Spin Doctors on U.S. Oil Production, Costs, and Energy Policy.

Spin Doctor: A person (such as a "Talking Head") who tries to control the way something is described to influence public opinion in a way that helps their side and hurts (often demonizing) differing views. "Spinning" always contains some elements of truth to enhance credibility, but conveniently overlooks/dismisses any facts not helpful in forming the desired public perception.

Current Status of U.S. Foreign Oil Dependency: Over the past 7 years, the amount of oil supplied from foreign sources has decreased from an all-time record peak of 60% in 2005 to currently ~40%. While lower oil consumption (resulting from economic recession, greater auto efficiency) has played a part, this amazing (and hopefully sustainable) achievement has been primarily the result of technology advancements in oil extraction.

Per the U.S. Energy Information Agency's (EIA) long-term forecast, foreign oil use is expected to decline even further (with an estimated 32% from oil imports by 2040). Through the extensive use of fracking and horizontal drilling, almost all of this domestic growth in oil and natural gas production is occurring in six U.S. regions:

History of U.S. Oil Production & Consumption:

Increased U.S. Oil Production Growth Regions

What Spin Doctors Don't Tell Us On U.S. Foreign Oil Dependency: In this renaissance of U.S. oil production, one often hears the sound-bites of "Energy Independence", "Freedom from Mid-Eastern Oil", "Canada is now America's #1 Oil Importer". The problem with these now generally held public perceptions is that they don't exactly tell the full story.

While it is correct that Canada is now the "single country" largest exporter of oil to the U.S., the Mid-east dominated oil cartel of OPEC (which includes a very oil-hostile Venezuela) remains America's largest supplier of foreign oil.

Putting the above chart into a global perspective, OPEC oil consumed in the U.S. is more (or about equal in the case of Japan) than the "total" amount of oil consumed in other leading industrialized nations:

U.S. OPEC Oil Imports Versus
Total Oil Consumed in Other Nations Understanding the massive U.S. appetite for oil is pretty simple -- the American "love affair" with cars. Compared to the rest of the world, the U.S. remains hopelessly addicted to gasoline. Americans (per capita/person) consume more than 300 gallons of gasoline per year, which is by far the highest among 128 countries. That's more than three Germans, or ~7 people in France.

Use of Cherry-Picking Ideological Arguments: Perhaps the most hypocritical example of selective cherry-picking by "Spin Doctors" is the commonly used "sound-bite": "Free Markets should determine energy winners and losers, not big-government".

The following graph (using EIA data) breaks out the individual components of current pump gas prices -- where U.S. consumers currently "have no choice" but to pay 37¢ per gallon to OPEC for crude oil costs.1 From an ideological argument perspective, this is the equivalent of a mandate that 16% of all gasoline be blended with OPEC oil. 2

Components of Gas Pump Price(U.S. average of $3.34 per gallon @ November 2013)

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1 69% of the current pump price of gasoline is crude oil costs ($2.30 per gallon). 40% of all crude oil is from foreign sources (92¢). 40% of foreign oil is from OPEC (37¢). 2 40% of all oil consumed is from foreign sources and 40% of foreign oil is from OPEC (40% times 40% equals 16%.)

OPEC is anything but "free market trade" -- a cartel that manipulates markets, restricts output and fixes prices that's had a devastating effect on the U.S. economy. But OPEC's reach is beyond just its Middle-East members, where Venezuela has nationalized and continues to seize U.S. Oil Companies' assets.

What The Spin Doctors Don't Tell Us On Economics: The message of "Drill, Baby, Drill" has mass public perception appeal of basic supply/demand economics that even a caveman can understand. It's just common sense that if U.S. oil production increases (by removing "big-government" barriers) that gasoline prices at the pump will decrease -- Right? Well, not exactly.

An inconvenient fact is that extracting oil using fracking and horizontal drilling technology has dramatically higher costs than in typical Middle East oilfields. According to Oil Analysts, the average cost of new oil production from U.S. tight oil and shale gas regions is ~$70 a barrel, with marginal costs (the last barrels produced) as high as $114 a barrel in 2012.^{1, 2, 3}

Conversely, for conventional oil output in the Middle East, average production costs are just over $20 a barrel , with marginal costs at ~$30 per barrel.

World-Wide Marginal Production Cost of Oil

While there are numerous economic benefits in developing domestic energy resources (e.g., job creation, economic development, reducing the massive U.S. Trade Deficit) -- expectations of significantly lowering the "current" price of crude oil isn't one of them. Simply stated, because of the high extraction costs of advanced technologies, increased U.S. oil production is totally dependent on maintaining high oil market prices.

In order to achieve claims made by "Spin Doctors" for a return to $2 gasoline by increasing U.S. oil production would require a precipitous price drop to ~$40 a barrel (bbl) -- a market price significantly below either the average (~$70/bbl) or marginal (~$110/bbl) costs to extract oil using fracking/horizontal and deep-sea drilling.

We Need to have a "Real" Energy Policy Debate: In order to have a meaningful dialog everyone needs to pause, take a deep breath, and move away from the extreme polarization that partisan "Spin Doctors" create. Energy policy shouldn't be limited to "Red State vs. Blue State" tunnel vision on any one specific "hot button" issue (ranging from Conservatives mistrust of big government to Environmentalists' adamancy‎ on Climate Change).

It's about addressing a myriad of problems and trying to solve them -- compromising and finding common interests in a bigger picture rather than focusing on things that divide us.

Overlapping Issues with Energy Policies:

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Additional News Stories:
In U.S. Public Opinion Polls, Saudi Arabia is viewed very unfavorably.
Record Growth in U.S. Oil Production.
Global Oil Prices and Energy Security
Fact Check on Keystone Pipeline Claims

Happy Dependence Day to Mid-East Oil and China!

This past Independence Day, a mostly overlooked news story was China becoming the largest benefactor of American blood and treasure spent in Iraq (~5,000 soldier deaths and $1.9 trillion) -- as China is now Iraq's #1 oil customer (purchasing ~50% of Iraqi oil with expectations that this will increase).

But this story line isn't limited to Iraq, as China is now also the #1 oil customer of many oil exporting countries in the Persian Gulf -- benefiting from U.S. military protection of the Region's oil supplies (with an estimated U.S. cost of ~$8 trillion during the past 3 decades -- about $27,000 per each U.S. Citizen).

Since Chinese Oil Companies are controlled by their central Government, this shouldn't come as a shock. Unlike U.S. and other Western Oil Companies, China is not driven by shareholder profit but national interest to fuel their economic growth. Simply stated, China is willing to pay more to develop these oil resources than western multi-national corporations (e.g., Exxon, Shell, BP, etc.). Even by paying more for oil, China will still retain a competitive advantage over most U.S. manufactured goods as a result of their cheaper labor, currency devaluation (Yen), and lax environmental regulation (including carbon dioxide).

The below graphic from the U.S. Energy Information Agency is a timeline depiction of Chinese oil consumption that has been needed to fuel their staggering economic growth during the past +30 years:

As Americans now prepare for the likelihood of even more war in the Middle-East, the footprint of oil re-surfaces yet again -- with recent news reports that Iran (through Russia) has been funneling billions of dollars to the dictator Assad to develop oil resources in Syria.

Starting with the funding for the 9/11 World Trade Center attack (Saudi Arabian sources) to the current deadly civil war in Syria -- a common denominator just always seems to be oil money that supports international terrorism and wars for political/religious control in the Region.

This Labor Day as the U.S. prepares for war, Americans should remember that every time we fill up our gas tanks: Through the hard earned money of our labor -- we are supporting this unending madness and opportunism for China to exploit.

While U.S. foreign oil dependence has significantly decreased in the last few years due to technology advancements in hydraulic fracturing (where its long-term impact on water resources is uncertain), we should not lose sight that the U.S. still imports a tremendous amount of oil -- much of which comes from volatile OPEC countries.

To put this into context, U.S. oil imports from OPEC in 2012 approximately equaled or exceeded the "total oil consumption" of other leading industrialized countries:

U.S. OPEC Imports Versus Total Oil
Consumption of Major Countries This Labor Day as we celebrate the "American Spirit" of hard work, creativity, opportunity, and resolve, it should be recognized that ethanol is a perfect example of this "Spirit" -- and just how far we've come in such a short period of about 10 years. Unfortunately, many politicians today want us to go back to the "Good Old Days" of dirtier fuel and greater fossil fuel dependence by rescinding Renewable Fuel Standards. These politicians would also abandon the vision to dramatically increase auto fuel economy (54.5 MPG) through the development of highly efficient, smaller turbo-boost engines (requiring the high octane found in ethanol).

The next time you hear an opportunist politician rail about "Big Government forcing ethanol down consumer's throats" -- think about which picture of values you want to support when you fill up your gas tank.

Returning to the Roots of Ethanol's Importance

Ethanol Protects Our Most Vulnerable By Providing Cleaner Gasoline.

Critical in forming public opinion on any issue is the use of paradigms -- an explanation "model/view" of how something works. With paradigms it often doesn't matter if the underlying facts/logic are incorrect or not objective (cherry-picked), its only what the Public perceives as correct or true that matters.

With many public perception paradigms there is usually a strong underlying cause as to why certain beliefs can often be so easily accepted -- such as mistrust by Conservatives in "big government" taking away individual freedoms (spawning conspiracy theories). Two current examples of this affecting public health policy are efforts to eliminate fluoride in drinking water (for dental health) and vaccinations (for children's health).

In today's world of mass communication (e.g., the Internet, battle of viewer ratings, etc.), forming public paradigms can be easily accomplished by the use of simple "sound bites" -- where something can be quickly "demonized".

An example of a highly effective quick sound bite demonization is Sarah Palin's use of fruit fly research to define a paradigm of ubiquitous wasteful Government spending (even though this science research is critical in finding cures for genetic diseases in humans, such as childhood autism).

(Click for the sound bite)

In forming public perception paradigms, a highly effective technique is to "cherry pick" aspects of an issue in order to "frame" the public debate -- forcing opponents to always be on the defensive to specific charges/claims. In the current "War on Ethanol" this is exactly what's happening as ethanol supporters constantly find themselves fighting a public perception of another highly subsidized, big-government, and wasteful program.

Ethanol Supporters must recognize that a strategy limited to "only" refuting claims point-by-point (e.g., engine damage, diverting crops for fuel use resulting in high food costs and world hunger, etc.) is not likely to be successful -- something more is needed.

In the classic movie comedy "My Cousin Vinny", a New York City lawyer (Vinny, played by Joe Pesci) defends his cousin on false murder charges in the State of Alabama (a pretty tough place for a Brooklyn lawyer). In one funny scene, Vinny objects to the Prosecutor's question, where the Judge responds to him: "That is a lucid, intelligent, well thought out objection -- OVERRULED!"

Often, even the best of well thought-out and factual arguments can not overcome ingrained prejudices and biases -- especially in today's Red State versus Blue State culture wars.

In the "Court of Public Opinion" on ethanol what is needed is a "Paradigm Shift" to change the playing field. A good starting place is to return to the original public health benefits roots of why ethanol use was needed in the first place:

Octane: Octane is an additive needed to reduce the reaction of unblended gasoline to combust/ignite under pressure in a car's engine cylinder (called anti-knock). Without proper octane levels in gas, engine performance levels will decrease and will cause engine damage. For decades, the principle source of octane was lead, which according to every World Health Organization was resulting in severe health problems (e.g., central nervous system damage, neurological development in children, fertility problems, high blood pressure, kidney damage).

Ethanol has a high octane rating (~113), where the majority of gasoline today is blended with ~10% ethanol (called E-10) to achieve the needed regular grade octane rating level of 87 for proper engine performance:

Gas Component:	Octane Rating	Percentage Blend	Weighted Octane
Ethanol (E-100)	113	10%	11.3
Unblended Gas (E-0)	84	90%	75.7
Gas @ Pump (E-10)	87	100%	87

Cleaner Air from Less Smog: If you live in a metropolitan area, have you noticed that there is less smog air pollution (severely impacting lung functions of children and the elderly) than a decade ago? This was accomplished by adding an oxygenate additive in gasoline, making it cleaner burning. First an oxygenate called MTBE (derived from fossil fuels) was used, but was found to be probably carcinogenic (cancer causing). Ethanol has replaced the use of MTBE.

Health Benefits Vs. Costs: While the health benefits (e.g., reducing rates of cancer, child autism, asthma, etc.) of cleaner gasoline from ethanol blending are immeasurable, what is the cost that consumers have to pay for these benefits by using ethanol? To answer this question, we need to look to non-ethanol alternatives for (1) oxygenates (ethers) and (2) octane additives (alkylates).

A first step is to compare the wholesale commodity price of un-blended gasoline (E-0) versus ethanol (E-100) -- where currently, ethanol is trading at a "discount" of $0.92 per gallon (yes, you are reading this right, a discount not a premium).

Commodity Price of Gas Versus Ethanol
(per gallon) Removing ethanol as the source of a needed oxygenate and octane additives would eliminate this "discount", resulting in an ~9¢ per gallon price increase at the pump (e.g., price difference of $0.92 per gallon times the typical 10% blending ratio). But in doing this, the ethanol-free gas would then have a performance problem as it only contains 84 octane (versus minimum requirements of 87).

To estimate what the additional costs would be to make up for this short-fall in octane level, we can look to current pump prices where the higher octane levels in mid and premium grades are achieved by non-ethanol additives (alkylates, aromatics and reformates).

Comparison of Average U.S. Gas Prices by Octane Grade

	Regular (87 Octane)	Mid-Grade (89 Octane)	Premium (91 Octane)
Pump Price Per Gallon	$3.57	$3.74	$3.90
Octane Level Vs. Regular	-	+2	+4
Increased Cost Over Regular	-	17¢	33¢

Using the above market data, eliminating ethanol blending in gasoline (for oxygenate and octane requirements) would result in a pump price increase of ~34¢ per gallon:

Consumer Cost Impact:	Increase in Price per Gallon:
Elimination of Ethanol Discount	9¢
Non-Ethanol Octane Additives	25¢ (1)
Pump Price Increase	34¢

(1) Based on the above pump premiums for mid and premium grades, for each incremental increase in octane level of 1, the increased price is ~8¢.

Thus, contradictory to the paradigm presented by opponents of ethanol (e.g., recent actions by the State of Florida to eliminate blending requirements), ethanol use "reduces" the cost to consumers in achieving health objectives versus other alternatives.

Conclusion: In a culture of increasing ideological divides and short memories (what have you done for me lately?), the ethanol story of health benefits (especially for children) must be re-emphasized and re-told -- and that its just not another "big government" wasteful program shoved down the public's throat.

Also the current myopic view of the environmental community in criticizing ethanol should be taken to task on these health issues. What do they propose to use for the massive octane and oxygenate additives needed to cleanly sustain U.S. transportation?

Only by achieving a fundamental "paradigm shift" in attitudes will the general public even listen to the "point-by-point" argument rebuttals being made in support of ethanol.

References:
Reuters News Article Analysis of Ethanol
Life Without Ethanol
How Stuff Works: How Gasoline Works

Why We Need U.S. Produced Ethanol (Part 1)

Currently a "War on Ethanol" is being conducted primarily by Tea Party Republicans to "Get big government out of America's gas tanks". Examples include: U.S. Rep. Goodlatte (R-Va.) to completely eliminate the National Renewable Fuel Standard, and State Representative Matt Gaetz (R) to eliminate ~10% ethanol blending with gasoline in Florida. Recently, a FOX TV station in Orlando reported that they asked people on the street, and found very little support for ethanol use in Florida.

Really, nobody can make a lucid argument anymore why U.S. produced ethanol is important? Are Fox News and Rush Limbaugh types right that its all about the Green, Global Warming Agenda by Obama to create a New World Order of Socialism? Are ethanol requirements all about Big Government trying to take away personal liberties? Is it about Government intervention into "Free Market Capitalism" to pick winners and losers?

Lets see if we can help out a little. Does anyone vaguely remember something that happened on 9/11/2001, where 15 of the 19 Terrorists were from (and funded by) Saudi Arabia? Anyone?, Anyone?

How about Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad who are in a strategic anti-American alliance with the economic objective to create instability resulting in high oil prices. As Chavez said in a recent speech in Iran -- "If the U.S. empire succeeds in consolidating its dominance, then humankind has no future. Therefore, we have to save humankind and put an end to the U.S. empire".

What is so disconcerting is just how quickly America has lost focus on why National (enacted in 2005) and Florida (enacted in 2008) Renewable Fuel Standards were originally initiated in the first place. Current news headlines of Iran threatening to block oil shipments through through the Strait of Hormuz and the civil unrest in Nigeria should be a wake up call.

One must wonder how Tea Party types would have responded to a question of whether the U.S. should continue trade with Germany and Japan (funding their economies for their war effort) during World War II.

Funding Terrorism Through Our Gas Purchases Isn't Supporting U.S. Troops.	In presenting why U.S. ethanol production is important, maybe the arguments just have not been entertaining as much as say, Rush Limbaugh. For those who need to be entertained, does the Jon Stewart (Daily Show) clip help on why oil purchases from places like Venezuela and Saudi Arabia is not in America's best interest?

Cold Hard Facts: We used to say "You're entitled to your own opinion, but not to your own facts". Listening to Conservative Media, one would conclude that U.S. ethanol policies (only enacted in 2005) have been an abysmal failure.

Let's spend a moment to look into some of the numbers of foreign oil imports and U.S. ethanol production. According to the U.S. Department of Energy (DOE), in 2010 the U.S. imported about 63% of its crude oil requirements (the type of oil used to produce gasoline). Also according to the DOE, combined oil imports from Saudi Arabia and Venezuela would represent the single largest source of U.S. imported oil.

Again using U.S. Department of Energy information, the below chart compares the gasoline equivalent of U.S. produced ethanol to gasoline produced from Saudi Arabia, Nigeria, and Venezuela oil imports. Although many Republicans would disagree, the below chart sure looks encouraging as to efforts in developing domestic resources.

A common rebuttal to the above chart from Conservative Media and Republican Tea Party types is that "no one can PROVE that U.S. ethanol production reduces foreign oil imports from un-friendly places like Saudi Arabia or Venezuela". It is because of this common rebuttal that the above chart compares only the FACTS of current gasoline production.

Since oil is a world-wide commodity with extremely complex international pricing dynamics, no one can authoritatively state what any one specific event would result in. For example, using this Conservative "Think Tank" logic, one could also state that "no one can PROVE increased U.S. oil production would decrease oil imports from Saudi Arabia, Nigeria, or Venezuela". Maybe increased U.S. oil production would only decrease oil imports from friendly countries like Canada or Mexico. Also, no one can PROVE that building the Keystone project (high price oil from costly tar sands extraction) will result in lower oil imports from Saudi Arabia, Nigeria, or Venezuela.

Its time to stop playing silly ideological games and get to work in seriously developing all domestic energy resources for transportation fuels -- including oil, natural gas, and ethanol/bio-diesel.

What Exactly Is America's Energy Problem?

With gas prices moving to $4 a gallon at the pump, we are again reminded of the words of the beloved Yogi Berra -- "This is like Deja Vu all over again". So after +30 years, why has it been so difficult to develop a National Energy Plan? A major reason is the diversions used by so many competing Ideological, Political, and Corporate Interests to create a fog of confusion to the American Public.

In this battle over public opinion, just a few simple facts could go a long way in at least identifying what America's real energy problem is -- our oil dependency with transportation:

We do not have an overall "energy crisis". We have an oil dependency problem Only 1% of U.S. oil consumption is used to generate electricity ~72% of U.S. oil consumption is for transportation fuels (primarily cars)

U.S. Energy Sources and End Uses
Since only ~1% of our total oil use is for electricity, the U.S. is already "Energy Independent" from foreign oil for power generation. For transportation, the story is totally different as oil provides ~94% of fuel source requirements, where about 50% comes from foreign oil. The overwhelming majority of oil use is for cars and light trucks, with truck freight hauling and air transportation the other two most significant uses.
The Diversion of Global Warming: So if America doesn't use much oil for electricity, why does the energy policy debate (and failed bills in Congress) focus so heavily on electricity generation from wind, solar, and nuclear power?

By looking at the above FACTS, the American Public can see that what has been framed as an "Energy Crisis", is really two distinct issues -- (1) Oil dependency for transportation, and (2) Global Warming/Climate Change through the use of fossil fuels. By combining these two issues in framing the national energy policy debate, public opinion confusion occurs resulting in a "Status-Quo" by:

Blurring Policy initiatives between electricity generation (not causing our oil problem) and fueling transportation (which is our oil problem). Unnecessarily drawing transportation policy initiatives to reduce oil use into the Global Warming controversy

Even if we put a solar panel on every roof, a wind turbine on every street corner, a new nuclear power plant in every State, and made every building energy efficient (e.g., insulation, light bulbs) -- there would be no real change in our oil dependence. These electricity policy initiatives are to either reduce CO2 and other greenhouse gas emissions, or to advance Special Interests (especially nuclear power).

Conversely, transportation policy initiatives targeted to the three primary uses of oil would be a huge step toward "Oil Independence":

Cars -- Increased Auto MPG, Ethanol, Urban Mass Transit, Electric Vehicles. Freight Hauling -- Creating a natural gas infrastructure for heavy truck hauling. Reducing Air Transportation -- High Speed Rail between major urban areas.

Making Global Warming a focal point in the national energy debate creates a diversion of negative public opinion reactions from increased taxes (carbon tax), even more federal EPA regulation, to destroying the economy and job losses (especially to China). According to a recent national Rasmussen Poll only 33% of Americans believe that Global Warming is man-made from increased levels of greenhouse gases.

But even if Global Warming is the greatest scientific hoax ever created, America still needs to develop alternative sources, uses, and greater energy efficiencies to reduce our transportation dependency problem with oil. We can not simply "Drill, Baby, Drill" our way out of this problem. Americans consume 25 percent of the world's produced oil, but our nation holds less than 3 percent of the world's proven oil reserves.

The Diversion of "Drill, Baby, Drill": To achieve the commonly used "Oil Independence" catchphrase only through drilling, the U.S. would need to develop and sustain new sources of oil production currently equal to Saudi Arabia. Is this possible? According to Energy Information Agency information, Saudi Arabia has oil reserves 14 times greater than the U.S.In addition, an inconvenient truth that "Drill, Baby, Drill" Supporters fail to ever discuss is price. Oil is an internationally priced commodity. No oil company would ever sell oil from U.S. resources less than world market prices. Another fact never discussed is that any dramatic increase in U.S. oil production above proven reserves would require developing non-conventional resources (using some very questionable environmental practices like fracking). The reason that tar sands and shale deposits are not widely used is their very high extraction costs, making these resources economically viable only when oil prices are high. So while increasing domestic oil production in an environmentally safe way will have many benefits, reducing prices at the gas pump will not be one of them.

The Diversion that Government Shouldn't Choose Energy Winners and Losers: This often heard statement argues that a national energy policy should be based on free market capitalism, not big-government centralized control of providing incentives to "specific" technologies. However, in "Walking the Talk" this principle is only applied to renewable/alternative energy. A recent example of this hypocrisy is Republican members of Congress introducing legislation to keep federal loan guarantees for nuclear power but to eliminate the same guarantees for renewable energy projects. Federal Government intervention into free market capitalism for energy has occurred for decades, including:

Price-Anderson Nuclear Industries Indemnity Act: As the World has seen recently in Japan, nuclear accidents can be catastrophic with an economic toll in the hundreds of billion of dollars. In order to remove this economic impediment to stimulate nuclear power in the U.S., Congress enacted the Price-Anderson Act that currently limits the individual liability of a nuclear plant's owner to $300 million.

Oil Pollution Act: In the 1990 OPA, Congress limited an oil company's liability to pay for damages to fishermen, property owners and other individuals and businesses, governments (via lost tax revenue) and natural resources to $75 million per incident.

Oil and Natural Gas Federal Subsidies: The total amount of federal subsidies for fossil fuels is difficult to quantify. However, President Obama has proposed eliminating $4 billion a year in more than a half-dozen tax exemptions for oil companies. The tax breaks have a long history -- the so-called percentage depletion allowance for wells dates back to the 1920's.

Where Do We Go From Here?: America's Energy Policy shouldn't be a Red State versus Blue State issue -- it must be an American issue. From our viewpoint, a national energy policy is being held hostage by two major factions: (1) A Democratic Party overly driven by Environmental Ideology -- especially Climate Change, and (2) A Republican Party driven too much by Corporation Special Interests. Hopefully, the American Public will start to see through the myriad of diversions and demand real change, including:

Environmentally Safe Drilling: After the BP Gulf spill, is the solution really just the need for more Government oversight and regulation? We agree with Ron Paul that the answer isn't more regulation. Its just letting the market work by eliminating the $75 million liability cap from the Oil Pollution Act.

"When a business's liability is limited by law, then they make riskier decisions than full liability would allow. For instance, in this case, BP opted for single wall oil pipe casing, as double-wall was "too expensive." Of course, if full liability is incurred, then the definition of what is "too expensive" changes dramatically." -- Rep. Ron Paul.

It's Transportation, Stupid!: If 72% of America's oil use is for transportation (where about half comes from foreign oil), why are we talking about anything other than transportation in a national energy policy debate? Policy initiatives promoting "Energy Independence" through electricity generation is a Red Herring diversion for two reasons: (1) Electricity generation is not causing our oil dependency problem (only 1% of oil is used for electric power); (2) The argument for "electrification" is putting the cart (electricity supply) before the horse (electricity demand). Only after energy demand initiatives (e.g., electric vehicles, high speed rail, etc.) that will achieve significant fuel switching from oil to electricity should new power plants be on the table for discussion.

In solving America's oil problem of course we need to develop new oil resources in an environmentally conscious way. But we also need more, much more by developing alternative sources (ethanol), uses (electric cars), and greater energy efficiencies (increased car mileage).

Without an intense focus on transportation, America really doesn't have a Plan and as Yogi also said, "If you don't know where you are going, you will end up somewhere else."

Is the Sierra Club a Friend or Foe of Biomass Energy?

This week, President Obama announced a plan to reverse a ban on oil drilling (including much of Florida) with objectives to decrease foreign oil dependence and to create new jobs. But what especially caught our attention was the reaction of environmental groups -- especially the Sierra Club.



In an opposition rally to expand off shore oil and natural gas drilling, a representative of the Florida Sierra Club refuted the job creation argument of the Obama Administration stating, "For every one oil industry job, from biomass, you would get 9 jobs per megawatt hour. And by the way, Florida is known as the Saudi Arabia of biomass," said Cathy Harrelson of the Suncoast Sierra Club."

But something does not make sense here.

Just a week earlier, the Sierra Club led the opposition in killing a proposal to build a new generation biomass energy plant (a joint venture with Duke Energy) in Gretna, Florida.

This is yet one more example of how the environmental community is dysfunctional on the subject of biomass energy and reminds us of a cartoon we once saw stating "We have seen the enemy, and he is us!"

We are also seeing carbon emission standards being advocated by environmental groups like the Sierra Club of 250 pounds of carbon per Mwh for new biomass electricity power plants -- where apparently, the carbon cycle neutral argument of biomass energy is being completely disavowed.

In doing the math, this 250 pounds standard is impossible to meet -- without the carbon cycle neutral argument. For example, an ultimate chemical analysis of biomass reflects about 9,000 btus per pound (dry basis), where approximately 50% is carbon.

An example of a new, high efficiency biomass generation technology (i.e., gasification) would have a heat rate of around 9,000 btus per kWh. Thus, using the very best technology available would result in carbon emissions of ~500 pounds per Mwh -- about double of the 250 pounds standard being advocated by environmental groups such as the Sierra Club.

Maybe we should initiate a "Bad Guy of the Year Award" -- where the leading candidate for this year's award would currently be the Sierra Club.

CO2 Benefits of Biomass Energy Vs. Solar and Wind Energy (Part 3)

In Part 1 and Part 2 of this blog series on the benefits of biomass energy, we made three key points:

That biomass energy is carbon cycle neutral, just like solar and/or wind energy.

Biomass energy can be carbon cycle negative when it is developed in an environmentally sustainable way (e.g., soil building carbon sequestration, incorporating biochar).

Biomass energy is much more likely (especially in the Southeast and Midwest U.S.) to displace base load coal-fired electricity generation than either wind or solar power.

The reason for this is something called an "availability factor" (i.e., the number of hours a generating unit runs), where typically, solar and wind resources have low availability factors which are usually associated with natural gas or oil peaking and intermediate dispatch units.

Availability or Capacity Factors by Technology

This last point is important as coal fired power plants in the U.S. are responsible for 82% of CO2 emissions from total electricity generation.

Today, we will summarize these 3 key points by

Building on the previously cited EPRI paper on the avoided CO2 intensity of fossil fuel technology options (oil, natural gas, coal).

Incorporating empirical research on soil carbon sequestration from growing energy crops.

From carbon sequestration work performed with the University of Florida on fast growing trees, we found that a volume of below ground biomass equal to ~60% of the above ground mass was being created. However, we must note that our findings of terrestrial carbon sequestration are significantly higher than found in other research. Because of this, we include carbon sequestration rates derived from a U.S. Department of Energy study performed in North Carolina in the table below -- providing a range of .24 (DOE estimate) to .64 (our research findings estimate) tons per Mwh.

CO2 Displacement by Technology (ton/Mwh)

CO2 Displacement by Technology (ton/Mwh)

Conclusion: When biomass energy is developed in an environmentally sustainable way as base load power generation (displacing coal use), the CO2 benefits can be ~4 times greater than solar power displacing natural gas peaking technology.

Pricing Green Electricity -- Feed in Tariffs

The basis of today's blog is an article by Ronald Bailey in Reason Magazine on Renewable Energy Feed-In Tariffs. Go to: http://reason.com/archives/2010/01/26/overpaying-for-green#commentcontainer

From the article: "Green power advocates in the United States have started pushing for a European-style subsidy scheme in which homeowners or businesses that install solar panels or windmills can sell their excess power back to the grid at inflated prices. Utilities are required by the state to pay above-market rates for this environmentally-friendly power. However, a recent report by the independent German economics think tank, RWI, noted that the solar electricity feed-in tariff of 59 cents per kilowatt-hour in 2009 is more than eight times higher than the wholesale electricity price"

It is this type of journalism that one typically finds in the main stream print and TV media that quite frankly, drives us up the wall. In this type of reporting, both sides of an issue are usually being disingenuous (whether it be Republicans Vs. Democrats, Red State Vs. Blue State, the radial Environmentalists Vs. the Drill Baby Drill crowd).

In the media typically found today, Journalists most often start with an "IDEOLOGY" and then cherry picks data to prove their case. Let's review how Mr. Bailey manipulates data (cooking the books) to prove his ideology. The starting point is to understand what an electricity grid is and how it works.



An electricity grid is comprised of all generating sources (coal, nuclear, natural gas, renewable) to meet peak demand. During a season (e.g., fall, summer, etc.) and/or time of day (e.g., night versus daytime) a specific generating unit will be dispatched (run) to meet the System's demand requirements based on its variable cost (which is primarily its fuel cost). Everyone must understand that a generating unit's capital cost (the cost of originally building the facility) has little to no impact on how a unit is dispatched. Capital cost can be thought of as "sunk cost" -- things like financing costs that must be paid to lenders/investors whether the unit runs or not. This explanation explains why nuclear facilities are typically run first (low fuel cost) as base load units although their capital costs are very high.

Understanding how the integrated resource grid works shows how Mr. Bailey manipulates data in an attempt to prove his ideology where he compares the wholesale price of electricity (which includes all sources of generation) to the cost of a renewable option of wind energy. Now -- if Mr. Bailey compared the cost of a new peaking natural gas or oil fired unit to the wind option, this would be a correct and "fair" comparison.

But the story just doesn't end with a discussion of only marginal cost in a dispatch grid. The Story must include both marginal costs (primarily fuel) and capital costs. When an electric utility builds a fossil fuel plant (say to meet peak demand requirements) its capital costs are included in a "rate base" where recovery of these costs are included in the "overall price" of electricity that the utility charges its customers. If this peaking unit does not run very much (say, by having a mild winter or cool summer), the actual cost (marginal fuel cost plus fixed financing cost) can result in a cost per kWh much, much higher than any of the feed-in tariffs that Mr. Bailey referenced.

For example, look at this concept this way. If you bought a new car, monthly car payments would be due whether you drove the car 10 miles a month or 1,000 miles. However on a cost per mile driven basis (gas plus the car payments) the miles driven would have a huge impact -- a pragmatic truth that Mr. Bailey does not address.

We just wish the main stream media practiced some intellectual honesty, so that meaningful discussions on energy policy can occur. If Mr. Bailey can show that feed in tariffs for peaking renewable energy are dramatically higher than what customers are and have been historically paying for peaking natural gas and oil units -- then he should make this Apples to Apples case.

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The Radical Greens -- Eco-Terrorism through the Media.

Two stories on biomass energy caught our attention this week where "misinformation of fear" continues to be presented in the media:

Huffington Post: Green Nightmare: Burning Biomass is Not Renewable Energy

New York Times Op/Ed: Clear-Cutting the Truth About Trees.

The purpose of these articles is to advance a "message of fear" -- that adopting policies of biomass energy will lead to the mass destruction of forests throughout the world as clear cutting will occur.

As scientists, engineers, and farmers, we can provide a real-world "message of hope" from our efforts in Florida that we strongly believe will be more representative to provide biomass for power generation and transportation fuels.

In our approach that we call a catalytic "Genesis Effect", we have taken environmentally damaged marginal lands to grow energy crops in a sustainable and environmentally pro-active way -- with a key emphasis of soil carbon building/sequestration.


The following two pictures are of the same land area at one of our energy crop farms, showing the "before" and "after" results of the Genesis Effect. Before energy crop planting, the site had been invaded by a mono culture plant (cogongrass, that according to the USDA is the 3rd most invasive weed in the world). Typically, environmentally damaged lands have very little Soil Organic Matter or Soil Organic Carbon (SOM/SOC).


After creating energy crop tree farms on these marginal lands (where the trees coppice or re-grow after cutting), we have seen (working in conjunction with the U.S. Department of Energy Oak Ridge National Lab) a dramatic increase in SOM/SOC after just a few years.


An additional environmental benefit that is occurring on our energy crop tree farms is the re-establishment of native flora and habitats (where in 3 years, ~30 native species plants have emerged on the forest floor).


Our response to the radical "Greens" is that there is a message of hope (not fear) in developing biomass energy in a "responsible and right way"!

Environmental Groups Get F in Energy 101

Let's face it -- Most Environmental Groups only begrudgingly accept biomass energy as truly green. In their view, energy options such as wind or solar are much "Greener". After all, although bio-energy can claim the "Carbon Neutral Argument", it still emits air pollutants such as greenhouse gas emissions, where solar and wind do not.

The fatal flaw in these Environmental Group's perspective is their failure to understand basic Energy 101 involving electricity generation -- and how an integrated electricity grid works.

In these Environmental Group's perception of the World, green technology generating options are viewed on a stand-alone Micro Basis. For example, solar and wind options emit no greenhouse gas emissions, where biomass energy does.

In reality, electricity generation options work on a Macro Basis of the integrated resource grid that includes all forms of energy -- both renewable and fossil fuel generation options.

In determining the value of renewable energy sources, a key question must always be: What does a specific technology option displace on the integrated grid?

To answer this question, one must understand "basic terms" of (1) base load, (2) intermediate load, and (3) peaking load generating options.

Because of availability (number of hours and when the sun shines or the wind blows), solar and wind options are typically considered either intermediate or peaking technologies on an integrated resource grid. As such, wind and solar options will displace primarily natural gas generating units (where natural gas is by far the cleanest of fossil fuels compared to coal and oil).

Conversely, biomass energy and geothermal options are typically considered base load, and would primarily displace in much of the U.S., coal fired generation.

Why is understanding things like base load versus intermediate or peaking load important? Well, according to the U.S. Department of Energy, base load coal fired electricity generation produces approximately 90% of all CO2 emissions from electricity generation.

Two good Web resources to understand these concepts can be found at:

(1) The Common Purpose Institute's webpage on Biomass Energy Quick Facts and

(2) Renewable Energy World's discussion of the Integrated Resource Grid

Congress Gets F in Energy 101 (Part 2)

Renewable Energy World has a current article on the value of the "heat" component CHP (combined heat and power) from biomass energy.

The article has the following graph, illustrating the greenhouse gas benefits of the "heat" CHP component, like with using biogas for industrial product drying. Note the highest level of greenhouse gas benefits is the 3rd bar -- the scenario with the highest "heat use" component.



But, lets look at how Congress views the "heat" component of CHP in providing economic incentives under the Section 45 Tax Credit to promote biomass energy:

(1) If a biomass gasification project used 100% of the biogas for the production of electricity ONLY, the project qualifies for a 30% investment tax credit towards the capital costs.

(2) If the same above project was for CHP, the tax credit is reduced to 10%.

(3) If the project uses 100% of the biogas for an industrial processes "heat" requirement, the project's tax credit would be ZERO!