Energy & Environment

The U.S. as an Energy Exporter?

The country is poised to transition from one of the world’s biggest consumers of energy to one of its largest producers.
by | November 2012
 

Forty years ago, Montana lost the coal race. In the 1970s, the state competed with its neighbor Wyoming to take advantage of a boom in demand in the eastern and southern United States. Wyoming emerged the clear winner: It was better positioned to ship its coal eastward, and political turmoil stifled production in Montana. Today, Wyoming exports 10 times more coal than Montana, even though Montana is home to the biggest coal reserve in the country.

But another boom is on the way, thanks to soaring demand in China, India and other parts of Asia. On the whole, the Asian-Pacific market is expected to increase global energy demand by 40 to 50 percent in the next two decades. Who will supply that energy? The United States, among other countries. According to Mark Mills, an adjunct fellow at the Manhattan Institute and a former adviser to President Ronald Reagan, the United States is sitting on more than 10,000 billion barrels of oil-equivalent in natural gas, oil and coal -- four times what’s available in the Middle East.

This time around, Montana doesn’t want to lose out. The state has 120 billion tons of coal below its surface, nearly one-quarter of known coal reserves in the United States, according to the state’s energy department. Gov. Brian Schweitzer has been an impassioned advocate of increased coal mining (specifically, clean coal) since he came into office in 2005. “We have a lot of coal in this country. We have more coal than any other country on the planet,” he said at a 2007 legislative conference, advocating for clean coal technology. “We’ll create hundreds of thousands of jobs during the next 20 years. We’ll be energy independent. And you won’t have to send your grandchildren to another war some place that has oil.”

Such is the promise of America: Energy Exporter. Thanks to the unprecedented shift in global supply and demand, the U.S. is poised to transition from one of the world’s biggest consumers of energy to one of its largest producers. In 2011, refined oil exports from the United States eclipsed imports for the first time since the government began collecting comprehensive data in 1993. For refined gasoline specifically, the United States hadn’t been a net exporter since 1959. (It’s important to note that when it comes to crude oil, we still import far more than we export -- meaning that the United States, for now, remains a net energy importer.)

But the long-sought goal of energy independence is starting to look like a possibility for the first time since the 1950s. “The thought that U.S. oil and gas production would boom the way they have -- after all, oil production is growing more quickly in North America than any other part of the world -- would have been unthinkable to many only a decade ago,” says Blake Clayton, a fellow for energy and national security at the Council on Foreign Relations. “The prospect of the United States ever returning to the days of producing more oil than it consumes, what politicians often describe as ‘energy independence,’ used to seem like a chimera. Now it’s not nearly so far-fetched.”

Some have estimated that the United States could become the world’s leading energy producer by 2020. The economic impact would be staggering. The Manhattan Institute has estimated that if the energy exportation potential of the United States were maximized, as many as 4 million jobs would be created, and federal, state and local coffers would be flooded with as much as $1 trillion in new revenue. Beyond the financial windfall, the global ramifications of such a shift are difficult to predict. But the fallout would undoubtedly lead to a fundamental reshaping of America’s geopolitical and macroeconomic role on the international scene.

At the local level, the impact is already being felt. States like Ohio, Pennsylvania and Texas have benefited greatly as the oil and gas industries have taken off in recent years. After natural gas deposits were discovered a few years ago near Williamsport, Pa., for example, more than 100 companies set up shop there. In 2010, while other cities were only beginning to dig out of the Great Recession, Williamsport’s 29,000 residents saw their town’s economy grow by 7.8 percent, one of the fastest rates in the country. Meanwhile in Ohio, the unemployment rate is a full percentage point below the national average, and companies are reportedly investing hundreds of millions of dollars in the state to prepare for a pending natural gas boom. North Dakota, another leader in the oil boom, has the lowest unemployment rate in the country.

If coal follows a similar trajectory, states like Montana want to position themselves to reap the benefits. But eager policymakers will have to make the sell to their cities and towns. Turning the Pacific Northwest into the next frontier of energy exportation would require substantial investments in infrastructure. It would call for ports in Oregon and Washington to ship the product to China and its neighbors, along with increased rail traffic cutting across Montana and Idaho to carry the coal to the sea. Both of those elements are already encountering resistance from many communities along that route, the places that would bear the brunt of the export boom. Local officials are worried about the impact on their infrastructure when rail traffic, which is already a nuisance, rises to meet the increased output. (And that’s not to mention broader concerns about the environment and public health.)

No one’s anticipating a Persian Gulf on the Great Plains. At least not yet. But if even a fraction of that estimated trillion-dollar payday turns out to be realistic, cities and states may see the financial promise of coal increasingly trump other concerns. And if the U.S. continues on the path toward becoming a net exporter of energy, the nation -- and its place in the world -- could soon be radically different.

If you want to get coal out of Montana, you’ll almost certainly have to go through Helena. The state capital sits nestled between Helena National Forest to the northeast and Beaverhead-Deerlodge National Forest to the southwest -- squarely on the path of any coal being shipped from the eastern part of the state to potential terminals in Washington or Oregon. Bisected by the Montana Rail Link line, Helena already has between 35 and 50 trains passing through every day, according to a recent city traffic study. Because most crossings are at grade, traffic comes to a standstill every time they do. The problem is serious enough that the city’s emergency services have laid out alternate routes if they need to make a run, going significantly out of their way to avoid the crossings.

If Montana’s coal industry expands as supporters hope it will, Helena officials expect the train traffic could double. Ideally, the city would build concrete walls to mitigate train noise or, even better, replace the existing rail crossings with underpasses or overpasses. But in the wake of the economic downturn, Helena, like most cities, can’t afford such investments. “We don’t have the money to address any of this,” says Helena Commissioner Katherine Haque-Hausrath. “We’re a small city in the whole scheme of things. We’re just trying to do our part to be a part of the conversation.”

Three hundred miles west of Helena lies the town of Cheney, Wash., which would be similarly impacted by the increased rail traffic from more coal production. Mayor Tom Trulove says he, too, is concerned about how the additional trains would affect his citizens. “Like everyone else, we’re in favor of jobs. We support economic activity. We’re just trying to find a way to mitigate the social costs of that activity.”

Helena and Cheney are among the many communities that have sent letters to the Army Corps of Engineers, which is reviewing applications for coal ports in Oregon and Washington, asking for an environmental impact assessment of the plans -- specifically the swell in rail traffic -- before any approval is granted. Oregon Gov. John Kitzhaber submitted a similar plea in April, and so far his request is the only one to earn a response. The Army Corps told Kitzhaber it would meet its requirements under the National Environmental Policy Act, but it didn’t respond to his concerns about rail traffic. In a local newspaper, Kitzhaber’s natural resources policy adviser called the corps’ response “opaque.”

Helena’s letter cited the risk of increased traffic congestion and pollution, of course. But it also framed the issue as one of international importance. “With access to our cheap coal, countries in Asia will be induced to build new coal-fired power plants, instead of transitioning to cleaner energy sources,” the City Commission wrote. “This will lock in reliance on coal as a source of energy for the life of these power plans, with an astronomically negative effect on climate change.”

For its part, the coal industry says it’s conscious of local concerns. The railroad companies say they’ve invested in new technologies to reduce the amount of coal dust escaping from their trains. And mining companies seem on board with Schweitzer’s push for clean coal technology. A spokesperson for Montana Rail Link, one of the largest rail companies in the state, says that fears like those voiced in Helena’s letter are “a gross mischaracterization.” “We think that there can be a balance,” says Bud Clinch, executive director of the Montana Coal Council. “All these concerns can be mitigated. This can be a good thing for the state of Montana.”

The tug-of-war between environment and economics is nothing new. But the promise and politics of energy exporting heighten the debate. Oregon and Washington have both fostered environmentally conscious reputations over a number of years. But with a total of six ports proposed in the two states -- ports that would funnel as much as 100 million tons of coal to Asia every year -- the states’ leaders have largely stayed quiet. Other than his letter to the Army Corps, Kitzhaber has declined to take a firm position on whether the ports should be built. Washington Gov. Chris Gregoire has taken a similar wait-and-see approach.

Many local leaders within those states, however, have been vocal in their opposition to becoming centers of the new coal economy. In May, the Seattle City Council passed a resolution opposing the construction of any coal terminals in the state, saying the impact on traffic, public health and global climate change would be detrimental. Similarly, in September, the Portland City Council voted unanimously to oppose any new port until a full environment and health assessment is conducted by the Army Corps.

Thanks to the slower-than-hoped-for recovery from the economic downturn, however, those environmental concerns may ultimately be outweighed by financial ones. “If we weren’t still mired in the Great Recession, I think it would be more likely that the ports would not get built,” says Tom Power, an economics professor emeritus at the University of Montana. “But all bets are off given the anxiety associated with the lingering recession.”

States and localities are, understandably, focused on the tangible impacts of a shift toward energy exportation of coal, oil and natural gas. But there are other fundamental questions at the heart of such a transition. Is energy independence really achievable -- and is it worth the environmental toll? How would it reshape America’s role on the global stage?

Indeed, is the trend toward exporting even real? Some analysts, for example, attribute last year’s shift on refined oil exports to decreased domestic demand in a depressed economy. Once the economy recovers, the thinking goes, American energy demand will rebound, and last year’s export boom will turn out to have been an anomaly, a statistical blip. Or maybe it won’t. Michael Ross, a University of California at Los Angeles political science professor and author of The Oil Curse: How Petroleum Wealth Shapes the Development of Nations, says that a host of factors -- new technologies, discoveries of new resource deposits -- could affect the country’s potential future as an energy exporter. Few people foresaw the current boom, he points out. The real bottom line, he says, is that “we simply do a terrible job of forecasting. I wouldn’t place a whole lot of money on anybody’s long-term forecast.”

It’s certainly not inevitable that states will choose revenues over environmental concerns. New York, for example, has placed a firm moratorium (although not necessarily a permanent one) on natural gas fracking, despite some estimates that the state is forgoing nearly 100,000 new jobs by doing so. And not everyone is so sure of the purported economic impact anyway. An analysis by the University of Montana projected that, while mining jobs in the state will likely increase between 2010 and 2020, they would actually grow more slowly than they did between 2000 and 2010. Other sectors, such as health-care services and leisure/hospitality, are expected to grow much more quickly.

“You only need a relatively small workforce to move huge quantities of coal. Mining and rail shipping are incredibly efficient in terms of labor,” says Power of the University of Montana. “It’s not that it’s a boon for the economy. It’s a boon for the state government. That’s where the impact is and that’s the reason it’s being pushed.”

But it’s the international implications of energy independence that could represent the most sweeping changes. It’s an idea that echoes the perspective that Montana’s Schweitzer expressed in his 2007 remarks. If we didn’t need to import oil from other countries, would we have gone to war with Iraq? Would we have intervened in Libya?

Michael Klare, a professor at Hampshire College and author of The Race for What’s Left: The Global Scramble for the World’s Last Resources, says there are numerous potential outcomes of an energy-independent America, including “a greater willingness of the part of the United States to pull its boots from the ground in the Middle East, while still controlling the oil flow at sea; a greater boldness in confronting China, sensing its greater dependence on imported oil carried by ship over sea lanes controlled by the U.S. Navy; and a greater focus by the United States on oil production in the Western Hemisphere.”

In other words, as much global power and influence as the United States wields today, energy independence could expand that reach even more. “Energy exporting countries are a lot less inclined to be cooperative, to play nice in the realm of international diplomacy,” says Ross. “For the world’s most powerful diplomatic and military power to go from dependent on others for its fuel to being independent, that could have quite far-reaching consequences.”

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