A few days ago, June 29, 2017, President Donald Trump made a speech at the US Department of Energy during which he announced six new energy initiatives for the US. I have written, and made speeches (1), on many of these same issues, and take this space today to write some thoughts on these. I hope that Energy Secretary Rick Perry, and President Trump take the time to read these. Perhaps some of SLB readers can forward this to them.
In summary, nuclear power can never be economic; US coal reserves cannot be mined profitably for more than 20 years at the present prices; US oil is far too valuable as a strategic resource for military use and must be kept ready for a prolonged world war; natural gas is abundant and therefore low-priced, however exporting LNG will increase the domestic price and erase our competitive advantage. Each of these is discussed in more detail below.
The six items listed by the President are:
1. Nuclear Energy revival and expansion
2. Coal power plants - financing overseas plants and selling coal to them
3. Oil pipeline to Mexico for oil sales
4. LNG sales to Republic of South Korea
5. LNG exports from Louisiana
6. Oil and Gas offshore leasing in new areas formerly off-limits
The speech's text includes the following:
[President Trump:] "Today, I am proudly announcing six brand-new initiatives to propel this new era of American energy dominance. First, we will begin to revive and expand our nuclear energy sector -- which I’m so happy about -- which produces clean, renewable and emissions-free energy. A complete review of U.S. nuclear energy policy will help us find new ways to revitalize this crucial energy resource. And I know you're very excited about that, Rick.
"Second, the Department of the Treasury will address barriers to the financing of highly efficient, overseas coal energy plants. Ukraine already tells us they need millions and millions of metric tons right now. There are many other places that need it, too. And we want to sell it to them, and to everyone else all over the globe who need it.
"Third, my administration has just approved the construction of a new petroleum pipeline to Mexico, which will further boost American energy exports, and that will go right under the wall, right? It’s going under, right? (Laughter and applause.) Have it go down a little deeper in that one section. You know, a little like this. Right under the wall.
"Fourth, just today, a major U.S. company, Sempra Energy, signed an agreement to begin negotiations for the sale of more American natural gas to South Korea. And, as you know, the leaders of South Korea are coming to the White House today, and we've got a lot of discussion to do. But we will also be talking about them buying energy from the United States of America, and I’m sure they’ll like to do it. They need it. Thank you. (Applause.)
"Fifth, the United States Department of Energy is announcing today that it will approve two long-term applications to export additional natural gas from the Lake Charles LNG terminal in Louisiana. It’s going to be a big deal. It’s a great announcement.
"Finally, in order to unlock more energy from the 94 percent of offshore land closed to development, under the previous administration, so much of our land was closed to development. We're opening it up, the right areas, but we're opening it up -- we’re creating a new offshore oil and gas leasing program. America will be allowed to access the vast energy wealth located right off our shores. And this is all just the beginning -- believe me.
The golden era of American energy is now underway."
Sowell Commentary
1. Nuclear Energy revival and expansion
The President said, ". . .we will begin to revive and expand our nuclear energy sector -- which I’m so happy about -- which produces clean, renewable and emissions-free energy. A complete review of U.S. nuclear energy policy will help us find new ways to revitalize this crucial energy resource."
The nuclear power industry is beyond help. The very nature of nuclear power from fission required certain design decisions - and still requires them - to attempt to produce power that is sufficiently safe, fairly reliable, and at sufficiently low cost to compete with other sources of electricity. The nuclear engineers are well aware of the issues, and took appropriate steps in every phase of the design and regulatory process to do their very best to meet the goals stated above. Yet, even with the best engineers and helpful regulators, they failed. I have written long and often on the various merits and failings of nuclear power, in particular the 30 articles on SLB of The Truth About Nuclear Power (2). There are many other articles besides the TANP series, also (3).
The essence has two things: first, that nuclear power by fission of uranium has inherent physical constraints that do not permit high efficiency (4). Because of this, the plants must produce and circulate a greater amount of steam to the turbine, which causes the generating side of the plant to be much larger and therefore more expensive. The second is the hazardous nature of uranium fission that requires multiple layers of expensive safety systems. Nuclear plants require three layers of containment: the fuel rod contains the uranium pellets, the reactor contains the fuel rods, and the air-tight containment building contains the reactor. There are, therefore, three physical barriers to uranium and the high-energy radiation particles emitted. The three are the thin metal wall of the fuel rod, the thick alloy steel wall of the reactor, and the very thick concrete and steel containment building. In addition to the three barriers, a meltdown has such serious consequences that multiple reactor cooling systems are required by regulations. Finally, the consequences of radiation release from an enemy missile or large aircraft impact are very great. To minimize such risk, all new designs in the US must have hardened designs for the reactor, the spent fuel storage area, and the plant's cooling systems. All of the facts above force the cost to build a nuclear plant ever upward, to the point that a nuclear power plant, output for output, costs ten times as much as a modern natural-gas fired power plant. (facts: a 1000 MW gas-fired power plant in Lordstown, Ohio costs $1000 per kW output, while the nuclear plants under construction in Georgia at the Vogtle site now cost at least $10,000 per kW. The Vogtle nuclear plants are more nearly $12,000 per kW)
No future reactor designs, and there are a great many that are or were under consideration, have any hope of reducing the cost to construct. This is true in other countries also, in particular Finland, France, and UK where the latest and most modern designs are under construction. It is said that China is building nuclear plants for far less cost, and that may be true given their much lower wages and materials costs. It is not likely that the US would import Chinese workers and pay them Chinese wages, though. Such alternative designs are described in detail on SLB, including Small Modular Reactors, Molten Salt Thorium Reactors, High-Temperature Gas Reactors, Fusion by magnetic pinch, and Fusion by laser implosion (5) (6) (7) (8).
2. Coal power plants - financing overseas plants and selling coal to them
". . .barriers to the financing of highly efficient, overseas coal energy plants. Ukraine already tells us they need millions and millions of metric tons right now. There are many other places that need it, too. And we want to sell it to them. . . "
Coal is also a frequent topic on SLB (9). The essential fact is that coal-fired power plants in the US cannot compete in the electricity markets with the coal coming from the mines at present prices. Coal mining is just about as efficient and low-cost as it is likely ever to be. Existing coal-fired plants must spend $millions to install pollution abatement equipment. New, modern coal-fired plants cannot obtain a reasonable return on investment and are therefore not being built at all. There is a great amount of coal still in the ground, but no mining company can produce it at a profit. The choices are then to subsidize coal production or subsidize the pollution abatement portion of new coal-fired plants in the US, or both.
What President Trump is apparently advocating is selling US coal at higher prices to overseas customers. That is indeed curious, since the US would then be competing with coal from Australia. However, there are countries that do indeed need coal. India is one, China another, and Ukraine is mentioned by the President. However, the US coal mines have already produced the low-cost coal. What remains must be sold at a higher price to be profitable. If the overseas coal consumers are willing to pay that higher price, and the cost of shipping, then good for them. The end result, though, is that coal-fired power plants in the US will continue to close as they cannot justify the capital investment to meet pollution standards. The clean air act exemption for grandfathered coal fired power plants has ended (10).
3. Oil pipeline to Mexico for oil sales
". . .has just approved the construction of a new petroleum pipeline to Mexico, . . ."
What a reversal of fortunes. It was not many years ago that Mexico exported oil to the US. It makes temporary sense, though, to export oil from Texas oil fields to Mexico. SLB has an article on the huge Wolfcamp oil field in West Texas. (11)
The greater question, though, is the wisdom of exporting oil at all from the US, to any country. As written before on SLB, the US and our allies won World War II in large part because of the oil reserves in the US. Not that much has changed in 70 years, even though there are a few nuclear-powered ships and submarines in our Navy. The other ships depend on oil, and all the Air Force jets depend on jet fuel from oil. The same is true for the Army's vehicles and tanks, they need diesel fuel from oil. It would indeed be a sad day for the US to be in a world war, have oil supplies from other countries cut off, and wonder where all that oil went that at one time was safely under the surface in the US. "Well, we exported it to Mexico. It seemed like a good idea, at the time."
Mr. President, please ask any of your senior military advisors about how they would proceed to win a prolonged war, without any domestic oil. Their answers should be quite sobering. The fact is, no nation can win any war without oil. Ask the military historians how long Japan could have held out with their oil almost depleted. The same for Germany. Ask the historians and military strategists why control of oil is such a crucial element in winning a war.
4. LNG sales to Republic of South Korea
5. LNG exports from Louisiana
These two are both about liquefied natural gas, LNG, so will be combined for the comments.
". . .sale of more American natural gas to South Korea, [and] export additional natural gas from the Lake Charles LNG terminal in Louisiana."
The ramifications of selling US-produced LNG to overseas customers should be carefully examined. World prices for LNG are many times higher than US prices, on a dollar per Btu basis. LNG exporters hope to sell into those markets and reap much higher rewards. But, the impact on domestic natural gas prices will be an increase. Electricity from gas-fired power plants must necessarily increase in price as the gas price increases. Commercial users of natural gas, and residential uses also will be adversely impacted. It is not a Make America Great Again moment to enrich the few at the expense of the many.
It is also a solid fact that American process plants have been, and are still being built to process gas liquids (ethane and propane) from the abundant natural gas production in the US. Those process plants depend on having relatively low-priced feedstocks. That pricing advantage would evaporate as natural gas prices increase with LNG sales overseas.
6. Oil and Gas offshore leasing in areas formerly off-limits
". . . from the 94 percent of offshore land closed to development, under the previous administration, so much of our land was closed to development. We're opening it up. . . "
Mr. President, as I wrote above, it is a serious error to produce and sell off the oil from US lands. Every President since Truman has known the fact of oil and winning a war. That is why the offshore areas are closed to exploration and drilling. There is, of course, the extensive drilling in the Western Gulf of Mexico offshore Louisiana and Texas. And, a bit of the California coast was available for drilling for a while. We know there is oil offshore in the off-limits areas, and we have a rough idea how much oil is there. We don't need that oil.
But, to be fair, there may be larger, geo-political implications. (12) Consider if the US did produce enough oil to drive down the world price of oil, down to half of the present price or even lower. Russia, a major oil exporter, would have much less revenue. Middle East countries would also suffer. Perhaps that is the goal.
I hope that the need for sufficient oil for a future world war is given careful consideration, Mr. President.
Roger E. Sowell, Esq.
Marina del Rey, California
copyright (c) 2017 by Roger Sowell - all rights reserved
Foot Notes and links:
(1) see link Speech on Peak Oil and US Energy Policy, R. Sowell
(2) see link Truth About Nuclear Power - Part 30; Conclusion
(3) see link Vogtle Nuclear Plant Costs Increase
(4) see link Cannot Simply Turn Off a Nuclear Power Plant
(5) see link No Benefits from Smaller Modular Nuclear Plants
(6) see link Thorium MSR No Better Than Uranium Process
(7) see link High Temperature Gas Nuclear Reactor Still A Dream
(8) see link Power From Nuclear Fusion; Magnetic Pinch and Laser Inertia
(9) see link Various Articles on Coal on SLB
(11) see link President Trump and the Future of American Oil
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