The man charged with implementing the Navy’s energy agenda doesn’t seem to understand the energy revolution taking place in America. Ret. Vice Adm. Dennis McGinn, who was recently confirmed as assistant secretary of the Navy for energy, installations, and the environment, told POLITICO last week that the U.S. needs to develop advanced biofuels as a long-term strategy to replace conventional gasoline. The problem is that McGinn’s belief rests on faulty assumptions and overlooks the oil (and natural gas) boom occurring in the United States.
In the POLITICO interview, McGinn claims that “all forms of energy, energy efficiency, renewable energy, biofuels — just make so much sense. They’re grounded in national security logic, in really, really good analysis of the future scenario.” What, exactly, McGinn means by the “future scenario” remains unclear. Presumably, McGinn’s future scenario is based on the “aggressive energy goals” announced by Navy Secretary Ray Mabus in 2009.
Eight years ago, McGinn may have had a point. In 2005, U.S. oil production was decreasing (in large part because the government keeps 97 percent of federal lands and water off-limits) while U.S. oil consumption was increasing. At the time, the U.S. imported 60 percent of its oil.
Since the hydraulic fracturing revolution, however, domestic oil production is booming, while consumption has leveled off. As a result, imports have fallen to about 40 percent with more than half of our imports now coming from the Western Hemisphere. The Energy Information Administration (EIA) projects the net import share to dip even further to 30 percent in 2014, the lowest level since 1985.
Here are some additional facts about the domestic oil boom for McGinn to consider:
- U.S. proved crude oil reserves in 2011 increased by a record amount for the second year in a row, rising 15 percent to the highest level since 1985.
- Domestic oil production increased more than 2 million barrels per day (bpd) over the last two years, reaching a nearly 24-year high of 7.57 million bpd for the week ending August 9.
- North America’s 1.79 trillion barrels of total recoverable oil reserves are enough to fuel every passenger car in the United States for 430 years, almost twice as much as the combined proved reserves of all OPEC nations, and more than six times the proved reserves of Saudi Arabia.
- Oil production in North Dakota rose to a record 24.6 million barrels in June, a 24 percent increase from a year earlier. Thanks to the Bakken shale formation, North Dakota has eclipsed Alaska to become the second biggest oil producer in the country.
- The National Petroleum Reserve—Alaska (NPR-A), formerly known as Naval Petroleum Reserve No. 4 when it was established in 1923 as an emergency oil supply for the U.S. Navy, contains 896 million barrels of conventional, undiscovered oil. The Naval Petroleum Reserve was literally established to provide oil for the Navy, but the federal government has not allowed oil production in the area. If McGinn were serious about energy security for the Navy, then he would surely work to make sure the NPR-A is open for production.
While America has vast and growing oil reserves, our biofuel production pales in comparison. The U.S. produced about 100 billion gallons of oil in 2012, but just 13.3 billion gallons of ethanol, the leading source of biofuel. Moreover, Mabus and McGinn are pushing so-called “advanced biofuels,” which are even more scarce and expensive than ethanol. In 2012, the U.S. produced only 627 million gallons of advanced biofuels.
McGinn pays lip service to the “future,” but his energy agenda is stuck in the past. Some of the earliest internal combustion engines, dating back to the 1800s, were designed to run on biofuels. A century later, Henry Ford designed the first Model T to run on either gasoline or ethanol. Even cellulosic ethanol is not new, as Robert Rapier explains:
Almost 200 years ago, in 1819, French chemist Henri Braconnot first discovered how to unlock the sugars from cellulose by treating biomass with sulfuric acid (Braconnot 1819). The technique was later used by the Germans who were the first to commercialize cellulosic ethanol from wood in 1898 (EERE 2009).
So the world’s first commercialization of cellulosic ethanol took place 114 years ago. First commercialization in the U.S. took place in 1910 — 102 years ago. The Standard Alcohol Company built a cellulosic ethanol plant in Georgetown, South Carolina to process waste wood from a lumber mill (PDA 1910). Standard Alcohol later built a second plant in Fullteron, Louisiana. Each plant produced 5,000 to 7,000 gallons of cellulosic ethanol per day from wood waste, and both were in production for several years (Sherrard 1945). So actual production 100 years ago was up to about 2.5 million gallons of cellulosic ethanol per year.
Cellulosic ethanol production was higher a century ago than it is today. Over time, affordable oil displaced expensive biofuels, a trend that continues to this day.
Despite an abundance of affordable, domestic oil sources, the Department of Defense (DoD) is opting increasingly for uneconomical biofuels. The military has made at least 19 biofuel purchases totaling more than $65 million since 2009, according to a recent IER analysis. These purchases cost taxpayers $48.36 per gallon, on average, compared to about $3.24 per gallon for conventional fuels purchased on a bulk contract. The worst deal for taxpayers on a per gallon basis was a 2012 purchase of 55 gallons of biofuel for $245,000—a cost of $4,454 per gallon.
As the largest energy consumer in America, the military is rightfully concerned about energy security. Unfortunately, McGinn would rather waste taxpayer dollars on exotic biofuels than capitalize on the domestic energy boom that promises to deliver affordable energy for decades to come. If McGinn is truly interested in taking “the politics out of something which is essentially a national security issue,” as he puts it, he should embrace the American shale revolution.
IER Policy Associate Alex Fitzsimmons authored this post.