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National energy policy for 8 years

• The national policy imposed the following;

Taxed energy demand

■ Limited the energy supplies

■ Ignored expanding energy needs

• Summary of the past policy on energy;

■ You cannot find it You cannot transport it

If you get it, we don't want you to use it

• Good News: Crisis can be solved

• Bad News: Not temporary; will not fix itself

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Energy supply challenges

• Demand for energy rising across the board, particularly for natural gas and electricity

• Supplies limited by regulatoiy structure

■ Failed to keep pace with technology advances

■ Uncertain political environment discourages investment in desperately needed facilities

• Energy infrastructure is woefully antiquated and inadequate

Note: The energy infrastructure is that network of generators, transmission lines, refineries, and pipelines that convert raw resources into usable energy or fuel

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Oil: Rising consumption and accelerating dependence

In U.S., will increase 33 percent in 20 years U.S. production continues to drop

■ Produce 39% less now than in 1970

■ At present reduction rate, production will decrease to 5.1 million barrels per day by 2020, down from 9.4 million barrels per day in 1970.

Imports have steadily risen

■ Will soon rise to 64% unless checked

■ Empowers foreign suppliers such as OPEC Assuring affordable, reliable, adequate supply of crude oil is a critical national challenge

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Oil: Rising consumption and accelerating dependence

* We have been decreasing the infrastructure

■ No new refinery built in over 25 years

■ New regulatory interpretations limit expansion of capacity of existing refineries

■ Regulations require producing more than 15 different types of gasoline

■ Refining industry strained to capacity

* E.g., Clinton symbolically released 30 million barrels of oil from the Strategic Petroleum Reserve

* The oil had to be shipped overseas to be refined!

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Natural Gas: Rapidly rising demand, supply constraints

* By 2020, U.S. will consume 62% more natural gas than today

* More than 9 out of 10 of announced new electric power plants will be fired by natural gas

* 40% of potential gas resources are on federal lands either closed or severely restricted

* Last lease in Gulf of Mexico more that 10 years ago

* New discoveries falling

* Dangerous to assume relying on natural gas, severely restricting exploration, keeping low prices

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Natural Gas: Rapidly rising demand, supply constraints

• Given enough natural gas, 38,000 more miles of transmission pipelines and 255,000 miles of distribution lines will be needed

• This alone will cost $120-150 billion

• E.g., Alaska's Prudhoe Bay produces 8 billion ft3 per day

■ About 13% of America's daily consumption

■ Never reaches the market, pumped back into ground

■ Waiting on building a pipeline to connect Alaska fields to US/Canada distribution system

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Electricity: Needs, problems

• Over 20 years, conservative estimate is that demand will increase 45%

■ Will require construction of 1,300 new power plants, about 65 every year (about one every 6 days)

■ Last time we added so many power plants was 1985

• Some experts calculate demand will increase faster

■ May require nearly 1,900 new power plants

■ That is 90 per year (about one every four days)

• Either way, will place great pressure on already strained and aging power grid

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The aging power grid

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• Network of transmission lines, substations, and transformers

• Built when utilities were tightly regulated, supplied service to assigned regions

• Interconnections between suppliers were strictly emergency backup measure for rare usage

• Not designed at all for long-haul swapping of power in a competitive market

• Transmission bottlenecks contributed to California blackouts this winter and price spikes in New York City last summer

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Coal fired electrical power

Coal powers half our electricity generators.

Enough coal for 250 years.

Coal emissions slated for broad reductions

Administration will support new technology, but will not threaten electricity supplies and let it significantly raise electricity prices

President Bush therefore decided not to impose new mandates on C02 emissions

If nation is to have reliable electricity over next 20 years, coal must play a major role

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Nuclear power plants

• No new nuclear power plant permit granted since 1979

• 103 existing nuclear power plants

• Many not expected to even file for license renewal as licenses expire over the next 15 years

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Dangers of complacency ^

• Last three recessions tied to rising energy prices

• Latest crisis already causing negative effects

• Soaring fuel costs: extra $115 billion between 1999 and 2000; 1% off Gross Domestic Product

■ Californians lost $2.3 billion in wages, sales, etc.

■ Layoffs hitting in West as manufacturers shift to states with more reliable energy sources

■ Intel will not build $2 billion plants in California to expand there.

■ Farmers' incomes to drop 20% in next two years

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Dangers of complacency (2)

Some homeowner gas bills in Washington D.C. more than tripled this year

Heating bills of some residents exceeded their food bills during the winter

California power outages shut down traffic lights, closed businesses, darkened schools

Police patrols were used to insure compliance Electricity shortages predicted for New York City and Long Island this summer Strained refinery capacity in the Midwest

Low capacity threatens electricity reliability in Midwest, Southeast, and Northern Plain states

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Need for national energy policy

• Rising demand, tightening supplies, aging power infrastructure, decade of neglect

• President created Energy Task Force, headed by VP Cheney, to determine strategy

■ Environmental responsible exploration and recoveiy

■ Conservation and energy efficiency

■ Encourage investment in new technology for renewable energy sources

• Debate is still deeply polarized

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Extremes of the energy positions

■ Zero tolerance to exploration

■ New, undiscovered sources will somehow provide for us

■ Limitless faith in special tax breaks for a favored activity or subsidies for a preferred industry

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