 To the Point: Letters to the Editor - By Ken Silverstein Daily IssueAlert 5/9/2005 Free Dear Readers, With a new energy bill emerging that may or may not be signed into law by the fall, one area is often overshadowed in the whole debate: requiring cars to achieve greater gas mileage. In the bill to pass the U.S. House just recently, the Democrats tried to tack on a provision to require autos to get an average of 7.5 miles per gallon more, which some say would wipe out our dependence on Middle Eastern oil. We definitely have the technology to achieve that: just use smaller engines and cars, or electric-gas hybrids. The problem is that most Americans do not want to sacrifice performance for higher efficiency, although most of us would do just fine driving a smaller car to get to and from work. There are two basic ways to push us in the efficiency direction: government regulations and free market principles. Government regulations seemed to work in the late 1970s when it came to dealing with the oil crunch back then. But, free market economists say that Americans will switch their buying preferences in response to high energy prices. In essence, with more efficient options commercially available, let buyers choose how they want to spend their money and that will send the right signal to the manufacturers. In fact, one can argue this is already occurring because hybrid sales are increasing. 
Nuclear Plants and the Desalination Process 5.4.05 Congratulations on providing an outstanding article on this vital subject. We are now several decades behind in nuclear electric power production and I seriously doubt our ability to meet the demands that continue to mount. Transmission is also critical and inadequate action is being taken there. Nuclear is still the optimum method of electric power generation considering all of the concerns. It has been 50-plus-years since Shippingport went critical to pave the way, thanks to a great team, which included Westinghouse. Thanks for reminding your readers how foreign nations have made nuclear progress. Archie D. Fellenzer, Jr I would like to know whether anybody is working on the use of nanotechnology for desalination. At the outset it would seem that nanotechnology would be the ideal technology considering the paramount importance that desalination has in most parts of the world. At one stroke the water problem would be solved. A. Raja Rao Utility Recruitment: Overall Plans still Fuzzy 5.3.05 I retired from San Diego Gas & Electric after 23 years on Dec. 31, 2004. From my perspective, California utilities are not actively recruiting new employees and some are actively working to drive older and more experienced workers out of the companies. The holding company that owns SDG&E and Southern California Gas company, Sempra Energy, took over management of both the subsidiary utilities' pension plans when it was formed in 1997. In 1998 Sempra announced it was adopting a new "cash balance" pension plan. It said older workers would be allowed to stay in the utilities traditional defined benefit pension plans, and the new cash balance pension plans, and take their benefits from whichever plan paid the highest benefits at the time they retired. Then, when it announced the new cash balance pension plan benefit levels, Sempra "lowballed" the benefit levels of the older workers compared to the traditional plan by hundreds of thousands of dollars per worker. In June of 2003, Sempra froze the benefit of the older workers under the traditional pension plans. Since the new plans were adopted so late in their careers, the older workers could never work long enough to accrue benefits under the cash balance plans equal to what they had already accrued under the traditional plans, much less what they would have accrued had Sempra not frozen their traditional pension plan benefits. Facing years of work with no ability to accrue any additional pension plan benefits, thousands of utility employees are leaving the company, and Sempra has not announced any plans to replace them with younger workers, regardless of their skill levels. I believe that this bodes poorly for the financial future of SDG&E, SoCalGas and Sempra itself. Given this experience, I find your speculation about utilities' new employee recruitment plans pretty puzzling. To me, it looks more like they are actively working to discard their older more experienced workers. The pension "savings" they achieve by this unfair and potentially illegal behavior is then listed on their financial reports as "profits," which allows utility and holding company executives to receive significantly higher annual performance bonuses. Don Wood Gas Additives and the Controversy 5.2.05 Thank you for addressing "Gas Additives and the Controversy." I believe that an essential point missed in your discussion is simply—"gasoline additives are obsolete"! In the 1970s, with intense focus on clean air, the U.S. Environmental Protection Agency concluded that automobile exhaust emissions from carburetor engine designs could be reduced with improved combustion if an oxygenating agent was added to the gasoline (10 percent). Let's ask the question: "When was the last time car manufactures built a carburetor engine?" All cars today use fuel injected engine designs, and they have been sold for more than 20 years! Engine fuel injection is computer controlled with special oxygen sensors (in the exhaust), to adjust the fuel used to assure complete combustion—regardless of the additive in the gas! EPA's requirement for a clean air gasoline additive is obsolete! However ethanol, typically derived from fermented corn, has become a BIG political favor to the U.S. Midwest agricultural interests. Even with a tax incentive, ethanol adds 10 percent or more to the price of a gallon of gasoline. And, as ethanol has a lower Btu energy value, there is a measurable ~10 percent reduction in automobile mileage—you must burn more gasoline per mile! Therefore, the additive requirement (ethanol) costs you an additional ~ 50 cents/gallon of gas (@ $2.50/gal). Note also, an increase in fuel consumption may result in more emissions! To reduce your cost of gasoline, get rid of ethanol! It's time to ask your governor, and your congressman to cancel EPA's gasoline additive requirement! Keith Moore Oxnard, Calif. Be careful—the studies I've seen say that ethanol contributes to smog formation. That's why the folks who were promoting ethanol required the refineries to reduce the Reid Vapor Pressure (RVP) of the gasoline that was to be blended with ethanol, or else allowed the blend to get a waiver that allowed what would otherwise have been considered off-spec fuel to be sold because it had ethanol in it. One of the reasons California has petitioned for the elimination of the oxygenate requirement in gasoline is that they found out that ethanol did, in fact, increase pollution vs. MTBE. Since MTBE pollutes water, that leaves them without an acceptable oxygenate. Regarding pollution, some ethanol production facilities also emit air pollutants, so it's questionable at best whether using ethanol actually benefits anyone other than the farm lobby, ADM and Cargill. It would be interesting to see whether ethanol producers have to comply with the same emissions standards as oil refineries and coal-fired power plants. Anne Keller Jacobs Consultancy, Inc You use a 1.5 billion gallon figure for current ethanol consumption that is way off. In the next sentence you mention capacity at 2.8 billion, which is also off. I'm not sure what you think we do with the differential, we certainly don't export it. Now, if you meant that we use 1.5 billion as an OXYGENATE that is close to the right number. We currently produce 3.5 billion (approximately), with another 4-5 hundred million under construction. We consume almost all of that. Doug Durante Clean Fuels Development Coalition Ethanol production today is 4 billion gallons a year and expanding rapidly.
Coal: The Great Divide 4.27.05 As you are aware, the need to lower emissions is driving power plants to consider switching to lower sulfur PRB* coals or at least blending with PRB coals. A major hurdle to switching, and what drives much of the need for blending at many plants, are the increased problems associated with slagging and fouling. Our company has just received a patent (6,883,443) that will prevent slagging and fouling in the upper waterwall and convective pass for any coal used. We believe it will remove a major barrier to the increased use of low sulfur PRB coals. It can be retrofitted on existing boilers and in fact, we believe it can be used in original design to help standardize sizing new coal fired boilers. Terry Rettig Vice President Aptech Engineering Services, Inc. * Editor's Note: PRB refers to Powder River Basin coal One thing that you did not adequately discuss in your article on coal is the indirect, but very significant, cost of health effects from the whole process of mining, transporting and burning of coal. Just last week the Ontario (Canada) minister responsible for energy noted that he was persuaded that coal was too expensive (all things considered) to be used for generation of electricity. This was (partly) based on a newly-released report on the health/environmental impact of the use of coal. Sometimes we are being persuaded to ignore many of the important costs of doing things, usually by those whose personal stake is too strong for them to take the bigger view. Welcome to being humans; we are seldom objective. Jim H. White System Science Associates Ltd < Yes, but western is higher in mercury. C. Baird Brown Ballard Spahr Andrews & Ingersoll, LLP Philadelphia, Pa. I appreciate your observations regarding the coal industry and trade-offs between use of eastern (Appalachian) and western (Basin) coals. However, one additional observation may be necessary to round out the reader's understanding of these matters. Existing utility boilers that have been designed to utilize high Btu, lower moisture content Appalachian coals may not be able to use Basin coals without costly design modifications. Although improved rail transportation systems may facilitate construction of new generators in eastern states that are designed to use Basin coal, we should not expect to see a large near-term shift to use of western coals by eastern electric generators. Bruce R. Oliver President Revilo Hill Associates, Inc. A competitive advantage the United States has, and should have for some time to come, is its coal. The problem is how to use it cost-effectively to keep the environmental lobbies happy and prevent deterioration of air quality (not necessarily the same thing). The country has spent a lot of money on clean coal technologies; many are viable, but there is resistance. The problem is that most of the clean coal technology solutions are capital intensive. The regulated utilities worry about that because they don't trust the regulators to protect them. The merchant plants have a hard time going with capital intensive solutions. Throw in a little "we've never done it that way" intransigence, and they don't happen. The coal industry really shot itself in the foot in the mid-1980s, mistakes that made the natural gas boom of the 1990s possible. Some readers will remember that the original clean air legislation had sunset provisions. The electric utility industry lobbied the Reagan administration hard not to re-enact the legislation. It dragged out longer and longer, making it inevitable that only easy and quick to build gas plants would get built when finally the new rules were established. The coal industry had decided to be "team players" with the electric utility industry, when really their self-interest would have been to have pushed for early re-enactment. Some people saw that, at the time, and commented on it, but most ignored it. The result was that when the rules had been set and utilities and independents were comfortable with the new stability, it was too late to build coal plants. The need was "now" and coal is not "now," it's seven or 10 years from now. Of course, with gas under $2.50, gas is a no-brainer. The capital costs are half what a coal plant would go for, if not less, and the Btus cost differential was not enough to put coal in the game. So, we had our own "dash to gas." Even so, coal still generates about 50 percent of our electricity, and does so at very effective prices. Energy costs are important to an economy, more important than economists seem to understand. We need cost-effective energy, and we still have a lot of coal. Gas makes sense in crowded, ecologically challenged areas. Coal makes sense on a large scale, and relatively isolated. We can get both fuels to most parts of the country, although coal is more constrained than gas. In my view, the government should set a fair set of rules, and then get out of the way. The emphasis should be in keeping our economy strong while protecting the environment. It's not as difficult as it sounds. We're smart. We can do it. Zach Allen President Pan EurAsian Enterprises Energy Bill Emerges 4.25.05 Any thought that increased domestic production will result in any meaningful reduction in foreign oil dependence is very shortsighted at best. It is basically 1960s thinking. If all potential sources of domestic oil (Atlantic, Pacific and Eastern Gulf coasts, ANWR and BLM and NFS lands in the Rocky Mountain states) were fully exploited, at current consumption rates we would only achieve independence for a few decades at most. Given that no viable alternative energy technology is presently on the radar, meaning it's at least 50 years off, we could be totally dependent upon foreign sources within 20-30 years. The true depth and breadth of our economic and technology dependence on petroleum should be of the highest concern to those who believe they are planning our futures. BTU input is rapidly becoming the determining cost factor in pricing in every sector of the commodities, durables and consumer goods and materials sectors of the economy. Hugh Scott Good article as usual, but there are some errors. The wind PTC is equal to 1.5 cents per kWh and the wind industry's contracts range from 4 - 6 cents—so in no way does the PTC exceed costs that they get paid for electricity. In terms of the CBO projections on the Bill—cumulative from 2005-2015 for conventional energy: $7.675 billion (oil, gas, nuclear, electric utilities); for energy efficiency (fuel cells, and energy efficient improvements to existing homes): $397 million and solar residential $18 million or a grand total of $415 million revenue loss over 10 years. Scott Sklar President The Stella Group Last week Congressman Sherwood Boehlert, R-N.Y., voted against the energy bill. His House science committee had detailed significant research and development initiatives for sustainable and renewable energy and energy efficiency as their legislatively mandated component in HR 6 as a scientific and strategic imperative. Unfortunately, HR 6 fails to offer a near-term and effective means to capitalize on such research in order to gain national energy security and independence. Prioritizing national energy strategies and funding levels is a Herculean task for the Congress. The importance and necessity of alternative energy is being overshadowed in HR 6 by continuing to rely on finding newer and better ways to develop coal, oil and natural gas and providing additional tax breaks for traditional fuel sources. It is time to find similar opportunities for sustainable and renewable energy. HR 6 perpetuates history by continuing to subsidize the fossil fuel industry, which on the whole has given short shrift to effective energy efficiency standards. Likewise, the Biorefinery in New York, a sustainable and renewable energy project, is a promising, strategic emerging industry that merits equal advantage. The Biorefinery in New York is a process that uses woody biomass to naturally and efficiently produce ethanol to extend gasoline and make it more environmentally benign, produces sustainable commodity and industrial chemicals like levulinic and acetic acid and biodegradable plastics with wide-ranging applications. The United States must finally face the rather grim realities that fossil fuels are neither renewable nor sustainable. Today even many of the most conservative energy analysts are projecting passing a point of diminishing returns for petroleum feed stocks by 2037. Therefore, we most strongly urge all of New York State's elected leadership to support significant additional and sustained funding for research, development and commercialization of renewable energy sources including accelerated application of New York's abundant, renewable woody biomass resources. Admittedly, HR 6 does some of that; but HR 6 still allocates the vast majority of research and development funding to fossil and nuclear fuel programs. Michael R. Brower Director, Community and Government Relations State University of New York Re: The debate over requiring 7.5 more miles per gallon: I have trouble believing that GM is any more interested in better car technology now than they were 30 years ago. More recently, they had a chance to invest in hybrid technology but chose not to because they said it didn't make economic sense. (Just like it didn't make sense to make smaller, fuel efficient cars prior to the 1973 Arab oil embargo!) Re: Arctic National Wildlife Refuge: If the stats are valid—import needs would only drop by 3 percent—it hardly seems worth the risk. That's unless, of course, you own those wells and the profits are flowing into your wallet! I'm not an environmentalist; just a realist! My view is that humans are just as much a part of the environment as anything else. Creatures (including humans) that are destined for extinction for environmental and/or other reasons will become extinct no matter how hard we try to bend nature's path to our liking and prejudices. Whatever mitigation measures might appear to be effective in the short term (like transplanting Harbor Seals), in the long haul Mother Nature ALWAYS wins. Mike Marullo New Orleans, La. Canada's Kyoto Commitment 4.20.05 Quote from your article: “Many scientists blame the increase of the earth's temperature of 1.1 degrees Fahrenheit over the last century on the increase in carbon dioxide (CO2) emissions. If the temperature calculations are correct, the hike would be greater than at any other time in the last 1,000 years and one that many argue could only get worse if CO2 emissions are not tamed. A 2004 study in the journal Nature found that more than 1 million species could be extinguished by 2050 if the rise in temperature is not curtailed.” OK, I've had it with this kind of garbage. Silverstein seems to be on an agenda he hiked right out of Popular Science magazine (better titled “Politically Popular Science”). Let's examine some FACTS.
This is not science, but political science. In other words—get off the bandwagon—it doesn't fit you well to just repeat garbage data you have not taken the time to research. There are enough issues to deal with without perpetuating theoretical myths. Predicting the extinction of species is an art that should be left to liberal tree huggers. Perhaps you should limit your magazine reading selection. Perhaps UtiliPoint should limit its editorial space, so you'd be forced to stick to facts instead of conjecture. You write many good articles—don't taint your record with this kind of junk. I cancelled my subscription to Popular Science. Steve Apple Sales Director TiPS, Inc You state, as though it were fact that the earth's temperature has gone up 1.1 degree Fahrenheit in the last century. That statement would certainly generate discussion since I think that is less than a "fact" and more of a supposition by those who want ammunition to require change. There are MANY possibilities for an increase and while CO2 is certainly one of them, it is not the only one. IF you understand/accept THAT, then the cost of implementing the Kyoto protocol is even more expensive across many fronts. A difficult issue that throwing big sums of money at, when it is such an unknown, is a questionable approach. Competition with the low labor rate countries will make Canada's competitiveness unlikely. Dan Bartel I really enjoy reading your great newsletters on energy. The latest on Canada was excellent. I suggest you consider a piece on ocean energy. John W Roulac Founder and CEO Nutiva Stock Options May Lose Cachet 4.19.05 Your recent article summed up the issue well—if a value can be assigned to stock options in order to deduct them from taxable income, a value can be assigned for financial reporting. If companies don't want to expense options, they shouldn't have to—as long as they don't try to expense them for tax purposes as well. We hear a lot about how tough the job market is now in high tech—it's hard to see why it's essential to keep giving employees options in order to keep them now. Anne B. Keller Senior Consultant Jacobs Consultancy, Inc. Climate Change: Why the U.S. is Still a Leader * 4.15.05 I am a professional working within an energy trading organization in the U.K. I read you article with great interest as I led the team responsible for the implementation of the Emissions Trading processes and platform for my company in response to the E.U. ETS. Whilst I perceived the article as rather "chest beating," I did agree with some of the points raised, for example the fact that Europe has espoused its ETS as if it were the first in the world—obviously not the case. My company has interests in the U.S. too and I am aware of the market that exists in the U.S. What I found difficult to swallow was the rather misguided references to the motor industry in the U.S. Any growth in environmentally friendly forms of transport has been more than offset by the recent preponderance of SUVs (Socially Unacceptable Vehicles) in the U.S., which has led to a dramatic and unacceptable rise in pollution through mobile sources. Average engine size in the U.S. is huge by comparison to its European counterparts—my own car is a 1.1 liter engine with excellent fuel economy and emissions outputs and gets me from A to B in comfort. The U.S. should maybe consider applying high duty on fuel to encourage drivers to reduce engine size. I understand that fuel in the more expensive U.S. states is around $2 per gallon, whereas in the U.K. fuel is 3 times that at around $6 per gallon. Additionally, there are loopholes that exist allowing for lower fuel economy on SUVs (harking back to the 70s when most trucks in the U.S. were for business usage) —this does nothing to suppress the growth in the SUV culture. I too am skeptical of the benefits of Kyoto, however what is most important about Kyoto is what it represents—a unified acceptance that something must be done to combat global warming and whilst Kyoto itself may not be the answer, it does put global warming on the agenda. You also point out that Kyoto does not go far enough, but if it was that easy then why did America withdraw and turn its back on the rest of the world? If what you say is right and the U.S. is indeed "leading" the world in the reduction of emissions, then so it should given that a nation containing just 4.5 percent of the global population is contributing to 22 percent of carbon emissions. Matt Gunn Project Manager The emphatically worded opinion piece on Climate Change by Mr. Fusaro reflects how many of us feel in the energy industry; that is, we feel that the U.S. can be a leader if it puts its mind to it. The difference may be in how far we see ourselves from that occurring. The crux lies in the article's admission that federal action has been lacking. The U.S. enjoys one of the highest per capita energy consumption rates in the world. One can argue that being a leader in energy consumption creates a challenge for those that see the U.S. becoming a leader in Climate Change. Is it possible to be a leader in both? Is the average voter willing to support the Climate Change agenda if it means higher energy costs to consumers? Uwe Roeper President ORTECH Consulting *Article written by Peter Fusaro, Chairman, Global Change Associates Miscellaneous Ken, you should add the new Secretary of Energy to your mailing list ... he could learn a lot from you. Patrick D. Mulcahy President Team China/California Read your article everyday. Excellent work! Patrick Zeka Vice President U.S. AgBank, FCB UtiliPoint's IssueAlerts are compiled based on the independent analysis of UtiliPoint consultants. The opinions expressed in UtiliPoint's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. UtiliPoint's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2005. UtiliPoint International, Inc. All rights reserved. |
