http://www.eia.doe.gov/cneaf/alternate/page/renew_energy_consump/table1.html

FOR IMMEDIATE RELEASE
December 17, 2008
CONTACT:
Brian Kennedy (202) 346-8826
Chris Tucker (202) 346-8825

IER: Obama Interior Pick Will Have “Plenty to Say” on When, Whether American Economy Can Make Its Way Back

IER president urges Sec.-designate Salazar to leverage power of affordable energy to deliver jobs, revenue and energy Americans need

WASHINGTON – Institute for Energy Research president Thomas J. Pyle issued the following statement today after the president-elect formally announced his intention to nominate U.S. Senator Ken Salazar (D-Colo.) to serve as our nation’s 50th secretary of the Interior:

“As a cabinet officer soon to be charged with managing one of every five acres of land in the United States, along with nearly two billion acres of submerged land offshore, Senator Salazar will have a crucial role to play in strengthening our country’s energy security. He’ll also have plenty to say on whether access to affordable, reliable energy continues to be available to all Americans. We congratulate Senator Salazar on this important nomination, and look forward to working with him to ensure his office diligently works toward these goals.

“Senator Salazar’s legislative record suggests these twin national priorities of energy security and affordability may end up playing second fiddle to the desire to lock these resources away. As a Senator, Salazar has been a persistent critic of granting basic energy access to the people of this country who own it, whether that energy resides under Alaska’s North Slope, Colorado’s Roan Plateau, or in massive deepwater reserves far offshore. That will have to change if our economy has any hope of making a full and swift recovery.

“Never before in our nation’s history has the role of Interior Secretary been as central to the long-term health and well being of our country. It’s our hope that Senator Salazar comes to understand the gravity of this new role, better appreciate the benefits of expanding access to reliable energy sources, and fully consider the consequences we can expect for choosing not to.”

The facts on Sen. Salazar:

• Voted against the responsible development of at least 10.4 billion barrels of American oil on Alaska’s north slope, preventing what would’ve resulted in a 50 percent increase in U.S. proven reserves.
  (http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00288)

• Fought attempts by the federal government to expand production of clean-burning domestic natural gas on Colorado’s Roan Plateau, impeding the safe development of nine trillion cubic feet of natural gas – enough to heat and cool four million American homes for 20 years.
  (http://salazar.senate.gov/news/releases/080609roan.htm)

• Struck a backroom deal with Senate appropriators to prevent billions of barrels of oil shale energy from being produced, calling his effort a “victory for responsible oil shale development.”
  (http://salazar.senate.gov/news/releases/080313oilshale.htm)

• After failing to extend the shale ban into the new year, Salazar castigated the federal government for following the law and beginning the process of issuing leases.
  (http://salazar.senate.gov/news/releases/080904shale.htm)

• Proudly announced his support for a so-called energy bill that would’ve permanently locked away nearly 75 percent of America’s known offshore energy resources, increased utility rates for all Americans, and expanded the reach of the federal government in the day-to-day decisions of American energy consumers.
  (http://salazar.senate.gov/news/releases/080813enjnt.htm)

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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www.InstituteforEnergyResearch.org