A rush of recent reports on energy has much to say about the fundamental foolishness of the green vision of energy production, the vision long regnant in academia, and the one that informs the Obama regime.
The green vision — really, the green dream or delusion — is that the world is running out of fossil fuels, and we need to switch to so-called renewable or sustainable sources, such as solar power, wind power, and biofuels. (These “renewable,” allegedly low-pollution green options never include nuclear or hydroelectric power, both of which are proven to be cost-effective and clean — a point to which I will return shortly). If we just embrace these “new” energy sources, the greens aver, jobs will just multiply magically.But if we continue to use fossil fuels, we are doomed to economic stagnation.
The first report is the happy news that the number of new American oil wells is increasing at a pace not seen in over three decades.
According to the major oil drilling company Baker Hughes, it installed over 800 new oil rigs last year, over twice the previous year's (2009) total, and a tenfold increase over the yearly average during the late 1990s.
These rigs are placed to tap so-called “unconventional reservoirs,” squeezed into shale rock strata. Ten years ago these shale oil reservoirs were written off, but the increase in oil prices and in the level of oil-drilling technology have now opened them up.
The story mentions several promising shale oil fields, including the Eagle Ford formation (stretching from southern Texas into northern Mexico), the Bakken formation (in North Dakota), and the Monterey formation (in California). These formations currently produce about half a million barrels a day. It is now projected that production will hit 1.5 million barrels per day in four years, the equivalent of what we currently get from the Gulf of Mexico, which is roughly about 30% of current total domestic oil production. This will go far toward making up for declining production from our conventional fields in Alaska and the Gulf of Mexico.
The Bakken formation is yielding oil faster than can be sent through pipelines to market, so the oil companies are shipping it by road and rail. The companies have had to open camps to house all the workers needed, and North Dakota has unemployment at less than half the national average (its rate is 3.8%, to be exact). As another article notes, the Bakken field produced 113 million barrels in 2010, up from 33 million the year before.
If the Bakken and Eagle Ford oil fields pay out as expected (they are projected to yield an eventual four billion barrels of oil), they will wind up as the fifth- and sixth- biggest US fields ever found. By 2020, shale oil fields could allow us to cut our imports of foreign oil by 60%, which (at $90 a barrel) is $175 billion less we give foreign dictators. And another article reports that the EIA estimates that with these new fields, American petroleum production will increase 14% by 2020.
A more recent news item gives us more detail about the new shale oil drilling technology. It involves drilling down and then horizontally into the rock, then pumping a mixture of sand, water, and small amount of chemicals in to crack the rock and loosen the oil molecules. Drillers figured out how to make the shale crack more extensively, and that made the extracted oil cheaper than had ever been thought possible.
This process, called fracking, has proven very effective in freeing natural gas, as I noted in an earlier piece. It is beginning to pay off big time in oil production as well.
With this method, new fields are being opened, such as the Leonard formation (which straddles New Mexico and Texas), and the Niobrara formation (which underlies Wyoming, Colorado, Nebraska, and Kansas).
Now, last year, as shale oil technology started proving itself a tremendously effective method for extracting oil, environmentalists immediately arose in opposition. Rep. Henry Waxman (D-CA) held hearings investigating fracking, and the environmentalist Left produced a documentary (Gasland) alleging that the technology was poisoning groundwater. But all the EPA studies have shown that fracking is safe, and even the Environmental Defense Fund seems comfortable with it.
So much for the death of petroleum. Turning now to renewable-green energy sources, some interesting stories are worth noting. Let’s begin with the report that France’s solar program is in trouble.
Two years ago, the French National Assembly passed a law requiring France’s national utility, Electricité de France (EDF), to buy all the power produced by newly installed solar panels at $745 per megawatt-hour, roughly ten times the market price for electricity. The goal was to increase the number of people installing solar panels on their roofs.
The Chinese-manufactured solar panels have a large “carbon footprint” — meaning they were produced by using large amounts of power generated by the burning of dirty coal.
The intended result was that applications for rooftop panel array connections rose — from 7,000 applications a year before the subsidiary to about 3,000 a day by December of last year. But there were unintended, though embarrassingly foreseeable, consequences. One was that the cost to EDF of buying solar power has exploded to $1.4 billion a year, and is threatening its financial health. EDF saw its stock drop by 20% in 2010 (compare that to a 3.7% drop for Europe’s Stoxx 600 Utilities Index). EDF is now $78 billion in debt, a situation that has caused it to defer modernizing its 53 nuclear reactors (which provide 75% of France’s electricity). And it has had to jack up the surcharge that consumers who don’t use solar panels have to pay.
A second consequence is that the solar panels are being purchased from China, thus shifting jobs from France to there. Worse, the Chinese solar panels have a large “carbon footprint” — meaning they were produced by using large amounts of power generated by the burning of dirty coal!
Then there is the report about an ethanol plant, Range Fuels, that in 2007 received startup subsidies of $76 million from the federal government and $6 million from the lucky state of Georgia, where it was supposed to open a plant making ethanol from pine chips. The next year, it got a loan for $80 million, guaranteed by taxpayers under the “Biorefinery Assistance Program.”
The reason the Bush administration started pushing this “advanced biofuels cellulosic ethanol” program (essentially, a program for producing ethanol from switch grass and other biomass) was that corn-based ethanol was already rapidly acquiring a bad reputation for excessive costs and a low yield of energy outputs. Cellulosic ethanol looked like a better prospect.
Georgia politicians were so excited by the smell of pork that they started calling their state “the Saudi Arabia of Pine Trees.” The Saudi Arabia of pine trees!
Well, guess what? Range Fuels just closed, having never produced even one shot of ethanol. Gone with the wind, as they used to say in Atlanta. And all the subsidy money gone with it.
Honest to God, you couldn’t make this stuff up.