Hansen’s Oil Sands Facts are Lost in Space

To hear it from environmental activist James Hansen, development of the oil sands in Canada will usher in the apocalypse, “game over for the climate,” as he wrote in a recent New York Times op-ed.

It’s a frightening thought, but unfortunately for Mr. Hansen, it’s not grounded in realistic assumptions.

Of course, this isn’t the first time Hansen has proclaimed “game over” if the oil sands are developed. In June 2011, Hansen penned a letter calling the oil sands a “monster,” the development of which would mean “game over” in the global effort to control carbon emissions. Hansen wrote that the oil sands contain “at least” 400 gigatons of carbon, which would equate to adding about 200 parts per million (ppm) to the atmosphere.

But in his recent op-ed, Hansen now states that the oil sands contain 240 gigatons of carbon. What changed?

The reasons are likely numerous, but a significant one came from Andrew Leach, who pointed out last summer (right after Hansen published his letter) that to get the carbon content Hansen claimed, you’d have to burn 2.4 trillion barrels of oil – or about 40 percent more oil than the total in-place resources found in the Canadian oil sands. It’s worth noting that the new figure Hansen uses – 240 gigatons – is 40 percent lower than his original claim. Leach also noted that it would take until the year 3316 to get the amount of oil out of the ground that Hansen is referencing.

Moreover, total oil in place does not indicate how much oil will be produced. Although technologies are constantly evolving to allow for greater recovery rates, the oil sands in Canada are estimated to hold about 170 billion barrels of oil in proven reserves, with as-yet undiscovered, technically recoverable resources being pegged at about 320 billion barrels, or about 86 percent less oil than what Hansen suggested in his original “game over” model.

What’s even worse about Hansen’s doomsday scenario is the “solution” he offers to rectify it: a new tax on carbon that could raise energy costs for consumers, who might not be able to purchase as much, decreasing demand. Hansen specifically references “the reduction in oil use resulting from the carbon price” as something that would, somehow, “stimulate innovation, jobs and economic growth, avoid enlarging government or having it pick winners and losers.”

How a new tax to be collected and distributed by the federal government will “avoid enlarging government” is anyone’s guess.

Finally, Hansen assumes that efficiencies have completely flatlined and will not improve – a hypothesis that doesn’t even pass the laugh test, much less empirical evidence. As just one example, congressionally mandated increases in fuel economy through 2025 will substantially reduce U.S. gasoline consumption. This, combined with increased oil supplies from Canada through the Keystone XL pipeline, would allow the U.S. to reduce oil imports from unfriendly countries like Venezuela – with the added advantage of the environmental benefits pipelines offer over other forms of transportation.

In short, Hansen’s “game over” scenario suffers from significant flaws in its assumptions, and the fix he proposes for his wild projection could actually create additional and unnecessary economic pain to American consumers.

The truth is that development of the oil sands – and the approval of the Keystone XL – will create tens of thousands of new jobs, significantly grow the economy and further enhance America’s energy security. And as U.S. Secretary of Energy Steven Chu has said, companies developing the oil sands are “making great strides in improving the environmental impact of the extraction of this oil and will continue to do so.”

Not so frightening now, is it?

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Oil and Energy Security

The Congressional Budget Office has a new report out on energy security that’s sure to spark conversation.  Much of that will seem muddled and polarized – not because of the speakers, but because of the nature of the report itself.  Let’s start with its basic premise:

“One widely used definition of energy security – and the one used in this report – is the ability of U.S. households and businesses to accommodate disruptions of supply in energy markets. Households and businesses are ‘energy secure’ with respect to a particular source of energy if a disruption in the supply of that source would create only limited additional costs.”

CBO is correct that the cost of energy matters, but having actual energy also matters. The report notes, for example, that the U.S. lacks “alternatives” that can be substituted in large quantities for oil for transportation needs if there’s a significant global supply disruption or global price increase. This brings us to supply and demand:

“Policies designed to decrease the impact of increases in oil prices that persist for several years or more can also be divided into those that would increase the supply of oil or oil substitutes (such as increasing domestic oil production) and those that would encourage consumers to reduce their reliance on oil (such as increasing the gasoline tax or developing vehicles that are more fuel efficient or that use other types of fuel). Both types of policies would tend to lower the world price of oil, either by making more oil available to the world market or by reducing demand for it …”

There’s certainly a divide between those pushing for greater U.S. supply and those pushing for decreased U.S. demand.  But that’s a political divide. The energy reality is that we need both – a true all-of-the-above strategy.  

Still, political opponents of increased domestic oil and natural gas development (and increased U.S. supply) surely will seize on this line in CBO’s report:

“Policies that promoted greater production of oil in the United States would probably not protect U.S. consumers from sudden worldwide increases in oil prices stemming from supply disruptions elsewhere in the world,”

While ignoring what comes after the comma:

“even if increased production lowered the world price of oil on an ongoing basis.”

First, let’s note that even as CBO downplays the usefulness of increased domestic oil production, it acknowledges that increased domestic supply is, well, useful in the context of the world price of oil. As for the first part of CBO’s assertion, the fact is that more domestic production must result in one of two outcomes:

Greater supply on the world market resulting in greater crude and/or refined product storage; or Increased worldwide spare capacity

In either case, energy markets would be in a better position to weather a supply disruption without a major spike in prices. That’s not to say there would be no impact, but it would certainly help provide greater protection from such shocks.

Oil is a worldwide market for which the price is determined by supply and demand. What CBO is saying is that on an ongoing basis, increased U.S. supply could lower the worldwide cost and thus, on an ongoing basis, the price for U.S. consumers. CBO argues, however, that if there’s a sudden supply drop (see Libya last year) or even a possible supply drop (see Iran this year), there could be consumer price spikes regardless of the level of U.S. production. The problem with arguing this way against increased domestic production is that day-to-day prices also are an energy security argument. Yet, there also are day-to-day costs to reducing demand:

“Such policies would impose costs on vehicle users (in the case of fuel taxes or fuel-efficiency requirements) or taxpayers (in the case of subsidies for alternative fuels or for new vehicle technologies). But the resulting decisions would make consumers less vulnerable to increases in oil prices.”

In other words, let’s raise day-to-day costs for consumers to shield them from sudden increases in oil prices. New technology vehicles that remain out of the price range of most Americans aren’t much of an energy policy. But it’s really this next part that drives home the need for a real all-of-the-above strategy:

“An increase in crude oil prices would also have a permanent effect on the economy, as the increase in payments to foreign producers and owners of oil assets would represent a transfer of wealth out of the United States.”

But what if, instead of a negative permanent effect, we created a positive permanent effect by keeping that money here:

What if we took charge of our energy future by taking charge of supplying it? Combined with continuing efforts, led by the oil and natural gas industry, to reduce demand and find alternatives – that’s what energy security looks like.

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May 9, rig mechanic

by abdul razaq yusuf
(doha,qatar)

what does it reqire to be a rig mechanic for the first time,apart from having up to 20years of experience in the fild as a diesel mechanic.how does one obtain the safety trainnings if it is part of the basics?

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Job Creation To-Do List? Here’s Ours

Here’s the president talking about job creation Tuesday in Albany, N.Y.:

“Now, we know the true engine of job creation in this country is the private sector – it’s not Washington.  But there are steps we can take as a nation to make it easier for companies to grow and to hire, to create platforms of success for them -- everything from giving more people the chance to get the right training and education to supporting new research projects into science and technology.”

Sounds good. On job creation the private sector definitely is where it’s at. America’s oil and natural gas industry supports 9.2 million U.S. jobs and could do more – 1.4 million new jobs by 2030 with the right policies, according to a study by the Wood Mackenzie energy consulting firm.

Unfortunately, as the president’s speech went on, his emphasis tilted back toward faith in Washington, with a to-do list for Congress that included familiar items – including tax breaks for small businesses and wind and solar companies. The president:

“We can make a difference.  And at this make-or-break moment for America's middle class, there’s no excuse for inaction.  There’s no excuse for dragging our feet.  None … The truth is, the only way we can accelerate the job creation that takes place on a scale that is needed is bold action from Congress.”

Now, it’s a little odd to hear the president talk about excuse-making and foot-dragging on job creation when he’s the one standing in the way of the biggest shovel-ready project around: the Keystone XL pipeline. This private project would create jobs and help make America’s energy future more secure while sending billions of new dollars in revenue to governments.

Obstacles in Congress? Not with the Keystone XL. The president has the authority to get this project going. No congressional action is needed. Keeping the Keystone XL pipeline – and its jobs, energy and tax revenues – on the drawing board is on the president and no one else.

So, approval of the complete Keystone XL pipeline tops our jobs to-do list. Others:

Regulation – Restrain Washington’s tendency to overregulate. Needless, duplicative regulation is a job killer. Energy is a job-growth sector, especially in the area of shale development. Yet, a new hydraulic fracturing regimen just announced by the Interior Department, while improved from a preliminary version, could threaten shale energy’s game-changing potential by adding a layer of federal regulation in an area that’s already being well-regulated by the states. API President and CEO Jack Gerard during a conference call with reporters:

“It simply isn’t necessary to add a new layer of regulation on top of already competent management and oversight [by the states]. What is the need? ... The feds should not be in the process unless there’s a demonstrated need. … Why not learn from successful models in states like Wyoming instead of risking getting in the way of development?”

Taxes – Reject higher taxes on energy producers. We discuss the president’s energy tax-hike proposals here and here. The bottom line is that when the goal is job creation it makes no sense to raise taxes on a sector that’s hiring and creating economic growth.

Access – Allow greater access to U.S. resources – both by opening new areas for development and by eliminating unnecessary hurdles in places where development is occurring. Vast resources in Alaska and off our coasts remain off limits – and with them job growth that would accompany energy development. Meanwhile, oil and natural gas production in federal areas onshore and offshore is, at best, flat. Gulf of Mexico oil production is just now climbing back toward where it was a couple years ago – and well short of where it was projected, and expected, to be.

OK, so that’s a bit more than would fit on the president’s sticky note. But each of these is within policymakers’ reach, and each would put the onus for job creation where the president said it belongs, on the private sector – specifically on an energy sector that’s a proven job creator and eager to do more.

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Going Beyond Rhetoric on Natural Gas

Over on the White House Blog, there’s genuine enthusiasm for natural gas, and for good reason.  Natural gas is clean-burning, affordable and so abundant that a number of experts describe it as a game-changer, a 100-year energy source.

In the here and now, natural gas that comes from shale through hydraulic fracturing is lifting state and regional economies while revitalizing the U.S. manufacturing sector. Heather Zichal, deputy assistant to the president for energy and climate change:

“Since taking office, President Obama has supported an all-out, all-of-the-above strategy that develops every available source of American energy. A strategy that’s cleaner, cheaper, and full of new jobs. As part of that effort, the Administration has focused on expanding production of natural gas. After all, we have a supply of natural gas that can last America nearly 100 years. And this Administration will continue to take steps to develop this energy resource in a way that can help fuel our economy and, according to industry experts, support more than 600,000 jobs by the end of the decade.”

Zichal is right about the need to expand natural gas development. And it can be done, given the right policies. Eye-popping growth, job creation and industrial/manufacturing revitalization – occurring in states like North Dakota and Pennsylvania – can happen on a larger scale. With the right policies.

Unfortunately, the administration’s actions don’t always match its rhetoric. Although Zichal says the administration is “focused on expanding production of natural gas,” this is not occurring in the places where the administration has the most control of development: on federal lands. The chart below (Energy Information Administration data) shows that natural gas production on federal lands is declining – even as production on non-federal lands is taking off.

Certainly, the Interior Department’s approval this week of more than 3,600 natural gas wells on federal lands in eastern Utah is a move in the right direction. But then, Bureau of Land Management rules on hydraulic fracturing on federal and tribal lands threaten development with new regulatory hurdles. API President and CEO Jack Gerard, during a conference call with reporters:

“These rules are headed in the wrong direction. They would create superfluous, costly requirements, threatening jobs, revenue and energy production while providing little or no environmental or safety benefit. One must ask, where is the need?”

More Gerard:

“It takes 14 days to get a drilling permit to work on private land in North Dakota.  It takes more than half a year on average to get a federal drilling permit for development on federal lands.  A report by SWCA Environmental Consultants concluded that lengthy delays by BLM in reviewing projects in Wyoming put the development of an estimated 17,000 wells on hold.”

It’s good that the administration, at least rhetorically, is embracing the promise of natural gas. But reaping the blessings of this abundant resource takes more than cheerleading. It takes policy actions – policy restraint, in some cases – to turn natural gas’ potential into reality.

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