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For the Pickens Plan to Work, People Have to Misunderstand It |
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Last week I mentioned how T. Boone Pickens is trying to pressure Barack Obama into a flawed energy policy. But be forewarned, Barack Obama is not the only target for the Pickens Plan misinformation campaign. The only thing that can stop the Pickens Plan from being implemented is the taxpayers citizens understanding it. If they understand the Pickens Plan, they will not support it.
How can you tell an argument has hit a little too close to home? The bad guys start getting defensive and squeamish. This is exactly what happened to Mitch Jackson, Director of environmental affairs and sustainability at FedEx, when he wrote this well thought out blog post disputing the merits of natural gas vehicles point by point. Here are the three strongest points he made, in my opinion:
3. To use natural gas vehicles, we, as a nation, would have to build a completely new fueling infrastructure for vehicle fueling.6. Natural gas, like oil (which produces diesel fuel and gasoline) is a fossil fuel which emits carbon emissions when burned.
7. Natural gas, while plentiful within the U.S., is, like oil, a fungible commodity – meaning that it can be transported and sold in other markets that require natural gas - including foreign markets. So, no matter that the fuel would be sourced locally in the United States – its price and availability, again, like oil, would be influenced by foreign demand.
The crack team over at the Pickens Plan responded as could be expected, by crafting a long-winded and rambling blog post, throwing out straw men and using deceptive language to create the illusion of a legitimate debate on the virtues of natural gas vehicles (NGV’s). To be clear, among those who are actually interested in transitioning to a secure and stable energy and transportation policy, there is no debate. Nobody who knows what they are talking about really thinks it makes much sense to replace our dependence on one dirty fossil fuel with another.
For now, let’s see how the first argument stacks up.
Jackson writes:
3. To use natural gas vehicles, we, as a nation, would have to build a completely new fueling infrastructure for vehicle fueling.
Pickens Plan writes:
Finally, Jackson questions the practicality of building a nationwide natural gas fueling network to power our vehicles. What Jackson fails to realize is that, unlike any other alternative to diesel or gasoline, the nation’s natural gas pipelines provide virtually every American consumer or fleet, public or private, with an opportunity to fuel because the backbone of the fueling infrastructure already exists. This is how the rest of the world increased their natural gas vehicle populations by over 300 percent within five years totaling 8.6 million vehicles.
So wait, the argument is that ‘natural gas is the only alternative fuel with a backbone of a distribution system already in place’? It’s not clear whether the Pickens people are familiar with plug-in hybrid electric vehicles (PHEV’s), which can go 40 miles without using any fossil fuel on a quick charge from your standard 110 volt outlet at home.
The Pickens people must also not be familiar with what is going on in Utah right now. Questar Gas Co., which operates a network of 19 natural gas refueling stations in the state, has been providing people who drive NGV’s with fuel for less than it costs them. For 20 years, people in Utah who didn’t have NGV’s were subsidizing the fuel for their neighbors. The reversal of this policy, which is now being mandated by the state’s Public Service Commission, is expected to increase rates from 80 cents per gallon to $1.43 per gallon, within six months. NGV drivers are outraged:
I trusted state agencies to provide stable/reasonable pricing for motor vehicle use of natural gas,” wrote Michael Millet, a professor of automotive technology at Salt Lake Community College. “If I knew you were going to jack the rate up so high, I would have not gone to the trouble to convert or pay for the expensive equipment to burn natural gas.”
This episode is an excellent example of the fact that natural gas vehicles can not pay for themselves. Whether it is taxpayer money in the form of subsidies or consumer money in the form of higher utility rates, any widespread effort to use natural gas as a transportation fuel would be dependent on transferring large quantities of wealth to natural gas companies who don’t like us. T. Boone Pickens will never tell you this because for his plan to work, you have to misunderstand it. Look at what he puts his money behind if you don’t think Boone is out to line his pockets with taxpayer money.
By implementing the wind investments and electric grid modernization Mr. Pickens advocates, while replacing our consumer and commercial vehicle fleets with electric vehicles and plug-in electric hybrids, we would essentially be able to fuel our vehicles with wind. Wind power is among the cleanest and most abundant forms of energy at our disposal. Any additional capacity generated by wind (solar, geothermal, hydro, etc.) should be used to take coal-fired power plants off the grid, starting with the dirtiest ones first. Using sustainable energy sources to replace electricity from natural gas, rather than replacing mean coal, is a fundamentally inefficient way to address our energy security.
Richard Kolodziej, president of NGV America, explains the crux of the problem faced by Pickens and others who have placed major bets on natural gas.
Because there are so few natural-gas vehicles, outside of commercial or government fleets, fuel retailers don’t have much incentive to sink $500,000 to $750,000 into a natural-gas refilling station capable of handling cars as rapidly as a conventional gas station can.
There are currently about 1,100 natural gas filling stations in the United States (search by zip code here). There are about 115,000 gasoline stations in the United States. As Jackson mentioned, the filling stations and the NGV’s themselves represent a chicken and egg problem: neither makes sense without the other. For natural gas to be as ubiquitous as gasoline and diesel currently are, someone would have to pay for over 100,000 natural gas filling stations. At a low-end estimate of $500,000 each, that is an investment of $50 billion. Building just 20,000 natural gas filling stations would cost $10 billion or more. Who do you think is going to pay for that? It won’t be T. Boone Pickens, I promise you that.
An interesting piece from the National Review: http://planetgore.nationalreview.com/post/?q=MGQ2ODIxOTQ2MzVhNjBhZTlkZ mNjNTMyYzg5NmI2MTY=
…even some conservatives are calling the emperor on his new clothes, albeit in a ludicrous manner.
Yikes!! Josh Nelson is either unaware of the facts about natural gas and natural gas vehicles or he is so intent on criticizing Boone Pickens and the Pickens Plan that he cherry picks what he knows. Let me make four overall points and then address his recent statement.
First, this is going to be long. Reducing our dependence on foreign oil is a complicated and nuanced subject that doesn%u2019t lend itself to bumper sticker positioning. Sorry.
Second, if we are to move away from our dependence on petroleum for transportation, we don%u2019t have %u201Cchoices.%u201D We have to use every option available, including electric vehicles, gasoline-hybrids, plug-in gasoline hybrids, other hybrids, gasoline-ethanol flexfuel vehicles, diesel-biodiesel blend heavy-duty vehicles, propane %u2013 and natural gas. There is no silver bullet answer to our dependence on petroleum for vehicles. The question we need to answer is %u201CIs the option in question better for the environment and energy security than petroleum?%u201D If it%u2019s more economical than petroleum, even better, and, if it%u2019s a technology that is commercially available today, better still.
Point three. According to DOE%u2019s Energy Information Administration, we used 138 billion gallons of gasoline in 2007. Many of the options listed above can be used in the light-duty market to displace gasoline. But we also used 47 billion gallons of diesel fuel, and only two %u2013 biodiesel and natural gas %u2013 are available options for the heavy and medium-heavy diesel market (diesel-hybrids are being used in some applications with mixed results). Importantly, of the two options, only natural gas can displace 100 percent of petroleum diesel fuel while reducing greenhouse gas emissions by 22 percent (California Energy Commission number).
Point four. America%u2019s natural gas resource base is huge, and the %u201Ceconomically recoverable%u201D volume of America%u2019s gas resources keeps growing — as economics and technology change. As an illustration, in 1990 the Potential Gas Agency (the experts) estimated that, in the US, we had 1100 trillion cubic feet (Tcf) of gas resources (i.e., gas that could be produced economically at that time). That is about 58 years of supply at our current rate of consumption. Despite producing over 300 Tcf of that gas since then, last year, the Potential Gas Agency estimated that we had 1500 Tcf in gas resources. Importantly, a study by Navigant Consulting published in July concluded the real number is closer to 2200 Tcf, primarily because we now know how to produce gas from gas shale economically. This would be 116 years of supply at current US production levels.
There also is the potential of methane hydrates. This is methane (which makes up about 90 percent of natural gas) trapped in ice structures found off of every continent. It is estimated by the US Geological Survey that there is twice as much energy trapped in methane hydrates than in all the oil, coal and natural gas in the world combined. The problem is that we don%u2019t know how to mine it — yet. But, keep in mind, we didn%u2019t know now to mine gas from shale 15 years ago, and now it%u2019s almost half our resource base. And the Japanese government forecasts that it will producing methane from hydrates within 15 years.
Oh %u2026 and then there is biomethane. Methane is produced when organic matter decomposes without oxygen, like in landfills or swamps. The US Department of Energy estimates that we could easily produce 1.25 Tcf PER YEAR of this renewable natural gas from just landfill gas, sewage and animal waste alone. This is equal to about 20 percent of the diesel fuel we use. There are a small but growing number of biomethane-to-vehicle projects already in operation in the US. The number could increase significantly. Importantly, in Europe, they have concluded that producing biomethane from cellulosic matter (crop waste and energy crops like switchgrass) is far more productive and less expensive than producing cellulosic ethanol. Cellulosic biomethane could provide a virtually inexhaustible supply of renewable natural gas.
Now to Mr. Nelson%u2019s points.
First, he quotes Mitch Jackson, Director of environmental affairs and sustainability at FedEx, that %u201CNatural gas, like oil (which produces diesel fuel and gasoline) is a fossil fuel which emits carbon emissions when burned.%u201D That is a true statement (although natural gas produces far less greenhouse gases when burned than any other fossil fuel). But then Mr. Nelson states that he supports continuing to burn natural gas for power generation. From a greenhouse gas reduction point of view, Mr. Nelson actually has the priorities backwards. There are many more options to reduce greenhouse gases from power generation than there is for vehicles, including wind, solar, biomass, nuclear, geothermal and, possibly, coal sequestration. As mentioned above, there are only two viable options today to displace diesel fuel in trucks and buses. Natural gas can reduce greenhouse gases compared to diesel, and, if biomethane is blended with natural gas, the greenhouse reduction can be much higher. The California Energy Commission ranks biomethane as among the most effective greenhouse gas reduction strategies.
Second, Mr. Nelson cites as among Mr. Jackson%u2019s %u201Cstrongest%u201D criticisms of the Pickens Plan the following: %u201CNatural gas, while plentiful within the U.S., is, like oil, a fungible commodity - meaning that it can be transported and sold in other markets that require natural gas - including foreign markets. So, no matter that the fuel would be sourced locally in the United States - its price and availability, again, like oil, would be influenced by foreign demand.%u201D That WOULD BE correct if America%u2019s natural gas producers had a way of shipping natural gas to, say, Japan. But we don%u2019t and we won%u2019t. That%u2019s why the price of natural gas in the US is about one-third of the world price. Right now, America produces about 86 percent of the natural gas use. We import about 12 percent from Canada (not because we don%u2019t have the gas here, but because it%u2019s less expensive to import Canadian gas to serve Northern markets than piping the gas all the way from Texas or Oklahoma). We also have several LNG terminals in the US to import liquefied natural gas from around the world, which accounts for the last 2 percent. But, except for one small facility in Alaska, there are no natural gas exportation facilities in the US or Canada. What that means is that we can export our natural gas by pipeline to Canada or Mexico (which have their own gas resources), but we can%u2019t ship it anywhere else. Which is great for American consumers since it is the supply and demand dynamics in the US that determines the price in the US %u2013 not foreign demand. And that won%u2019t change since the Administration and Congress would need to approve building export terminals. Congress just had a bitter battle over opening up the Outer Continental Shelf for oil and gas exploration and production. Do you think Congress or the American public would be happy if the gas that they find on the OCS (plus other on-shore gas) would be exported, and, as a result, US natural gas prices triples? That%u2019s why it the supply and demand dynamics in the US will continue to determine the price of natural gas in the US %u2013 not foreign demand. So, Mr. Jackson%u2019s point is incorrect.
Mr. Nelson cites a third point by Mr. Jackson as among the %u201Cstrongest%u201D criticisms of the Pickens Plan, namely that: %u201CTo use natural gas vehicles, we, as a nation, would have to build a completely new fueling infrastructure for vehicle fueling.%u201D Yes %u2026 so? It%u2019s a good thing that no one took this argument seriously when they started introducing the cell phone. The fact is that the same argument is true for electric and plug-in hybrid vehicles and, eventually, hydrogen. As the Pickens Plan folks tried to explain to Mr. Nelson, electricity and natural gas have the advantage of being delivered to most homes and businesses. What is needed then is a device to bring the electricity or the natural gas to the vehicles. The natural gas compressor is more expensive but the operating savings can more than pay for that (depending on the number of miles driven each year). Importantly, since the target for the natural gas vehicle industry initially is high-fuel use urban fleet vehicles (especially return-to-home vehicles), it is not necessary to replicate the 180,000 gasoline stations around the country. A very viable market for natural gas vehicles is being created with only a tiny fraction of those stations.
Fourth, Mr. Nelson states emphatically: %u201CNobody who knows what they are talking about really thinks it makes much sense to replace our dependence on one dirty fossil fuel with another.%u201D This statement is nonsense. First, the Pickens Plan does not advocate shifting all petroleum to all natural gas for vehicles. As mentioned above, there are no panaceas. We have to use all available options in the parts of the country and the applications where they make the most sense. A second issue is timing. From an energy dependence perspective, we have to move away from petroleum to something. We can wait until some magic solution comes along and do nothing in the meantime or we can more quickly to use domestic fuels available today. Natural gas is one of those. Third, what does %u201Cdirty%u201D mean? Greenhouses gases? If so, every alternative to petroleum (except nuclear — but including renewables) produces greenhouses gas if your measure greenhouse gases on a well-to-wheels (full cycle basis). This is the only way to measure and compare greenhouse gases. Burning natural gas does produce greenhouse gases, but it produces less than many other options including some renewables.
Finally, Mr. Nelson questions Mr. Pickens intentions. Yes %u2026 if the wind, solar and natural gas vehicle parts of the Pickens Plan were to become a reality, anyone who invested in those technologies and projects would make money %u2013 including Boone Pickens. I think it%u2019s fair to say that Boone Pickens enjoys making money. But he certainly doesn%u2019t need it. He%u2019s 80 years old and a multi-billionaire. Moreover, he%u2019s given away $700 million of his money to charity, and will be giving away a lot more. He passionately believes the Pickens Plan is needed and it will work. That%u2019s why he%u2019s investing his own money in wind and natural gas vehicle companies. Mr. Pickens is a patriot that wants to get America off of foreign oil, and sees his plan has the quickest way to achieve that. What would Mr. Nelson%u2019s criticism of Mr. Pickens if Mr. Pickens proposed his plan but did NOT invest in it? Probably something like %u201CWhy doesn%u2019t he put his money where his mouth is!%u201D
My main point in all of the above is that natural gas vehicles, while not a panacea (there is no panacea), have an important role to play in displacing petroleum vehicles while reducing urban pollution and greenhouse gases. Mr. Jackson made some allegations about natural gas and natural gas vehicles, and representatives of the Pickens Plan responded to address them. For their efforts, Mr. Nelson belittled them by stating: %u201CHow can you tell an argument has hit a little too close to home? The bad guys start getting defensive and squeamish.%u201D Putting aside who are the bad guys in all this, I thought one of the purposes of blogs was to get to the truth through participants give-and-take. If Mr. Nelson doesn%u2019t want anyone to question his positions, he should say so up front, and save everyone time and effort.
I’ll second that. The guy who wrote this article criticizing Pickens has baseless arguments which only serve to reveal his profound ignorance.