Geo Destinies

Walter Youngquist

[Chapter 27 from: Myths and Realities of Mineral Resources, University of Oregon;
National Book Company, 1997; at the time of publication Walter Youngquist
was Chair Emeritus, Department of Geology]

Although minerals and energy minerals are fundamental to our existence, the facts of these resources and of industries which produce these materials are subject to many myths and much misinformation. This is unfortunate for it clouds the ability of individuals in a democracy to make intelligent choices. Some of the distortions are deliberately made by political interests who play upon the fears and hopes of the electorate, and then in the role of the defender of the public interest against the oil or mining companies seek to obtain votes by this device. Some statements are made from ignorance, and some are made by people who have their own political and social agendas which they wish to perpetrate upon the public. Some are made by people who are a bit over enthusiastic about a particular resource and do not carefully examine the hard facts, or may not be aware of them. Some statements are made by promoters wanting to raise money for a particular mineral development, whether that development has a sound basis or not.

It is important that facts be sorted out from fiction if democracy is to be the form of government which makes our laws and guides our international, national, and personal affairs. The tax structure which is a political matter has much to do with the success or failure of many mineral ventures. However, what is fact must be carefully presented and any doubts about a statement be fairly noted.

Also, it is important for correct public policy that the basic geologic, economic, and technical facts be known about a given resource, so that there are no illusions by government leaders or the citizenry in general as to how important that resource is now or may be in the future. There are numerous glowing statements in print about what can be expected from things ranging from oil shale to mining the moon. It is indeed nothing short of amazing what claims are made, and what people may believe. This also applies to solutions to resource-based problems such as population pressures, where colonizing space has been suggested. Some of these myths are discussed here.

In part, this chapter is a summary of statements made in other parts of this volume with respect to particular resources. However, for the sake of emphasis with regard to some of the misunderstandings concerning mineral resources, the facts are here brought together in one chapter for convenience of review.

Myth:

There is no oil supply problem in the United States

During the two oil supply crises of 1973 and 1979, in the U.S. the average citizen frequently stated the belief that no "real" oil shortage existed, and that the shortages were caused by the oil companies withholding oil from the market. But when the individual is asked two basic questions: How much oil does the United States produce each day, and how much oil does the United States consume each day, there usually is no reply. People are "experts" on the oil situation with no knowledge of the facts. This serves no useful purpose.

Reality:

The United States passed the point of oil self-sufficiency in 1970, and has been an importer of oil ever since then. In 1996, the United States produced about 6.4 million barrels of crude oil a day but imported more than 7 million barrels of crude oil plus 1.7 million barrels of refined oil products. The U.S. is now importing more oil than it produces.

The United States is the most thoroughly drilled area in the world and there is no possibility that this nation will ever again be self-sufficient in oil in the volumes and ways in which it is now being used. In what are reasonably prospective available oil areas in the United States, there are very few undrilled places left large enough for a major oil filed to be discovered onshore. Offshore there are some prospects, but offshore drilling has been banned in many areas.

A major oil field covers many square miles and almost all sizeable prospects have been drilled onshore U.S., except in a small comer of the Arctic National Wildlife Refuge, which has been under environmental limitations. Some prospective areas do exist in more distant offshore areas open to exploration but these are generally in increasingly deeper waters, and are difficult and expensive to drill. The amount of oil which would make the United States again self-sufficient in petroleum cannot be found and produced in what areas remain to be explored, either onshore or offshore. As one petroleum geologist put it, "Exxon has run out of real estate." This is true of all the major companies who have now had to mostly go abroad to obtain acreage prospects of worthwhile size. Myth: Just drill deeper for more oil.

The statement is sometimes made that deeper drilling would find more oil.

Reality:

Oil occurs in sedimentary rocks which are a fairly thin part of the Earth's crust. In the long-time oil-producing State of Kansas, for example, granite or something else besides sedimentary rock exists everywhere at depths of 15,000 feet or less. All over the world, at some depth, non-petroliferous rocks are encountered below which there is no oil. Where there are great thicknesses of sedimentary rocks, 16,000 feet is, with a few exceptions, the limit of oil occurrence. Below that depth, because of the temperature of the Earth, only gas exists.

Myth: Oil companies have capped producing wells to keep up the price of oil This is one of the oldest and most persistent myths about the oil industry. The idea is that oil companies will drill wells and then cap them, thus withholding production from the market until the price of oil goes up.

Reality:

It is true that many wells are drilled and then capped. Almost all of them are capped because they are dry holes-that is, they are failures. Less than one in eleven exploration wells is successful. The law requires that failed wells be filled with cement at key points in the well to avoid groundwater contamination, and then capped. To the landowner who had great hopes for the well drilled on his property, the face-saving statement to the neighbors is that "they found oil but just capped the well." Only when the oil company drops the lease does reality arrive.

There are some wells which could produce oil which are temporarily capped. There are two common reasons for this. One is that there is no facility for transporting the oil from the well at the moment. Either a pipeline does not exist or it is too expensive to truck it out. Generally, if the well is a producer, other wells will be drilled in the area to establish the presence of enough recoverable oil to justify developing a transport system by which the oil can be brought out economically.

A second reason may be that occasionally it is true a well may be drilled, completed, and capped when the current price of oil is not high enough to pay for the expenses of producing the oil-the pumping costs and perhaps the problem of the disposal of the salt water which may be produced with the oil. However, capping a well and leaving it for a time is risky because sometimes the well cannot be restored to production.

Drilling a well is so costly that if the well is productive and capable of bringing a return on investment, the well will be produced. If a million dollars is involved in exploration, lease, and drilling costs-and one million is much less than many wells cost-then the cost of that money in lost interest which that money would otherwise bring, demands that the well be produced. No one can afford to tie up a million dollars, or many millions with no economic return. And it is not done.

Myth:

Don't drill this prospective field. Only 90 days of U.S. oil supply there

One of the most misleading arguments used against drilling a particular area is the statement that it would only supply X number of days or months of U.S. oil demand. Yet to the average citizen this is one of the most "logical" reasons for not allowing drilling in a particular area. It is one of the most widely and most effectively used arguments against oil drilling. It appears frequently in numerous newspaper editorials and letters to the editor, and at public hearings.

With regard to the long-running debate about opening a portion of the Arctic National Wildlife Refuge in Alaska for oil exploration, in 1995, the president of a prestigious environmental organization said "...there may be at best only 90 days supply of oil for the U.S. There can be no justification to develop the arctic refuge."(27) Let us pursue this argument.

Reality:

At the present time the U.S. uses about 18 million barrels of oil a day. A 100 million barrel oil field is regarded in the petroleum industry as a "giant." They have been discovered only infrequently. Yet if one of these giant oil fields was used to supply U.S. oil demand, it would last less than six days!

To put this in further perspective, at the present time only 15 oil fields in the United States have produced as much as a billion barrels of oil. This is done, of course, over a period of many years. But if the argument is applied that the oil field would only supply oil for a given length of time in the U.S., it should be noted that the oil from each of these 15 fields, if it could have theoretically been used alone at one time, would have only supplied the U.S., at its current rate of consumption of about 6.6 billion barrels a year, only about 57 days.

If the argument used by the president of the environmental organization was to be followed, there would be no oil drilling at all in the United States. These days, a ten million barrel oil field discovery is an important event in U.S. oil exploration. But that amount would last the U.S. less than 14 hours! The fact is, we are not discovering ten million barrel oil fields every 14 hours in the U.S. That is why our oil reserves are in decline. Prudhoe Bay, the largest oil field ever discovered in North America, would have lasted the U.S. less than two years if it alone had been used.

But it is not possible to produce all the oil out of Prudhoe Bay or in any other field in 90 days, or six months or two years. If one divides the number of producing oil wells in the U.S. into the total proven U.S. reserves, each well has a reserve of about 38,500 barrels. These 38,500 barrels of oil, if they could be immediately produced, would supply U.S. oil demand for about three minutes. On this basis, it might be argued that none of these wells should have been drilled, in which case the U.S. would have no oil production. But oil supplies are produced over many years from many wells which make up the total U.S. production.

Each well makes a contribution, and each discovery serves to stretch out domestic supplies a little longer. Individually most fields, with the notable exception of the huge Prudhoe Bay Field, and each well produces an insignificant amount of oil relative to total U.S. production. But taken together they add up to the 6.4 million barrels a day now being produced.

People who use this argument presumably drive to work in gasoline-powered cars. Where do they want that gasoline to come from? People demand and use oil. With few significant prospective areas now still open to drilling in the U.S., where is the oil supposed to be obtained? Those who would curtail exploration first need to reflect on what is causing the huge and increasing demand on mineral and energy resources, and address that cause and not the symptoms of the problem. The cause is the resource demands of growing numbers of people, and the desire to continue to maintain the largely petroleum-based standard of living enjoyed by citizens of the industrialized nations. Use no oil and there is no need to drill. Otherwise drilling is necessary-somewhere. And each well and field are a necessary part of the total supply picture.

Politics and Oil

In the United States, and in many other countries, gasoline is the commodity which most touches individual lives even day. It has been politically popular to proclaim that it is the right of even American to enjoy cheap gasoline, and if this does not occur the politicians blame someone-usually the oil companies. It is "they" versus "us". "They" are the oil companies. "Us" is the public, and the public elects the politicians. When considering the problems of gasoline supply, people should simply look in the mirror to see the major part of the problem. The United States uses more gasoline per person than any other nation in the world, except Venezuela. In the Los Angeles area more people drive more cars more commuting miles every day than anywhere else on Earth. To a lesser extent this occurs in many other cities in the United States including greater San =46rancisco, Houston, New York, Chicago, Denver, and Seattle.

Myth: Gasoline is high-priced

When gasoline in the United States crossed the one dollar per gallon retail price there was a general public resentment of the oil companies. Gasoline was "too high priced."

Reality:

In the 1990s in the U.S. the basic cost of gasoline (before taxes) was less in terms of inflation adjusted dollars than anytime in the past 40 years. In fact, it was nearly as cheap as anytime in the history of the oil industry. It was also historically inexpensive in terms of how long the average wage earner had to work to buy a gallon of gasoline.

The cost of gasoline at the pump is the basic cost of exploring for, drilling, producing, refining, and marketing the gasoline together with the taxes which are placed on this commodity. Lesser costs are the cost of transporting and storing the gasoline enroute to the service station. Profit margins are spread all through this system, and are generally in line with average market returns on investment. The biggest single cost in the final price of gasoline at the service station is taxes. Gasoline is a favorite source of revenue for government. In 1993, for example, U.S. President Clinton signed a bill which increased the U.S. federal gasoline tax by 4.3 cents. This was not dedicated for the purpose of road building and maintenance, but went into the general U.S. Treasury, and was stated to be for the good cause of reducing the annual government deficit, which end result has since seemed rather elusive in practice. States and cities also impose gasoline taxes. In the United States, federal and state gasoline taxes on the average are in total equal to more than the basic cost of the gasoline at the refinery.

Based on constant 1967 dollars, exclusive of taxes, the retail price of gasoline in the U.S. in 1920 was 49 cents, in 1930 it was 39 cents, in 1950 it was 37 cents, in 1970 it was 30 cents, in 1974 it was 40 cents. The price in 1995 was 67.7 cents a gallon.(19) But this 1995 price is for a much improved quality of gasoline with additives for better engine performance, and also for reduction of air pollutants. The price is also for unleaded gasoline which was not available in 1974, and which costs more to produce than does leaded gasoline. This record of price stability is in marked contrast to the large increase in prices of virtually all other consumer items. The oil companies have done a remarkable job in supplying the world's largest consumer of gasoline, the U.S. citizen, with inexpensive high-quality gasoline without restrictions as to quantity. However, because gasoline price touches so many people, the political posturing over gasoline prices in order to gain voter favor seems to be a continuing phenomenon. In the U.S. in the spring of 1996, gasoline prices rose about 10 to 15 cents per gallon. This was due to the fact it had been an exceptionally long, hard winter, and refineries had delayed their shift of refinery output emphasis from fuel oil to gasoline. There were also weather related problems in the North Sea and Mexico which interrupted oil shipments, and the world oil price rose from about $17 a barrel to $25. U.S. oil companies have no control over the price of world oil, from which now comes more than half the U.S. oil supply.

But both major U.S. political parties tried to make campaign advantage of the situation. The administration announced that the Justice Department would immediately look into the matter of a possible price conspiracy among the oil companies. The opposition in the Congress said it would try to repeal the 4.3 cent gasoline tax increase which the administration had pushed through in 1993. The media interviewed motorists at the filling stations who by and large were of the view that the oil companies were greedy, which view was widely echoed by cartoons, editorials, and radio and TV commentators.

Some of the media, however, had more informed observations. The syndicated columnist, Mike Royko, viewing oil prices both historically and currently, wrote some very direct comments about the 1996 oil price situation:

"What I didn't hear any reporter say was: 'Of course, in this country, we pay far less for gasoline than they do in Canada, Europe, or just about any other developed nation.'

"Nor did they point out that when you factor in inflation that the price of gas is less than it was 40 years ago.

"If the broadcast hysterics took note of these few simple facts, there wouldn't be any talk of a gas pump crisis...

"If CNN insists, every half hour, that helpless American motorists might suddenly be sputtering to a stop on the shoulder of the road, is the White House or Congress going to deny that we are suddenly fuel-starved? Is any self-respecting politician going to stand up and say: 'Hey, what's the fuss? You want to see high gas prices, go to Canada or Europe. What are you network magpies chirping about?'

"Of course not. When the nation's broadcast babblers, from whom the majority of Americans get their news, say we have a crisis, it's time for the political speech writers to crank out something, even if it is something stupid.

"That stupidity includes the instant-investigation into the vague possibility that the oil companies have somehow conspired to pick our pockets.

"All that the investigation will show is that if there was a conspiracy, they've somehow conspired to give us the world's cheapest fuel for our cars."(21)

In terms of oil, American's live in a "fuel's paradise." A British observer on the scene has written, "...by European standards petrol [gasoline] is almost given away in the United States..."(28)

It should be noted that in other countries, the retail cost of gasoline without tax is about the same as in the U.S. That gasoline costs more than five dollars a gallon in some nations is due chiefly to taxes, and to a lesser extent to retailer's profit, which commonly is higher than in the United States. Also, in some countries the gasoline distribution system is less efficient than in the U.S. and it costs more to transport the gasoline to the retail outlets.

Myth: "They" own the oil companies

To gain popular favor, many politicians, frequently joined by the media, assert that oil companies are vague and distant entities owned by "they" and it becomes "they" versus "you." The oil industry is a favorite whipping boy for politicians seeking to gain votes. Because the average citizen is not well informed on these matters, political rhetoric often reinforces prejudices against the oil industry rather than dealing in realities.

Reality:

Who does own the oil companies? During the 1979 oil crisis I was invited to address a luncheon meeting of a State Employees Association in the State Capitol. The topic was the oil crisis. The oil industry was being widely blamed. I asked who among the State employees owned any oil company stock. Not a hand was raised. However, just prior to the meeting I had been in the office of the Public Employees Retirement System which administered the pension plan for all State employees. I had examined the holdings of the fund and discovered that the largest single industry holding in terms of dollar value, was oil company securities. The fact was that everyone in the room owned oil company stock. The conventional myth is that large oil companies are owned by some vague group distinct from the general public, the "they." The reality is that "they" are us.

And this is very broadly true. Insurance and investment companies place the funds of their clients in a variety of investments among which traditionally have been oil companies. Through life insurance, and other insurance policies, annuities, and mutual funds, the major oil companies as well as the mining companies are owned by the general public.

A recent study of ownership of stocks in the six largest oil companies in the United States disclosed the following: nearly 200 mutual insurance companies hold close to 16 million shares. Ninety-one colleges own these stocks, and about 1,000 charities and educational foundations in the United States are holders of these oil company securities. In direct ownership more than 2.3 million Americans hold stock in these six companies.

Many other Americans own interests in smaller oil companies. As to who produces U.S. oil, it should be noted that currently in the United States, excepting the North Slope Alaskan oil which is a very high cost operation and requires a very large investment, more than half of the oil produced in the U.S. is produced by small independent producers. It is the oil produced abroad in such high cost areas as the North Sea, where major oil producers are dominant. This is inevitable as expense of operations in these areas runs into billions of dollars, and are much beyond the financial and risk taking abilities of small independent oilmen. And, as noted, these larger companies are owned directly, and through pension plans, annuities, and insurance policies, by millions of citizens.

Myth:

Some remote special group of people run oil companies Here, also, people frequently believe that persons who are not part of the general public run the oil companies, just as they may believe that some distant remote group owns the oil companies.

Reality:

People who run oil companies just as those who own the companies are again not "they" but us. Geologists, engineers, accountants, and business administration majors make the oil companies function. They are our sons, our daughters, our neighbors. I taught petroleum geology at a state university. From my experience, which is typical, I cite two examples of who runs oil companies. One student had worked as a meat-cutter in a butcher shop in his small Central Oregon hometown during his high school days to help out his family. He worked his way through college by various jobs and went on to graduate school and received a well-earned Ph.D. He worked his way up through the oil industry and is now vice president of a major U.S. oil company. He is based in London in charge of the company's North Sea operations. Another student worked as a clerk in his father's shoe store during both his high school and university days. After earning a graduate degree he held various positions in an oil company, and now represents one of the world's largest companies in examining oil prospects from Russia, to Norway, to Africa. Each of these men was the boy next door. The people who run the oil companies are us.

Myth: "Big oil" is bad

"Big oil" is a favorite expression frequently used in a derogatory manner by many in the media, and others who, for various reasons wish to turn the public against oil producers. The myth is that somehow "big oil" is bad.

Reality:

It is true that worldwide oil production is becoming a bigger and bigger business. The reason is that the easy to find, shallow oil has been found. Now, more and more significant discoveries have to be searched for in remote "frontier" areas (arctic, or jungle) or must be sought after in deep water offshore areas which involve very expensive exploration programs. Costly leases must be negotiated with foreign governments, and if the area of interest is offshore, huge drilling platforms which may cost half a billion dollars or more must be built. Oil exploration is being conducted offshore Greenland and in the frequently violently stormy North Sea. These are expensive areas in which to operate. Oil exploration and development in the areas east of the Andes Mountains in Peru, Ecuador, and Colombia means building roads and hauling equipment through difficult terrain. Ultimately pipelines must be built over the mountains. Oil companies must be big to do these things and deliver gasoline to consumers. Individuals, or small companies with small amounts of money cannot do it.

Myth: oil companies own oil

Reality:

In a number of countries, including Saudi Arabia, Venezuela, Kuwait, Iran, Iraq, Peru, and Mexico, oil was originally discovered and developed by foreign companies with the expertise which the country itself did not have. Subsequently, with the rising tide of nationalism following the colonial period, oil company properties-oil fields, pipelines, shipping facilities-were taken over by the respective governments, at times with little or no compensation.

Most of the oil in foreign countries is owned by the governments, not the oil companies. Oil companies simply hold leases (abroad commonly called concessions) to develop the oil deposits. The companies are allowed to search for and produce what commercial oil may be found. Sometimes the oil companies can sell it themselves and sometimes they have to market it through state-owned companies. In a sense they own the oil they produce, but they never really own the oil in the ground. They only lease the right to produce it. This is an important point, because it means that U.S. companies or any other companies operating in a foreign country do not own an assured safe resource base.

In the United States, the mineral rights which include oil and gas usually belong to the owner of the land. The owner can sell these rights to a resource development company, so, in effect there can be more than one owner of a piece of land. The surface can be owned by one individual and the subsurface can be owned by someone else. Oil companies can buy the mineral rights to oil and therefore own the oil. However, even in the United States, more often than not, the oil companies have to lease the mineral rights. Offshore oil belongs either to the adjacent state, or beyond the state limits, to the federal government. Oil companies, for the most pen' do not own much oil. Many own no oil. On the oil they do produce, they pay a royalty to the private owner, or royalties and taxes to the government. These costs range from 12.5 percent to as much as 90 percent of the value of the oil.

In other countries, the government generally owns all the mineral resources which may be leased out to developers. But governments change their minds about lease terms or cancel them with or without any compensation. Quite a few have done so-another severe hazard of the mineral resource business. The existence of OPEC is obvious proof that oil companies do not own or control most of the world's oil.

Myth:

Oil companies make big profits compared with other enterprises The profits of oil companies are frequent targets of criticism by both the politicians and the media. Many people believe that mineral resource companies are excessively profitable relative to other enterprises.

Reality:

As pointed out in Chapter 26, Mineral Economics, the amount of capital which has to be invested in the production of oil is very large and it takes a long time, in some cases, many years, before any return can be realized on the investment, if indeed there is a return at all. Many smaller oil companies go bankrupt from a series of dry holes. One such example was a firm which drilled in the geologically rather unpredictable deltaic sedimentary complex in the Denver-Julesburg Basin of Colorado. The first well was a small producer. Subsequently four wells were drilled around the first well. All four were dry holes. The small amount of oil coming from the first well was insufficient to repay the bank loan which had been used to finance the drilling of the other four wells. The company went out of business.

Oil exploration and production is a high risk venture. Companies that do survive, earn a relatively modest return on investment. On records kept since 1968, the average return on stockholder investment in 30 representative U.S. oil companies has been 12.5 percent. In 1994, it was only 9.2 percent.(7) For 30 representative manufacturing companies, the return has been 13.1 percent.(1) The average return for oil companies is less than the average return for manufacturing industry in general.

Relating this to the gallon of gasoline which we buy, an editorial review of this matter stated:

"No one needs to be reminded that gasoline prices have risen since the OPEC camel began flexing its muscles. But oil industry analyses show that oil companies aren't exaggerating when they say they make a profit of only about two cents on every gallon of gasoline sold. In fact, only Exxon reports making that much. Standard of California, Phillips Petroleum and Texaco report making no more than 1.5 cents a gallon. The big winners in the gasoline sweepstakes are the federal and state governments, which collect six times as much in taxes per gallon as the companies earn in profits and some of the most spectacular increases in gas pump prices are attributable to state tax boosts."(2)

Although this editorial was written in 1975, the economics of the oil industry remain about the same today. In spite of intervening inflation, two cents a gallon is regarded by the oil companies as a very good profit on a gallon of gasoline. Adjusted for inflation since 1975, the profit is barely one cent a gallon.

At the upper end of the list of profitable segments of the economy are the so-called "sin-stocks", the tobacco and liquor companies. It is ironic that companies which produce products that are harmful to the health and welfare of the country are much more profitable than is the oil industry which produces a basic necessity and makes life for much of the world much more pleasant than it would be without this important energy source.

If anyone still believes that the oil business is very highly profitable, it should be noted that in the developed nations it is a free economy and anyone is welcome to form an oil company and get into the business, or simply buy stock in oil companies. Almost all major companies are publicly held, with their securities listed on both national and international stock exchanges.

Mining Companies

What has been said about oil companies in terms of huge capital costs, the risks of failed exploration efforts, and the long time from a discovery to when income is realized also applies to mining companies. Their economic returns are no better on the average than for oil companies, and in many cases are less. Mining company securities also may be bought on the stock exchanges of the world if one wishes to participate in this industry. Many other businesses show a better consistent and higher return.

Alternative Energy Sources

Alternative energy resources are those which could presumably replace the largest single conventional energy source which oil. Because of occasional oil crises and the increasing dependence of the United States and almost all other industrialized nations, as well as most Third World countries on foreign oil supplies, the urgency for developing and using alternative resources is growing.

Well-meaning but uninformed people make a great variety of statements as to what alternative sources might do for the country. Unfortunately poorly founded statements are frequently picked up by the media who repeat them without any research as to what the facts might be. This in turn misleads the public.

There are three considerations when evaluating the worth and validity of alternative energy sources. One is the ability of alternative sources to really replace oil in the quantities we are now using oil. A second concern is how using alternative energy sources might affect and change current lifestyles. What would it really involve to change to a "solar energy economy" as is the popular concept among alternative energy enthusiasts. The third consideration is the environmental impact of converting to alternative energy sources. These three factors with their myths and realities are briefly treated here.

Myth: Alternative energy sources can readily replace oil This is the assumption made by many people who advocate alternative energy sources as an early easy solution to our dependence on imported oil, and the perceived negative environmental effects of burning oil.

Reality:

The facts relative to this myth are mixed. Alternative energy sources can replace oil in its energy uses, but in some uses much less conveniently than in others. Fuel oil used under steam boilers can be replaced by nuclear fuel, or coal. But replacing gasoline, kerosene, and diesel fuel for use in vehicles, airplanes in particular, by an alternative energy source will be much more difficult.. At the present time, 97 percent of the world's approximately 600 million vehicles are powered by some form of oil. Going to another fuel source to meet this huge energy demand now met by the convenient, easily transported, very high grade energy source which is oil will not be easy.

The British scientist, Sir Crispin Tickell, states a very important fact, "...we have done remarkably little to reduce our dependence on a fuel which is a limited resource, and for which there is no comprehensive substitute in prospect."(28) It is very important to note that there is no apparent replacement for oil in the volumes and ways in which we now use it. The transition to a comparable energy source or sources will be difficult, and probably much less convenient than using oil. Even if it could be done it would markedly change the lifestyle of industrialized society as we know it today. This leads to the next and related myth.

Myth:

Alternative energy sources can simply be plugged into our present economic system and lifestyle, and things will go on as usual.

This also is a common assumption with regard to a transition to alternative energy sources, even to the major renewable energy source, solar. People do not appreciate the close relationship between the current energy sources, principally oil, and the control which energy forms have over the activities of their daily lives, and where and in what sorts of structures they live and work, and use for transportation.

Reality:

Conversion to a solar energy economy would involve vast construction projects installing huge collecting systems. Houses and factories would have to be redesigned to much more energy efficient standards. In transport, an electric economy means electric cars, and the facilities to generate huge amounts of power beyond what is presently being used. And the electric car, as far as can be visualized with reasonably foreseeable technology, would not offer the degree of mobility which gasoline powered vehicles do. This would markedly alter both the work and recreational habits of people. It would markedly affect recreational related economies.

Other energy sources, beyond oil, similarly would involve a restructuring of daily routines. Our activities are very much controlled by the energy forms which we use. Our standard of living is largely a function of how much and in what form we can command energy supplies. Changing from the energy form which is oil to other energy sources can and will have to be done, but lifestyles will be altered, as may also be the standard of living.

Myth:

Alternative energy sources are environmentally benign.

Advocates of alternative energy sources, commonly believe that these energy supplies have very little impact on the environment. Sunlight as a source of energy would seem to be an ideal energy source with virtually no negative environmental consequences. Or, converting a relatively more polluting source of energy such as coal into a less polluting liquid fuel appears to be a good exchange.

Reality:

Converting coal to some liquid fuel form which could be used in transportation is possible but to do so to the extent of replacing oil would involve the greatest mining endeavor the world has ever seen. It would require strip mining vast quantities of western land each year. If alternative energy considerations do not include coal, but rather are thought of in terms of solar energy, biomass, nuclear power, wind, hydropower, tidal, ocean thermal energy conversion (OTEC) or shale oil, they also have environmental impacts.

These have been discussed in more detail in Chapter 22, Mineral Development and the Environment, but some of the environmental problems are briefly summarized here. Solar energy collectors in numbers sufficient to be significant in our energy supplies would use very large amounts of land. Mining the materials used to make these collectors would have an impact. Because the collectors would not have an infinite life, there would be the continual problem of replacement, involving more mining operations.

The environmental impact of using biomass as a major source of energy would be huge, especially in terms of the degradation of the highly important mineral resource, soil. Nuclear energy from fission has the potential (and the reality, in the case of Cherynoble) of having a huge impact on the environment. Fusion nuclear power is relatively more safe but not entirely so. Wind power devices are unsightly, noisy, kill birds, and, like solar collectors, deteriorate and have to be replaced with more materials mined from the Earth. Tidal power, hydroelectric power, and OTEC have undesirable effects on aquatic environments. If oil shale is part of the energy alternative for the United States, the impact of developing that energy source on already scarce southwestern water resources would be large, and probably not sustainable.

In brief, as the saying goes, "there is no free lunch" in the use of any alternative energy source with respect to the environment. All make an impact. Eventually some or all of these sources will be used. The decisions to be made involve which sources have the least environmental effects and yet can meet the projected energy demands. With an ever-increasing world population requiring more and more energy, any energy source or combination of sources which will adequately meet this demand will inevitably have a large environmental impact, by the sheer size of the operations.

Myth:

Biomass-plants-can be a major source of liquid fuels This myth comes up frequently, and it has been rather thoroughly explored through various projects and proven to be a myth. A variety of plants including greasewood in the arid Southwest U.S., sugar cane, sugar beets, trees in general, seaweed, and seeds have been cited as important possible sources of liquid fuel for the future. In 1979, an article in a widely read U.S. magazine states: "Myriad forms of natural organic matter can provide heat or be converted into gas, oil, or alcohol. Wood holds the most immediate promise."(9)

Reality:

In regard to wood as an alternative liquid fuel, a final report on a U.S. government-sponsored project on the conversion of wood to a liquid fuel stated as a conclusion: "Investigations to date have led the authors to be optimistic about the possibilities of oil from biomass. While difficulties in bringing the current facilities on-stream have somewhat limited information to date, it is felt that a vigorous activity in the future can eventually provide a new source of energy for the country in the form of oil from biomass."(6) A translation of this statement might be that "the project didn't turn out very well, but maybe in the future a lot of research could improve results." That may or may not be true. The project involved wood-to-oil conversion, and one conclusion was that "Information gained here should provide the means to be commercially competitive by approximately 1990."(6) The project was abandoned in 1981. No wood anywhere in the world is now being converted to liquid fuel.

There are several reasons why converting growing plants to oil will not be a significant substitute for oil obtained from wells. These have been touched upon in other chapters. Briefly they are:

The energy conversion efficiencies are low, in some cases as with ethanol from corn, it is negative.

The energy cost of harvesting and transporting the materials is high relative to the energy produced. In the case of wood, cutting the trees and loading and hauling them to a processing plant would be energy intensive even before processing into a liquid.

The volumes of plant material available are not sufficient to yield large amounts of oil, given the low energy conversion efficiencies.

The degradation of the land growing these materials by continuing harvesting without returning the fiber to the land is severe.

If wood is considered, there is already a scarcity of wood in most of the world. In the form of wood waste (little is wasted now) there is insufficient raw material from this source to provide significant amounts of feedstock to convert to liquid fuel.

The best land is now under cultivation for much needed human food supplies. If plants were used for raw material for liquid fuel conversion they would either have to displace food crops from present agriculturally developed land, or put marginal lands (thin soil, steep hillsides) into production which would greatly increase land degradation by erosion, and also have serious downstream effects, including silting up of reservoirs.

In final view, the Energy Research Advisory Board of the U.S. Department of Energy stated in 1981 (U.S. population then was 258 million compared with 267 now), that the 258 million Americans used 40 percent more fossil energy than the total amount of solar energy captured each year by all U.S. plant mass. Current annually available biomass volume is no significant replacement for the large storehouse of organic energy accumulated over millions of years in the form of coal and petroleum.

In summary, biomass, at least considering the size of world population today which has to be supported by crops, cannot be diverted from food supplies in significant quantities to be important as a liquid fuel, and at best energy conversion efficiencies from biomass to oil are low. The environmental impact of using biomass for conversion to liquid fuel on a large scale would be severe and unacceptable. Biomass is not a potential source of significant quantities of liquid fuel.

Part 2