A Comprehensive Energy Policy

Making Realistic Choices in a Competitive World

Energy is the common element that sustains increasingly complex societies while meeting the most basic human needs of the developing world’s citizens. To meet those diverse requirements, global energy consumption is projected to grow by 49 percent by 2035, with electricity demand increasing by 87 percent, according to the U.S. Energy Information Administration’s (EIA) International Energy Outlook 2010. Growing economies and populations around the world will need all the energy they can get over the next 25 years. As a result, all fuel resources will be in greater demand, with coal use growing by 56 percent as nations secure its advantages as an abundant and affordable source of energy.

China and India are leading a new industrial revolution, and their economies will consume more than twice the energy in 2030 as they did in 2006, while the United States’ energy demands will rise by 13 percent over the same timeframe, according to EIA. In a world where the competition for fuels is destined to become more intense, the United States needs an energy strategy that will secure our economic well being and our national security. We also must provide for adequate and secure supplies of the metals and materials that are vital to the construction of power generation equipment and technology and the infrastructure to transmit and distribute power.

Such forces compel us to look realistically at our nation’s energy policy within the context of a domestic economy still challenged to create jobs and sustained economic opportunity and a more energy-competitive world that places a premium energy security and reliability. As such, a comprehensive energy policy should embody the following principles:

• Ensure energy security and reliability
• Promote economic and jobs growth
• Avoid market distortions in energy sources
• Advance environmental performance through technology
• Sustain the competitiveness of American companies
• Supply the metals and materials needed to deliver affordable and reliable domestic energy

Ensure Energy Security and Reliability

Energy policies should promote a diversity of energy resources. However, our economic well-being and national security are at risk of being undermined by policies that stake our energy future on fuels that are in short supply, intermittently available, controlled by other nations, costly or subject to price volatility. Today’s economies —whether mature or developing—depend on a reliable source of affordable electricity.

Coal, as the world’s most abundant fuel, is the only energy source with the scale and low cost to alleviate energy poverty in developing nations around the globe while continuing to meet the energy needs of the world’s most advanced economies. Because coal is widely dispersed, it provides a reliable and secure energy resource that is free of the constraints imposed by international politics. As a result, coal is projected to fuel 43 percent of the world’s electricity in 2035—double the share of any other resource.

American coal is the world’s single largest energy reserve—secure within our own borders. With a 240-year supply, based on current rates of consumption, America can continue to rely on domestic coal to provide reliable baseload power without transferring billions of dollars abroad to import energy that is less reliable and affordable. Other nations recognize the benefits of coal-based generation and have made coal the fastest growing energy resource for the past six years. (BP Statistical Review of World Energy, June 2009) The United States should not forego the advantages coal provides for this economy.

Similarly, the U.S. has the world’s sixth largest recoverable reserves of uranium—rounding out America’s baseload generation needs.

Enable Economic and Jobs Growth

Due to its abundance and affordability, coal meets nearly half of U.S. electricity needs. The equivalent of roughly 77 million jobs and 57 million households rely on coal-based electricity to keep the computers, lights, machinery and appliances running.

Coal’s mitigating influence on overall electricity costs has helped to keep U.S. industries cost-competitive and will be key to our economic recovery, especially in manufacturing and other sectors that are the backbone of our economy and vital to expanding jobs and exports. Nuclear energy also has provided cost-effective power generation and meets another 20 percent of our electricity needs.

To ensure coal and uranium continue to enable economic and jobs growth, public policies must:

• Provide sufficient transparency and certainty for operators and investors to maintain coal and uranium production adequate to meet the nation’s needs;
• Be based on appropriate science and technical information, rather than speculation; and
• Recognize the appropriate relationships between state and federal governments and agencies and draw upon the applicable expertise and legal responsibilities of each.

America’s energy policy affects more than 375,000 direct jobs in U.S. mining and 1.5 million jobs that are supported by mining. Whether producing the raw
materials that generate energy, providing the materials that are vital to energy infrastructure and equipment development or using energy to run their operations, these jobs depend on an American energy policy that meets the nation’s growing energy needs with affordable, secure and reliable fuels that are responsibly used and produced.

Avoid Market Distortions in Energy Sources

While the nation is well-served by a diverse energy portfolio, policies that distort markets by stimulating demand for higher-cost energy options slow economic growth and are inflationary. Forced fuel-switching away from low-cost coal and uranium will result in higher costs and more unemployment, lower productivity and less job creation. Such market penalties reverberate throughout our economy, reducing consumer purchasing power and the investment potential of businesses and manufacturers.

Further, because coal, uranium and mineral mining jobs pay up to twice the average wage in producing states, market distortions that replace high-paying coal and uranium jobs with low-paying alternatives are a net loss to our economy and to mining communities and states that depend on mining for economic security. Federal subsidies often create distortions that impose high penalties on the American taxpayer.

Coal will continue to be the most stable and cost-effective generator of electricity over the next 25 years, according to the Energy Information Administration’s (EIA) most recent Annual Energy Outlook (AEO). According to EIA, coal prices are expected to remain flat through 2035, while natural gas prices, by comparison, are forecast to increase by 56 percent over 2008 levels. As a result, coal-based electricity is expected to grow by 16 percent by 2035, remaining the country’s single largest electricity provider at 44 percent of generation.

Nuclear energy has been the nation’s second-most important provider of baseload generation since the 1960s, and its use is expected to grow by 11 percent by 2035. While the U.S. has substantial uranium reserves, we currently import most of the uranium used to run the world’s largest nuclear energy fleet.

Advance Environmental Performance through Technology Research, Development and Deployment

Technology is the key both to ensuring responsible environmental performance from traditional energy providers and to the development of supplemental energy resources.

The Clean Coal Technology (CCT) program, for example, has a proven track record for research, development and deployment of technologies that have dramatically improved environmental performance in coal-based generation. Since 1970, coal use has tripled while emissions of conventional pollutants have declined by more than 40 percent. Continued support of advanced CCT technologies will result in
additional cost-effective environmental improvements as will more efficient generation and other innovations that leverage coal’s versatility to produce synthetic gas, specialty chemicals, diesel, jet fuel and hydrogen.

Just as the CCT program has benefited the nation, the Department of Energy and Nuclear Regulatory Commission have also ensured safe performance of nuclear energy generation and uranium mining projects.

Sustain the Competitiveness of American Companies

Policies that impose higher energy costs on U.S. companies will further exacerbate our imbalance of payments and cost jobs throughout our economy. Policies that penalize affordable and reliable domestic energy options will undermine economic recovery and send high-paying jobs and expertise offshore. Conversely, policies that promote affordable and reliable domestic energy options will build a needed foundation for American companies to remain competitive in world markets and preserve American jobs.

Supply the Metals and Materials Needed to Deliver Affordable and Reliable Domestic Energy

Supplemental energy resources, including wind and solar, new energy-saving technologies for businesses and new consumer products designed to meet evolving energy standards all require metals and materials for their construction and production.

New hybrid automobiles require nearly twice the copper (75 lbs. vs. 42 lbs.) as their conventional alternative, according the U.S. Geological Survey (USGS). Vestas Wind Systems estimates their 3.0 MW turbine uses 335 tons of steel and 4.7 tons of copper, among other metals and materials. Beyond these base metals, rare earth elements such as lanthanum, neodymium, dysprosium and others are vital to the performance of high-capacity batteries, hybrid-electric vehicles, wind turbines and oil refinery catalysts.

Yet the U.S., despite an abundance of natural resources, is increasingly reliant on foreign sources for the metals that are critical to our energy future. As the USGS notes in its Minerals Commodity Summary 2010, the U.S. relied on imports for more than half of 38 mineral commodities and was 100 percent import-reliant for 19 of those commodities. Across the range of metals and materials that are needed to meet our energy needs, however, U.S. policymakers have taken no steps to ensure domestic laws and regulations are conducive to mineral production. To the contrary, Behre Dolbear, one of the nation’s oldest consulting firms on mining investment, reports in its 2010 Ranking of Countries for Mining Investment that “permitting delays in the United States are the most significant risk to mining projects” and gives the U.S. its lowest ranking in this category. Even states that court mining investments are “negatively impacted by federal rules and regulations” that make the U.S. less attractive for investment in new and existing mining projects, according to the report.

When mineral investments are forced off-shore, not only are good jobs lost to competitor nations, so, too, are the downstream manufacturing jobs. China provides a good example of this dynamic. It controls most of the world’s rare earths production and is moving in to final magnet production, thereby increasing both employment opportunities and technological expertise.

Summary

The United States needs a comprehensive energy policy that recognizes the fundamental role of energy in the economic well-being of every American household and business and the growing competition for energy resources worldwide. Its policy must be coupled with a strategy for enabling domestic production of the minerals and materials that will be needed to develop and build the infrastructure, technologies and products that are fundamental to meeting our energy needs.

The U.S. has vital interests at stake in the development of realistic policies for providing affordable energy and producing the minerals needed by an increasing sophisticated economy. Absent such policies, the U.S. risks further transfer of wealth, diminished opportunities for its people and reductions in living standards.