Set a new course for America’s energy future

12 08, 2011 by POLITICO

As the Congress hurries to finish up its 2011 business, they would do well to pay attention to two important pieces of information.

First, beginning in June 2011, the United States became a net exporter of oil products. This is a classic good-news bad-news story.

The good news is our production has increased — along with our demand having decreased — to the point that we can export oil. The bad news is: Our elected leaders will likely decide that our energy problems have cured themselves — so they won’t have to think about it anymore.

The oil statistic that should still worry our leaders, however, is the amount we are importing from, and the amount of money we are exporting to, the Organization of Petroleum Exporting Countries.

In 2007, OPEC provided 44 percent of our oil. In 2011, so far, we are still depending on OPEC for 43 percent of our oil. While the absolute level of imports has dropped from 2007, the total amount of money spent is higher because price continues to climb. The national security risk of importing enemy oil is as high now as it has ever been.

As you will soon see reflected at your local gas station, world oil prices are again higher than $100 per barrel. Higher oil prices inevitably lead to higher gasoline prices. This is because even though demand in the U.S. has dropped, the growing middle classes in China, India and other developing nations are growing rapidly, putting upward pressure on prices.

That leads us to our second data point. A National Petroleum Council study on the long-term outlook for North American natural gas says, “the supply of natural gas can match any projected level of demand out to the end of the report’s study period, 2035 [nearly a quarter-century into the future], and at a reasonable cost.”

“The NPC’s sole purpose,” according to a Barclay’s Capital Commodities Research newsletter, “ is to advise the U.S. federal government, and NPC reports carry considerable weight in Washington policymaker circles.” The study drew on public and private sources as well as “over 400 individuals.”

This study is the federal equivalent of the Natural Gas Potential Committee biennial study that, in 2008, changed the energy landscape when it factored in non-traditional methods of extracting natural gas. Natural gas went from being, in 2007, a scarce resource, whose use needed to be carefully monitored, to a resource offering a 100 (now 125) year supply.

So, rather than declaring our energy problems “solved,” Congress should seize this moment and make a profound shift in our energy policy — specifically on heavy trucks. We should move decisively to shift our national fleet of 8.5 million 18-wheelers and fleet vehicles from burning dirty, imported diesel to running on cleaner, domestic natural gas.

You’ve heard the arguments about switching to natural gas as a principal transportation fuel: There are a relative handful of natural gas vehicles because there are so few fueling locations. No one will invest in fueling locations until there are more vehicles. Joseph Heller wrote a book about this: “Catch-22.”But the refueling issues involving natural gas for fleet vehicles and trucks are easily managed. Delivery vans, utility trucks, taxicabs and similar vehicles all return to “the barn” at night, where a central natural gas refueling facility is readily available. Eighteen-wheelers usually run the same routes on a regular schedule — so placing natural gas refueling islands at existing truck stops can be handled by private industry.

The problem is that there is limited NGV manufacturing capability in the U.S. But there will be — because the per-gallon and life cycle savings of NGVs are too big to ignore. Congress is considering the Nat Gas Act in both the House and Senate.

The Nat Gas Act provides for a modest, paid-for tax exemption for five years, to offset the marginal difference in purchase price between an NGV and a standard diesel-powered vehicle

This five-year sunset provision would allow enough time for manufacturing to ramp up. The cost difference between the two types of engines will shrink and, ultimately, disappear.

The advantages are many. Environmentally, natural gas is 30 percent cleaner than petroleum. Economically, it is cheaper than gasoline or diesel, and to stay that way because of the abundance.

From a national security standpoint, it can reduce our reliance on OPEC oil by half in seven years. From a jobs standpoint, according to House sponsor John Sullivan (R-Okla.) more than 500,000 jobs will be created in this industry.

Special interests argue that governments shouldn’t pick transportation fuel winner and losers. But they ignore the fact that the failure to pick winners picks one – and it is OPEC oil and diesel.

Meanwhile, we are the losers. We are exporting oil products and we have a 125-year supply of domestic natural gas.

This is the moment for the Congress to act and set a new course for America’s energy future.

T. Boone Pickens is founder and chairman of BP Capital Management and author of the Pickens Plan, a blueprint for reducing foreign energy use.