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Contaminated "American Fuel"

by a siegel Thu Apr 29th, 2010 at 03:37:52 AM EST

Two weeks ago, the "progressive" think tank Center for American Progress issued American Fuel: Developing Natural Gas for Heavy Vehicles.  This misleading and error-prone report strongly supports misguided policy concepts to subsidize heavily transitioning American transportation from one fossil fuel (oil) to a slightly lower polluting alternative (natural gas).  Even though political momentum exists behind this concept, it does not make "T Boone Pickens ... bold plan" a good one.  The report asserts that subsidizing natural gas into transportation offers a path to reducing oil demand by 1.25 million barrels/day by 2035, would not impact the cost of natural gas for other uses, and provides a benefit for carbon reduction.  Putting aside some uncertainty about optimistic assumptions about future natural gas production, choosing to emphasize natural gas for transportation is a far more costly and less effective path to reducing oil demand, controlling natural gas prices, and reducing carbon emissions than a myriad of other option already on the table.

Simply put ... this is a flawed and misguided report supporting a flawed and misguided policy proposal that would send the United States down a flaw, misguided, and reckless path.

front-paged by afew

What are we talking about here? The report fails to

  • Lay out, openly, serious issues like cost to the taxpayer for pursuing this option and the carbon emissions implications of the concept;
  • Place this concept against other alternatives (in cost to taxpayer/economy, oil use reduction levels achieved, cost per barrel of oil saved, reduction in carbon emissions, etc ...);
  • Engage forthrightly many issues surrounding such a plan, from security risks to the potential for it to lead to higher pollution loads.

A core challenge, which the report doesn't successfully address, is: What sense does it make to move from one fossil-fuel addiction to another?

It is, in fact, hard to figure out where to start with this report's problems ...

Why such a stove-piped discussion?

Perhaps its greatest problem is how stove-piped the discussion is, without any serious suggestion of viable alternatives and seemingly blind acceptance of business as usual statistics.  Thus, when it comes to transportation, the table on vehicles simply presents  the Energy Information Administration's and Federal Highway Administration's figures on the number of trucks/large vehicles in 2009 and projections for 2035.  What do these projections have? A significant increase in fleet numbers, working off an assumption that there is not meaningful move to (for example) smart growth and increased cargo transport on rail -- both of which are the sort of policies which would drastically reduce the demand for those additional vehicles.

Or, when it comes to technology, there are many concepts and paths for improving fuel efficiency in trucking fleets that doesn't require transition to natural gas.  See, for example, the sections on trucking in the Rocky Mountain Institute's Winning the Oil Endgame.  Essentially equivalent fuel savings could occur, faster, via their paths toward improving large truck fuel efficiency.  Electrification of rail offers a serious path to far greater oil demand reduction in part through offering a path to move cargo from fossil-fueled truck to electric powered trains.

In other words, our energy system and its climate impacts are incredibly complex, systems-of-systems challenges and opportunities that examining a policy option in isolation from a larger set of options almost certainly leads down faulty paths.

Why not cost analysis?

The report points to a variety of Congressional legislation for subsidizing natural gas in transportation but does not provide any cost estimates for those bills.  From the report

These bills would create economic incentives to boost investments in heavy-duty  vehicles powered by natural gas and the necessary refueling  infrastructure. It does this by increasing and extending several key tax  credits:

Alternative Fuel Tax Credit: Allows  natural gas users to receive a 50-cent credit per 121 cubic feet (for  CNG) or gallon (for LNG) of natural gas they purchase through at least  2019

Alternative Fueled Vehicle Tax Credits: Makes all dedicated natural gas vehicles eligible for a credit equal to  80 percent of the vehicle's incremental cost; Makes all bi-fuel natural  gas vehicles eligible for a credit equal to 50 percent of the vehicle's  incremental cost; And increases the light duty vehicle purchase tax  credit by 150 percent--from $5,000 to $12,500--and doubles the vehicle  purchase tax credits for all other vehicle weight classes

Alternative Minimum Tax applicability: Allows the natural gas vehicle and fueling infrastructure tax credits  to count against the alternative minimum tax provisions and makes them  transferable under certain conditions

Refueling Property Tax Credit: Creates an incentive to build CNG or LNG refueling facilities by  increasing the refueling property tax credit from 50 percent or $50,000  per station to 50 percent or $100,000 per station.

Research and development grants: Provide grants through the Department of Energy to light- and heavy-duty  engine manufacturers for research and development of better natural gas  engines

How much might these cost?

The "alternative fueled vehicle tax credit" might cost in the range of $60,000 per heavy truck (based on estimated incremental $75k cost). With a target of 3.5 million, that would be $210 billion dollars dedicated to subsidizing moving from one fossil fuel use to another.  

If we assume that there is reduction of 300,000 barrels/day equivalent usage in a decade (including existing natural gas fleets), that 50 cent "Alternative Fuel Tax Credit" would cost $6.3 million per day or over $2 billion per year in subsidy for burning natural gas in transportation.  Again, per year ...

Let's assume 25,000 refueling facilities: that would be another $2.5 billion.  

Etc ...

Eventually all those $billions add up to real money ...

What about analyzing the cost-benefit ratio in comparison to other policy options?

Initial analysis of The Pickens' Plan supports a conclusion that it is not a cost effective path for reducing US oil demand (and, by the way, is simply not effective in reducing emissions) when compared to other options.  A reasonable standard is:

    How many dollars of Federal investment would it take for each barrel reduction in US oil demand?

While the proposal to support natural gas in transportation with (massive) federal subsidies should (could) be examined against a vast array of potential policy options from subsidizing telecommuting to mandating smart growth to alternative fuel development, let us just briefly consider three options:

  1. natural gas for truck transport;
  2. electrification of rail; and
  3. installing dashboard feedback systems in all automobiles.  

An analysis of these three resulted in the following cost per barrel reduction in daily US oil demand:
  • Natural Gas for Truck Transport: $75k per barrel cut from daily oil demand + additional costs for natural gas + additional costs of refueling infrastructure + the cost of the alternative fuels' credit + pollution impacts of drilling and natural gas burning + ...
  • Electrification of rail: $36k per barrel/day cut from oil use  w/other benefits
  • Feedback systems in cars: $10k per barrel cut from daily oil demand  w/other benefits

To place these in consideration:
  • Electrification of rail has the potential for reducing oil demand by some 2.5 million barrels a day by 2020, some 15 years faster than the 1.23 million barrels a day reduction that the CAP report projects for 2035.  Electrification of rail would, as well, significantly cut actual carbon emissions rather than simply lead to a reduction in carbon intensity per mile driven. It would also improve safety and reduce highway infrastructure costs due to reducing, significantly, the number of truck miles on America's highways.
  • Putting feedback systems in America's car fleet is a program that could be executed in just a few years and could contribute to a reduction in US oil demand by some 1 million barrels per day. This would also foster actual carbon emissions and would improve safety as feedback systems lead to safer driving habits. (Note: feedback systems in commercial fleets also contribute to improving fuel efficiency and vehicle safety though that benefit is not included in this figure.)

Let's look at this a different way?  What could $10 billion of Federal funding "buy" on each of these three paths?

  • Natural Gas Transportation:  Less than 5 years just of the Alternative Fuels Tax Credit (not the subsidies for vehicles, for refueling stations, for drilling, for ...) at a level of 300,000 barrels a day equivalent.

  • Electrification of Rail:  Roughly 10% of the total required Federal resources to transition 35,000 of America's rail (the key rail lines) from diesel to electric while upgrading the lines for (somewhat) faster and more efficient service of both cargo and passenger uses.

  • Feedback systems in cars:  Fully funding a program to put  feedback systems in 100% of America's (post-1996) light vehicle fleet and could be done in a few years resulting in somewhere between 500,000 to 1,000,000 reduction in daily US oil demand ... again, by 2015 or sooner.  

Very simply, the natural gas option is higher cost, lower impact in reducing oil demand, takes longer to achieve its impact, and results in higher carbon emissions than these two other options. And, again, there are many, many other options out there that also look to be lower cost and higher positive impact across multiple domains than pursuing a "clean natural gas" transportation future.

Who are they listening to?

Perhaps the study team should be credited with doing comparative cost-benefit analysis.  As they write

The lifecycle costs of natural gas fueled trucks are already competitive  with diesel. A California Natural Gas Vehicle Coalition report found  that these trucks and buses are highly  competitive with their diesel counterparts, and "the relative  average annual cost difference of owning, maintaining, and operating  comparably equipped vehicles was found to be small over the range of  expected fuel prices, vehicle technology costs and vehicle fuel  economy."

Sigh ...

In fact, reasoned analysis suggests that subsidizing natural gas for transportation as a path to reduce US oil imports (and, below, reduce carbon emissions) is a far more costly and far less effective policy option than many other viable technological and social opportunities that already exist.

What are the real carbon emissions impacts of this policy construct?

Repeatedly, the report states

natural gas vehicles emit up to 25 percent  less carbon dioxide pollution than their diesel or gasoline  counterparts.

There are several challenging issues here.

  • Methane is has 23 times the greenhouse gas (GHG) impact (in the near term) than CO2 emissions. A 1.1% leakage rate in the system for natural gas delivery into natural gas vehicles would obviate the "25 percent less" immediately. (Note that the EPA has estimated that 1.4% of natural gas transported in pipelines leaks in that delivery system.)  Can that leakage be avoided? Probably but this is a serious risk. (The report includes this issue, calling for an EPA study even while endorsing moving forward with subsidizing natural gas into the transportation infrastructure.)

  • While the report states concludes that transitioning heavy-duty trucks would, by 2035, lead to a 1.01 million barrels/day reduction in demand from the BAU case, the carbon load would still represent an increase from 2009's 1.625 million barrels of oil burned to the equivalent of burning 1.981 million barrels (rather than 2.230 in the "BAU" case).  In other words, the projected case still represents an over 20% increase in heavy truck carbon emissions (and the situation is worse with medium-duty trucks). While this represents a reduction in carbon/GHG intensity per truck mile (if there is not methane leakage), the United States must have significant absolute reductions in carbon emissions well before 2035 rather than simply a slowing of growth in emissions for a polluting business-as-usual baseline.

Is there such a thing as "Sustainable" fossil fuel production?

Coming from an institution that has published multiple items challenging "Fracking" (also here, here, ...) as a path for natural gas production, the following sentence rings false:

Of course, there are polluting ways to go about producing shale gas and there are sustainable ways.

Simply put, "sustainable" is not a word associated with fossil fuel unless we are talking in geologic age terms, which is about the time frame to consider for sustainable production and replenishment of fossil fuel reserves. (Note: some of best, most accessible work on Fracking has come from ProPublica.  See also TXSharon's excellent work, such as Hydraulic Fracture: Your Money or Your Life)

Are there other issues?

Sadly, there are too many including the following:

  • Supply and demand implications for other natural gas uses.  The report simply asserts that increasing natural gas demand by a projected 12% would have no meaningful impact on the cost of natural gas for other uses from electricity production to water heating to fertilizer production.  Evidently the supply/demand curves are meaningless ...

  • LNG's potential risks:  The report supports the creation of a large and dispersed liquid-natural gas (LNG) infrastructure around the United States, with heavy trucks having LNG tanks.  LNG can be dangerous and LNG facilities are already a potential terrorist target.  The security and safety risks of such a widely dispersed LNG infrastructure merited flagging and discussion.

  • LNG's energy cost:  The report, again, suggest LNG use in a distributed system. To 'produce' LNG requires significant energy (to cool it to about negative 260 degrees F) and a significant additional infrastructure. What are the energy, fiscal, and pollution costs for that additional LNG infrastructure?

  • Ignoring other technology options: The report writes-off the potential for electric or plug-in hybrid electric drive to be viable for "heavier vehicles" including buses. In fact, hybrid and electric public transit buses are already working well in actual service. Plug-In Hybrid Electric School Buses (PHESBs) are already in service in number of communities across America in a test program. (An interesting twist: what might the impact be of a PHENGSB: plug-in hybrid electric natural gas school bus?)  There are even hybrid tractor trailors, with some 30 percent improved fuel efficiency. Hydraulic hybridization works well with some heavy vehicles, like trash trucks. Again, all of these options provide better oil savings per $ invested, with (significant) other benefits, than investing in subsidizing natural gas transit.

The Pickens Effect?

As per the above, this report is backing a program that would be bad for the taxpayer, bad for the nation, and bad for the climate. Putting massive amounts of public funding into supporting increasing natural gas usage in transportation would, however, be quite good for T Boone Pickens who has expended significant resources in seeking to sell it and who has been embraced by (too) many Democratic Party leaders in the past several years.  It is time to look past the sales job and examine the snake-oil for what it is. It is regretful that CAP's team failed to do such an analysis.

There is a process called MTG (methanol to gasoline), developed by Mobil (now of the Standard Oil spin-off, Exxon-Mobil) and first commercialized in New Zealand. It is a 2 step process (in overview):

  1. CH4 + 1/2 O2 ---> CH3OH

  2. n(CH4OH) + heat --> (CH2)n + nH2O

It is an easy way to convert the methane in natural gas to gasoline via a methanol intermediate. About 32 million tons/yr of MeOH are made each year from natural gas, so the MTG process is an "add-on". The process can be tweeked to give more gasoline or more diesel, and very little "grunge" (asphalt) is made. The gasoline and diesel is now a "drop-in" replacement for crude oil derived products.

Methane currently retails for around $6/MBtu (a million MBtu is about 950 cubic feet (pure CH4 basis) or ~ 1000 ft^3 as delivered, or for the metric inclined set (rumor has it, a few of them on the Eurotrib), about 28.3 cubic meters. Meanwhile, gasoline in bulk sells for about $2.20/gallon, or $18.64/MBtu. Even accounting for some energy loss, selling the methane as gasoline and diesel would more than DOUBLE the value of that methane versus selling it as natural gas. And no conversion costs either.

It is my 2 cents worth that conversion of methane into gasoline and diesel is what will equalize (thermal basis) the price of natural gas and crude oil. Also, I don't think that the equalizing process (time to make natural gas to gasoline production facilities) will take all that long.

The other side of that coin is that natural gas prices will rise to about 3 times their current level, especially when oil goes towards and then above $100/bbl. Whoever has stores of cheap natural gas in North America stands to totally pig out at the trough, and be rolling in money, taking their currently low valued resource, doing nothing but waiting, and then cashing in big-time.

Sounds a bit like TB Pickens (rhymes with tuberculosis, I believe).


by nb41 on Wed Apr 28th, 2010 at 11:40:01 AM EST
I'm dubious about the gains claimed by the feedback systems: people don't drive pick-up trucks to get milk because they think it's efficient, they drive big honking trucks because it is a societal signal saying 'we are rich enough that we don't need to care about wasted fuel and capital'.  Just like manicured lawns and gold earrings.  If the feedback system were mandated the luxury value that the Prius 'I only use xL/100km' smugness would probably be obliterated and the study's measured gains would be illusory.

I had to check to see whether the author was Bruce after reading this :)

by njh on Wed Apr 28th, 2010 at 07:19:28 PM EST
Given the choice between a little economy car and a giant honking truck, if there is no price difference, which would you choose? Not many people PREFER to drive small cars--if they had, Colin Chapman would have made a lot more money.
by asdf on Wed Apr 28th, 2010 at 07:22:28 PM EST
[ Parent ]
Well I chose a little car given that exact choice.  But I long ago realised that my buying decisions and tastes in general were anticorrelated with the populace.  (which is why I read ET :)
by njh on Wed Apr 28th, 2010 at 07:51:14 PM EST
[ Parent ]
The links provide a bit more clarity but there is research behind this. There are disagreements, without 100% agreement in literature, but 'realtime feedback' impact across a broad population seems to have a 5-15% (depending on which study, etc ...) impact. There will be drivers who, in fact, end up less fuel efficient and there are those who will be come hyper-milers getting 30+% increases in fuel efficiency. This benefits seems to track, from what I have seen, across various vehicle types.  Simply put, if there is something there that says "$XX per mile" and drivers see it drop (immediately) to "$X per mile" with very little impact on driving times, then the "average" driver starts to modify their behavior bit-by-bit.

Blogging regularly at Get Energy Smart. NOW!!!
by a siegel (siegeadATgmailIGNORETHISdotPLEASEcom) on Wed Apr 28th, 2010 at 08:10:16 PM EST
[ Parent ]
... the social display value of the pick-up truck is having the pick-up truck ... and of course there are material advantage in the snow belt comes when the snow hits the roads and then starts to pile up ... and of course, for a small fraction of the buying public, they actually have things to put in the back of the pick-up truck to carry around.

If the feedback device is just there, rather than being an optional extra, then everyone who buys the pick-up truck will have the efficiency of their driving staring them in the face, and some will use that to drive more efficiently. Since 30% gains are possible, average gains of 5% to 15% seem quite plausible.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Apr 29th, 2010 at 01:43:39 PM EST
[ Parent ]
You still have a choice!

You can choose between a green Americas or a polluting Eurasia.

[Europe.Is.Doomed™ Alert]

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Sat May 15th, 2010 at 04:00:24 AM EST
Or is that an Icelandic volcano?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat May 15th, 2010 at 04:35:30 AM EST
[ Parent ]
Interesting observation about that graphic, noting the green plant from N America & the smokestack emerging from Northern / Western Europe ...

Blogging regularly at Get Energy Smart. NOW!!!
by a siegel (siegeadATgmailIGNORETHISdotPLEASEcom) on Sun May 16th, 2010 at 06:38:36 AM EST
[ Parent ]
Skillfully Orwellian, as we know who the bigger polluter is...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun May 16th, 2010 at 07:07:03 AM EST
[ Parent ]

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