Creation of a Federal Energy System

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Nov 29, 2013 (3 years and 6 months ago)

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General policies

Creation of a Federal Energy System


General Policies


For the proper implementation of any energy plan as well as for any specific policy measure a set of overarching
strategies must be defined to form a framework for the change that is

needed to reach our end goal of a more well
established (and better working) energy sector. To this effect several policy measures will be discussed in the
following section.


Policy 1: Federal Energy System


With the need for more clean, reliable, and mo
re efficiently distributed energy, it makes sense to task an agency to
help guide and push forward this movement towards a more diverse energy portfolio. To this extent, the Federal
Energy System (or FES) will act as an agency dedicated to the advancement
of all of the primary sources of energy
including coal, oil, natural gas, nuclear, hydropower, wind, solar, biofuels, hydrogen, and geothermal. The Federal
Energy Collective and contributing energy reservoirs will look and act similarly to the Federal Rese
rve in that it is
not funded through tax
-
payers and therefore partially divorced from any current political struggles (or agendas)
1
.
Also, the FES will be structured very similarly to the Federal Reserve
2

as follows:




Federal Energy Collective (FEC):

-

Cons
isting of 5 Governors, each serving 10 year terms (staggered every two years); they are each
appointed by the President of the United States and confirmed by the Senate.

-

The Chairman of this Board of Governors is appointed by the president of the United St
ates for a term
of 4 years.

-

The Vice Chairman of this Board of Governors is appointed by the president of the United States for a
term of 4 years.

-

Role 1: Maintain and/or adapt the short, medium, and long term plans (and policy measures).

-

Role 2: Adaptati
on of the Carbon Tax (increase or decrease) to meet the current and future energy
plans and needs of the FES.

-

Role 3: Consider monetary distributions of the Collective Energy Fund.

-

Role 4: Consider comprehensive energy education program initiatives (in col
laboration with the U.S.
Department of Education).

-

Obligation: Report to the Speaker of the House annually on the state of energy in the nation and justify
measures undertaken to keep on plan.




Energy Source Reservoir (ESR):

-

10 separate reservoirs with
one linked to each of the aforementioned primary energy sources.

-

Each reservoir consists of a President and a 12 person Board.

-

The President is nominated by the ESR board and approved by the FEC for a term of 4 years.

-

The Board consists of 12 members with
3 member groups representing each of the following areas:
source of energy; technology for efficiency (Research and Development or R&D); environmental effects,
impacts, and policies; and infrastructure. A director for each of each ESR board is elected ever
y year.

-

The 3 member groups within each board are nominated by (1) Board of Governors, (2) Energy Source
Members (to represent firm interests), and (3) Energy Source Members (to represent the
people/consumers of energy) to serve 4 year terms. All of these
members must be approved by the
FEC.

-

Role 1: Determine state of affairs on specific energy source and consider policy measures needed to
coincide with overall energy plan.




1

"
Why we Hate the Oil Companies
"
, John Hoffmeister.

2

http://www.federalreserve.gov/pubs/frseries/frseri4.htm

-

Role 2: Make recommendations (policy measures, funding, R&D needs, etc.) to the F
EC based on each
member group area.

-

Role 3: Create a data repository for each bank’s specific energy source including up
-
to
-
date data,
research articles, and other necessary information.

-

Role 4: Develop an education plan for the specific ESR energy source.

-

Obligation: Report to the Board of Governors (FEC) quarterly.




Energy Source Member (ESM):

-

Consists of firms and companies that supply (produce, refine, etc.) or distribute energy.

-

Source Members must pay an annual fee to become members within this group
ing and will therefore be
able to have their voices heard.

-

Fees would be determined based on generation or distribution capacities and would allocate 1 vote to
the company (or firm) to use when making decisions in regards to their ESR.

-

This fee cannot be
passed down to the consumer and must be paid directly from the ESM.

-

Failure by any firm to join this group could result in potential closure of operations.

-

Role 1: Track emissions and energy expenditures to be collected and used by the ESRs.

-

Role 2: Make r
ecommendations to ESRs in regards to subsidies, research and development funds, and
any other necessary policy measures.

-

Obligation: Provide quarterly reports on emissions, energy usage, current R&D, and other vital
information (requested by the FEC or E
SR).




Federal World Energy Market Committee (FWEMC):

-

Consists of 9 members including the 5 Governors and 4 of the Energy Source Bank Presidents.

-

The 4 members of the ESB will always include the Oil Source President with the remaining 3 positions
taken by
3 out of the remaining 9 ESB Presidents. These 3 positions will be rotated every two years so
as to allow for fair representation of all energy sources.

-

The FWEMC reserves the right to form a leadership structure as it sees fit to address the world energy
picture.

-

Role 1: Assess the world energy market and consider world trends in use and costs of each energy
source.

-

Role 2: Consider domestic (and non
-
domestic) policy measures that are needed to maintain the United
States current and future energy plans.

-

Role 3: Advise the President of the United States on the state of affairs for energy around the world.

-

Obligation: Compile ESR reports to address energy source state of affairs to be discussed at least
quarterly (if not more frequently).




Collective Energy Fund (CEF):

-

Consists of Researchers, Economists, and Administrative Staff.

-

Provides the initial foundation for the Federal Energy System.

-

Role 1: Collection of Carbon Taxes.

-

Role 2: Collection of ESM fees.

-

Role 3: Distribution of R&D f
unds as determined by Board of Governors.

-

Role 4: Monitor current R&D expenditures.

-

Role 5: Distribution of subsidies as determined by Board of Governors.

-

Obligation: Monitor and report the financials quarterly to the Board of Governors (FEC).


This policy

measure does not hold much sway in the short term aspect of this energy plan, but still provides a good
foundation for the development of the full system in the medium and long term. First, the Collective Energy Fund
will be established and staffed with a

set of economists, researchers, and other administrative staff. During this
period of time, this group will be tasked with determining (and reporting) the sources of all energy taxes,
subsidies, and initiatives. Second, the CEF will start absorbing these
funds and implementing the initial stages of
the Carbon Tax (mentioned in the later). Third, this group will bridge gaps and form relationships with current
energy agencies including the United States Department of Energy, Energy Information Administration
, and other
departments/organizations (on the federal, state, and local levels). The absorption of subsidy funds as well as the
initial carbon taxes will help in filling out the staff in this department so as to adequately address the needs
determined by t
he initial energy plan.

Third, the carbon tax’s impact, environmental and economic, will be monitored over the short term and
recommendations will be made as to what necessary changes will be required to meet the energy goals outlined for
the medium term.

Fourth, energy source members will be approached with rate schemes (and given time tables to
comply) that take into account the medium and long term energy plan strategies. As mentioned above, these rates
will be based on plant or firm capacities (refinin
g, supplying, distributing, etc.). Finally, an unbiased review panel
within the CEF will examine potential FEC and ESR candidates and provide a report to both the President of the
United States and Energy Source Members on the qualifications of these exper
ts within the energy field;
recommendations will be made as to how to staff both the FEC or the ESR. Within the short term, these initial steps
will ease us (as a country) towards the full implementation of the new energy system.


The Federal Energy Sys
tem starts to take charge of our energy future within the medium term; thus helping us to
tackle many of the energy problems that we have experienced over the last several decades. First, the FEC will be
established so as to match the definitions mentioned

above. Initially, two candidates will be appointed by the
President of the United States to represent this group with a new member added every two years until the 5
member board is filled. The FEC will be tasked with considering the current and future ene
rgy plans, determining
the effects of each policy measure (or fund request) proposed through each ESR, and adapt the carbon tax so as to
maintain the energy plan today and in the future. Second, the ESR will be established based on the strategy
highlighted

in the above bullets. The previously engaged Energy Source Members will have a role in selecting 8
members of the board with the 4 remaining positions selected by the Governors. Each ESR will be tasked with
determining the needs for their energy source du
ring this time and make an initial report to the Board of
Governors (FEC) concerning policy, subsidy, and tax recommendations. Also, each ESR will be tasked to develop an
educational program so as to inform the youth of our nation as to the benefits, trade
-
offs, and impacts of each
energy source (unbiased). This task will be headed by a small group within each ESR as defined below (education).
Third, each ESM will be required to continuously collect data and report this to their corresponding ESR. Fourth,
t
he Federal World Energy Market Committee will begin operations as soon as the Board of Governors is filled. The
FWEMC will be tasked with determining the state of affairs in the world energy market and making domestic (and
non
-
domestic) policy adjustments
so as to match the aims of the FEC. Finally, the CEF will take on more roles
during this point in time. The CEF will be tasked with the collection of newly reallocated subsidies, newly formed
taxes, and ESM fees. Also, this department will be in charge of
distributing approved R&D funds, technological
improvement funds, infrastructure funds, and approved subsidies to the appropriate parties. The medium term
and long term strategies for the Federal Energy System are very similar and therefore will be similar
ly tasked.


The Federal Energy System, in the long term, will act as a guiding light that leads the way towards an even more
well developed energy portfolio for our nation. The tasks and aims of each department within the FES will follow
what was mentioned

in the medium term with a few slight exceptions. To keep this federal system in check,
Congress and the President will hold the right to propose any changes in this federal agency that they deem as
necessary for the advancement of the energy interests of
the nation (similarly to what is currently done in the
Federal Reserve System
s
). Each department within the FES will be tasked so as to maintain the roles highlighted
above and therefore maintain the energy plan as defined by the FEC.


The aforementioned
education program will have several components aimed at informing the nation as to the
many sources (and forms) of energy currently available. The first measure proposed would include the
development of 1
-
hour lesson plans for each energy source specifical
ly designed for each grade level from
Kindergarten through Twelfth Grade. Staff members within the ESR, specifically hired for their experience in the
education arena, will design these lesson plans so as to inform without leading too much into the energy
source
biases. The lesson plans will be sent to first the FEC then the Department of Education for approval. A quid pro quo
incentive policy will be offered to the nation’s school districts where a monetary compensation will be offered for
districts willin
g to implement these ten 1
-
hour lessons into their curriculum. In addition to the lesson plans offered
for students from K
-
12, a scholarship program will be created to motivate high school graduates (and bachelor
level graduates) to pursue degrees in energ
y (i.e., nuclear engineering, petroleum engineering, energy education,
and so on). Scholarship applications will be submitted to each of the ESRs based on the interest of the applicant.
Each ESR will assess the application and make a series of recommendati
ons to the Board of Governors. The FEC
will then approve or dismiss any of the recommendations for scholarship recipients. The scholarship fund will be
monitored and distributed by the CEF. The final education measure, which has been mentioned throughout t
his
section, takes the form of the data repositories created through each ESR. Each repository will consist of unbiased
data (collected in collaboration with the Energy Information Administration), research articles in the related field,
and additional edu
cational resources for people of all ages. This education program will start with the
implementation of the FEC and ESR and will help to better inform our nation as to the importance of energy.


SWOT:


Strengths: Multiple Funding Sources (Carbon Taxes,

Subsidies, Membership fees);

Federal Agency that can adjust
the energy plan without going through the current bureaucratic mess that is the energy system (numerous
departments and agencies with different interests).



Weaknesses: Initially will prove d
ifficult to collect taxes, subsidies, and fees; Initially difficult to understand

the
limitations of the each in
div
id
ual and the agency as a whole (testing their muscles);



Opportunity: Provide a more comprehensive energy plan for the nation with one

agency working towards this
end instead of many; Form relationships with current industries/agencies/departments; Form relationships with
labor unions and create jobs
for infrastructure projects.



Threats: Other departments/organizations will not like
their loss of power; Firms (or
companies) will not like to
be forced into a
cohesive unit and charged a fee;


Sensitivity Analysis:

the increase of fees
to

the firms will in
crease their overall costs and
reduce their profit
margins (the actual value for the fee imposed by

the Federal Energy System will consider this);


Enablers and Derailers:


Enablers: massive blackouts (in the nation), spiked prices in energy sources an
d limited availability of the
resources; Possible War; Energy Prone President or congressional body.



Derailers: Big business; federal, state, and local agencies/branches fai
ling to cede
power to the Federal Energy
System.


Carbon Tax

As a measure to

both provide a source of income for the agency named above and to ultimately reduce
emissions, a carbon tax system will be considered in the short, medium, and long term. This system will charge
varying rates based on a firm’s or resident’s emissions. The
se emissions are primarily created through power
plants based on the energy required to meet the customers demand. These fees will most likely be absorbed by the
consumers in the form of a slight increase in energy and product prices. Through the implement
ation of this tax,
we should see a significant decrease in consumption of the “dirtier” sources of energy (coal and oil) due to the
increased price handed down to the consumer. This reduction in consumption of fossil fuels will directly reduce
the nation’s

emissions rate. This tax will be able to help fund R&D projects through the Federal Energy System as
defined earlier. Each ESR will determine the need for R&D funds and then provide their recommendations to the
FEC. These R&D funds will be used so as to i
mprove the efficiencies and reduce the environmental impact for each
source of energy. Several of these technological advancements include the improvement of combustion engines,
the improvement of power plants, the improvement in mining (or drilling) pract
ices, and the improvement of
energy capture technologies. These funds will also be used to help reinvest into certain forms of proven technology
that are vital towards the improvement of current plants including Carbon Capture and Sequestration (CCS) and
c
oal gasification. The FEC will also have the right to change the Carbon Tax rate at any time if it deems it necessary
to maintain the current or future energy plan; this change must be approved by Congress and justifiable to the
ERCs and ESMs.


The idea
of a Carbon Tax is nothing new in this country and has been implemented in differing forms in
several states around the country. The residents of Boulder, Colorado passed a carbon tax in 2006, called the
Climate Action Plan Tax, that set a slight fee for r
esidential, commercial, and industrial electricity customers based
on their kilowatt hour usage; these rates currently range from $0.0049 /kWh (for residential customers) to
$0.0003 /kWh and provided approximately $1.8 million in 2010
3
. These funds were pl
aced in an account that will
be used by the city to improve its residents range of energy choices in the future. In 2010, Montgomery County
within Maryland passed a direct carbon tax of $5/ton CO
2

for any permanent structure producing over one million
tons

of CO
2

a year or the single coal power plant in the county
4
. This plant was forced to pay the fee (without
increasing the residents’ electricity costs) thus prompting the plant to file a suit against the county; the courts
found this tax to be punitive in

nature forcing the county to repeal the tax and pay back the previously collected
taxes to coal plant that was wronged
5
. The decision to place the entire burden of the carbon tax on the plant was ill
advised and is one of the pitfalls that will be avoided

when considering the implementation of our energy plan.
These two examples provide key points that will be addressed within this plan’s specific carbon tax.


Within the short term (over the next 10 years), the Carbon Tax should be the lowest and least c
onstraining
for energy suppliers and in turn the consumers who will be stuck with increased electricity and oil costs. A study
done through the Brookings Institute, in collaboration with the World Resources Institute, states the impact of a
$15/ton CO
2

tax

based on the current cost of the fuel source, the increased cost of the fuel source, and the elasticity
of consumer demand based on the implemented carbon tax
6
. Another study performed by the U.S. Climate Task
Force looks at other Carbon Tax rates and cla
ims that a fee of $22/ton CO
2

in the short term and $41/ton CO
2

in the
medium term can reduce the nations energy demand (by as much as 7% in 2030) and reduce emissions rates (by
as much as 30% in 2030); thus helping to stabilize the atmospheric CO
2

concentration to around 450
-
550 ppm by
2050
7
. By implementing a Carbon Tax of $15/ton CO
2
, assessed to energy producers (and suppliers) in the short
term, we hope to control the demand for coal and thus reduce the consumption of traditional fossil fuels.
Due to the
variability of the market and the uncertainties of subsidies for differing fuel types, the Collective Energy Fund will
closely monitor the economic and environmental effects of this carbon tax rate. Based on results determined by the
Brookings I
nstitute study, as seen in Table X
6
, we can make some assumptions as to the potential benefit of this
proposed policy. Due to the relatively slight increase in prices since 2005 (approximately $3 per short ton of coal
and $10 per bbl of oil) current resul
ts will not vary by that great of a margin.



Table X












Considering a more current CO
2

emission rate (2009) of approximately 5.505 giga tons of CO
2
h

in the combined
sectors of industry, transportation, electricity generation, residential, and commercial will provide information as
to the economic benefit of this tax; the breakdown of specific emissions can be seen in the below, Figure X
8
.
Considering
the fossil fuel emissions for these sectors along with the proposed $15/ton CO
2

tax and its subsequent
reduction in emissions (and consumption) to approximately 4.8 giga tons of CO
2
, we could acquire a fund of nearly
$72 Billion that can be used to towards

furthering the goals of the FEC. This Carbon Tax, as mentioned before, will
also help to decrease our nations reliance on coal and other fossil fuels. By making the prices of the traditional



3

http://www.bouldercolorado.gov/index.php?option=com_content&task=view&id=7698&Itemid=2844

4

http://insideclimatenews.org/news/20100525/maryland
-
county
-
carbon
-
tax
-
law
-
could
-
set
-
example
-
rest
-
country

5

http://www.montgomerycountymd.gov/Apps/Council/PressRelea
se/PR_details.asp?PrID=7738

6

http://pdf.wri.org/Brookings
-
WRI_GreenTaxSwap.pdf

7

http://www.sonecon.com/docs/studies/CarbonTaxReport
-
RobertShapiro
-
2008.pdf

8

http://epa.gov/climatechange/emissions/downloads11/US
-
GHG
-
Inventory
-
2011
-
Complete_Report.pdf


hydrocarbon based energy sources more comparable to those of the

renewable energy sources, we could hope to
see a better diversification of our energy portfolio in the near future.


Figure X: CO
2

Emissions by Sector and Fossil Fuel Source


Looking into the medium term (2022
-
2037) for this carbon tax, we would hope to

see a decrease in the use of the
both coal and oil and therefore a more diversified energy portfolio. Within the medium term, the increase in costs
of the traditional energy sources will cause renewable energy sources to become more affordable (and in mos
t
cases substitutable). However, the traditional energy source prices will also decrease from their short term states
due to their incremental increases in efficiency and emission control systems. The short term tax system will
provide much needed funds to

improve R&D and cause many plants (and firms) to consider more environmentally
friendly practices that reduce their CO
2

emissions as well as consumption of a particular energy source. A
subsequent increase in the Carbon Tax to $30/ton CO
2

during this peri
od will maintain the Collective Energy
Fund’s budget and provide additional motivation for the continued strive towards more energy efficient and
environmentally friendly technologies. The Federal Energy Collective reserves the right to modify this rate ba
sed
on information obtained through studies performed in the short term through the Collective Energy Fund; thus
allowing the Federal Energy System to follow the current (or modified) energy plan.


In the long term (2038
-
2062), the Carbon Tax will be incre
ased even further to a rate of $45/ton CO
2
; this will help
to reduce the CO
2

atmospheric concentration to a value within the range specified by the U.S. Climate Task Force
6
.
The increased carbon tax rate will again help to maintain the Collective Energy Fund’s budget and provide
additional motivation for the continued strive towards more energy efficient and environmentally friendly
technologies.

The Federal Energy Collective reserves the right to modify this rate based on information obtained
through studies performed in the medium term through the Federal Energy Collective and
Federal World Energy
Market Committee
. With the help of a carbon tax,

we can see a reduction in emissions, reduction in consumption of
traditional carbon based energy sources, and increase in revenue to the Federal Energy System that will be used to
improve the state of energy within our nation currently and in the near fut
ure.




SWOT:


Strengths:
Massive backing source for the Collective Energy Fund
;

Controlled and modified through the
dedicated Federal Energy Agency
wi
thout going through
the current bureaucratic mess that is the energy system
(numerous departments

and age
ncies with different interests); reduces CO
2

emissions and provides a framework
for other emission taxes in the future.



Weaknesses: Initially will prove difficult to collect
these taxes
;
w
ill be difficult to determine tax rates to match
energ
y plan guidelines; initially
difficult to understand the
where this fund will best be utilized

agency as a
whole
(testing their muscles)




Opportunity: Provide
an actual plan that is geared towards the reduction of CO
2

emissions and the reduction in
c
onsumption of fossil fuels
; Form
relationships

with current industries/agencies/depar
tments; Pr
ovides a
framework for other CO
2

taxes and other emission taxes here and in the rest of the world.



Threats: Firms (or companies) will not like to be
ing

fo
rced
into
this tax (may lose customers
;

customers will not
like the energy rate hike (of as much as double

for coal).



Sensitivity Analysis:

the increase of
costs to the consumer
s will reduce their demand (of
fossil fuel sources)
throughout all stages of
this energy plan and therefore increase demand of other fuel sources


Enablers and Derailers
:


Enablers:
Implementation of stricter regulation on emissions; change in president or congress that sees the need
for more environmental stewardship; breakthr
oughs in efficient and more environmentally friendly high carbon

content fuel sources.



Derailers: Big business

(why should we have to do this when other countries have not forced this on their
population)
;
Unrest by the lower income bracket who have
less to spend on additional energy costs (I don’t care
about the environment, I care about not freezing tonight).

“Smart Grid” energy infrastructure

Our current national energy infrastructure is out dated and becoming a liability. The current infrastructure was
implemented over 40 years ago and is deteriorating rapidly and more American citizens are experiencing
blackouts, brown outs, and other power
shortages. As power outages increase more deaths will occur due to
“exposure” to the climate (i.e. heat waves, blizzards, etc). Also the current grid is inefficient, does not allow
consumers the choice, and American currently pays its electricity bills p
assively (The Smart Grid: An Introduction).
America is going to have to implement new infrastructure to satisfy the increasing demand over the next forty
years (The Smart Grid: An Introduction). Also American is currently experiencing an economic recess
ion put many
out of a job and looking for work. This economic recession could be used to boost the nation’s economy, decrease
unemployment, and also help secure energy for the U.S. by implementing a smart grid.


The creation of a nationwide smart grid c
ould potentially pull America out of its current economic struggles
and meet its ever increasing energy demands well into the future. Implementing an infrastructure such as this
would be a great investment for America and to pay for such an expenditure th
e Recovery Act passed to help pull
this nation out of its economic crises could be used to employ workers needed to build the grid (Wired for Progress
2.0). With the use of the Recovery Act would offset a lot of the consumer’s costs to create such a grid
(Recovery
Act). The frame work would have to be implemented such as computer systems and metering systems required
analyzing the data collected from the grid to determine the best course way to deliver and save energy. This
process could begin in urban ce
nters along the coasts of the U.S., where population is greatest (i.e. most energy
consumption) and spread across the nation much like the continental railroad. The locations immediately
receiving the implementation of the new grid would experience a slig
ht increase amount on their energy bill. But,
after their grid is operational they will pay a lower cost for energy then they currently do.

As the smart grid concept begins to catch on around the nation, as well as begin to be implemented; further
inves
tors could be obtained to help pay the costs of the new infrastructure. Such an investor could be the
Department of Homeland Security and the Department of Defense (Wired 2.0). Energy is vital to any economies
well being and every military needs producti
on lines to create the supplies and weaponry needed to defend our
nation. Energy security is vital for the protection of America to allow it to operate and also to create a more
resilient defense that does not rely on foreign fossil fuels.


Enablers

-

Th
e U.S. government will be the greatest enabler during the short term period by providing loans and
grants through the Recovery Act.

-

Consumers could potentially be enablers, once educated on the smart grid and the energy savings it
would provide in the lo
ng term. Also, some of these consumers could potentially work on the grid,
providing them a job.

-

The U.S. economy would be boost by the increased spending of the government (who is providing jobs).

-

U.S. Military realizes the necessity of energy security
and invests in energy security through the
implementation of the smart grid.



Derailers

-

Utility companies might see the decentralization of energy harmful to their business. The grid could be
seen as a threat to job security.

-

Consumers could be unwil
ling to pay for increased energy prices to implement the needed
infrastructure. Also concerns over “big brother” monitoring consumption rates.



-

Over all costs may derail the entire project. This could be on a consumer level or a governmental one.
The
government might invest in a different project that they feel is “better” for the nation.

-

NIMBY, some individuals will not want transmission lines and other power producers around their
homes.

Embracing electric vehicles

Since the increasing use of ele
ctric vehicles would affect the demand on multiple energy sources, the discussion of
policies regarding electric vehicles must be done as an overall consideration of its impact on multiple energy
sources.


In addition, the use of electric vehicles has the
potential to be a bridge into the adoption of a smart grid, as
electricity demands will change dramatically while the country moves towards greater adoption of electric
vehicles.


Both of these considerations must be made outside of the discussion of indiv
idual energy sources.

For this plan, the focus will be on smaller
-
sized, private cars for converting to battery power.


Converting large size
vehicles such as buses or semi
-
trucks is too expensive to consider for now.


The smaller batteries needed for smal
l
cars is a much more reasonable and realistic possibility.


In fact, the increasing adoption of electric cars is already
in motion, the proposed policies will simply guide the process.


As oil subsidies are gradually repealed, a substitute
for oil will be

increasingly necessary.


By guiding the process of infrastructure change .


Short term

Oil

Intro

Virtually all projections of future energy demand forecast dramatic increases in the demand for oil
products due to continually increasing demand in developed

countries and compounded by rapidly growing
demand by extremely populous developing countries, such as China and India. Oil consumption is also increasing
more rapidly in most oil
-
exporting countries than it is for the rest of the globe as a whole (Halloc
k
et al
., 2004, pg.
1674), creating the possibility that these countries will substantially decrease their oil exports in the future.
Continued political instability in high oil
-
producing countries with low oil demand

such as Suadi Arabia

may
create furthe
r challenges in conventional oil output and export ability. Despite even the most radical conservation
efforts and the development of more efficient technologies within the United States, demand will continue to grow
enormously, which will cause the global

price of oil to skyrocket.



Source: EIA
Annual Energy Outlook 2011, page 23


Looking at oil supply, a grave picture is painted considering what a large percentage of American energy is
produced from petroleum

37%, according to the U.S. EIA (Annual Ener
gy Outlook 2011). Although 70,000 oil
fields exist around the globe, roughly 500 of them represent two
-
thirds of cumulative oil supply. Most of these
large fields are relatively old, with many past peak production and most expected to reach peak production

within
the next decade. New fields with similar capacity are not expected to exist (Sorrell, Speirs, Bentley, Brandt, &
Miller, 2009, pg. vii).

As field production declines, the oil industry must continually branch out to new sources just to keep
product
ion at current levels. The rate of decline for current oil fields past peak production is at least 4% per year,
which a global average of at least 6.5% per year. These numbers suggest that an additional 3 mb/d of new oil
production capacity much be added a
nnually just to maintain current production levels! For a better
understanding of how massive an undertaking this is, this is equivalent to a new Saudi Arabia (with the same
production and export levels) coming into existence every three years (Sorrell, Sp
eirs, Bentley, Brandt, & Miller,
2009, pg. viii).

Oil field decline rates are trending upwards as we deplete the large, primary producing fields, shifting
production towards smaller, newer, and offshore fields. According to the UK Energy Research Centre,
“more than
two
-
thirds of current crude oil production capacity may need to be replaced by 2030, simply to prevent production
from falling. At best, this is likely to prove extremely challenging” (Sorrell, Speirs, Bentley, Brandt, & Miller, 2009,
pg. viii).


Beyond mere physical supply, four other factors are hugely important regarding oil futures:

1.

Remaining resources are typically more expensive to locate, extract, transport, and/or refine than
current supplies

2.

Extraction of remaining resources will have in
creasingly severe environmental consequences

3.

Compared with conventional oil, exploitation of non
-
conventional oil sources is typically more
energy
-
intensive at all stages of production, leading to decreasing levels of net energy available for
societal cons
umption

4.

Remaining resource rates of production are estimated to be relatively low due to physical
properties and location of the resource, as well as the high cost of investment

This last point is crucial: although economists like to talk about supply vers
us demand, it is much more
pertinent and realistic to instead consider rates of production versus demand, since the barriers listed above
impact whether or not existing supplies can actually be harnessed into usable energy for America’s enormously
consumpt
ive habits (Sorrell, Speirs, Bentley, Brandt, & Miller, 2009, pg. viii).



For these reasons, we propose gradually reducing oil subsidies, tax credits, and other fiscal measures
which benefit oil producers until they have been completely eliminated in th
e long term.
This is the smartest
option because it will encourage development of other energy sectors and it will discourage unnecessary oil
consumption. It would be wise to work towards adapting to these transitions before global oil markets force the
Un
ited States to do so. Reducing subsidies and tax breaks for the oil industry will encourage Americans to make
choices that will secure a better energy future, rather than waiting for unavoidable supply and demand issues in
the global oil market to force su
ch changes at an unknown future date, with little preparation.


Furthermore, it makes little sense that the federal government subsidizes oil production because this
encourages consumption and development in the field beyond that which is created by market

forces. Subsidizing
and providing other financial incentives to oil producers allows them to charge consumers less for the product
than it is truly worth, which is completely unnecessary given high global demand and finite supplies of oil. By
gradually el
iminating these subsidies, the proposed policies will return American oil markets to a laissez
-
faire
state.



Along with the other G
-
20 countries, the United States already agreed to “phase out and rationalize” fossil
fuel subsidies at the Pittsburgh Sum
mit in September of 2009 in order to reduce greenhouse gas emissions (Allaire
& Brown, 2009, p. 1).



According to a 2009 study by Resources For the Future, the monies spent on oil and gas tax preferences
would equal $31.48 billion over a ten
-
year period (
Allaire & Brown, 2009, p. 2). We propose to shift these funds
away from expenditures favoring oil and gas and instead towards the Collective Energy Fund, where it will be used
to fund R&D for technologies for efficiency within the transportation sector, R&
D for more environmentally
sustainable Enhanced Oil Recovery (EOR) projects, and public transportation projects in densely populated urban
areas.


Gaining future energy security will require work beyond our federal policy proposals. We highly
recommend pol
icies at the state level regarding sustainable urbanism, energy efficiency within built structures,
increasing our human resources devoted to the energy sector, and increasing American educational focus upon
energy as an important subject.


Sustainable
urbanism involves planning and designing a city’s layout in order to reduce automobile
dependence and enable citizens to more readily access their daily needs. Beneficial measures would be to change
zoning laws to allow mixed
-
used communities, increase urb
an population densities, and develop more and better
forms of public transportation. These measures would hugely reduce dependence upon automobiles, causing an
equally large reduction in oil demand.



Specifically regarding public transportation, we recomm
end implementing rail
-
based systems because of
the huge gains possible due to their increased energy efficiency.



Source: Salter, Dhar, & Newman, 2011, p. 14


Salter, Dhar
, and Newman’s results from a study of 84 different international cities (Table 2.8 above) shows
that urban rail systems use about half of the amount of energy per passenger kilometer than that employed by
buses and are, on average, 4.6 times more energy e
fficient than the average car. For a more concrete example, they
compare 1995 Barcelona, Spain, to 1995 Atlanta, Georgia; two cities with similar levels of per capita wealth. Within
Barcelona, public transit constituted 35% of the average citizen’s motoriz
ed transport and the average person used
eight giga
-
joules (GJ) of fuel for transportation within 1995. In contrast, public transit made up a mere 1% of
motorized transport for the average Atlanta resident, who used an average of 103 GJ of fuel for transpo
rtation
within the same year (2011, pg. 14
-
15). That’s more than 12 times more energy that Atlanta residents put towards
motorized transport, with the vast majority of this energy coming from gasoline.

Even in the most public
-
transit
-
oriented city in Ameri
ca, New York, public transit only accounts for 9% of
the average citizen’s motorized transportation (Salter, Dhar, & Newman, 2011, pg. 15). Increasing public transit,
and specifically rail systems, has the potential to drastically reduce energy consumption

within the transportation
sector, offering increased energy security for the United States in the future. For more information regarding
specific strategies to improve transport services, please see page 25 and beyond within Technologies for Climate
Chang
e Mitigation: Transportation sector from the TNA Guidebook series.


We also encourage states to implement and regularly update aggressive energy efficiency building codes in
further efforts towards reducing energy demand. By implementing and enforcing r
egulations regarding wall
thickness, windows, insulation, and other physical features which increase structural tightness, actors on the state
level can reduce energy demand greatly. Because these features go largely unchanged through a structure’s
lifetim
e, the greatest benefits can be reaped by implementing and enforcing these changes sooner rather than later.
While LEED certification is a step in the right direction, fine
-
tuning needs to be done to ensure that the energy
efficiency of buildings is more c
orrelated with the building level of certification. Studies have found 18%
-
39%
reductions in energy usage by floor area compared to conventional buildings, but have also found that a similar
proportion of LEED certified buildings use more energy by floor a
rea than conventional buildings (Newsham,
Mancini, & Birt, 2009, p. 1; Diamond, 2007).


Although this report largely focuses on physical energy supply, technologies, and policy, the human
resource aspect of the American energy sector is facing potential
crisis as well. Within the next ten years, almost
50% of those working within U.S. energy industries will be eligible for retirement. This is troubling because of the
drastically reduced amount of students who have been going into petrochemical fields. Wit
hin the last 25 years,
college enrollment for petroleum engineering and geoscience majors has dropped by almost 75% (National
Petroleum Council, 2007, p. 25). We suggest that states offer more energy
-
related field scholarships, increase
student and immigra
tion quotas for trained energy
-
field professionals, and increase their financial support of
academic energy programs and initiatives.


Because of the monumental importance of energy supply and infrastructure to our economy and our way of life, it
is disgr
aceful how little the average American comprehends of United States energy demands, infrastructure, and
how these relate to the global energy market. As suggested by Hallock
et al.

(2004),


Energy, including especially its basic nature, sources and relati
on to economic and environmental issues has to
re
-
enter our university curricula as a discipline as basic, widely taught and worthy of study as biology,
economics or geology. We need to critically examine the appropriateness of using neoclassical models to

make
judgments about future oil supply and the role of markets. Economics was once, and should be again, as much a
biophysical science as it is a social science; constructing a reasonable biophysical economic approach would be
of great utility (pg. 1694).



i)

Short Term Policy Recommendations

(1)

Repeal the investment tax credit for Enhanced Oil Recovery (EOR) projects

(2)

Levy an excise tax on oil and gas produced offshore and within the Outer Continental Shelf (OCS)

(3)

Repeal credit for production from marginal wel
ls

(4)

Repeal deduction for tertiary injectants
9

(5)

Shift the federal monies that would have otherwise been spent on the policies above to be
dispersed within the Federal Energy Collective and spent on R&D for technologies for efficiency
within personal
transportation and on R&D for more environmentally sustainable EOR methods

ii)

Supply


The U.S. received 49% of its crude oil and petroleum products from the Western Hemisphere in 2010, with 25%
coming from Canada alone. About 18% of crude oil and petroleum pr
oduct imports came from Persian Gulf
countries.

Top Sources of Net Crude Oil and Petroleum Product Imports:



Canada (25%)



Saudi Arabia (12%)



Nigeria (11%)



Venezuela (10%)



Mexico (9%)

(U.S. Energy Information Administration, 2011a, “
How dependent are we on
foreign oil?”
)









9

F
or a detailed explanation of these policies as they currently stand, please see Department
of the
Treasury, 2009, p. 59
-
64

The EIA’s 2011 Annual Energy Outlook report estimated that 69.3 billion barrels of undiscovered crude oil
is technically recoverable offshore from the United States in the Reference case; this estimate jumps to 144 billion
barrels in the High OCS Resource
case (Conti, 2011, pg. 36). As market forces push oil producers to explore these
options in the future, levying an excise tax on OCS and other offshore drilling will provide substantial R&D funds to
explore further efficiency gains using technology as well

as providing R&D towards more sustainable EOR projects.


The EIA estimates that domestic offshore oil production will increase in the short term as the United States
expands its domestic production capacity and harnesses newly available technologies that

will make previously
inaccessible wells technically recoverable.



Source: EIA
Annual Energy Outlook 2011, page 37


According to the EIA’s Medium
-
term Oil & Gas Market report, global demand was 89.3 million barrels per day
(mb/d) in 2011 and will increas
e by 7.2 mb/d to 95.26 million barrels per day in 2016, averaging an increase of 1.2
mb/d of additional global demand each year. China alone is estimated to constitute 41% of the total demand
growth and non
-
OECD countries in Asia and the Middle East will
constitute an estimated 53% of demand growth.
Global OECD demand will decrease by 1.5 mb/d due to higher prices (U.S. Energy Information Administration,
2011b, pg. 16).


iii)

Technologies for efficiency


It can take over two decades for a newly commercialized technology to be broadly applied in the vehicle
fleet market. This fact, coupled with under 8% annual fleet turnover on average (Borenstein, 2008, pg. 16) means
that most technologies for efficiency w
ould not have a serious effect on oil markets and demand until the medium
term.



As public transit

particularly via rail

increases due to our state
-
level recommendations, regenerative
braking can increase energy efficiency by 15
-
17%, as well as reducing C
O2 emissions (Ford, 2007). Conventional
electric train braking systems dissipate the kinetic energy used to stop the train as heat. Regenerative braking, on
the other hand, reverses the current in the electric motors, slowing down the train. The reversed e
ngine motors act
as generators, generating electricity to be returned to the power distribution system. A current drawback of this
technology is that the electricity generated must be simultaneously drawn to another source. This issue would be
combated by
the increased frequency of rail travel, as recommended. Regenerative braking systems reduce wear
and tear on mechanical brakes and offer energy savings and reductions in CO2 emissions. Freight trains have
reported a 5% reduction in CO2 emissions, full stop

service commuter trains have reported an 8
-
17% reduction in
CO2 emissions, and dense suburban network rail lines have reported up to 30% CO2 emission reduction using this
technology (“Regenerative braking in trains,” 2011).


The Energy Independence and
Security Act (EISA) amended the Energy Policy and Conservation Act
(EPCA) by mandating that the model year (MY) 2011
-
2020 CAFE standards be set sufficiently high to ensure that
the industry
-
wide average of all new passenger cars and light trucks, combined,

is not less than 35 miles per gallon
by MY 2020 (Department of Transportation, 2009, pg. 2).


The Department of Transportation made the following projections on the industry
-
wide level of average fuel
economy and average tailpipe emissions for passenger c
ars and for light trucks if automobile manufacturers meet
the “optimized” CAFÉ standards set forth by this legislation:


Source: Department of Transportation, 2009, pg. 23



iv)

Environmental protection

(1)

Repealing the investment tax for EOR projects could potentially reduce the amount of EOR projects,
decreasing the harmful production of brine at these sites.

(2)

From 2011 to 2015, the optimized CAFÉ standards of the
Energy Independence and Security Act
will:


(a)

Save an estimated 54.7 billion gallons of fuel

(b)

Reduce CO2 tailpipe emissions by 521 million metric tons over the lifetime of the vehicles
10



v)

Infrastructure




10

C
ompared to
fuel consumption

and
CO2
emissions that would occur if the standards remained at
the
adjusted baseline, MY 2010


Source: U.S. Department of Energy, 2008

According to data gathered by the National Petroleum New
s Survey (above), the 164,292 gas stations
within the U.S. in 2007 was a dramatic reduction from 1994, when there were over 200,000 in the country.
Some believe that this reduction is due to the small profit margins available from gasoline retail, although

this
does not explain why the number of businesses was declining during the 1990s, a time of general economic
prosperity. If this trend continues, it could serve to support our policy initiatives as reducing availability of
gasoline suppliers will work to

raise prices, shifting demand to other energy sectors.


Coal

Supply:


Looking into the supply of coal currently and in the near future shows that we have an ample supply of this
energy source. As of 2009, coal production was at a level of 1,072.8
million short tons with total U.S. coal
consumption at 1,000.4 million short tons
11
. By looking at coal reserves, one can see how much of this energy
supply is available currently and potentially in the future. Figure I, seen below, shows the amount of coal

still
recoverable in active mines and in recoverable mines
12
. Therefore, it can be seen that we have still have 17.5 billion
short tons of reserves in active mines and an additional 243.1 billion short tons. The Energy Information
Administration (EIA) clai
ms “that U.S. coal consumption will increase at about 1.1% per year for the period 2009
-
2035. If that growth rate continues into the future, U.S. recoverable coal reserves would be exhausted in about 119
years if no new reserves are added” (Annual Energy O
utlook, April 2011)
13
. Considering the steady decrease in coal
(over the short, medium, and long terms), that we have proposed to set forth through the implementation of
Carbon Taxes, we will should not see any major increases in coal consumption. Therefore
, even assuming the
growth rate as described by the EIA, we still will have ample stores of recoverable resources over next century; this
still leaves the identified (but currently not mineable) and undiscovered coal reserves for future generations. The
co
al that is not being used due to the reduction in U.S. consumption may be able to be traded to other countries or
used later in the future.





11

http://38.96.246.204/cneaf/coal/page/special/feature.html

12

http://www.eia.gov/energyexplained/index.cfm?page=coal_reserves

13

http://www.anga.us/media/210391/annual%20energy%20outlook%202011.pdf



Figure I


Technology for Efficiency:


Integrated Gasification Combined Cycle (IGCC)


In the immediate future, or

short term, we can see a one major technology source able to be tapped for
improved efficiency. In an electrical grid study performed by ABB, one of the largest engineering firms in the world
and a leader in field of power, the group finds that “the effic
iency of generation [for coal plants] varies widely with
the technology used… only about 30
-
35% of the energy in the coal ends up as electricity on the other end of the
generator… and the latest coal technology, known as integrated gasification combined cy
cle or IGCC, is capable of
efficiency levels above 60%”
14
. As mentioned by this group, one way in which to improve the low 30
-
35%
efficiency of a coal plant is by the use of a technology known as gasification (or IGCC). According to the Department
of Energy
, coal gasification is the process by which “
coal is typically exposed to

steam and carefully controlled
amounts of air or oxygen under high temperatures and pressures… produc[ing] a mixture of carbon monoxide,
hydrogen and other gaseous compounds”
15
; the e
ntire process can be seen in the figure below (Figure II)
16
.
Additionally, the use of an IGCC plant over a traditional coal plant provides an overall reduction the levels of sulfur
oxides (SOx) and nitrous oxides (NOx) emitted
5
.
As many of the older factori
es are reaching the end of their lives,
newer plants must be added to ensure the continued energy demand. With the implimentation of the Carbon Tax,
as mentioned in the general policies section of the report, newer plants will need to take advantage of gas
ification
technologies to remain competitive.


Figure II




14
http://www04.abb.com/global/seitp/seitp202.nsf/c71c66c1f02e6575c125711f004660e6/64cee3203250d1b7c12572c8003b2b48/$FIL
E/Energy+efficiency+in+the+power+grid.pdf


15

htt
p://www.fossil.energy.gov/programs/powersystems/gasification/index.html


16

http://www.clean
-
energy.us/projects/eastman_power_magazine.htm



Environmental Management of our Land, Air, and Water:


Carbon Capture and Sequestration (CCS)


One form of technology stands to provide significant reductions in many of the one of the key
contaminents
emitted by a typical coal power plant. The inclusion of a carbon capture and sequestration system an existing or
new coal plant can reduce CO
2

emissions by over 85%
17
. The International Energy Agency (IEA) describes CCS as “a
3
-
step process inc
luding CO
2

capture from power plants, industrial sources, and natural gas wells with high CO
2

content; transportation (usually via pipelines) to the storage site; and geological storage in deep saline formations,
depleted oil/gas fields, unmineable coal se
ams, and enhanced oil or gas recovery (EOR or EGR) sites”
7
; Figure III
below shows an example of a power plant with CCS technologies
7
. CCS provides drastic reductions in CO
2

emissions, but at a fairly steep price to the plant ranging from $30 to 90/ton of
CO
2

thus causing an increase of
between 2 and 3 cents/kWh in electricity cost
7
. “Assuming reasonable technology advances, projected CCS cost by
2030 is around $25/tCO
2
, with [an] impact on electricity cost of 1
-
2 cents/kWh.”
7

The following table (Table I)
shows the initial investment cost required for current and future CCS technologies
7
. The Federal Energy System
will be able to help move more coal plants, in the medium and long term, towards CCS technlogy and therefore
provide a safer and cleaner coal for

the future.


Figure III


Table I







17

http://www.iea.org/techno/essentials
1.pdf


Air


Other Environmental effects include exposure to mercury, SOx emissions, NOx

emissions, and other GHG
emissions. By implementing both a CCS and an IGCC system into a power plant, we can help to reduce the
effects of several of these other major contaminants.


CHRIS GINO WILL ADD MORE INFORMATION IN HERE ON SPECIFIC EPA STANDARDS
AND ANY
POSSIBLE VALUES ON REDUCTIONS.


Water


Water is impacted through both the mining of the coal and the eventual combustion of this coal:

Mercury from Coal Plants.

Affect on Groundwater

Acid Mine Drainage (Discuss Cause, Effect, and Treatment)

U
nderground Coal Mining Techniques to Abate Water Pollution (EPA, 1970)

CHRIS GINO WILL ADD MORE INFORMATION IN HERE ON SPECIFIC EPA STANDARDS AND ANY
POSSIBLE REDUCTIONS.


Land


Destruction of wildlife and land is very prevalent in coal mining:

Surface Min
ing Control and Reclamation Act of 1977 (Discuss this further)

Topsoil Erosion

Coal Seem Fires

Flyash Spills

Acid Rain (SO
2
)


CHRIS GINO WILL ADD MORE INFORMATION IN HERE ON SPECIFIC EPA STANDARDS AND ANY
POSSIBLE REDUCTIONS.


Infrastructure:


-

Newer
and improved plants (aging infrastructure, Figure IV
18
) using CCS and IGCC. Discuss permits needed
and legal framework needed for this.

-

Improvement of the grid (transmission lines and other features of the smart grid).

-

Education system set in place by the F
ederal Energy System to inform the nation on the benefits and
impacts of coal.


CHRIS GINO WILL ADD MORE INFORMATION IN HERE FOR SPECIFICS ON EACH PORTION OF
INFRASTRUCTURE.






18

www.netl.doe.gov/coal/refshelf/ncp.pdf



Figure IV


Natural Gas



Supply


Natural gas is a fuel source that will be increasingly used in the future to help meet the needs for energy in the
United States. At the current time (2011) natural gas fuel accounts for 24% of the electricity generation and 1% of
the transportation fuel.

Proven natural gas reserves have been increasing steadily for the past decade. These
reserves amount to 272.5 quadrillion cubic feet total nationwide. Over the same period of time the Federal
Offshore proven reserves have steadily decreased and as of 2
009 the reserves equate to 12.6 quadrillion cubic feet.
The Federal Reserves are located off the coast of California and the Gulf of Mexico. Throughout the nation there are
493,100 producing wells which have increase every year for the past decade. In a
ddition to the conventional
natural gas reserves the United States also has both Shale Gas and Coalbed Methane proven reserves which
amount to 60.9 quadrillion cubic feet and 18.5 quadrillion cubic feet in 2009 respectively. The discovery of both of
these

sources is relatively resent Shale Gas reserves and coalbed methane has increased slightly since the U.S.
Energy Information Administration (EIA) began tracking withdrawals. When discussing the natural gas supply it is
also important to understand how mu
ch is consumed. In 2010 total consumption in the United States equated to
24 quadrillion cubic feet. With the growing population and the general need for more energy the total
consumption of this source has been on the steady incline since the mid
-
1980s.

Of that total 7.3 quadrillion cubic
feet was used to produce electricity in 2010. Natural gas used for electricity production is expected to increase
into the future. Natural gas is also used as a transportation fuel in vehicles as well as in commercia
l trucks and
public transportation vehicles. The amount of natural gas that is used in the transportation sector has increased
every year since 1997 and as of 2010 vehicle consumption of natural gas was 32.9 trillion cubic feet.




In order to meet the g
oals set by this Energy Plan the supply of natural gas must be increased to ensure a
stable form of energy. With an increase in technology and innovation more natural gas reserves can be found and
sources that have been found but not extracted because the
y were not economically feasible could be extracted.
Through the discovery and extraction of new natural gas sources energy security could be closer to a reality.
Currently congressional and presidential restrictions on drilling for oil and natural gas e
xist in 85% of the Outer
Continental Shelf. Regulations have also been imposed inland limiting the amount of drilling that can occur. In the
short term the natural gas supply is projected to increase 25 trillion cubic feet per year. This estimate includ
es net
imports. The majority of the natural gas supply is expected to be generated from shale gas sources which are
extracted with hydraulic fracturing. All natural gas sources are projected to decrease slightly into the future while
shale gas will incre
ase dramatically. By 2021 natural gas production is expected to increase to approximately 23
trillion cubic feet. This is an increase of 2.04 trillion cubic feet over the 2009 level. Consumption will increase to
approximately 25 trillion cubic feet over

the base year of 2009. By lifting some of these restrictions the natural gas
supply can be increased significantly. Fracking should also contribute to natural gas supply because the supplies
are expected to increase dramatically into the future accordin
g to the EIA Annual Energy Outlook 2011.




Fracking and shale gas has been deemed safe and has increased the amount of proven reserves in states
like Pennsylvania, New York, Texas, Oklahoma, Arkansas, and Louisiana. A significant amount of shale gas exists in
the Marcellus shale gas Formation in N
ew York, Pennsylvania, and West Virginia. Current estimates differ but all
agree that the amount is significant. Hydraulic Fracturing is a proven technology process by which a fluid is
injected (99% water, sand, and fracking fluid) into wells to free the

oil and gas trapped in rock formations beneath
the Earth’s surface. Fracking has been used in over 1 million wells within the United States for over 60 years.
Through this process over 7 billion barrels of oil and over 600 trillion cubic feet of natural

gas have been extracted.
Fracking practices must adhere to both federal and state laws and there have been no instances of contamination
of drinking water sources. Fracking is conducted thousands of feet below groundwater sources. To ensure that
fracki
ng can continue the removal of trade secrets for fracking fluids will allow regulators to know the exact
contents to guarantee that it is safe. There have been instances where gas migration has occurred, which was the
result of poor well construction or p
roblems with the concrete and steel casings around the well bore. The
National Petroleum Council estimates that 60 to 80 percent of all domestically drilled wells in the next 10 years
will remain active due to hydraulic fracturing practices.


Source:
ProPublica,
http://www.propublica.org/special/hydraulic
-
fracturing
-
national





Tech for

efficiency


Combined Heat and Power (CHP) or Cogeneration is a technology that captures the excess waste heat and uses
it to heat or cool surrounding buildings or structures. The excess heat can also drive additional steam turbine (low
grade heat) producing additiona
l electricity. The efficiency of the system is typically within the range of 60
-
75%
efficient compared to the efficiency of conventional generation (coal) of 30
-
49% efficient. CHP in the United States
accounts for 8 percent of power production, although
the nation is the world leader in total installed capacity, with
84,707 MW operating in 2003. As in Germany, most of U.S. CHP capacity is in industry. More than 85 percent of
U.S. capacity is large
-
scale
-
over 50 MW
-
and almost 65 percent is over 100 MW. T
he United States has the potential
to produce between 110,000 and 150,000 MW of electricity with CHP systems.



Source

http://www.epa.gov/chp/basic/efficiency.html


Encourage the permitting and

construction of Combined Heat and Power (CHP) Plants. ITCs encourage the
development of CHP through the reduction of initial costs which are capital intensive. There is currently a 10
percent ITC for CHP plants at the Federal level through the Energy Im
provement and Extension Act of 2008. ITCs
would incentivize investors to fund CHP plants to increase the overall amount that are developed throughout the
country. Providing greater incentive would encourage businesses and utility companies to invest in s
maller
distributed type CHP plants that could utilize the excess waste heat for heating and cooling of the surrounding
buildings or towns. Currently federal regulations limit the system size of CHP plants up to 50 MW with an
efficiency of over 60% in orde
r to receive the ITC. By increasing the federal limit of 50 MW to be more compatible
with larger scale electricity generation plants (typical coal power plant has an 800 MW generating capacity which
is 1/16 of the CHP maximum) utility companies could util
ize a technology that is dramatically more efficient than
traditional sources. Increasing the ITC level over time will encourage utility companies to utilize CHP technology
which provides greater efficiency as well as other heating and cooling opportuniti
es.


Increasing the Production Tax Credits (PTCs) will encourage the development of new CHP plants for
electricity generation. PTCs are performance
-
based credits for electricity generation output. This would
encourage sustained performance by

providing utilities a KWh tax credit. The credit amount would depend on the
size of the CHP system. At the federal level a 1.1 cents/kWh tax credit exists for CHP type electricity generation
systems. By increasing the credit level utilities would be in
centivized to increase the efficiency of the electricity
generation as well as sustain the performance over the life of the system to gain a larger credit per kWh.


In the short term it will be important to start to invest in technologies that can be u
sed to generate
electricity more efficiently. This Energy Plan suggests two different methods for encouraging the development of
Combined Heat and Power which are the ITCs and PTCs. Both of these incentives would increase the amount of
government support

over time to meet the goals set by this plan.


o

ITCs should increase from 10% to 12% of expenditures in the short term. The maximum electrical
output limit set by this policy should also be increased from 50 MW to 80 MW. Through this
increase larger CHP e
lectricity plants could be constructed which would meet more of the needs of
many areas throughout the country.


o

PTCs should increase from 1.1 cents/kWh to 1.5 cents/kWh in the short term to make CHP more
competitive with other forms of renewable energy.


Compressed Natural Gas used for transportation
. Natural gas vehicles represent a growing segment of
the transp
ortation sector.


According to the
Natural Gas Vehicle Coalition
, the use of natural gas for vehicles
doubled between 2003 and 2009.


Over 110,000 natural gas vehicles are currently on US roads.


A large por
tion of
those vehicles are transit buses, which account for nearly 62 percent of all natural gas vehicles.
http://www.naturalgas.org/environment/naturalgas.asp



The section of the New A
lternative Transportation to Give Americans Solutions (NATGAS) Act that
addresses natural gas vehicles should be repealed. This act subsidizes the production, use, and purchase of natural
gas vehicles (NGVs). It was designed to promote transportation fue
l competition and reduce foreign oil
dependence and greenhouse gas emissions. Instead of doing what it was designed to do the act transfers a portion
of the actual costs of using and producing natural gas vehicles to taxpayers. This gives natural gas veh
icles an
unfair price advantage over other technologies and does not increase market competition. Competition in the
market will be the best solution to increase the availability of NGVs by allowing consumers to choose the cheapest
product or fuel.


o

Beg
in to repeal the NATGAS act to encourage increased market competition to allow consumers to
choose the cheapest alternative.




Environmental protection


Natural gas is the cleanest burning fossil fuel which is mostly comprised of methane a greenhouse gas. It is
cleaner because when it is burned it releases 30% less carbon dioxide than oil and 45% less than coal. Since
natural gas is so clean burning it d
oes not contribute to smog because it emits low levels of nitrogen oxides as well
as virtually no particulate matter. According to the Environmental Protection Agency (EPA) vehicles that run on
compressed natural gas could reduce the carbon monoxide emiss
ions 90
-
97% when compared to traditional
engines. Carbon dioxide emissions would be reduced by 25%, nitrogen oxide emissions by 35
-
60%, and other non
-
methane hydrocarbon emissions by 50
-
75%.




In the electricity generation industry natural gas is a
go
od alternative to the other traditional fuels (coal and oil). Its use will dramatically reduce the amount of harmful
emissions that are released into the atmosphere by the industry. The traditional coal
-
fired power plant need to use
scrubbers to reduce t
he sulfur dioxide emissions that lead to the creation of thousands of tons of harmful sludge.
Power plants that use natural gas as the fuel source have no need for scrubbers because low levels of sulfur
dioxides are emitted that do not lead to the creatio
n of sludge.
http://www.naturalgas.org/environment/naturalgas.asp



Due to the cleanliness of natural gas emissions when compared to other traditional sources of energy it will
become im
portant to utilize this source over the others to reduce the amount of harmful emissions that are
released into the atmosphere.




Infrastructure


Throughout the nation there are currently more than 210 natural gas pipeline systems which consist of a tota
l
of 305,000 miles of pipe both interstate and intrastate for the transmissions of the fuel. Within the pipeline system
there are more than 11,000 delivery points, 5,000 receipt points, and 1,400 interconnection points that provide for
the transfer of nat
ural gas throughout the country. In various places throughout the U.S there are 49 locations
where natural gas can be imported or exported through the pipeline system.

Source EIA Natural Gas
http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/index.html


The pipeline system throughout the country is aging and it is becoming increasingly important update and
modernize the i
nfrastructure to ensure the safety of humans and the environment. Most pipeline systems in the
United States are privately owned and are regulated by the Federal Government. It will be in the best interest of
these companies and the government to require

the modernization of the entire system at the cost of the each
pipeline company. The U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration
(PHMSA) and the Federal Energy Regulatory Commission (FERC) will oversee these s
ystem improvements.



Begin to require the pipeline companies to update the system. The pipeline system throughout the country
is aging and it is becoming increasingly important update and modernize

the infrastructure to ensure the safety of
humans and the environment. Most pipeline systems in the United States are privately owned and are regulated by
the Federal Government. It will be in the best interest of these companies and the government to r
equire the
modernization of the entire system at the cost of the each pipeline company. The U.S. Department of
Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) and the Federal Energy
Regulatory Commission (FERC) will oversee t
hese system improvements. This updating and modernization will
take considerable time and investment but it is necessary.

Nuclear



Reopen dialogue in the federal government with regards to reprocessing nuclear waste.

Reprocessing nuclear waste would simplify the need to find waste sites, however there are safety concerns
involved with creating large quantities of plutonium. There are arguments for and against both sides, and this is
something that needs to be discusse
d again in tandem with finding an acceptable storage facility.

http://www.pbs.org/wgbh/pages/frontline/shows/reaction/readings/us.html




Continue research into possible
geologic storage of nuclear waste.

Assuming reprocessing of nuclear waste is not considered, one of the country’s foremost priorities must be finding
geologic sites to safely store nuclear waste, since nuclear waste storage facilities are nearing capacity.

Though the
amount of nuclear waste is a small fraction compared to other energy sources’ waste, it is radioactive for such long
term that it must be dealt with more effectively even than other waste.




The NRC will continue relicensing plants that are sti
ll deemed safe to operate, while simultaneously continuing
to approve uprating proposals (replacements of major reactor components).

Rather than lose all the current nuclear power as plants come to the end of their initial life, the NRC will continue to
re
license plants that are still safe to operate. Part of this process involves uprating the plants, which involves
replacing major reactor components. Given major issues with public acceptance of constructing new plants,
updating old plants with new compon
ents can extend the life of the plant while also making it more efficient.

http://www.world
-
nuclear.org/info/inf17.html

http://www.eia.gov/nuclear/

http://www.eia.gov/oiaf/aeo/otheranalysis/aeo_2010analysispapers/nuclear_power.html




Incentivize the construction of new plants (generation IV) in the place of

old plants and standardize these
plants.

Generation IV plants are more efficient and safe. As a result they would have less waste and be more likely to be
accepted by the public. Incentivize the construction of these new plants in place of old plants by

providing tax
credits and a 20% investment to developers by the U.S..

In addition, these new plants should all be identical under management of the NRC. Making them identical would
make them cheaper to build overall and it would mean that safety issues c
ould be handled faster, because one fix
could be applied to all the plants, rather than having to be adapted to each individual plant.

http://www.pbs.org/wgbh/pages
/frontline/shows/reaction/readings/french.html


1.

Supply

The power behind nuclear power comes from uranium, which should not pose any issue in the time
frame of this plan. It is known that, at present consumption, there is enough uranium to last for about 80
years. This is
known
uranium, but further exploratio
n would undoubtedly yield more deposits as uranium
is a fairly common mineral. In addition, reprocessing nuclear waste would provide an even greater supply.

(
http://www.world
-
nuclear.org/info/default.aspx?id=438&terms=uranium%20supply
)


2.

Technology for Efficiency

Replacing major components in reactors as they age will, in addition to making them safer, make
them more efficient. Also, newer plants that are being

developed are more efficient. Lastly, the
reprocessing of waste would also generate more electricity per unit of uranium.


3.

Environmental Protection

There are relatively few environmental concerns in regards to nuclear power, however those that
do exist a
re major roadblocks to the advancement of nuclear power. For one, the threat of some failure in
the plant and the subsequent disaster that would ensue is hard to not be considered by the public.
Whether it is a rational fear or not, in regards to every d
ay risk, is inconsequential, because fear of such a
disaster is really the only thing preventing nuclear power from expanding. These policies call for the NRC
to continue critically monitoring nuclear plants, assuring their safety, and only relicensing th
ose plants that
are safe.

The other major issue is dealing with nuclear waste. However, this waste has been dealt with and
contained so effectively that, unlike other forms of energy, it has not impacted the environment at all. The
issue is that there mu
st be a place to safely store it for as long as it remains radioactive. With a concerted
effort to locate more potential geologic storage sites that are less politically charged than Yucca Mountain,
it is likely a solution will be found for containing the

waste, within the time span of this plan.


4.

Infrastructure

In the short term, no major changes will occur in regards to infrastructure. Should new plants be
constructed, necessary step will need to be taken, but they will be made within the existing infra
structure.


Hydro power



Continue modernizing existing hydropower.

“One of the best opportunities we have to increase our supply of clean energy is by bringing our hydropower
systems into the 21st Century. With this investment, we can create jobs, help our

environment and give more
renewable power to our economy without building a single dam.”

-
Energy Secretary Steven Chu, Nov. 4, 2009

Modernizing existing hydropower facilities could potentially double hydropower’s contribution to the U.S.
energy portfolio.

The Department of Energy began the process already in 2009 by awarding $30.6 million to
modernizing seven existing hydropower facilities. These projects include upgrading turbines and other equipment
and expanding the capacity and lifespan of existing f
acilities. The seven projects alone will increase electric
generation by an estimated 187 GWh per year and considering that in 2009, the current hydropower facilities
produced about 273 GWh, the potential to increase generation simply by modernizing is su
bstantial. In addition,
modernization projects quickly provide jobs to local communities.

http://hydro.org/tech
-
and
-
policy/developing
-
hydro/modernizing/



Make the tax credit
policy for hydropower on par with other renewable energies.

Currently, under the Federal Renewable Energy Production Tax Credit (PTC), hydropower only receives
half the value compared to other renewable energies. In addition, hydropower pumped storage is
not included in
the Federal Renewable Energy Investment Tax Credit (ITC). The ITC provides tax credit for equipment or property
that is eligible to receive the PTC. Investors can currently choose either the PTC or the ITC. Amending the
renewable energy
tax credit policies to be more inclusive of hydropower technologies would undoubtedly increase
interest in hydropower investments.

http://www.eia.gov/energyexplained
/index.cfm?page=renewable_home#tab3

http://hydro.org/tech
-
and
-
policy/policy
-
priorities/




Make the process of obtaining a license for minimal impact hydropower projects simpler and more eff
icient.


For minimal impact hydropower projects, the Federal Energy Regulatory Commission should create an
expedited licensing process. Minimal impact hydropower projects would include small hydro, converting existing
non
-
powered dams, and closed
-
loop pum
ped storage. The process of obtaining a license for all of these projects
from the Federal Energy Regulatory Commission can be long and complicated. However, FERC has begun to take
some minor steps to easing the process. For instance, in regards to smal
l hydro, such things as improving outreach
to developers, as well as signing a memorandum of understanding with Colorado to simplify the procedures for
small hydro projects in the state, have already spurred interest in small hydro. This can all be done a
t no cost to
the government.

http://hydro.org/tech
-
and
-
policy/developing
-
hydro/small
-
hydro/

http://hydro.org/tech
-
and
-
policy/policy
-
priorities/

1.

Supply

The amount of electricity produced by hydropower varies substantially from year to year as it is
dependent on water availability. This could be a major issue in the future if water scarcity is a
problem.
You can see from the table below that, while other renewables have been growing steadily over time,
hydropower varies greatly from year to year.




Without addressing policies regarding water consumption, supply of water cannot be altered. Howe
ver,
there are ways to obtain more electricity from less water, as discussed in the next section, and as mentioned in
the policy recommendations above.

2.

Technology for Efficiency

Many of the existing hydropower facilities today are very old, some as old as
100 years. The technology
exists to modernize existing facilities, such as replacing turbines, resulting in substantial increases in
capacity. These short
-
term policies immediately address this and place modernizing existing facilities as
one of the firs
t and easiest things to do.

3.

Environmental Protection

Dams of any sort, though especially large ones, wreak havoc on existing ecosystems, with
potentially far
-
reaching effects.

These policies do not call for the construction of any more dams to prevent
this ecosystem degradation from continuing, but there is no prohibition against building them should the
need arise. Other than that, hydropower is one of the cleanest ways to g
et electricity. Besides equipment
production and maintenance, there is no waste. In addition, nontraditional forms of hydropower, such as
small hydro and pumped storage, are called “minimal impact” simply for the reason that they would not
have nearly as

large of an environmental impact as traditional hydro.

4.

Infrastructure

As stated earlier, the infrastructure for hydropower is extremely dated. These policies would
modernize existing traditional facilities, while promoting the growth of minimal impact me
thods. This
process would necessitate a change in infrastructure, especially for the minimal impact, to work. However,
as these policies for the short
-
term most immediately address modernization, infrastructure changes
would not be too substantial.

Biofu
els

Supply:


“According to data from the U.S.

Energy Information Administration

(EIA), daily ethanol production in 2010
averaged nearly 863,000 barrels/day (b/d)… represent[ing] 13.23 billion gallons of production… 2009 ethanol
production was 10.75 billion

gallons.”
19

This increasing trend compared with ethanol subsidies can be seen in
Figure V below
20
. The Energy Independence and Security Act (December 2007) prompted this gradual increase
with a target production value of 36 billion gallons of ethanol by the

year 2022
21
. This mandate sets forth a clear
increase in ethanol production based on four categories defined as biomass
-
based diesel, cellulosic biofuels,
advanced biofuels (non corn starch ethanol), and renewable biofuels.
11

An abundant supply of biofuels in the short



19

http://cornandsoybeandigest.com/energy/2010