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MEANS: Obama needs to prove he’s serious about energy independence
Natural gas is key to America’s future
Question of the Day
Federal energy development is an important answer to the questions on jobs, national security, the environment and federal budget that plague our nation right now. A focus on energy production is crucial to reviving our economy. In particular, we must turn our attention to natural gas because America is awash in it.
Since the 1970s, the U.S. Department of Energy has "invested" more than $1 trillion in "alternative energy" schemes. I say "schemes" because after all of these investments, solar power, the darling of the White House and its friends and the recipient of massive grants and subsidies, results in one ten-thousandth of the electrical production in America. Wind power, after scarring a huge amount of America's most beautiful scenery, amounts to a whopping 3 percent of electricity production. If these dials have barely moved after 40 years and $1 trillion, they are not going to move much in the next half-century. If electric cars ever roll, they will be powered by electricity from coal (nearly 50 percent of all electricity production), nuclear (20 percent), natural gas (20 percent) and hydro (most of the rest). In other words, expensive "electric cars" are actually, largely, "coal cars" -- welcome to the 19th century.
Of all of these energy sources, natural gas is the cheapest (65 percent of the cost of coal, 60 percent of the cost of nuclear, 67 percent of the cost of wind, 41 percent of the cost of solar and half of the cost of biomass). In our lifetimes, alternative energy is an illusion. It has added few net real jobs. No oil sheik or oil-fueled terrorist is losing a minute of sleep worrying that solar and wind power will reduce our dependence on Middle Eastern oil. Moreover, if carbon emissions really are a problem, solar and wind power will never have the scale to be a real solution, but natural gas might.
In transportation, the big area that really makes a difference in energy independence, natural gas costs about half of what gasoline costs to run a car, is generally considered safer, is much cleaner-burning, can be fueled at home and leads to longer engine life.
If the White House is serious about energy independence, the litmus test will be its support for natural gas as the primary American energy source, supplemented by more nuclear power.
What does "support" mean? Well, the United States has enough natural gas to supply its needs for more than a century, so that is not the issue. We also are finding more gas and more ways to extract it. As opposed to alternative-energy schemes, this is real, the cost can come down fast, and scaling to relevant size will be rapid. That is attracting private-sector capital.
Until recently, natural-gas cars and trucks have not been supported by sufficient infrastructure. However, that is changing. For example, Clean Energy Fuels, a private-sector investment venture, is completing the first phase of the "Natural Gas Highway," which will support long-haul truck fleets on America's major interstates. As that takes hold, it is a short jump to cars, the big step to energy independence. The feds need to support these transitions or at least just stay out of the way.
Another important part of the puzzle is to encourage exploration and production to increase supply. The president has on his desk a report from NERA Economic Consulting that recommends allowing the export of liquefied natural gas (LNG). This would increase demand for development of domestic supplies and further support a more rapid conversion to a natural-gas-driven economy. It could generate significant export revenue for U.S. companies. A deal on natural gas also might involve an export tax in exchange for clearance to export. This certainly could help balance the budget. To protect U.S. consumers from a rapid price spike, U.S. prices would continue to be regulated. This would be welcomed by our gas-poor allies in Asia and Europe and would offset the political leverage in Western Europe exerted by Russia's Gazprom.
With strong leadership from the White House and Congress, this debate does not have to go on forever. It may represent the only serious answer to a reduction in oil-funded terrorism, a cleaner environment, more jobs and increased revenues to balance the budget.
Grady Means is a businessman and economist, former assistant to Vice President Nelson Rockefeller and co-author of "MetaCapitalism, the e-Business Revolution and Design of 21st-Century Companies and Markets (Wiley, 2000).
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