RealClearEnergy Articles
Why Unlocking More Oil and Gas is Good for Every American - And the Environment
What if gasoline prices doubled? In other words, if you had to pay $5.00 per gallon, how much would that hurt your life?
That’s what happened during the 1970s oil crisis. The Middle East-led Organization of Petroleum Exporting Countries (OPEC) weaponized oil by embargoing the United States twice. At that time, America lacked the capacity to make up for the lost oil. In 1978, the average price per gallon was around 60 cents. By 1981, it reached $1.35. The economy went into severe recession and millions lost their jobs.
But more recently, major unrest in the Middle East has not affected Americans as strongly as it used to.
On September 14, 2019, Iranian-backed militias attacked the world’s largest oil refinery, in Saudi Arabia. The attack cut the refinery’s capacity in half.
California’s Solar Panel Mandate Only Worsens the Housing Crisis
Diversifying our sources of energy provides a variety of benefits, such as greater reliability and lower carbon emissions. While a new mandate for residential solar panels in California represents a step towards diversification, the regulations shift the financial burden onto the state’s poorest residents. At a time when the Golden State is blighted by an affordable housing crisis, legislators should be focusing on making housing and energy more accessible for consumers.
Beginning January 1st 2020, all new homes in California under four stories will require rooftop PV (photovoltaic) solar panels to off-set their anticipated energy use. According to the state’s Energy Commission, the solar panels are expected to add approximately $9,500 to the cost of construction. Coupled with increased energy efficiency regulations, it is estimated that homes built under the new standards will use 53% less energy than their predecessors.
The problem with the new solar mandate is that it imposes a sizeable cost on an already unaffordable property market. The median property price in California is now just shy of $600,000, almost double the national median. Priced out of owning their own home, almost 50% of Californians rent their housing. Moreover, the state has the largest homeless population in the country–the vast majority of which do not have access to any type of temporary housing.
The solar panel mandate adds yet another cost to building more housing for both buyers and renters in California. While a $9,500 increase won’t dampen the dreams of the state’s millionaires, it will price-out the poorest in the state who are struggling to make ends meet. According to calculations by the National Association of Home Builders, each marginal $1,000 price increase cuts almost 10,000 Californians out of the homebuying market. The mandate will bar almost 100,000 Californians from buying a home and will put financial pressure on countless renters.
FERC’s MOPR Decision Bolsters US Energy Security
“What was apparent during this weather event was the continued reliance on baseload generation,” Bruce Walker, Assistant U.S. Energy Secretary, January 2018, after the Winter Bomb Cyclone
FERC’s recent minimum offer price rule (MOPR) decision was about preserving U.S. energy security and restoring competition to PJM Interconnection’s capacity market. That’s because the purpose of a capacity market is to ensure that customers have adequate generating capacity when required. This centers on a reliable and predictable reserve of electricity that becomes essential when demand spikes or a power plant suddenly goes offline. We often see this happen during a winter polar vortex or a summer heat wave.
Our competitive power markets have been compromised by huge out-of-market payments. The problem has been that subsidies for wind and solar power have eroded fair competition in the marketplace. These are intermittent sources of electricity usually only available some 30% of the time, even on good days. For example, wind has had a federal subsidy that pays farm owners a whopping $23 per megawatt-hour. “Subsidizing The Rich Through California's Solar Scheme.” This hides their true costs and creates a never-ending incentive to generate electricity even when it’s not needed – often causing wind and solar generators to get paid to not generate power instead of glutting the grid.
This has added an unpredictability to the market and pushed many baseload power plants offline in favor of less reliable sources that subsidies have made to look cheaper than they actually are. Many baseload coal units, for instance, have thus been forced to retire prematurely. With months of fuel on-site, coal’s on-demand reliability has proven to boost the resiliency of the grid during our most challenging times:
- “Coal saves the day during polar vortex,” Associated Press, February 2019
- “We could not have served customers without coal,” Andrew Ott, CEO, PJM Interconnection, January 2018
Low-Income Families Shouldn't Pay Higher Electric Bills so Utilities can Build EV Charging Stations
Electric vehicles (EV) may be the future of transportation in this country, in part because many Democratic Presidential candidates have made EVs a key part of their climate change platforms. But a huge hurdle to this bright future is the infrastructure needed to charge electric vehicles in an affordable and accessible way. To make this future a reality, many state governments have taken the wrong approach and allowed utility companies to charge all of their users an increased rate to pay for the utility to construct EV charging stations.
While this utility rate increase may be used to reach an admirable goal, should single mothers or the elderly on fixed incomes be forced to pay increased costs on their heating bills so EV owners have a more convenient way to charge their cars? This is a question Democratic candidates will have to answer to working-class voters across the country.
For good reasons, many Democratic candidates have made transitioning away from gas-powered vehicles a key priority to addressing climate change. Senators Cory Booker and Elizabeth Warren have pledged to require all new passenger vehicles to be zero-emission by 2030, and Mayor Pete Buttigieg set a similar goal with a deadline of 2035. Both Senator Sanders and tech entrepreneur Andrew Yang have proposed buyback programs to allow people to trade in fossil fuel based vehicles.
But if we want to beat Trump - who has rolled back vehicle emission standards and mocked EV use - in 2020, we must be thoughtful about how these policies will affect working-class voters, especially those who are seeing their heating bills rise to pay for EV infrastructure.
Exxon and Evidence 101
ExxonMobil has defeated the New York Attorney General's office after 4 years of harassment provoked by environmentalist groups. Activist environmental groups have, for some time, been rhetorically "indicting" ExxonMobil for contributing to climate change. Through spurious media stories, they persuaded former New York Attorney General, Schneiderman, joined by other Democratic state Attorneys General, to take up their cause.
The problem for all these attorney general is that states have no jurisdiction over climate change. Whatever one thinks about climate change, the climatic phenomena know no borders. If anything should be done about climate change, it is properly committed to the federal government.
Untroubled by these fundamental facts, current New York Attorney General Letitia James nevertheless charged ExxonMobil with fraud in misleading investors regarding the threat posed to the company by the costs allegedly associated with by climate change. New York State’s notoriously broad and vague Martin Act.
New York’s Martin Act, enacted prior to the 1933 federal Securities Act, empowers the New York Attorney General to prosecute “any device, scheme, or artifice to defraud or for obtaining money or property by means of any false pretense, representation, or promise.” This “blue sky” law was enacted in response to concerns over stockbrokers selling shares in shell companies that had no genuine operating business. Unlike other securities legislation, including federal laws, the Martin Act vests sole implementation and enforcement responsibilities with New York’s Attorney General, not with a regulatory agency.
A Better Word of the Year for 2019: Energy Poverty
It’s that time of year. As New Year’s Eve approaches, we look back on 2019 seeking nuggets of wisdom from twelve more months of the human experience. Unfortunately, the Word of the Year selections from two top dictionaries reveal just how misplaced this year’s priorities were.
The Oxford English Dictionary selected “climate crisis” as the term that “reflects the ethos, mood, or preoccupations of the passing year.” Striking a similarly dismal note, Dictionary.com’s selection was “existential.”
A better word of the year for 2019? Energy poverty.
While wealthy world leaders take luxurious trips to Madrid for the U.N. Climate Conference, flying across oceans in crisp business suits, one billion human beings are living in abject poverty without access to electricity. Still more lack reliable electricity.
Clean Up the Critical Rare Earth Supply Chain
In 1969, the Cuyahoga River caught fire, and the United States then took serious steps to reduce and clean up pollution caused by industry. The benefits of these steps are obvious: American air and water are cleaner; the American population is physically healthier. Looking abroad, though, it is obvious that significant sources of pollution were not eliminated so much as redistributed to countries with less-stringent environmental protections. American consumers, up to and including the Department of Defense, should consider how they can better acquire certain materials, notably rare earths, from cleaner and more reliable sources.
For most of the latter half of the 20th century, the United States was the leading producer of rare earths, mostly from the Mountain Pass mine in California. By the late 1990s, however, the mine was struggling to remain profitable against Chinese competition. In 2002, the mine was finally shut down. It has been opened sporadically since, but it will never again be the leader in global rare earth production.
Meanwhile, China heavily invested in rare earth mining and production. Whether or not Deng Xiaoping actually said, “there is oil in the Middle East; there is rare earth in China,” it is obvious that Chinese industry, with significant assistance from the Chinese government, has quite deliberately become the world’s dominant supplier. By 2010, China was estimated to control 95% of the global rare earth supply, with 100% dominance at certain points in the supply chain.
While Chinese leaders have profited, the people and land surrounding the rare earth mines have suffered. The harsh acids and radioactive byproducts of legacy rare earth mining processes have ripped through the local countryside and population. “It feels like hell on Earth,” said Tim Maughan in 2015. In July, the Los Angeles Times reported that conditions in some areas were so bad, with “gaping pits of contaminated wastewater” in farms and villages, that local villagers were refusing to send their children to school.
The Future of Electric Vehicles
130 Zero- and Low-Emissions Vehicle Options By 2025
“More than 40 plug-in hybrids and fully electric vehicles are already on the market in the US – like the Nissan LEAF– and our choices will continue to grow over the next few years, with hydrogen fuel cell vehicles like the Hyundai Nexo and the Toyota next-generation Mirai at the LA Auto Show. By 2025 there will be 130 electric vehicle (EV) models from which customers can choose.
These new zero-emission cars, crossovers, and SUVs are the result of enormous investments by auto manufacturers, and they’re investing $225 billion over the next five years to electrify their fleets. That’s an amount roughly equal to what all automakers combined spend globally on capital expenditures and research and development in a year. This is a serious venture with tangible results for consumers and the environment.
New entrants into the personal transportation sphere will also be building zero-emission pickup trucks, city buses, delivery vans, and performance hypercars for consumers and businesses who are demanding new technologies. Moving people and goods can and will be done with cleaner and more efficient technologies.
Madrid Climate Conference Ends in Failure
Al Gore Talks—Donald Trump Vindicated
#TimeForAction was the slogan at this year’s Madrid climate conference that ended Sunday. #TimeForTalk would be more accurate. The talking was endless: more than 70,000 hours were spent failing to define a “market instrument,” something that was meant to have been decided at last year’s conference in Katowice, Poland. Even though the Madrid conference ran over into the weekend, making it the longest ever, the issue will be kicked into next year’s talks, in Glasgow, Scotland.
“I am disappointed,” United Nations secretary general António Guterres tweeted. He should be. Next year, countries are to submit their second set of five-year, nationally determined climate plans under the Paris Agreement. The Madrid conference was to have engendered a spirit of enhanced climate ambition, a kind of competition of climate virtuousness. All it could manage was a statement expressing “serious concern” about the widening gap between the participating parties’ collective efforts and the ambitious emissions trajectory required to keep the rise in global temperatures below 2 degrees Celsius.
Talk doesn’t cut greenhouse-gas emissions. The UN Environment Programme describes the last ten years as a lost decade, in terms of curbing global emissions. “There has been no real change in the global emissions pathway in the last decade,” UNEP says. Global emissions have risen at an average of 1.5% a year over the last ten years, pausing in 2016 but resuming the upward trend in 2017. Emissions have now reached a new record, with no sign yet of a peak. The underlying driver is the strong economic growth of non-OECD economies, which have grown at more than 4.5% a year, compared with only 2% a year for OECD members.
The Business of Climate Change
MADRID
Saving the planet takes money, and lots of it. Money is both the theme and the subtext of the latest round of UN climate talks being held here—a vast river of cash flows through the UN climate process. Formally, the meeting is about nailing down one of the more obscure provisions of the Paris Agreement: Article 6, which provides for market-based instruments so that countries can trade their way out of their decarbonization commitments. Billions of cross-border dollars and transaction fees hang on the outcome.
With the negotiations concerning mind-paralyzing definitions of interest only to the most intrepid climate geeks, business and finance leaders could wind up taking center stage. When they first started coming to climate conferences, it was to observe and advise. Now it’s to show-and-tell their green virtue. “Momentum is there,” declared Paul Polman, the former Unilever CEO. “Climate change is the biggest business opportunity of all time.” We’re close to several policy tipping points, he suggested.
The EU is about to approve a massive Green New Deal. Michael Bloomberg’s Task Force on Climate-related Financial Disclosures (TFCD) encourages companies to make voluntary climate-related risk disclosures. Draft EU regulations, meantime, could pave the way for mandatory climate disclosures that would force investment managers to justify their investments against climate and environmental benchmarks. Businesses are transitioning to “net zero,” Polman claims—meaning zero carbon emissions. They’re so far advanced that at this point, it’s only governments holding them back.
Alex Epstein’s Clear Thinking on Climate and Energy
“For many decades the human species has been at war with the planet,” UN Secretary-General António Guterres declared at the start of the Madrid climate conference last week. “And the planet is fighting back.”
Alex Epstein, the youthful pro-fossil-fuel campaigner and author of The Moral Case for Fossil Fuels, disagrees. What Guterres sees as humanity’s war on nature, Epstein regards as our successful effort to protect ourselves from raw, brutal nature—from famine, disease, natural disasters, and shortened lifespans, an effort that has, in the modern age, provided human beings with a hitherto undreamt-of quality of life. And it is energy—overwhelmingly from coal, oil, and natural gas, powering our machines and technologies—that has given rise to this unprecedented human flourishing.
Epstein’s human-centered optimism sets him apart from both sides of the climate and energy debate. As he points out in a recent talk at the University of Texas at Austin, if there is a climate crisis, it’s not showing up in the numbers that matter most. Climate-related deaths are way down from earlier periods in history. Several years during the 1930s, for example, saw more than 3 million climate-related deaths—equivalent to 10 million if adjusted for today’s population. By contrast, 2014 saw only 30,000 climate-related deaths, and 2018 just 5,625.
A few years ago, when Senator Barbara Boxer angrily questioned what Epstein was doing at a hearing of the Senate environment and public works committee, Epstein responded: “To teach you how to think more clearly.” Clear thinking is vital, given current American public opinion on climate and energy. A November Pew Center survey finds 67% of respondents saying that the federal government is not doing enough to reduce the effects of global warming. Similarly, an AP-NORC Center survey conducted last year found 71% of Americans saying climate change is a reality. Nearly half say that the science on climate change is more convincing than five years earlier.
Let’s Be Smart About America’s Energy Potential
The United States is at the center of a global energy revolution. Driven by advances in extracting oil and gas from shale rock in Texas, North Dakota, and New Mexico, America is now the world’s largest oil producer. By 2025, it will likely be the biggest energy exporter, surpassing Saudi Arabia and Russia. This energy revolution has fueled economic growth, created thousands of high-paying jobs, and narrowed the trade deficit. It’s no exaggeration to say America today is closer to energy independence than at any point since the 1950s.
Yet this revolution is at risk of stalling. Despite a 200% increase in US oil production and a 40% jump in natural gas output since 2010, construction of the pipelines needed to move products to consumers has lagged. While new projects are coming online at a record rate, opposition to key pipelines threatens to leave the U.S. energy market fragmented. For consumers in New York, Massachusetts, and other states that continue to block new pipeline construction, the result is higher energy prices, less reliable power grids, and reduced cost-competitiveness for local industries relative to other states.
Opponents of pipeline projects like the Williams pipeline in New York and others elsewhere (Keystone XL, Dakota Access, Access Northeast, etc) are often too quick to dismiss the economic, social, and environmental benefits of pipelines and the opportunity costs of not building them. Earlier this year, the Empire State used the Clean Water Act to shut down a nearly $1 billion natural gas pipeline that would have connected the state’s power plants with gas-rich fields in Pennsylvania and Ohio, and reduced the average price of electricity in New York City which currently stands at 21.0 cents per kWh, 54 percent higher than the national average (13.6 cents per kWh).
This is an clear abuse of Section 401 of the Clean Water Act which allows a state to block the construction of a pipeline by refusing to grant the project a water quality permit. I used to oversee my state’s water quality permitting program, and I am a fierce defender of state’s rights. But I’m also a fierce defender of standards that are objective, and question the use of the Clean Water Act when it is invoked in an arbitrary manner that does nothing to protect the environment. Fortunately the Trump Administration has proposed a rule change will streamline the regulatory process and effectively limit a state’s ability to block projects at the last minute.
Rethinking Conventional Energy Investment Wisdom
America’s shale energy revolution, which moved the United States in a decade’s time from an outlook of increasing energy scarcity and dependence to one of affordability and abundance, has been transformational for global energy production markets.
Historically, investment in oil and gas production, pipelines, and the associated petrochemical manufacturing facilities has centered around Houston and the Gulf region. For good reason – America’s oil output more than doubled in just a decade thanks to a combination of technical advances and aggressive investments into layers of oil-rich shale that have transformed the Permian, once considered a worn-out patch, into the world’s most productive oil field.
But what makes American shale development a “revolution” is the way in which it challenges us to rethink conventional investment wisdom across the energy sector.
Stop Blurring the Line Between Climate Science and Climate Activism
In late October, yet another Congressional committee looked at climate change. Unfortunately for those of us who want serious solutions, the focus was only on pointing fingers at industry or giving oxygen to ambitious proposals such as the so-called Green New Deal. What is needed is more attention to practical ways to address climate change. Ultimately, practical solutions will come from science, technology and engineering.
Instead, the October 23 hearing before a House Oversight subcommittee, intended to explore the burdens from the effects of climate change on the economically disadvantaged and minority communities, focused elsewhere. Much of the session pushed the accusation that ExxonMobil encouraged public skepticism about climate change and played down its own scientists’ predictions that fossil fuels use would cause warming temperatures. Over the last four years, the company has debunked those claims with thousands of documents but partisans and activists are undeterred.
The star witness was Naomi Oreskes, one of the energy industry’s most tenacious antagonists. Oreskes, a professor of the history of science at Harvard, earned a doctorate in mining geology from Stanford. These credentials aside, she is more activist than scientist. Peers have discredited more than one of her analyses.
In a 2017 paper she co-authored with Geoffrey Supran, “Assessing ExxonMobil's Climate Change Communications (1977–2014),” she accused ExxonMobil of shelving science for a disinformation campaign. Some saw the paper as flawed in its methodology. Professor Kimberly Neuendorf, a research scientist and expert in content analysis whose work was cited in the paper, later analyzed the methodology and conclusions and found so many flaws that she pronounced the content analysis, “..unreliable, invalid, biased, not generalizable, and not replicable.”
U.S. LNG Can Punish Russian Meddling
In reaction to the fear that Russia or other foreign governments will interfere in future elections, bipartisan groups of senators have proposed two measures to sanction, punish and weaken Russia and any future culprits. The bills, called DETER and DASKA, may be based on the right intentions, but they are the wrong steps.
Rather than implement sanctions that will have unintended consequences, including negative impacts on our own businesses, we should use the strength of our own industry to strike at Russia’s economy. In particular, we can and should use the power of our own hydrocarbon industries to exert our influence.
Russia’s economy is already weaker than most Americans probably expect. The International Monetary Fund estimates that Russia will have the world’s eleventh largest GDP this year, at $1.6 trillion. For comparison, our GDP, the largest in the world, is 13 times bigger even though our population is only a little more than twice the size of theirs. In short, our economy dwarfs the Russian economy. We can exert the power of that economy without sanctions.
In particular, Russia is reliant on its oil and gas industry to maintain its economy. According to the Federal Customs Service, in 2018, nearly 64% of Russia’s export revenue came from fossil fuels, including oil and gas. Russia’s Finance Ministry reported that in 2018, about 40% of Russia’s federal budget came from oil and gas revenues. Sales from Gazprom, the Russian natural gas company that supplies 37% of the European gas market, make up about 5% of Russia’s $1.6 trillion GDP.
As California Burns; Valuable Lessons from Hurricane Katrina
As I watch parts of California burn, I am reminded of Hurricane Katrina, notably the despair and destruction that characterized much of New Orleans immediately post disaster. Years later, through a variety of rebuilding efforts, we were able to use Katrina as a catalyst to improve many aspects of the city, especially elements of our outdated and inadequate infrastructure.
Now, as California endures escalating wildfires and prolonged blackouts, the state must take a page out of the Katrina playbook and utilize this pivotal moment to change its approach to infrastructure investment. Namely, the state’s electrical grid, which is the source of many of these fires.
According to a 2014 Technical Report for the Dept of Energy, climate change will increase disruptions of infrastructure services in sensitive areas already strained by ageing infrastructure, resulting in “cascading…system failures.” In California the wildfires are charring both the earth and the energy grid.
The Climate Leadership Council’s Bipartisan Solution
If you only casually follow the climate debate, you could be left with the impression that there are two camps sitting at opposite poles. You’ll read that on the right are “climate deniers” refusing to accept the conclusions of scientists and, on the left, “socialists” aiming to reorder our economic system. Through this lens, we have little hope of ever building enough consensus to solve the climate problem.
Fortunately, the vast majority of American voters represent a third camp—the camp that actually wants to get something done. Some 80% of voters now say it is important for a national climate policy to be bipartisan, according to a recent poll from Luntz Global.
This yearning for bipartisanship--which holds across all categories of voters--shouldn’t come as a surprise. With the rollback of President Obama’s Clean Power Plan and other climate regulations by the Trump Administration, the American public has witnessed how fragile climate policy can be when it’s only supported by one party. The clear lesson: any durable solution must have buy-in across the political spectrum.
On a more fundamental level, though, voters may intuitively believe that on climate, both parties have good (and bad) ideas. Go too far in one direction, and the environment suffers; too far in the other, and the economy falters. Voters want their leaders to work together to find middle ground.
How To Trigger A Global Recession In One Easy Step: Ban Fracking
In a time long ago, seven years this month, President Obama and candidate Mitt Romney sparred in their second debate over the extent to which Obama deserved credit for increasing America’s oil and natural gas production. Three years later President Obama would, without fanfare, sign epic legislation reversing a 40-year-old petroleum export ban.
The United States used to be the world’s biggest importer of oil. Now, for the first time since 1949, the U.S. is a net exporter of petroleum thanks to fracking technology. America’s new role in global energy markets has already blunted others using energy as a geopolitical weapon.
So, what would happen if America’s next president were to make good on a promise to ban fracking? We know the answer.
Enthusiasms for alternatives aside, solar and wind combined supply less than 2 percent of world energy, while 54 percent still comes from oil and natural gas. Many analysts have pointed to the domestic jobs and revenues that will be lost were America to shut down fracking. But that’s the least of it. Far more significant: removing that quantity of fuel from world markets would trigger the biggest energy price spike in history, and a global recession.
'Affordable and Reliable’ Energy Makes Life Possible
In the United States, we have an abundance of affordable and reliable energy. But some of us take having access to energy for granted. We expect to plug in and charge our mobile devices, flip a light switch and click on the television. And without fail, it all works. It’s not until our power—and our way of life—is interrupted that most of us think about energy and where it comes from.
California’s recent blackout revealed that having reliable electricity is an economic privilege, and interviews from across the state suggest those less affluent continue to have more losses and were disproportionately forced off the grid.
As it is, Californians already pay among the highest rates in the U.S. for their power, and unfortunately these costs are projected to rise even more. These increases often have a higher burden on low-income households that already struggle to keep up with rising cost, leading many down the path to energy poverty. The issue plagues not only California residents, but many more across the country including in Pennsylvania, where utility rates for customers are much higher than neighboring states. In Georgia a study finds energy consumption among the highest in America, and in New Mexico a new state law will increase cost to consumers, with the most negative impacts felt by lower income families who spend a larger share of their monthly income on energy.
The irony is that each state listed has an abundance of natural resources that can be accessed. But lawmakers, caving to environmentalist and special interest groups that don’t speak for the poor, continue to put forth expensive policy ideas like the Green New Deal that promote false hope and unrealistic outcomes for those who already grapple each month to make ends meet.
