- December 2010

Fortifying Our Energy Security

By U.S. Rep. Fred Upton, R-Mich., newly selected chairman for the House Energy and Commerce Committee in the 112th Congress, and former Energy Secretary Spencer Abraham

When the new Congress convenes, the central questions before it, and between Capitol Hill and the White House, will be how to improve America’s economy and maintain U.S. national security. The answers to both questions are, in no small measure, the same: We need to strengthen our energy security.

Without an affordable, sufficient energy supply, our economy cannot make the forward strides required to put the recession behind us. America’s economy has never grown at a strong clip without adequate supplies of reasonably priced energy — and this remains true.

Moreover, without affordable, domestic energy supplies, America is likely to continue to face the geopolitical vulnerability that comes from being at the mercy of other nations for such a disproportionate share of our energy supply.

Energy security must be at the top of Washington’s agenda, or we will continue to face serious economic and national security threats well into the future.

Fortunately, it is within our power to address these challenges. The United States remains blessed with large quantities of domestic energy supplies. The issue is: Can we take advantage of them?

Monday marks the 50th anniversary of the northeast corner of Alaska’s designation as the Arctic National Wildlife Range. This area, home to large quantities of natural resources, has been off limits to energy production.

We had a unique opportunity 15 years ago to change course and fortify our nation’s domestic energy supply. But it was derailed. In 1995, President Bill Clinton vetoed legislation that would have allowed environmentally responsible exploration for an estimated 10 billion plus barrels of oil in a tiny sliver of ANWR. This action deprived our nation of what could now be about one million barrels of oil per day—an amount that would allow us to reduce our imports by almost 10 percent.

And that’s not all. Astoundingly, huge percentages of additional U.S. oil resources remain off-limits to exploration. According to federal estimates, there is enough oil in deep waters many miles off our coasts and on federal lands to power more than 60 million cars for 60 years. In addition, if we advance the commercialization of the nation’s 2 trillion barrel oil shale resource, we could meet U.S. oil needs for more than two centuries.

If we are permitted to use our vast domestic energy reserves, prices would fall, new jobs could be created and the United States could achieve a greater level of energy security.

Inexpensive energy helped build our economy into the most powerful and prosperous in the world. High energy costs, along with growing dependence on foreign sources, take us in the opposite direction.

And, it is not just oil. We have not licensed and built a nuclear power plant in decades. Ignoring advances made in nuclear safety and the deployment of nuclear plants in the rest of the world, U.S. policymakers have thwarted development of nuclear energy despite its obvious benefits.

Nuclear plants are a terrific source of job creation and economic development. Expanding nuclear power could create thousands of good-paying permanent jobs and provide yet another domestic source of vitally needed energy.

Oil and nuclear are not the only energy sources we need more of. The current situation demands an “all of the above” strategy — diversifying our energy portfolio, and pushing development of our own natural resources. That means not just more oil and nuclear, but more coal, natural gas and renewables. Sooner rather than later.

Unfortunately, in the past two years Congress, along with Obama administration regulators, have promoted policies likely to push prices even higher, by creating disincentives for energy production in the United States. The glaring consequence of reducing new domestic energy production is greater dependence on foreign energy, coupled with higher commodity prices.

Enough is enough. The days of such policies must come to an end.

Congress has a duty to pursue a broad, visionary, comprehensive approach to energy security. Everything must be on the table. Neither our economy nor our national security can be adequately protected if we continue to declare various forms of energy, or areas of energy production, “off limits.” Instead, we need to pave the way for more nuclear power and for the extraction of more domestic natural resources.

If we do this, we can have adequate supplies of affordable energy and end the increasing demand for energy imports. If we do not, we will find our energy more expensive and less available. Our economy is likely to suffer and our growing dependence on foreign energy will jeopardize U.S. security.

The choice is clear. We owe it to all Americans to make the tough decisions and take the bold actions they expect and deserve. It is time to get back on track to protect our nation and expand our economy.

Special column by U.S. Rep. Fred Upton, R-Mich., who was elected chairman of the House Energy and Commerce Committee in the coming 112th Congress by House Republicans Dec. 7, and former Energy Secretary Spencer Abraham. This column originally appeared in Politico on Monday, Dec. 6, 2010.

European Energy Security: Natural Gas and Russia

Today in Europe the most important energy security issue is the region’s dependence on imported natural gas, which leaves Europe beholden to the political and economic interests and whims of its suppliers, especially Russia.

For Europe, natural gas imports today comprise about 46 percent of demand, while for the European Union (EU) gas imports account for about 59 percent of demand. Russia is a significant factor in these imports, providing about 25 to 26 percent of total gas demand for Europe and the EU. Although the International Energy Agency (IEA) expects slow growth in European and EU gas demand through 2030—about 0.7 to 0.8 percent per year—in absolute terms more gas will be necessary. Unfortunately, for Europe and the EU, internal production is declining, except for Norway, leaving Europe and the EU increasingly dependent on foreign sources.

As a sign of the significance of the issue, Europe and the EU’s natural gas dependence was highlighted at the 11th IAEE European Conference “Energy Economy, Policies and Supply Security: Surviving the Global Economic Crisis” in Vilnius, Lithuania.

Looking to the future, gas import dependence will likely grow rapidly. By 2015, European gas imports will increase to 49 percent and by 2030 to 66 percent. For the EU, gas import dependence will be even greater, reaching 69 percent by 2015 and 83 percent in 2030. A major difference between European and EU dependence is Norway, a part of Europe but not the EU. Norway, whose production is expected to increase through 2030, is a major gas exporter to the rest of Europe. European imports also come from North Africa (Algeria and Libya). Internal supplies come from the Netherlands and the United Kingdom, which are both experiencing declining production.

Dependence on Russian imports will increase as well, rising in Europe to 29 percent in 2015 and 36 percent in 2030. For the EU, Russia’s share of the gas import market will increase to an estimated 30 percent in 2015 and 38 percent in 2030. By 2030, Russia will be supplying more gas to Europe and the EU in absolute volumes than any other source, a terrifying prospect for today’s policy makers.

Still, Russian gas dependency differs considerably among European countries. Three countries, Finland, Macedonia and Slovakia, are completely dependent upon Russia for their gas supplies. Several others, Bulgaria, Greece and Serbia-Montenegro, are more than 80 percent dependent. Additionally, nine countries (Austria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia and Turkey) rely on Russia for at least 50 percent of their natural gas supplies. For Germany, France and Italy, Russian gas imports range from 20 to 36 percent, although the total volume that Russia supplies is substantial.

Most of future gas imports will be used for electric power generation, which is expected to grow faster than total gas demand. Europe’s emphasis on reducing its carbon footprint and the fact that natural gas is the least harmful of fossil fuels will result in more demand for gas in the future. As electric power demand continues to grow in the coming decades, natural gas will likely be the fossil fuel of choice rather than coal or oil. Europe is relying on demand reduction strategies and enhanced reliance on renewable energy to meet its climate change goals; however, gas will continue to play an important part of its energy strategy.

With the shift to natural gas, import dependency, especially reliance on imports from Russia, looms as a growing political issue. There are good reasons for the concern. In the past four years, European gas supplies from Russia were severely disrupted twice. In January 2006, Russia and Ukraine had a dispute over gas prices. Russia turned off its gas valves for several days, and Ukraine did not send on to Europe the gas transiting its country. As a result, Europeans froze. In January 2009, a similar Russian-Ukrainian gas dispute led to a two-week shutdown of the gas transit system. Europeans felt the frigid impact again until the dispute was settled, even though the EU was better prepared for this disruption. A minor dispute in Belarus in June 2010 did not lead to a disruption but was another reminder of constant problems.

Disruptions in Ukraine and Belarus are important since 80 percent of Russian gas exports to Europe go through Ukraine, with the remainder going through Belarus. Russia and Ukraine resolved their natural gas contractual dispute in April 2010 (two months after a pro-Russian government was installed in Ukraine); however, future natural gas pricing and other contractual disputes cannot be ruled out. These incidents underlie the concerns in Europe and the EU on increasing dependence on Russian gas. Where Russia used to be a reliable supplier to Europe, politicians and policy makers now view Russia with skepticism and uncertainty.

Both Russia and the EU are advancing different energy systems to solve the uncertainty.  Russia is proceeding with two different pipeline bypasses that would eliminate the need to cross Belarus and Ukraine. The northern pipeline bypass is Nord Stream that will transport gas from Russia under the Baltic Sea to Germany. The first of two lines is under construction and is expected to open in 2011, while the second line is expected to open in 2013 or 2014. The second pipeline system is South Stream that would originate in Russia and transport gas under the Black Sea to Bulgaria and, eventually, to the European gas hub in Austria. Russia continues to announce progress on South Stream. But its expense, in the $15 billion range, and the uncertainty in gas supplies, leave many in Europe skeptical of this system. Russia has another option: using the existing Blue Stream gas system from Russia to Turkey as a way of bypassing Ukraine and transporting gas to Europe. Blue Stream is underutilized, and using this system would require the cooperation of Turkey and other transit countries.

The EU is looking to the Caspian and the Middle East for potential new sources of natural gas, with the Nabucco Pipeline as the primary transportation system. This system is in the advanced planning stages; however, many obstacles remain, including gas supply sources, transit agreements and financing. Neither South Stream nor Nabucco are certainties.

In the meantime, Europe and the EU have been diversifying their gas imports by turning to liquefied natural gas (LNG). This allows access to a variety of sources in Africa, the Middle East and the North Atlantic. Using LNG can increase flexibility when demand is uncertain, and LNG facilities can serve as storage facilities, again enhancing flexibility during times of uncertainty.

As the EU and Europe look toward the future, several important questions must be answered: Will Russia again be a reliable partner or will it exacerbate the EU and Europe’s import dependence problems? Can the EU’s development of Nabucco be a part of the solution to future gas import uncertainty? Will Europe be able to develop its unconventional gas resources as the U.S. has done, allowing it to increase internal production while limiting future gas imports? Will LNG become a greater part of the diversification strategy, again limiting increases in pipeline gas deliveries? All of these questions raise interesting and important issues for EU energy security. Until more definitive answers are provided by key European, EU and Russian leaders, Europe and the EU will continue to worry about their future natural gas supplies.

Analysis by Abraham Energy Report Contributing Editor Leonard L. Coburn who spoke at and moderated a panel at the 11th IAEE European Conference “Energy Economy, Policies and Supply Security: Surviving the Global Economic Crisis.”

Lights Out!: Ten Myths About (and Real Solutions to) America’s Energy Crisis

In Lights Out! former Secretary of Energy Spencer Abraham debunks the myths that warp our current debate over energy, and offers new solutions to the real problems we face in America. Drawing on the very latest thinking from experts in industry and academia, he proposes a fresh approach to meeting our daunting energy threats.

This book effectively answers how America and the world can overcome the challenges of rising global energy demand, geopolitical disruptions of the energy marketplace, and the environmental impact of producing and using energy.

What emerges is a pragmatic energy strategy that calls for blending a variety of energy sources including nuclear, clean coal, solar, wind, and natural gas with a more determined effort at improving energy efficiency through the deployment of smart energy grids and buildings, to help meet our challenges while preserving our economy and environment.

Order the book on Amazon.com, barnesandnoble.com or borders.com.