A Serious Proposal on US Energy
“My policy on cake is pro having it and pro eating it.” – Boris Johnson
On March 30, 1949, Syrian President Shukri al-Quwatli was ousted in a military coup backed by the Central Intelligence Agency (CIA), a first for the newly formed spy organization. Despite being twice elected to his position, Quwatli had to go because he was uncompromisingly opposed to granting transit rights to the Trans-Arabian Pipeline project (TAPLINE), then a critical centerpiece of US energy strategy in the Middle East. The proposed pipeline was to carry oil from the prolific fields of Saudi Arabia through Jordan, Syria, and Lebanon, where it could be exported via a terminal in Sidon. Days after the coup, the project was approved by the newly installed Syrian leadership. Construction of the pipeline was completed a year later.
The story of TAPLINE is the opening narrative in Charlotte Dennett’s gripping book Follow the Pipelines: Uncovering the Mystery of a Lost Spy and the Deadly Politics of the Great Game for Oil. What begins as a journey of discovery into the suspicious death of her father in 1944 (himself a US spymaster) evolves into a justifiably cynical retelling of modern geopolitical history through the lens of the competition for energy. Whether it be the wars in Afghanistan, Iraq, Syria, or Yemen, Dennett argues persuasively that the real motivations of each centered on the need to secure and transport oil and natural gas.
It is clear from reading such work that the highest levels of the US government had, at least until quite recently, a deep appreciation for the direct connection between energy and economic power, so much so that irresistible ends justified all manner of unspeakable means. We are certainly not here to defend the realpolitik tactics of past administrations, but we would be remiss if we didn’t point out that at least some of their perceived urgency to secure access to international resources arose from the widely held belief that the US had reached peak domestic oil production in 1970. It is easy to forget that Hubbert’s peak oil theory was virtually religious dogma among policy heavy hitters for several decades and, until the shale revolution, they had data on their side.
But the shale revolution did happen. The US, Canada, and Mexico have enormous proven energy reserves and the technical know-how to become the dominant energy-producing region on the planet. We can do so cleanly, safely, and domestically – reducing the strength of our geopolitical enemies and simultaneously creating high-paying jobs, providing a significant and durable competitive advantage to our manufacturing base, and increasing the standard of living of our population and that of our allies. Russia’s invasion of Ukraine and the subsequent economic destruction of Europe due to an energy crisis of their own making should serve as a serious wake-up call to North America’s political establishment. Instead of seeking to replace our energy reliance on one dictatorship (Russia) with three others (Venezuela, Saudi Arabia, and Iran), we should be looking inward for the answers to our problems.
It is time to get serious about energy. Here’s how Doomberg would do it…
Priority 1: Seduce Natural Gas Investment
America has spectacularly large and economically accessible deposits of natural gas. Given the crisis we face today, natural gas – which can be used to produce electricity, heat our homes, feed our domestic fertilizer plants, and enable the production of high-value polysilicon needed for solar cells – has to be at the core of our revitalization strategy.
EQT is the largest natural gas producer in the US, and their CEO Toby Rice had this to say when he appeared on Alex Epstein’s podcast Power Hour (emphasis added throughout; you can follow Epstein on Twitter here):
“Right now, the amount of inventory that we have in the US is really just dependent on the price that we receive. We have a very large inventory that can be economically produced at a $1.50 to $2 gas price. But when you get to $3, $3.50, $4, the amount of inventory that can actually be developed and generate a decent return for our shareholders multiplies almost exponentially. So, if gas prices long-term were $4.50, which by the way is the average price of gas over the last 20 years, there is no concern that we would be able to power the world with American domestic natural gas and really insulate energy demand from extreme price shocks, but we need the tools to be able to do that and that's pipelines and LNG export facilities.”
Moments later, Rice identified the key problem that needs to be solved:
“You're in a situation today where I think it's very hard pressed for companies to be incentivized to go out and develop this large scale infrastructure that this country needs, this world needs because of the regulatory uncertainty and just the pressure we get from anti-fossil fuel, keep-it-in-the-ground groups that are out there.”
President Biden should do everything in his power to accelerate regulatory approval of critical pipeline projects that are constraining natural gas production. He should work with Congress and rewrite laws to allow fast-track approval of developments identified by the industry as important priorities, like the Mountain Valley, PennEast, and Atlantic Coast pipeline projects. It is time to put an end to nuisance lawsuits, regulatory inertia, and environmental radicalism.
It borders on criminal negligence that much of the Northeast burns oil to heat their homes. In addition to the pipeline projects described above, the President should work with Congress to amend the Jones Act to create an exception for LNG carriers. This simple move – which would undoubtedly garner near-unanimous support from both parties – would allow the Northeast to source its natural gas from LNG export terminals based in the US. Systematically retrofitting homes to convert from oil to natural gas for heating would be expensive, and the President would have to break the union stranglehold on the region’s home heating infrastructure, but doing so would reduce our carbon footprint while strengthening our energy security.
Priority 2: Reclaim a Leadership Position in Polysilicon
With the natural gas industry unleashed, the President should make co-located production of polysilicon another national priority. The US blundered into allowing China to secure a dominant position in this critical market, and it is time to reverse that error. Making solar cells is incredibly energy-intensive, and cheap natural gas is the ideal feedstock. There’s going to be huge demand for solar in the decades ahead, and the only thing stopping the US from being the preferred global supplier is a lack of polysilicon production capacity. It is hard to imagine there would be much opposition to this from either party. The drill-baby-drill crowd gets a new market for domestic natural gas, and the environmentalists get a home-grown ESG industry.
Priority 3: Recommit to Nuclear
The President should work with Congress and various state leaders to halt all planned nuclear electricity plant closings, invest substantial sums in maintenance and life-extension of the existing nuclear fleet, and embark on a massive buildout of advanced nuclear reactors. In particular, he should work to accelerate the development and deployment of small modular reactors (SMRs), which are safer, cheaper, and quicker to bring online than traditional nuclear power plants. For an introduction to SMR technology, read this explainer by the Australian Nuclear Science and Technology Organisation (ANSTO), or listen to the latest Decouple podcast with host Dr. Chris Keefer.
Priority 4: Course Correct EV Adoption
Finally, the President should work with the automotive industry to pivot from a focus on full battery electric vehicles (BEVs) to plugin hybrid electric vehicles (PHEVs) instead. There simply aren’t enough battery materials available to support the conversion of a substantial portion of our automotive fleet to full electric. If battery materials are the constraint, we must manage to that constraint. On a gallon of fuel abated per kWh of battery basis, PHEVs are far superior to full BEVs – the math is undeniable. Instead, companies like General Motors (GM) are rolling out vanity vehicles like the electric Hummer, which sports a massive 200 kWh battery. This is an environmental abomination. That same battery pack could support 10 PHEVs and have a far greater impact on reducing our demand for oil.
This Doomberg energy plan is grounded in physics, is utterly achievable, and would position the US as the global energy superpower for decades. In fact, it makes so much sense, we expect our political leaders to do none of it. For proof, we conclude with a tweet from President Biden. The administration remains deeply unserious about the crisis that will soon befall us. The laws of physics can’t be wished away with platitudes, but this administration seems intent on trying.
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This sounds a lot like the Joe Manchin energy plan…
I haven't read such a quickly-digestible, insightful article in a long time. You guys are worth every penny of the subscription.