Reducing Oil Imports – Assumptions in New Independence Plan

“Our decision about energy will test the character of the American people and the ability of the President and the Congress to govern this nation. This difficult effort will be the ‘moral equivalent of war,’ except that we will be uniting our efforts to build and not to destroy,” said President Carter in 1977.

In 2008, America imported 11 million barrels of oil a day. By 2025 the U.S. will have cut that by one-third – about where we were in 1975, according to an energy independence plan outlined by President Obama yesterday.

Given decades of failed policies by both the Democratic and Republican parties going back to President Nixon designed to get the U.S. off of imported oil, it’s tough to be optimistic that something will actually get done by partisans in our bickering national government. They seem mostly concerned with winning the next election and securing the funds necessary to finance what will no doubt be the most expensive election in history. (See President Obama outlines Energy Independence Plan, Touting Alternative Fuels, “Safe” Nuclear Power, 33% cut in Oil Imports)

As is now the case – and was going back to the first oil embargo when Arab oil producing nations declared economic war against the United States – enormous sums of money are involved in energy.

There are no lobbyists working specifically for American Energy Independence, but armies upon armies of them for special interest, multi-national corporations and Wall Street traders benefitting from the status quo – and they care not a sack of tea about our independence. The president acknowledges as much, but to his credit he is attempting to change the course set by decades of failed leadership.

Here, for your information, are the underlying assumptions – and assumptions are always key in policy making – on how U.S. energy independence might become reality. Let the lobbying and political posturing begin, well, continue. 

Expanding “Safe and Responsible” Domestic Oil and Gas Development and Production

  • Implementing critical safety reforms: In response to the Deepwater Horizon oil spill in the Gulf of Mexico, the Obama Administration has launched what it calls “rigorous and comprehensive” environmental and safety reforms to ensure the responsible development of offshore oil and gas resources.
  • Identifying underdeveloped resources: The President asked the Department of the Interior (DOI) to issue a report on the status of unused oil and gas leases. That report showed that 57% of all leased onshore acres and 70% of offshore leased acres are inactive – meaning that they are neither being explored nor developed by oil companies.
  • Developing incentives for expedited development and production: DOI is developing incentives for expedited development of oil and gas production from existing and future leases.  For its offshore leasing program, the DOI has begun to employ incentives, including the shortening of some lease terms to encourage earlier development, and requiring drilling to begin before an extension can be granted on a lease. DOI is also evaluating what’s called graduated royalty rate structures to encourage more rapid production.

Securing Access to Diverse and Reliable Sources of Energy

The U.S. is acting in the international arena to moderate global oil demand and obtain additional supplies of liquid fuels and clean energy. The President claimed the U.S. is working with other nations to increase natural gas supplies, replace oil with natural gas in power generation, and increase oil production in a manner that ensures safety. What’s unsaid here is that other nations have a vested interest in keeping such resources to themselves.

Developing Alternatives to Oil, Including Biofuels and Natural Gas

The President said that the U.S. is committed to finding better and smarter ways to use abundant energy resources.

  • Expanding biofuels markets and commercializing new biofuels technologies: It is claimed by the President (and the powerful farm lobby) that corn derived ethanol is already making a significant contribution to reducing U.S. oil dependence, but increasing market share will require overcoming infrastructure challenges – there are few alternative fuel pumps – and commercializing promising but this far wildly expensive cellulosic and advanced biofuels technologies.  To help achieve this goal, the Administration has set a goal of breaking ground on at least four “commercial-scale” cellulosic or advanced bio-refineries during the next two years.  Motor vehicles in the U.S. consume nearly 171 billion gallons of fuel each year, and average just over 17 miles per gallon.

Also promised (don’t hold your breath if history is a guide) the Administration will look for ways to “reform” our biofuels incentives that are currently costing taxpayers billions and arguably decreasing world stability via food riots (because using corn for ethanol means less food and higher prices) “to make sure they meet today’s biofuels challenges and save taxpayers money.” (See Taxpayer Subsidized Ethanol Caught in Partisan Budget Battle)

  • Encouraging responsible development practices for natural gas: The Administration says it is committed to the use of this domestic resource, but fracking chemicals used in its production are clearly causing environmental damage. The Administration is working with state regulators to offer technical assistance, and launching a new initiative to use experts in industry, the environmental community and states to develop recommendations for shale extraction practices that will “ensure the protection of public health and the environment.”  (See New U.S. Segment – Compressed Natural Gas Taxis?)

Cutting Costs at the Pump with More Efficient Cars and Trucks

The Administration has made limited progress here – after years of stonewalling by automakers and oil companies – by:

  • Setting new fuel economy standards: Standards for model years 2012-16 will raise average fuel economy to 35.5 miles per gallon by 2016, and save 1.8 billion barrels of oil over the lifetime of the vehicles covered. This July, the Administration will also finalize the first-ever national fuel economy and greenhouse gas emission standards for commercial trucks, vans and buses built in 2014 – 2018.  These standards will cut oil use and promote the development and deployment of alternative fuels, including natural gas.  (See Comments Closing Today on Proposed Bus and Truck Fuel Economy Standards. 500 million barrels of oil at stake?)

The Administration is also developing the next generation of fuel economy and greenhouse gas emission standards for passenger vehicles 2017-2025 and expects to announce the proposal in September 2011. However with the ascent of a Republican majority in the House this year attempts to do the same thing beyond 2016 might be made illegal because of oil company, refinery and power industry lobbying. Sound familiar?  (See House Bill Says Greenhouse Gases not Air Pollutants. Republican Attack on EPA Despite Supreme Court Ruling)

  • Paving the way for advanced vehicles: The President has set an ambitious goal of putting one million electric vehicles on the road by 2015 – and critics say this is sheer folly. The President’s FY 2012 Budget – currently the subject of vociferous Republican opposition – proposes a yet another $7,500 tax credit for people wealthy enough to buy these expensive, limited range vehicles, as well as grants for communities that encourage the adoption of electric vehicles, and funding for R&D to drive innovation in advanced battery technology.  At the same time, the President is calling on Congress to move forward with policies that can help unlock the promise of natural gas vehicles. Translation – more taxpayer subsidies. (See CAR Says Electric Vehicles Will Follow the Incentives at the Federal, State and Local Levels. Budget Battles Loom?)
  • Leading by Example with the Federal Fleet. The Federal government operates more than 600,000 fleet vehicles, and has already doubled the number of hybrid vehicles in the federal fleet.  The President is calling for administrative action directing agencies to ensure that by 2015, all new vehicles they purchase will be alternative-fuel vehicles, including hybrid and electric vehicles. Left unsaid is that the presidency could change hands in 2012 with unknown effect on the plan.

Innovating Our Way to a Clean Energy Future

  • Creating Markets for Clean Energy: To “move capital off of the sidelines and into the clean energy economy – creating jobs in the process, need to give businesses and entrepreneurs a clear signal that there will be a market for clean energy innovation,” Obama said. The Administration is committed to pursuing a Clean Energy Standard (CES), an ambitious but achievable goal of generating 80% of the Nation’s electricity from clean energy sources by 2035 – including renewable energy sources like wind, solar, biomass, and hydropower; nuclear power; efficient natural gas; and “clean” coal.
  • Cutting Energy Bills through More Efficient Homes and Buildings: U.S. homes, businesses and factories consume more than 70% of total energy in use.  The Administration is on track to weatherize 600,000 low-income homes through Recovery Act investments, and why remains “committed to a series of policies that increase efficiency across sectors – including a HOMESTAR program to help homeowners finance retrofits, a “Better Buildings Initiative” to make commercial facilities 20% more efficient by 2020.”
  • Staying on the Cutting Edge through Clean Energy Research and Development: Through what’s Advanced Research Project Agency-Energy (ARPA-E) program, taxpayers have invested in more than 100 projects in areas ranging from smart grid technology, to carbon capture, to battery technology for electric vehicles. Past deficit Budgets funded three “Energy Innovation Hubs” that explore building efficiency, fuel from sunlight, and nuclear reactor modeling and simulation.

The FY 2012 Budget request more than doubles funding for ARPA-E and doubles the number of Hubs to include new Hubs that will advance smart grid technology, critical materials research, as well as batteries and energy storage.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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