The Jobs Bill Re-Visited

Posted on November 2, 2011. Filed under: Uncategorized |

By John Hofmeister

It’s unfortunate that the current administration’s fundamental opposition to domestic natural resource development and traditional energy resources persistently omits energy investment and reinvestment from the growth prospects of the national and global economy. In the name of political correctness and in deference to many of its political funders the absence of political leadership on reinvesting in the 98 per cent of the nation’s energy supply that depends on traditional energy resources is neglected, forgotten or dismissed in the President’s energy agenda. It pains me to say this as a registered Democrat who supported his 2008 candidacy, following then-Senator Clinton’s decision to leave the presidential race.

Here is what could be were the President to have serious interest in the nation’s economic well-being and private sector job creation as regards maintaining and building a 21st century energy system in the U.S.:

• My testimony in the U.S. House last February at the Energy and Commerce Committee’s Subcommittee on Energy and Power noted that U.S. oil and gas production peaked at 10 million barrels per day in the 1970’s and ‘80’s not because of shortages of natural resources but due to permitting obstacles that prohibited expansion of exploration and production in 85% of the nation’s continental shelf and on most federal lands. The current 7 million barrels per day production is more than likely to decline further due to the steady regression of deepwater drilling due to the arbitrary political shutdown of the Gulf of Mexico and its glacially slow recovery. A return to 10 million barrels per day, achievable over the coming decade, could result in the creation of up to 3 million new domestic jobs, including the multiplier effect, along the entire supply chain and into the broader economy.

• Looking at oil and gas investments more comprehensively, if access were made available on offshore and federal lands, in addition to private land, the prospect of the oil and gas industry spending up to or more than $1 trillion of private capital in the U.S. over the coming decade is essentially a given. Since the nation consumes 20 million barrels of oil per day now, lifting U.S. production to higher levels reduces imports of oil which we are going to consume anyway, because there is no substitute for such consumption in the foreseeable ten year future.

• The recent announcement by the U.S. Energy Security Council, on which I serve, that legislating an Open Fuel Standard would lead to the further reduction in foreign oil imports by dramatically increasing alternative alcohol fuels in the U.S., including ethanol, methanol, butanol, as well as natural gas and hydrogen for fuel cells, represents the opportunity for additional hundreds of billions of dollars of private investment to create further domestic energy supply increases, leading to additional U.S. job creation.

• Our aging coal and nuclear fleet of power generation facilities is in need of a dramatic replacement program as plants begin to exceed their original design lives. With our 600 plant coal fleet averaging 40 years in service, more than 100 new coal plant replacement projects have been put on the shelf by utilities in just the past six years. Some 60 out of 104 nuclear generation plants will be tasked to run an additional 20 years with permit extensions in lieu of building newer safer facilities. Were we to replace rather than extend old existing plants with technologically improved, clean coal and modern nuclear facilities up to another $1 trillion of private capital could go to work over the next decade, resulting in upwards of another 1 million jobs during the period. For those who believe the coal era is history in the U.S., they really need to dive deeper into the reality versus the rhetoric of future supplies of alternatives. Absent a dramatic expansion of the nuclear fleet, up to an additional 100 new plants, there will be a sustained need for coal, in addition to more natural gas plants, for at least another generation of coal facilities. Why not build them using clean coal technology, including coal gasification and carbon capture and sequestration, to dramatically reduce the environmental impacts of coal?

• Aging energy infrastructure that is in need of replacement, including transmission and pipelines, switchgear, transformers, storage tanks, in addition to smart grid and distributed generation, again privately funded, represent hundreds of billions of additional investment opportunities over the decade were political leaders willing to step up and make it possible.

• We can also double the amount of power generated by wind, solar and biofuels, if we choose, and double it again. But over the next decade it will be a lot of public, not private money, to make it happen given the questionable commercial viability of such alternatives.

• The point of my testimony and these additional comments is simple: lacking political leadership the nation is taking a $3 trillion pass on much needed energy infrastructure private investment over the coming decade. The jobs that won’t be created will never know the prospects of the additional economic multiplier that could result in an addition $3-6 trillion of further economic value creation. So the nation foregoes a $9 trillion uplift, upgrades to our aging 20th century energy system, and the economic impact of investing in a 21st century replacement energy system, so that political funders and traditional energy naysayers can call for more taxpayer funding for the sake of expanding 2 percent of our energy system. We’re upside down as a nation on the future of energy. We’re paying a huge price in sustained unemployment and we’re engaging in brinksmanship with our energy security by staying on our current course.

• $9 trillion private dollars spent on energy and infrastructure, including the multiplier effect, placed on top of a $14 trillion per year status quo economy would represent a roughly 7% GDP growth rate each year over the next decade. How bad a jobs bill would that be?

John Hofmeister
Founder and CEO, Citizens for Affordable Energy, Inc.
Former President, Shell Oil Company (retired)
Author, Why We Hate the Oil Companies: Straight Talk from an Energy Insider (Palgrave Macmillan 2010)

Turner GPA is one of the premier, highly respected government and public affairs firms in the nation. Turner’s state-of-the-art advocacy has earned them respect and acclaim from the media, clients, policymakers and even their competitors! Turner advocates on behalf of cutting edge businesses, municipalities, and non-profits that wish to ensure their perspectives and needs are taken into account in Washington, in state capitols and in City Hall, as well as in the media. The firm creates and implements intensely focused and targeted advocacy campaigns designed to meet and exceed its client’s expectations and goals. For more information on Turner GPA, visit http://www.turnergpa.comor call 202-466-2511.


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One Response to “The Jobs Bill Re-Visited”

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There is an undeniable logic to the short term solution of building more energy production capacity particularly those that might use clean-ER coal technologies (clean coal burning is a misleading label).
Overall, i think there are more pressing factors with broader and deeper impacts.

In private sector strategic terms, we could exceed past efficiencies, reduce harmful emissions, theoretically reduce some usage of imported petroleum. But is it progress against longer term national goals? The urgency of an aging generation of coal powered electricity is the driving impetus for technological innovations in solar and renewable energy. Public investment similar to that which brought this aged generation of energy production is needed for alternative energy, but energy markets are in existence and demand is growing.

The legendary abundance of coal is only a comparable scope to thermal “reserves”, solar potential, wind and wave power, and the potential for a hydrogen based fuel not from petroleum but from some renewable system like sea water.

Neither alternative energy nor increased coal burning will stop the hemorrhaging in the US economy from the costs of petroleum- which is inelastic to demand because we make an exception to the criminal and civil law policies against price fixing for oil- and insurance which is another deep impediment to economic expansion, the drain from productive consumer spending. For example, insurance pricing based upon individual/business creditworthiness ( a driver today might easily pay $300 per month each for gasoline and auto insurance- effectively reducing his/her ability to spend on consumer goods based on income averages). If these costs -gasoline and auto insurance were more appropriately in the range of $300 combined, imagine the long term stimulus from 90 million households- it might promote another decade of growth like that in the Clinton era- a consumer led expansion.

We are being gouged to the point of economic stagnation, while defense spending does provide some stimulus in the defense industrial base industries, urban centers are in decline- they depend on consumer demand for increased employment, economic expansion.

I have not mentioned health insurance costs which were the true target of health reform- public control of those costs which are enormous and will only grow further until controlled and forcibly reduced by a system or ordered competition. Now, would coal effectively reduce the drag of petroleum prices and insurances on the economy? Doubtful, these record high costs ripple through the economy eventually returning as higher prices to the cash drained consumer.

I urged synthetic fuels production from coal and oil shale decades ago, i think the consensus then was that it might be impossible because Americans would never pay $1.75 per gallon for fuel. That era has passed and coal and petroleum should be urged for higher uses than crudely burning them for a small energy harvest and a huge pollution burden externalized to public costs in health hazards and poor air quality. I sense that there is a greater abundance in coal than doing what was done 1000 years ago, setting it ablaze to warm our bodies.


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