ENERGY SECURITY, ECONOMIC GROWTH AND REDUCED GREENHOUSE GAS EMISSIONS
M. Edward Morrison, Ph.D, P.E.
July 7, 2008 - The United States must continue to move toward energy independence for reasons of economic and military security. America can reduce our dependence on imported oil and petroleum products by 50% and reduce carbon dioxide emissions (one of the green house gases) by: (1) staying the course on mileage efficiency standards for automobiles, SUV’s and small trucks, (2) using about one to two million barrels per day (bpd) of ethanol in gasoline, (3) producing two million bpd of clean fuels from coal in the western USA, (4) increasing oil production not now allowed by law from conventional wells, off-shore and shale oil in the western USA by two million bpd, (5) reducing coal fired share of electric generating capacity from 49% to 42%, and (6) increasing nuclear electric generating capacity share from 19 to 26% over the next fifteen years. This plan will essentially eliminate the need for importing oil or products from outside North America. Gasoline, diesel, heating oil and jet fuel price increases should moderate. Professional and highly paid skilled job opportunities will grow, providing more funds for the Federal and State Budgets, Social Security, and Medicare. Finally, the USA balance of payments will be reduced by over $350 billion per year.
President Bush and Congress enacted an energy bill in 2005, which has had a positive influence on the supply of refined petroleum products (gasoline, diesel, jet, heating oil, etc.). This bill included accelerated depreciation to encourage expansion of refinery capacity. United States oil refiners have completed or announced expansions to ensure adequate capacity to supply products to the USA market. Currently oil refiners operate their plants at 85% of capacity to meet product demand. Pipeline suppliers are increasing capacity to transport synthetic crude oil from Canadian oil sands production to US refining facilities. USA refining facilities are undergoing large investments to ensure their capability to produce clean fuels from this synthetic crude oil meeting all US environmental standards. The energy bill of 2005 provided incentives for recovery of oil from depleted wells using carbon dioxide injection. The use of carbon dioxide injection and investment in CO2 pipelines have been growing rapidly. These policies have moved the USA toward the ultimate goal of reducing our dependence on oil and refined products from potentially hostile nations.
About 20 million bpd of liquid products are consumed in the USA. Gasoline usage averages about 9 million bpd and may be reduced to about 7 million bpd by 2020 through energy efficiency standards for automobiles, SUV’s and small trucks required by the energy bill of 2007 depending on the growth or decrease in the use of automobiles and impact of public transportation. Diesel (a part of the distillate supply) and jet fuel use of about 5 million bpd is expected to increase, so the net reduction in fuel use through efficiency improvements may be on the order of one million bpd. Five million bpd of product imports, other hydrocarbons and ethanol currently make up the balance of the supply of USA liquid products. This bill also requires the increasing use of ethanol in gasoline over the next fifteen years. Currently about 400,000 bpd of ethanol is used in gasoline and is projected to be 2.3 million bpd by 2022. Over 1.3 million bpd of ethanol are to be produced from non-corn raw materials.
Crude (9.5 million bpd) and product imports (3.5 million bpd) into the USA are currently about 13 million bpd compared to 20 million bpd of consumption. Since product requirements will be reduced by increasing efficiency for automobiles, SUV’s and light trucks and biofuels, refinery utilization would drop from 85% to about 75%; if product imports remain constant. This would require refinery capacity to be shut-down over the next few years. In addition, large export refineries in the Middle East and Asia are being built to export products. Undoubtedly some of these products will find their way into the USA making things worse for United States oil refiners and making the USA dependent on imported refined products, an even worse security situation than we now face with mostly imported crude oil.
A target of at least two million bpd of products should be set for coal to liquids production in Wyoming and Montana over the next fifteen years, where large deposits of coal are currently mined. Conversion of coal to liquid (CTL) products has been commercially practiced in South Africa for over thirty years. Coal is reacted with water and oxygen (from air) to form liquid petroleum products. Product quality can be equivalent to gasoline, diesel and jet fuels currently used in the USA market. Production facilities will meet all existing environmental regulations. Some of the excess refining capacity expected over the next several years can be used in the production of gasoline, diesel and jet fuels from coal liquids. This would further reduce imported crude and products and increase refinery utilization to about 85%.
Electricity generation in the USA is currently supplied 49% by coal and 19% by nuclear energy. CTL plants generate carbon dioxide as a by-product, when gasoline, diesel and jet fuels are produced. By reducing coal electrical generation to 42%, increasing nuclear to 26% and utilizing the coal from the reduced electrical generation to produce two million bpd of CTL products, there is no overall increase in carbon dioxide emissions. Carbon dioxide emissions will be reduced through this plan by improved mileage efficiency requirements for automobiles, SUV’s and light trucks and other developing alternative energy technologies, such as solar, wind and biofuels. Total investment for the CTL and nuclear generating facilities is about $500 billion for the oil refining, pipeline, coal and power generation companies over the next fifteen years.
A major worldwide recession could force crude oil and product prices lower. In the early 1980’s, high interest rates, excess crude inventories and slowing world economies resulted in sharply lower crude oil prices. Consequently, CTL operators may need to have an agreement with the Federal Government to price product into the fuels market, which will ensure an adequate return on plant investment. CTL plants are currently economic at product prices of about $2.00 per gallon, excluding taxes.
In summary, this plan will reduce the USA’s dependence on imported oil and petroleum products by 50%. This plan will essentially eliminate the need for importing oil or products from outside North America. Price increases for gasoline, diesel and jet fuels will moderate. Carbon dioxide emissions will be reduced. A total investment in CTL and power plants of $500 billion and an increase of at least $300 billion for additional oil production investment over the next fifteen years will provide many new professional and highly paid skilled jobs with concomitant increases in federal and state revenue (income, social security and medicare taxes), bring the USA closer to energy independence with commercial processes and allow time for new energy technologies to become a reality. Investments will be made by the oil exploration & production, oil refining, pipeline, coal and power generation companies. Payments for imported oil and products will be reduced by $350 billion per year. The President and Congress should work with the energy sector and other groups to enact appropriate legislation to make this plan become a reality.