By Belton Zeigler
In a 2003 article titled “The Coming Energy Crisis?” the authors issued a dire warning: “By every measure of petroleum security or vulnerability that we have examined, the United States is as vulnerable, and in most cases more so, than at the time of the 1973 Embargo. Domestic production is about half, dependence on imports is 50 percent higher, the number of days that stocks can replace imports is 5 percent lower, and a larger percentage of imports is concentrated in a few suppliers.”
As recently as 2007, the Government Accountability Office issued a report on the future energy crisis that would result from reaching the event called “peak oil” — the point where U.S. production peaked and began to decline. The predicted result was sharply rising energy costs and widespread economic dislocation. And as far back as 1977, President Jimmy Carter issued somber warnings of the looming energy crisis of the 1980s. Energy, he said, was the moral equivalent of war.
Welcome to the energy crisis that hasn’t — yet — happened.
There were some very good reasons for these predictions. In this column I’ll survey the energy landscape of the past few decades, and the present. In my second, followup column, I’ll talk about what led us away from the long-predicted energy crisis and I’ll even take a stab at predicting the future myself.
The energy landscape of the past decade
Ten to 12 years ago, all predictions were that the United States’ energy economy would be in significant trouble in the latter half of this decade.
- Coal represented the cheapest and most important fuel for electricity generation in the United States — about 45 percent of all electricity generation at the time. But environmental concerns were killing coal.
- Environmental constraints were forcing utilities to retire even highly efficient older coal plants. New coal plants were impossible to permit.
- Natural gas was becoming increasingly scarce and expensive. The easy-to-find gas in Texas and the Gulf of Mexico was largely used up, requiring producers to drill deeper and more expensive wells at greater risk of failure. Production was not keeping pace with demand.
- The interstate pipelines that carry natural gas from the producing regions in Texas and the Gulf to markets along the Eastern Seaboard were reaching capacity.
- The Obama administration was committed to imposing sharp limits on carbon emissions to slow climate change. This was expected to increase the cost of using both coal and natural gas as a fuel. (Burning natural gas produces carbon emissions equal to about 60 percent of those from coal).
In response, energy companies were building or renovating port-side facilities to accept cargos of super-cooled natural gas in liquid form from foreign gas fields to support U.S. consumption.
There was talk, too, of a nuclear renaissance. An alternative was needed to coal and natural gas for electricity generation. Pushing utilities to build new nuclear plants was a stated goal of both the Bush IV and Obama administrations. In 2006, there were 18 initial applications for new nuclear projects pending at the Nuclear Regulatory Commission.
But the energy crisis of this decade never materialized.
Today, natural gas prices have fallen to about one-quarter of the price projected a decade ago. New liquefied natural gas plants are being built to export U.S. natural gas globally – not to receive foreign natural gas to supply U.S. customers as was the plan 10 years ago. The United States will become a net exporter of energy in less than four years, something not seen since 1953. After decades of off-shore exile, energy-intensive manufacturers and producers that rely on natural gas for feedstock (e.g., steel, aluminum, plastics, and fertilizer) are flocking back to the United States.
On the negative side, the nuclear renaissance is dead. Of the 18 projects in the permitting queue in 2006, only one may be yet constructed — the two-unit project that is still under construction today at Plant Vogtle in Georgia. The 17 others are gone. Existing nuclear plants, many of whose operating licenses were extended in recent years to serve customers for 20 or 30 more years, are being closed. Competition with natural gas-fired generation makes them uneconomical.
And so the energy crisis of the current decade has been replaced by a decade of abundant energy at prices that are far cheaper than anyone could have expected. In my second column in this series on infrastructure, I’ll explain why we haven’t experienced the energy crisis so many knowledgeable experts and conscientious leaders predicted.
And even though the great New York Yankees manager Casey Stengel said, “Never make predictions, especially about the future,” I’ll also attempt to make a general prediction about our energy future.
Belton Zeigler, a partner with Womble Bond Dickinson, has a practice focusing in the energy and natural resources sector, along with other crucial infrastructure components of our economy, including transportation and cybersecurity. Connect with Zeigler at linkedin.com/in/beltonzeigler.