Pathway to Prosperity National Energy Plan: Draft

eGeneration Foundation 1768 East 25th Street Suite 301 Cleveland, OH 44114 216.367.0602 www.egeneration.org

Pathway to Prosperity: 2016 and Beyond

An Economic Recovery Strategy for the United States

TABLE OF CONTENTS

Executive Summary ......................................................................................................................................... 2

The Plan: EA3 .................................................................................................................................................... 4

Retirement of Coal-Fired Resources ............................................................................................................ 7

Export of Natural Gas and Rising Natural Gas Prices .............................................................................. 7

Promising Small Modular Reactors .............................................................................................................. 9

Stability in the Marketplace .......................................................................................................................... 11

Energy is Good ................................................................................................................................................. 14

Reliability of our Electricity Infrastructure and Electrical Grid ......................................................... 16

Security of the National Energy Grid .......................................................................................................... 17

Moving Natural Gas, Coal, and Organic Waste to the Transportation Sector .................................. 20

Energy Efficiency ............................................................................................................................................ 22

Abundance ........................................................................................................................................................ 25

Oil and Natural Gas and Energy Security .................................................................................................. 26

Cost-Justified Alternative Energy Resources .......................................................................................... 27

Harnessing Naturally Occurring Renewable Technologies .................................................................. 28

Oil, Gasoline, and Diesel ................................................................................................................................ 30

Energy Independence From OPEC Imports By 2020 ............................................................................ 30

Critical Minerals ............................................................................................................................................. 35

Nuclear Energy ................................................................................................................................................ 37

Indirect Job Creation Resulting from a Rational Thorium Policy ..................................................... 40

Strategic Petroleum Reserve ........................................................................................................................ 45

Coal .................................................................................................................................................................... 46

Unconventional Fossil Fuels ........................................................................................................................ 47

Oil Shale ............................................................................................................................................................ 48

Methane Hydrates and Other Unconventional Gas Resources ........................................................... 49

Pathway to Prosperity: 2016 and Beyond | 1

Renewable Energy Resources ...................................................................................................................... 49

Hydropower ..................................................................................................................................................... 51

Marine Hydrokinetic Power ........................................................................................................................ 52

Solar Power ...................................................................................................................................................... 53

Wind Power ..................................................................................................................................................... 54

Electric Storage ............................................................................................................................................... 55

Geothermal Power .......................................................................................................................................... 56

The Implications of Energy Independence .............................................................................................. 56

Copyright © 2015 by eGeneration Foundation


EXECUTIVE SUMMARY

The last 150 years have brought the greatest living standards advancements in recorded history, enabled by affordable and reliable energy. Energy has brought light, heat, cooling, mobility, modern communications, health care, and other benefits to billions of people around the world. The United States has helped lead many of these advancements by spreading our ideals of free markets, free trade, rule-of-law, and limited government. In doing so, we've allowed private industry and individual initiative to innovate and drive progress, bringing about greater prosperity to all.

As the world capitalizes on these advancements, the ensuing spread of wealth is helping to lift more people out of poverty and into prosperity, allowing them to lead longer and higher quality lives.

America's dynamic business and economic system remains the envy of much of the world, in spite of various cycles and changes. Perhaps the most recent dramatic changes have been in the domestic oil and natural gas sector, where we've launched an energy revolution, fueled by technology and innovation, allowing us to produce more from oil and gas fields and

ABUNDANCE


develop new geographic frontiers. We've rewritten America’s energy story — changing the script from one focused on scarcity to one focused on abundance.

The most dramatic changes may be yet to come, with the development of new nuclear technologies, such as Generation IV Nuclear reactors, more specifically, Molten Salt Reactors. Molten Salt Reactors (MSRs) hold the promise of utilizing a variety of energy sources, including elements such as Thorium, to supply billions of years of affordable, accessible, and abundant energy to the world, effectively ending energy shortages.

America is currently the second largest energy producer in the world. Energy has kept our industries competitive, increased our living standards, and bolstered our consumer confidence and pocketbooks. However, the U.S. energy revolution is in danger of stalling without a common sense policy encouraging responsible development of energy resources our nation is fortunate to hold.

Energy policy must be centered on three fundamental objectives:

v Affordability v Reliability v Sustainability

We must create policies that allow markets to work effectively. Free markets with well-considered and constructed regulations, can help advance all three objectives. Market-based solutions keep fuels affordable for consumers and businesses. Free markets support environmental objectives by keeping our economy strong enough to fund them. Free markets also help ensure a predictable basis on which new sources can compete. Mandates cannot replace free market forces to achieve the long-term and sustained success of new products.

The United States needs an energy policy that will ensure America's tax, trade, regulatory, and access policies are transparent and predictable. The objectives of many proposed regulations may be noble, but they can often be far too complex and restrictive, with unintended negative consequences. We face a new generation of mandates, quotas, and infrastructure constraints that will fail the consumer if we don't address them with an energy plan that puts economic objectives and economic security at its core.

The United States must recognize that access to reliable and affordable energy is the basis for economic expansion, global competitiveness, an increasingly better quality of life, and longer life spans. The nation must move from discouraging fossil fuel and new nuclear energy development — which is largely our approach today — to enabling it. We need all forms of


energy to keep our economy strong, and wisely developing our unlimited resources will keep our nation strong, competitive, and will help every citizen achieve a better quality of life.

The United States has vast energy potential. For the nation to remain competitive — and provide affordable, reliable, and sustainable energy to consumers — we need to exercise clarity of purpose on energy policy.

THE PLAN: EA3

EA3 = Energy X ( Abundance X Affordability X Accessibility)

The United States is in the midst of a dramatic transformation in our capacity to produce the vital energy

that powers our American economy and the world.

For decades, our country has relied heavily on energy imports, making us vulnerable to hostile regimes and supply disruptions. Today, creativity and competition are driving our domestic energy sector forward, allowing the U.S. to access abundant and affordable resources here at home. This recent and rapid expansion of domestic energy production can improve our outlook for the future, both domestically and globally. We must allow for increased expansion by allowing new technologies and resources to reach the market.

It is time to appreciate the staggering economic and geopolitical benefits our vast hydrocarbon resources and advanced nuclear technology can bring. Jobs related to extraction, transport, and export of synthetic and natural hydrocarbons, as well as those related to the development of new nuclear technologies, could awaken the United States and the global community from its present economic and environmental doldrums.

Policies filled with over-regulation, corporate subsidies, and excessive taxation have made it difficult for U.S. energy developers to take full advantage of transforming energy markets. Energy policies created in Washington D.C., when driven by special interests and fear of public perception, distort the marketplace, put brakes on innovation, and make it impossible for companies and the public to discern truth regarding energy solutions.


In addition to increased consumer costs, taxes are often raised to subsidize inefficient resources or technologies, decreasing the reliability of our broad base electrical energy. We should be racing to pursue new energy resources, new technologies, and new discoveries, which will lead to energy abundance.

As proven in other sectors of the economy, allowing businesses and ideas to compete in the free market will not only produce the most efficient forms of energy, but will provide the largest cost savings to the consumer. The availability of abundant, reliable, affordable, and sustainable energy is necessary for a vibrant economy and an increasing standard of living for all citizens.

Renewable energies, such as wind and solar, can contribute to almost any energy portfolio by periodically relieving demand on the national electrical grid when and where it makes economic sense to do so. However, wind and solar cannot be primary sources of power for the broad based electrical energy needs of our nation or our global society. The EA3 plan includes the use of wind and solar, and provides for the renewability of new nuclear energy, as well. Our country needs the entire hydrocarbon, renewable, and nuclear based energy resources that are abundant, affordable, accessible, clean, and economically sound.

Research has shown that newer, next generation Small Modular Reactors (SMRs) will be flexible, economical, and more widely adopted than intermittent renewable technologies because SMRs can produce energy on-demand. While all SMR’s can provide value, one particular reactor holds great promise. The Liquid Core Molten Salt Reactor (LCMSR) has many advantages, including the fact that a tremendous amount of development needed to commercialize the technology has already been completed.

The LCMSRs are also able to utilize the element Thorium as a fuel source. (Thorium is an important nuclear fuel because it is abundant on all continents and provides billions of years of fuel reserves.) Liquid Core Molten Salt Reactor designs provide a high level of safety and cannot overheat or meltdown. They have simply designed passive safety systems that will shut the reactor down safely, without the need of human intervention in case of accident. They are also less expensive to build and can be brought on line more quickly than their larger Light Water Reactor (LWR) counterparts.


THE DASH TO NATURAL GAS

Pessimists once believed that domestic gas supplies would be insufficient to support a more natural gas-reliant electrical generation sector. This perception has evaporated in the face of stunning quantities of domestic shale gas that are known to be economically recoverable and environmentally compliant. It is now apparent that most new electric generating capacity will be gas-fired for several years to come, and that sufficient supplies of domestic gas resources will be available to support growing use by the electric sector. The development of North American oil and gas resources will be an economic driving force over the next decade. However, in the longer term, a more fuel diverse and balanced generating fleet will be required. In the near term there are several caveats to the improved domestic energy outlook that must be addressed:

v The gas pipeline network must be sufficient to continue to deliver gas, without interruption, to the expanding national fleet of gas-fired electrical generators;


v Accelerated retirement of older, coal-fired generation plants, and extended outages of other units for environmental compliance retrofits, should be phased so as not to cause local reliability issues;

v Capital intensive, non-gas generation resources cannot be economically justified in the face of current wholesale electric and natural gas prices. Developing economically competitive alternative resources should be a priority.

RETIREMENT OF COAL-FIRED RESOURCES

The earlier concerns of the electric industry regarding a “dash to gas-fired generation” have given way to widespread pursuit of new gas generating capacity, economic fuel switching, and accelerated retirements for older coal-fired generation. While many retirements were announced to avoid a litany of proposed new restrictions on air and water contaminants, others have been driven by low wholesale power prices tied to the price of natural gas. As much as 60 GWs of coal-fired generation may be retired over the next decade nationwide, but the impacts will be felt most heavily in the Midwest and other regions that have relied extensively on coal-fired generation for decades.

Due to the fact that electricity cannot be effectively or economically stored, it is essential to address the system reliability and impacts of planned plant retirements. Consumers will be required to foot the bill for new plant additions to replace retiring units, unit re-powerings, and capacity additions to meet the needs of a growing economy. In many states, consumers and businesses also need to cover the cost of direct and indirect subsidies for alternative/ renewable/clean energy resources in their utility bills.

EXPORT OF NATURAL GAS AND RISING NATURAL GAS PRICES It has been a long time coming, but initial large-scale overseas-liquefied natural gas

(LNG) shipments from the United States are set to begin in late 2015. Domestic natural gas producers, hoping to capitalize on the shale fracking boom, have been frustrated in recent years by the drop in prices that has come with the abundance of fresh reserves. The price of natural gas is too low for them to see a return on their investment that will please their investors. Exportation is important for the natural gas industry, but will likely spell problems for manufacturers that rely on low price natural gas for affordable electricity production because world demand will drive up price, including for domestic use. The upcoming shipments of LNG offer the prospect of an improved pricing backdrop for natural gas producers in the years ahead.


Drillers seeing the high prices being offered for LNG in Japan are understandably eager to get export capabilities operational as quickly as possible to capitalize on potential profit opportunities. Prices for LNG in Japan and other parts of Asia in the mid to high teens (about $.15-$.17 per cubic foot) are roughly quadruple the quotations in the United States.

It takes a long time to get a shipment facility approved and built. The first such plant, Cheniere Energy's (LNG) Sabine Pass facility in Cameron Parish, Louisiana, will have taken five and a half years from planning to production, if it comes on stream in late 2015, as planned. Cheniere also has a smaller project on the drawing board in Corpus Christi, Texas, set to send out LNG cargoes in 2019. Demand for output is brisk, even for the second facility. Prompt opening is important, as the total estimated cost for the pair of facilities is over $30 billion.

Sempra Energy also has the green light to build an LNG export plant in Louisiana. Construction is set to begin in 2015 on a facility that will cost a projected $10 billion and be ready by 2018.

Dominion’s Maryland Cove Point export facility has been approved for construction and the export of Ohio, Pennsylvania, West Virginia, and New York shale gas could start as soon as 2017.

There are a number of other facilities on the drawing board, as well. As of this writing, the amount of LNG proposed for exportation by 2019 is forecast to total around 50% of the natural gas currently pumped in the contiguous United States. Given the volume of shipments abroad, assuming a good number of those proposals actually materialize, domestic natural gas prices will rise.

There is also political pressure to boost American LNG exports to Europe so as to counteract the threat by Russia to withhold energy supplies in order to dominate countries around its periphery. Russia has made good on this extortionist threat in the past, and with the current political situation in Central and Eastern Europe, with Russia expanding its influence over other Eastern European states by both diplomatic and military means, there is no reason to expect it will not use the withholding of natural gas as a weapon again during future winters.

It may seem an obvious business strategy to make money by exporting inexpensive domestic natural gas in liquefied form to Asia and Europe, where gas prices are much higher. But in our rush to close down coal-fired power plants, massively expand wind and solar (that must almost always be complimented by natural gas plants), we are increasingly throwing our


energy eggs into the natural gas basket. When that energy cost rises, we will experience higher consumer prices, even though we will be awash in energy.

We have close to a 100-year supply of natural gas, at current consumption rates as of 2012. But we have retired many coal-fired power plants and replaced them with natural gas, and we have greatly expanded renewables that are supplemented by natural gas. With massive expansion of domestic natural gas and massive exportation, it is quite conceivable that our 100-year energy supply is, in all likelihood, a 30 to 50 year supply.

We will need expanded energy diversity and energy reserves to meet domestic and global energy needs, and to provide stable energy rates for many years to come.

PROMISING SMALL MODULAR REACTORS

Competitive with natural gas and coal plants, and capable of generating between 25 megawatts and 125 megawatts or more of electricity, Small Modular Reactors (SMRs) would be fabricated at factories, where quality control is easier to maintain than on a construction site. A factory-built SMR could be completed in a fraction of the time taken to construct a conventional nuclear plant, and then it can be transported by a special truck, trailer, rail, or barge and installed at a power plant site.

Many SMR designs could be located beneath the ground for security, and placed sequentially, one next to the other, in banks, with more added as need arises. For example, a dozen or more SMRs could be situated in a cluster and connected to a grid, yet operating independently of one another, so that when one module is taken out of service for refueling or maintenance, the others would continue to produce power. In some states, SMRs would supplement electricity coming from a large reactor, but in others, they’d be the only source of nuclear-generated electricity, supplying power to small cities, military bases, or rural areas.

A distinguishing feature of some SMRs is that they have no need for water for cooling or, as is the case with some designs, they are able to forego water altogether. This feature has particular appeal in drought-plagued areas where water resources are scarce.

Many SMRs using advanced reactor technology such as the LFTR (Liquid Fluoride Thorium Reactor) would drastically reduce amounts of radioactive waste and require less maintenance than large conventional reactors. As mentioned earlier, the LCMSR version of the SMR would not be subject to fuel failures and would operate at atmospheric pressures, removing the motive force should there be a breach of the primary system boundary.


Additionally, the nature of the coolant is such that it has a high (approximately 300 degrees Centigrade) melting temperature. It will solidify as it cools, further limiting the spread of contamination and making recovery easier and local to the facility.

Several U.S. companies and national laboratories — as well as companies abroad — are designing SMRs in hopes of capturing what could become a large global market for small reactors. The U.S. companies include such well-known, nuclear industry names as Westinghouse, Babcock & Wilcox, General Atomics, and General Electric, all of which have also designed large nuclear reactors. There also are a number of start-up companies with SMR designs on the drawing board, and they include Flibe Energy in Alabama, Trans Atomics in Massachusetts, General Atomics in California, NuScale Power in Oregon, and Terra Power, near Seattle, Washington.

Although SMR development is still in its infancy, small reactors are not new. They have been used successfully for more than a half-century to power nuclear submarines and, more recently, aircraft carriers. The U.S. Army also used SMRs to provide power at remote military bases in Wyoming, Alaska, Greenland, the Panama Canal Zone, and other places from the 1950s through the 1970s.

The Babcock & Wilcox model uses existing light-water reactor technology, while some of the other companies have designed high-temperature reactors that would be cooled with molten salts instead of water.

One start-up company, Trans-Atomics, hopes to market a reactor that consumes the transuranics in spent nuclear fuel. Such a reactor has the potential to eliminate the long-lived waste of today’s Light Water Reactor fleet. Another start-up, Terra Power, which is financed largely by Bill Gates of Microsoft, hopes to market a reactor that uses depleted Uranium as fuel. Depleted Uranium is produced as a by-product of the enrichment process. These reactors have the potential to eliminate all long-lived nuclear waste and radically reduce short-lived nuclear waste.

Other SMR designs use the element Thorium as a fuel source, which could serve as a near limitless energy resource for the world and can be made to produce no long-lived nuclear waste. Energy generation from the element Thorium is tantalizing because it does not need to be enriched and is found in plentiful quantities on all continents. When Thorium is used in a type of reactor known as a LCMSR (Liquid Core Molten Salt Reactor), it can produce an individual’s lifetime worth of energy from a ball (of Thorium) no larger than a golf ball. That is “all” energy, including the energy needed to make the products the individual uses (e.g. cars,


computers, buildings etc.) as well as to power the products throughout his lifetime (e.g. fueling the cars, heating and cooling, etc.).

STABILITY IN THE MARKETPLACE

Americans have suffered from a non-stop roller coaster ride of erratic energy prices for over fifty years. Prior to the 1960’s, technology was better able to match energy generation and harvesting of energy resources to demand, because: v Energy demand was lower due to a smaller national population and economy. v Technology was not as advanced and as energy intensive as it is today. v That portion of known energy resources that were easily and affordably harvested with a

minimum of economic and technological effort were larger in the past than they are today. v Energy resources today are more a function of accessibility, economics, and technology,

than a function of geology. v The technology of producing energy was superior to the technology of consuming energy in

the past. A “Great Leap Forward” in energy production technology was primarily driven by the 1940’s WWII war effort and was greatly exploited for civilian uses after WWII. Although, the commercialization of new energy technologies had, and still has, the ability to provide an abundance of energy to satiate the increasing energy demands of the market, these technologies have suffered in their ability to do so due to over-regulations, a challenging licensing environment, and the federal policy of often investing in popular, instead of practical, energy technologies.

v The past had fewer regulations, less administrative red-tape, and a political climate that allowed for more market competition, lower prices for consumers, and larger profits with less risk for American energy producing companies. Today, energy companies do make record profits, but that is because there are fewer companies competing in the energy sector as smaller ones have been pushed out of the market due to excessive rules and regulations. Energy companies maintain profit through volume, and our energy demand has only increased.

v We have become a much more litigious society, including litigation in the energy sector. Litigation always has costs, costs that are passed on to the ratepayers and consumers through increasing insurance costs that help to create inefficient business policies for energy companies.

To bring lasting stability to our energy markets we must develop sensible policies based upon a foundation of unbiased and credible science that include the importance of energy affordability, reliability, accessibility, and sustainability.

Human safety, and economic risks involved in bringing energy resources to market, must be measured in perspective and context, with the tradeoffs between efficient and economical


energy production, and the negative aspects to our population and the environment that are a result of each type of energy production.

To create a stable and lasting energy policy that provides abundant, affordable, and accessible energy; brings stability to our markets and our economy; reins in and streamlines regulations within the energy space; and provides for a healthy and clean environment; the institutions that oversee our energy production must be prevented from making “arbitrary”, biased, and partisan political regulatory decisions that are not based in economics or scientific principles. In this context, “arbitrary” is defined as proposing/adopting regulations void of the considerations of:

v Economic impact consequences v National security implications v Other geo-political considerations v Environmental impact considerations

All regulations have compliance costs, which are passed on to consumers and ratepayers. In addition, costly regulations can have a direct negative economic impact on the health and well being of the American public by reducing the potential of Americans to lead prosperous lives.

Energy is a necessity in our modern world, and the rising cost of any necessity hurts most those at the lowest rungs of the economic ladder. Increased energy costs raise the costs of all products and heavily impact industries such as agriculture, manufacturing, and transportation. Essentially, the costs of all products go up when the cost of energy rises. So the poor, as well as the rest of us, suffer economically.

Poverty and poor health - inseparably linked throughout history.

Poverty has many dimensions – material deprivation (of food, shelter, sanitation, and safe drinking water), social exclusion, lack of education, unemployment, and low income – that all interact to reduce opportunities, limit choices, undermine hope, and, as a result, threaten health. Poverty has been linked to a higher prevalence of many health conditions, including increased risk of chronic disease, injury, deprived infant development, stress, anxiety, depression, and premature death.

Poverty–ridden urban areas present exceptionally high health risks due to poor living conditions, limited food resources, and pollution. Urbanization is altering the type of public


health problems, particularly for the poor. These now include non-communicable diseases, drug use/addiction, accidental and violent injuries resulting from crime and domestic abuse. Common health impact determinants among the poor are:

v Obesity: Obesity and diabetes are a paramount problem worldwide, especially among the poor and socially disadvantaged, according to the WHO (World Health Organization.)

v Crime: Violence and crime are major urban health challenges. Ninety percent of the 1.6 million annual violent deaths occurring worldwide occur in low and middle-income counties.

v Mental Illness: Poverty increases the risk for mental illness, especially for children. Children exposed to ongoing poverty present with a high level of depression, anxiety, social withdrawal, peer conflict, and aggression. Mental health symptoms are increased in areas of economic deprivation due to exposure to community crime; gang induced violence, neighborhood drug infestations, and substandard housing conditions. The cost of appropriate mental health services is often out of reach, creating a cycle of mental illness and subsequent unhealthy behavior.

v Other Risks: Low birth-weight babies and high infant mortality rates are often found in economically deprived communities, and are especially prevalent in areas with underdeveloped energy infrastructures.

Congress needs to consider the full economic impact of regulations to the energy production sector as they impact the overall economy, the environment, and the health of all Americans.

v eGeneration believes that all federal agencies that can impose regulations affecting the energy sector be required to coordinate their efforts by submitting regulations to the DoE (Department of Energy) for consideration. v The DoE will analyze regulations submitted by regulatory agencies, and offer edits if

regulations from other agencies already address the proposed regulation. v The DoE will then consolidate proposed regulations into sample final proposed

legislative language. v The DoE will then have two independent non-partisan studies performed by

unbiased sources that will report the potential economic, environmental, and national security impacts of the proposed legislation.

v The DoE and other federal and state agencies involved would properly coordinate with government at all levels, including county and municipal governments, to ensure there would be no negative economic impact upon local communities as a result of the passage of the law or regulation.

v The proposed legislation will then be open for proponent, opponent, and interested public party comments for a set period (perhaps 60-90 days).

v The DoE will then pass the recommended legislation, along with the independent, economic, environmental, and national security impact studies and the public


comments to the House of Representatives for Congressional consideration and passage into law and inclusion in the United States Code.

v eGeneration believes that no federal agency, including, but not limited to, the (Environmental Protection Agency) EPA, will have the power to fine any public utility power generator without the expressed prior written consent of the DoE, and will not have standing to file legal action against any power generator without the prior written consent of both the DoE and the U.S. Attorney General.

The goal of this proposed plan is to educate others about the need for energy sector-affecting legislation to be enacted only after consideration by Congress of a thorough review of its economic impact, environmental impact, and national security impact.

Ultimately, eGeneration believes Congress is the only body that can determine which regulatory decisions are in the best interest of Americans because Congress represents, and is accountable to the American public. Federal regulatory agencies are not accountable to the electorate in any meaningful way.

ENERGY IS GOOD Energy is good. Energy provides the basis for advanced civilization and improved

standards of living. It allows us to live comfortably in climates that would otherwise be too hot or too cold. It allows us to transport cargo and ourselves around locally and internationally. It allows us to produce food in quantities necessary to feed a global population. It allows us to manufacture and communicate and enables every aspect of modern life. America has tremendous potential to produce energy and create jobs, both from within and without the

energy industry. We have the resources, capacity, and technological know-‐‑how to lead energy production and benefit our economy, national security, and environment.

Along with its benefits, energy has both direct and indirect risks and costs. To minimize those, we need to be more efficient in energy production and use, while seeking to reduce environment impact.

Affordable, abundant, accessible, reliable, and secure energy is not the problem; it is part of the

solution.


It is in our national interest to make energy abundant, affordable, accessible, reliable, sustainable, diverse, and secure. These principles are discussed below:

Abundant – As the standard of living rises around the world, demand for energy will continue to

grow. Anyone who has lived through a blackout or gasoline shortage or spent time in a less developed country needs no explanation on the value of energy abundance. The wise and efficient use of our abundant resources is also key to affordable and accessible energy.

Affordable – Energy costs impact all other prices. There is nothing else that impacts our economy

so directly, but is so within our control. From individuals struggling to fill up their gas tanks or pay their electric bills, to business leaders making investment decisions based on the cost of powering server farms or smelters, lower cost is better for corporations to consumers. There are those who believe the best way to reduce the indirect costs of energy to our society is to raise direct costs to discourage use, but this is a self�defeating policy. Lowering the direct cost of energy is key to helping the U.S. economy recover and prosper.

Accessible - Providing affordable energy to sparsely populated areas can be challenging.

Increasingly, we are shipping resources from remote locations to large cities to transform those resources into products. Transportation takes fuel, fuel is energy, energy costs money, and this adds to production cost. Making energy sources more distributive in nature (smaller) and less dependent upon geography (the need to be placed near water, yet far from population centers) is an important aspect of the energy challenge. We can be more efficient if we can place factories and their corresponding labor force closer to the resources they utilize.

Reliable - Reliability is also part of abundance. Blackouts, shortages, and system failures are dangerous, costly, and can cause life-threatening situations. The nation’s energy policy ought to place a high value on reliability of energy service as an element of abundance.

Sustainable – Attempting to minimize pollution costs by driving up energy prices is a policy

doomed to economic and practical failure. Instead, we need to be cognizant of environmental impacts of every type of energy production and make rational, informed decisions on what is acceptable, what needs to be mitigated, and how to do it. Our challenge is to reduce the cost of “cleaner” sources of energy, not raise the cost of existing sources. Too often, “clean” is treated as an absolute, but a wiser approach makes a relative comparison. A better definition of clean is: “less intensive in global lifecycle impacts on human health and the environment than its likeliest alternative.” Sustainable energy production ensures a healthy environment for future generations.


Diverse – Every type of energy has advantages and disadvantages. However, the more diverse

our energy sources, the more robust and secure our national energy grids and fuel supplies. Diversity also increases innovation. America needs to be inclusive of all economically viable energy producing technologies.

Secure – The United States produces approximately eighty percent of its own energy. Within

that figure, however, is a significant disparity. We supply virtually all of our nation’s electric power needs from coal, gas, nuclear, and renewables. The transportation sector, however, is almost all oil dependent, and we import over forty percent of our petroleum at tremendous cost. In 2011 alone, the United States sent more than $330 billion overseas to purchase foreign oil. Too many of these dollars go to unfriendly governments that do not enforce environmental or safety standards, and worse, promote terrorism. We should continue to steadily reduce the percentage of oil in our energy mix, but for the sake of our nation’s economy and for the sake of the world’s environment, we should strive to produce the largest possible percentage of our oil needs domestically, and to obtain any imports from geographic neighbors and strong allies.

RELIABILITY OF OUR ELECTRICITY INFRASTRUCTURE AND ELECTRICAL GRID

Investment in the nation’s electric infrastructure has languished for years. Energy generation policies have not focused on affordable, base-load, on-demand, and clean energy resource development. For the first time in a generation, wholesale changes in that dynamic are now being affected by new energy sources: hydraulic fracturing technology and the harvesting of non-traditional and heavy oil reserves. The revelation of massive amounts of North American oil and gas, and the use of more environmentally friendly natural gas that is now economically recoverable, has created the opportunity to establish a much more secure, affordable, and cleaner energy infrastructure to meet our contemporary needs.

Not to be outdone, new nuclear technology development is poised to reduce all energy costs. New nuclear technologies will provide virtually limitless reserves and stable costs for generations to come, and will accomplish this with little to no negative aspects of energy production.

Barriers to effective development of our new energy resources are often institutional, rather than technological. In particular, federal, state and local regulatory polices affecting electric energy production, transmission infrastructure, and uses have been inconsistent or conflicting. They have often encouraged an “acceptable” level of scarcity, rather than innovation and infrastructure investment in producing an abundance of energy. This has led to


reliability issues and has unnecessarily burdened consumers and businesses with high-energy costs. It is time to establish clear policies that support production of abundant energy that will result in sustained economic growth.

It is a serious challenge to confront an entrenched regulatory mindsets and practices that de-incentivize incumbent producers from utilizing current resources more efficiently; pre-select technologies for development, regardless of their economic merit; and otherwise impede needed energy infrastructure development. At the same time, the very nature of electricity service compels consistently applied transition rules to avoid creating unreasonable pricing or system reliability concerns that would adversely affect electricity consumers and businesses. To meet this challenge, federal, regional, and state energy policies over the next five years should:

v Address regional and sub-regional reliability and economic ramifications of significant retirements of existing coal-fired generation resources;

v Address reasons why renewable energy, energy storage, some traditional nuclear power, and other technologies are not cost-competitive, and replace taxpayer and ratepayer subsidies for these technologies with focused efforts to overcome their competitive deficiencies;

v Implement coordinated policies at all levels to accelerate demand response and greater end use efficiency;

v Develop and implement coordinated policies for natural gas pipelines that support greater electric system reliance on natural gas;

v Redefine FERC’s (Federal Energy Regulatory Commission’s) resource adequacy policies to support, rather than compete with, state resource planning efforts.

SECURITY OF THE NATIONAL ENERGY GRID

The physical and social fabric of the United States is sustained by a system of systems; a complex and dynamic network of interlocking and interdependent infrastructures whose harmonious functioning enables the actions, transactions, and information flow that undergird the orderly conduct of our civil society.

An electromagnetic pulse (EMP) generated by a high altitude nuclear explosion is one of a small number of threats that can hold our society at risk of catastrophic consequences. The increasingly pervasive use of electronics of all forms represents the greatest source of vulnerability to attack by EMP. Electronics are used to control, communicate, compute, store, manage, and implement nearly every aspect of government and civilian systems. When a nuclear explosion occurs at high altitude, the EMP signal it produces will cover the wide geographic region within the line of sight of the detonation. This broad band, high amplitude


EMP, when coupled into sensitive electronics, has the capability to produce widespread and long lasting disruption and damage to the critical infrastructures that underpin the fabric of U.S. society.

Because of the ubiquitous dependence of society on the electrical power system, its vulnerability to an EMP attack, coupled with the EMP’s particular damage mechanisms, creates the possibility of long-term, catastrophic consequences. The implicit invitation to take advantage of this vulnerability, when coupled with increasing proliferation of nuclear weapons and their delivery systems, is a serious concern. A single EMP attack may seriously degrade or shut down a large part of the electric power grid in the geographic area of EMP exposure effectively instantaneously. There is also a possibility of functional collapse of grids beyond the exposed area, as electrical effects propagate from one region to another.

The time required for full recovery of service would depend on both the disruption and damage to the electrical power infrastructure and to other national infrastructures. Larger affected areas and stronger EMP field strengths will prolong the time to recover. Some critical electrical power infrastructure components are no longer manufactured in the United States, and their acquisition ordinarily requires up to a year of lead-time in routine circumstances. Damage to or loss of these components could leave significant parts of the electrical infrastructure out of service for periods measured in months to a year or more. There is a point in time at which the shortage or exhaustion of sustaining backup systems, including emergency power supplies, batteries, stand-by fuel supplies, communications, and manpower resources that can be mobilized, coordinated, and dispatched, together lead to a continuing degradation of critical infrastructures for a prolonged period of time.

Electrical power is necessary to support other critical infrastructures, including supply and distribution of water, food, fuel, communications, transport, financial transactions, emergency services, government services, and all other infrastructures supporting the national economy and welfare. Should significant parts of the electrical power infrastructure be lost for any substantial period of time, the consequences are likely to be catastrophic, and many people may ultimately die for lack of the basic elements necessary to sustain life in dense urban and suburban communities. In fact, such impacts are likely in the event of an EMP attack unless practical steps are taken to provide protection for critical elements of the electric system and for rapid restoration of electric power, particularly to essential services. The recovery plans for the individual infrastructures currently in place essentially assume, at worst, limited upsets to the other infrastructures that are important to their operation. Such plans may be of little or no


value in the wake of an EMP attack because of its long-duration effects on all infrastructures that rely on electricity or electronics.

The ability to recover from this situation is an area of great concern.

The use of automated control systems has allowed many companies and agencies to operate effectively with small work forces. Thus, while manual control of some systems may be possible, the number of people knowledgeable enough to support manual operations is limited. Repair of physical damage is also constrained by a small work force. Many maintenance crews are sized to perform routine and preventive maintenance of high-reliability equipment.

When repair or replacement is required that exceeds routine levels, arrangements are typically in place to augment crews from outside the affected area. However, due to the simultaneous, far-reaching effects from EMP, the anticipated augmenters likely will be occupied in their own areas. Thus, repairs normally requiring weeks of effort may require a much longer time than planned.

The consequences of an EMP event should be prepared for and protected against to the extent it is reasonably possible to do so. Cold War-style deterrence through mutual assured destruction is not likely to be an effective threat against potential protagonists that are either failing states or trans-national groups. Therefore, making preparations to manage the effects of an EMP attack, including understanding what has happened, maintaining situational awareness, having plans in place to recover, challenging and exercising those plans, and reducing vulnerabilities, is critical to reducing the consequences, and thus probability, of attack. The appropriate national-level approach should balance prevention, protection, and recovery.

An EMP attack on the national infrastructure is a serious problem, but one that can be managed by coordinated and focused efforts between industry and government. Managing the adverse impacts of EMP is feasible in terms of time and resources. A serious national commitment to address the threat of an EMP attack can develop a national posture that would significantly reduce the payoff for such an attack and allow the United States to recover in a timely manner if such an attack were to occur.

v eGeneration believes that the 2008 EMP Commission recommendations should be adopted and acted upon post haste, thus protecting America’s energy grid.


MOVING NATURAL GAS, COAL, AND ORGANIC WASTE TO THE TRANSPORTATION SECTOR

v eGeneration believes in establishing natural gas (NG), and synthetic natural gas (SNG) derived from coal, subgrade coal, coal waste, sewage and municipal solid waste, refueling stations for all federal vehicle fleets.

v eGeneration believes in establishing coal and plant based Ethanol. Butanol, and Dimethyl Ether as alternative fuels for all federal vehicle fleets. Synthetic natural gas (SNG) is not a new idea; the Germans were developing synthetic fuels

in WWII, and the Great Plains Synfuels Plant has been producing it in North Dakota since the 1980s. When that facility was built, natural gas prices were volatile and rising. The process for making SNG from coal is straightforward, and its primary building block, the gasification unit, is off-the-shelf technology.

This effort is already under way in China. Last October, Scientific American reported that the first of China’s SNG facilities had started shipping gas to customers, with four more plants in various stages of construction and another five approved earlier this year. The combined capacity of China’s nine identified SNG projects comes to around 3.5 billion cubic feet per day, or a bit more than the entire Barnett Shale near Dallas, Texas produced in 2007 as US shale gas production was ramping up. It’s also just over a quarter of China’s total natural gas consumption in 2012, including imported LNG.

To put that in perspective, if that quantity of SNG were converted to electricity in efficient combined cycle plants, their output would be roughly double that of China’s 75,000 MW of installed wind turbines in 2012, when wind generated around 2% of the country’s electricity.

The appeal of converting millions of tons a year of dirty waste coal into clean-burning natural gas is clear. The gasification process has some key advantages over the standard coal power plant technologies in the ease with which criteria pollutants can be addressed. Generating power from coal-based SNG might actually reduce total criteria pollutants, rather than just relocating them. However, wherever these plants are built they would add a massive amount of CO2 back into the atmosphere. That’s because the lifecycle CO2 emissions for SNG-generated power have been estimated at seven times those from natural gas, and 36-82% higher than simply burning the coal for power generation.

What could possibly lead America’s government to pursue such an option, in spite of widespread concerns about climate change, valid issues with respect to air pollution, and our


own commitments to reduce the emissions intensity of its economy? America’s air particulate pollution from burning coal causes even more serious health and economic impacts and has been blamed for many premature deaths each year.

By comparison, the consequences of greenhouse gas emissions are much more indirect, potentially remote, and disputed in some quarters.

It’s much easier to capture high-purity, industrial-ready CO2 from a gasifier than from a pulverized coal power plant. It should also be much easier and cheaper to retrofit a gasifier for Carbon Capture Storage than to install such a retrofit at a coal fired power plant.

America could, alternatively or additionally, use plasma gasification powered by a nuclear reactor to transform coal and organic waste into transportation fuel, and realize very little increase, if any at all, in the production of CO2.

Only time will tell, but moving both our coal and natural gas resources towards providing transportation fuels makes sense. Coal and natural gas have many times the energy density of new modern batteries that power electric cars. These energy resources are easier to implement and pose less safety risk than trying to adapt nuclear technologies to power planes, trains, trucks, and automobiles. A nuclear fission reactor will more than likely never be recommended for personal transportation solely because of size and safety concerns.

However, utilizing Uranium and Thorium fuels in a nuclear reactor to power industry and our homes makes sense if we do so as affordably as, or more affordably than, natural gas and coal. New nuclear technologies show great promise to provide great economies in transforming our domestic coal and natural gas resources into gas and liquid transportation fuels.

v eGeneration believes that all ground based federal fleets should become traditional and alternative fuel vehicles, capable of running on coal derived drop-in fuels, butanol, gasoline, plasma converted fuel, natural gas, SNG, and carbon monoxide.

v eGeneration believes in the use of new nuclear Small Modular Reactors to power the retort process to liberate oil from oil shale, and advocates the use of nuclear heat applications to harvest heavy oil reserves.

v eGeneration believes in using new nuclear to drive the plasma gasification process that can transform America’s coal reserve into liquid transportation fuel and into synthetic natural gas without producing CO2.

v eGeneration believes in the use of plasma gasification powered by new nuclear technologies to greatly reduce landfills and turn municipal solid waste and sewage into fuel for the public and industry.

v eGeneration believes in research and development for bio-digestion in producing a synthetic natural gas that can be used as a transportation fuel.


o Bio-digestion makes use of rotting organic matter to produce methane that can be refined into synthetic natural gas. A byproduct is a very fertile topsoil amendment that can reduce the need for petroleum-based fertilizers.

o To jump-start this program, eGeneration believes in the exclusion of all federal, state, and local taxes from the price of synthetic natural gas used as a transportation fuel.

Although we have vast reserves of natural gas, NG is a limited commodity, and we should not place all our energy eggs in one basket. Bio-digestion helps the environment, and, unlike fossil fuel derived natural gas, can be manufactured in perpetuity.

ENERGY EFFICIENCY

Industrial manufacturers already promote production efficiency whenever possible to maximize competitive edge and increase profits. Intense competition has driven manufacturers to improve processes continuously, from productivity to waste reduction, while boosting quality and performance. Manufacturers will invest in technologies that will supply the greatest competitive advantage.

Overly prescriptive and compulsory federal energy efficiency requirement policies need to be rescinded for industrial manufacturers, as it is economic forces that drive energy efficiency, and compulsory policies put American manufacturers at a competitive disadvantage in the world market. These regulations cost manufacturers money without necessarily increasing efficiency. The market does that automatically, and government intervention is not only unnecessary; it is counterproductive.

A national energy plan should continue to support cooperative government-industry initiatives that assist manufacturers in establishing effective energy management programs and identifying cost-saving investments. These initiatives should be voluntary and should not compel investing companies to make expenditures without regard for the company’s best interest; expenditures that the company would not make if it were permitted to act in its own interest in the free market.

“Waste not, want not” is an expression known to many Americans. Due to our nation’s size and high standard of living, we must be conscious of our energy consumption. As our


standard of living rises, energy demand intensifies. We should aim to use energy more wisely – by using less energy per capita and per unit of gross domestic product.

Using energy efficiently is part of, not in conflict with, abundant and affordable energy. Energy experts have correctly called energy efficiency “the fifth fuel.” Using energy more efficiently is akin to developing more fuel.

Successes thus far should be celebrated. U.S. energy consumption per unit of gross domestic product has fallen from 17.35 thousand British thermal units (Btu) in 1949 to 7.31 thousand Btu in 2011, a drop of nearly 60 percent. We must give credit where credit is due, including to successful government programs that have spurred efficiency upgrades nationwide.

Still, it should be noted that a large part of the drop in overall energy consumption is an effect of the recent economic recession, from which we are still recovering. We need to continue to do better and find new and creative ways to encourage energy efficiency.

The prospect of even greater efficiency is bright, and its benefits are clear for the

economy and the environment. The challenge is doing so in a non-‐‑invasive manner. Energy policy should drive conservation without detracting from our standard of living. Efficiency innovations that prove themselves to buyers will prosper, just as innovations in other endeavors have become part of our everyday lives.

Simply reducing overall energy consumption in absolute terms does not necessarily enhance efficiency. A household that cuts its usage of gasoline is conserving, but if members of that household spend more time taking alternative travel, or simply take fewer trips, then they also may be accomplishing less in their lives. This is not true efficiency.

Energy consumption and the direction of the nation’s economy are typically correlated in positive terms. The nation’s total energy consumption declined from 101.3 quadrillion Btu in 2007 to 94.6 quadrillion Btu in 2009, for example, coinciding with a period of extraordinary international economic weakness. As the marketplace recovered, however, consumption rose to 97.3 quadrillion Btu in 2011.

This makes sense, intuitively. A growing economy uses more energy; a slowing or shrinking economy uses less. Wasting energy is never desirable.

Dividing energy consumption by the Gross Domestic Product (GDP) attains one common measure of energy efficiency. This is also known as energy intensity and enables us to determine how much energy is required to generate one dollar in the economy, broadly speaking. Less is


more. Although it is an imperfect measurement – as with all indicators, there are limitations to the analysis – it is nonetheless highly useful and instructive.

The American story on energy consumption and economic vitality is a model for the rest of the world. Energy efficiency, measured as thousand Btu per real (2005) dollars, has improved in virtually every year since 1949, when such records began. The amount of energy required to produce one dollar has steadily fallen, even as consumption has more than tripled. Energy consumption per unit of GDP has fallen from 17.35 thousand Btu in 1949 to 7.31 thousand Btu in 2011, a drop of nearly 60 percent.

It is for this reason that the International Energy Agency (IEA) recently singled out the United States for our advancements in this area. In its latest World Energy Outlook, the IEA

notes: “Among OECD [Organization for Economic Co-‐‑operation and Development] countries,

the United States has achieved the biggest improvement in energy intensity in recent decades, albeit from relatively high levels. Its energy intensity declined at an average rate of 2 percent per year from 1980 to 2010.” Incremental improvements have produced profound change over time.

According to the latest domestic projections from the Energy Information Administration, energy intensity will continue trending downward. (Carbon dioxide emissions per dollar of GDP are closely linked to energy intensity and will also continue to decline.) Even energy use per capita, which had long been relatively stable, will also accelerate its milder decline. Gains in efficiency accrue despite economic growth and the expansion of the U.S. population.

This is something of which we can all be proud, but there is still a long way to go.

Others internationally, such as the European Union and Japan, report lower energy intensities. There are several reasons this is the case. Overseas governments are often more willing to intervene in the economy and impose stricter mandates that make energy more expensive for consumers. This approach can lead to distortions and negative externalities. In its report, the IEA also discusses a series of barriers to greater efficiency gains, including the difficulties associated with measuring efficiency, low levels of awareness, the problem of split incentives, risk perception and aversion, and others.

Policymakers can help remove or manage these barriers – charting a course to an even more efficient economy that preserves the American free enterprise system and utilizes, rather

than abandons, the free-‐‑market approach that has made us so strong.


The drive toward increasing efficiency is an American success story. We see this across sectors in a variety of ways:

v We should support the rapid adoption of voluntary public policy initiatives to increase the energy efficiency of commercial and residential buildings, power generation and distribution systems, appliances, and industrial processes. Energy efficiency can reduce U.S. electricity consumption by up to one percent per year over projected demand. At half the cost of adding new generation, increased efficiency could potentially save consumers $100 billion a year on their energy bills by 2025.

v The Next Generation Nuclear Plants hold tremendous promise and are a testament to the ingenuity of 21st century engineering. This design remains operational for a longer period of time and also produces hydrogen, in addition to its highly efficient electricity production. So-‐‑called “Generation IV” plants are an international endeavor, in which the U.S. is a leader. More broadly, as nuclear power has increased its share of total U.S. generation; its capacity factor – a measurement of efficiency – has also substantially increased.

v The recent drought and spate of wildfires has brought water efficiency to the forefront. As we explore elsewhere in this document, understanding the energy-‐‑water nexus is key: water is used in some form or method in the production of all energy sources. Upgraded faucets, pipes, toilets, and other fixtures have saved over 250 billion gallons of water, according to the EPA.

v The building sector uses more than a quarter of U.S. energy each year. Technological improvements can enhance the efficiency of residential and commercial buildings, particularly in the space heating, cooling, and ventilation areas. Mandates are not a panacea, however, and typically have negative externalities.

v Technology provides numerous pathways toward greater gains in efficiency. Hydroelectric plants can be modernized with more efficient turbines, for example.

ABUNDANCE

Energy production supplies good jobs for millions of our citizens and provides security and prosperity for many. Abundant and affordable energy is a core foundation for our way of life. In recent years, however, we have taken energy production for granted, or in many cases, restricted our domestic production. We must produce more energy here at home. We can do so and can continue to make American energy production safer and with fewer environmental impacts than anywhere else in the world. We should place confidence in American ingenuity to balance both increased and responsible domestic production.

By producing more, the policies advocated in this document will pay for themselves while advancing our national energy goals.


OIL AND NATURAL GAS AND ENERGY SECURITY

New technologies and studies continue to prove that North America has a vast hydrocarbon base, with the potential to substantially affect supply in world markets. The Energy Information Administration (EIA) – an independent and impartial institution within the Department of Energy (DOE) that collects, analyzes, and disseminates energy information – reported in 2012 that the U.S. holds 220.2 billion barrels of technically recoverable oil, or more than a century’s worth of projected imports from the Organization of the Petroleum Exporting Countries (OPEC). This figure does not include the vast supply of unconventional oil resources that will become commercially viable in the future. The National Petroleum Council, in a fall 2011 study, affirmed that the U.S. has far more recoverable oil than many have acknowledged, thanks in part to the directional drilling and hydraulic fracturing technologies (“fracking”) that are dramatically increasing recoverable oil and natural gas reserves. We are increasing oil and gas production on private and state lands; it is critical that we allow the same to occur on federal lands.

The United States should establish a national goal to produce enough additional oil and synthetic fuels to become independent of OPEC imports by 2020. The fulfillment of this

commitment would support the creation of millions of well-‐‑paying jobs, increase federal revenues, reduce our budget and trade deficits, and help maintain affordable world energy prices.

Some Americans may view energy policy from a perspective of scarcity, oriented by the oil price shocks of 1973. But the energy market and policy landscape is vastly different today, especially in America. Over the past five to seven years, domestic oil production has dramatically increased, and forecasts for the future are very promising.

v Due to significant production increases on state and private lands: v Primary energy production in fossil fuels is at its highest point since DOE’s records

began in 1973. v The number of exploratory crude oil wells more than doubled from 2000 to 2010. v There were on average more rotary rigs in operation in 2012 than in any year since 1985. v Domestic crude oil production is higher now than at any point since 1997.

While trends on state and private lands are quite positive, oil production on federal lands

remained largely flat from 2003-‐‑2011, and sales of natural gas from federal lands fell by 31

percent. Of equal concern, the number of permits issued for onshore and offshore production


on federal lands – a key indicator of future production – has also dropped significantly since the preceding administration.

Claims that very recent federal policies have had a significant role in the increase in domestic oil production are, therefore, deeply misleading. About 96 percent of the increase in domestic oil production is attributable to growth on state and private land. Indeed, the overall domestic increase is in spite of federal policies that stymie production. We should reverse this trend and develop federal lands.

The ongoing boom in American oil and gas production must be fundamental to our national energy policy. We no longer should view energy policy from a perspective of scarcity, but rather, from a perspective of increasing abundance. With the right policies, abundant, reliable, and affordable energy is achievable.

The economic well-‐‑being and security of this nation depend on maintaining guaranteed and

affordable access to a diverse array of stable energy supplies. To effectively reduce our reliance on imported petroleum, we need to accelerate the development of our domestic resources in the safest, most efficient, and most environmentally sound way possible.

COST-JUSTIFIED ALTERNATIVE ENERGY RESOURCES

A majority of states have adopted some form of renewable energy or clean energy policy, and Congress has contemplated a national renewable energy standard as part of its energy legislative agenda. These programs universally take the form of mandated utility ratepayer surcharges to fund the development of selected, but otherwise uneconomic alternative technologies such as wind, solar, and biomass. At the same time, federal loan guarantees and favorable cost recovery policies in some states have failed to spur renewed interest in nuclear plant construction. A part of this problem is the lack of federal regulations regarding manufacturing, licensing, and operating Liquid Core Molten Salt Reactors (LCMSR). eGeneration believes that the Congress of the United States should mandate, and provide an adequate budget for the Department of Energy and the Nuclear Regulatory Commission to establish rules for manufacturing, licensing, and operation of LCMSRs to be built and operated in the United States by private industry for the production of energy.

Both cost effective renewable and new nuclear resources are important to a secure, long-term, clean energy strategy, but that strategy must confront the current reality of low, gas-driven wholesale power prices. Rather than continuing to drain already thin consumer and business energy payment accounts, federal and state governments should focus instead on


addressing the reasons why these resources currently are not economic or are not being developed. They should also focus efforts on producing economically sustainable and market competitive energy.

Similarly, the drive to expand America’s traditional nuclear generation has stalled due to a risky and uncertain regulatory environment. More emphasis must be focused on the accelerated development of SMRs (Small Modular Reactors). While nuclear needs to be a basic element of a clean energy plan, new construction must be prepared to be cost competitive. These criteria would point toward the mass factory assembly line production of Small Modular Reactors.

Renewed development efforts of new nuclear SMR power plants should be an integral component of a balanced U.S. clean energy plan. Given current circumstances, it would make far more sense for federal and state policymakers to explore development of more advanced designs that could be economically deployed in 15-20 years or less with the proper emphasis, rather than saddling American consumers and businesses with renewable-driven inflated utility bills today.

There are many promising SMR technologies to choose from that are safe, smaller, more cost-effective, and that produce less waste than traditional LWR power plants. Banks (multiple units) of SMRs can be brought to the grounds of a retiring traditional nuclear power plant and use all of the infrastructure that is in place to provide electricity to the grid, saving rate-payers a tremendous amount of money. Additionally, since SMRs are safe and small, and can be placed close to energy users, which make the grid more robust with added regional and sub-regional distributive generation.

HARNESSING NATURALLY OCCURRING RENEWABLE TECHNOLOGIES

v eGeneration believes in the research and development of utility scale solar geothermal and solar hydrothermal applications for heating and cooling of homes and businesses.

o Solar and hydro geothermal are already market competitive, but they have an unattractive upfront cost. The federal government should provide no-interest long-term loans to make solar geothermal and solar hydrothermal more attractive to individuals. o Most of the population of America lives close to a large body of water that has

stored an immense amount of solar thermal energy, which can be used to heat homes in the winter and cool homes in the summer. Solar geothermal and solar


hydrothermal technology is well understood, and there should only be a very small technical hurdle to commercialization.

v eGeneration believes in accelerating the commercialization of using the carbon dioxide in seawater to produce liquid transportation fuels for our military. This has already been accomplished experimentally at the Naval Research Laboratory. It is a technology with great promise for the future. The Holy Grail to both environmentalists and the U.S. Navy is the production of carbon neutral transportation fuels from seawater.

The Navy is operating a pilot plant to convert seawater to fuel, to create the ability for aircraft carriers or dedicated fueling ships to produce at sea their own fuel, and fuel for transfer to other ships and aircraft. This would represent a major tactical advantage for the U.S. Navy that is presently bearing the fiscal and physical burden of distributing nearly 1.25 billion gallons of fuel a year worldwide. As the seawater to jet fuel technology is still in its nascent stages, the large energy demands could only be covered in a system where there is plenty of energy to spare, such as a large nuclear reactor on board a large aircraft carrier, or a small nuclear reactor such as a Molten Salt Reactor aboard a small littoral class ship. This U.S. Navy-led fuels program has created a technology that can do more than create jet fuel. Depending on the catalyst employed in the process, the technology should be able to create a variety of fuels and other hydrocarbon products from seawater, such as methane or even pipeline quality synthetic natural gas (the new Zumwalt Class destroyer is currently powered by compressed natural gas).

It is doubtful though that this Naval Research Laboratory-developed process would ever be economically competitive with synthetic fuels derived from sources such as trash or coal for civilian applications, but the process is very likely to be far more cost effective than the Navy’s current procurement of bio-fuels and fossil fuels when the transportation chain cost of getting the fuel to where the Navy needs it is considered.

The Navy wants to reduce significantly in its supply line the number of fleet oilers and mixed provisions ships, which also transport oil to the fleet. The necessity of a destroyer or carrier to rendezvous with an oiler in the middle of a mission can be costly, both in fuel consumed and in the tactical sense. The fueling evolution may take the participating vessels away from their optimum tactical positions, and may also become vulnerable to enemy attack. Independence from off-board fossil fuels brings


with it an added level of security, further insulating the Navy's energy needs from turmoil in the Middle East.

The Navy’s adoption of MSRs (Molten Salt Reactors) to provide energy to produce strategic synthetic fuels within a Carrier Battle Group or an Amphibious Assault Group would provide it with a strategic and tactical cushion.

There is hope the Navy could also consider the potential of the MSR for Naval propulsion applications in such units as larger littoral combat vessels or destroyer types. Adoption of MSR propulsion systems by the Navy may engender spin off civilian maritime application.

OIL, GASOLINE, AND DIESEL

v eGeneration believes in research into the feasibility of using a high temperature Gen IV reactor, such as a Thorium based LCMSR (Liquid Core Molten Salt Reactor), for use in crude oil Hydrocarbon fractionation.

o It takes an enormous amount of energy to produce gasoline and diesel from crude oil. Allowing small modular nuclear reactors to power America’s refineries could allow this process to be to be accomplished much more cost effectively, efficiently, and safely.

v eGeneration believes in the national adoption of a single fuel standard for gasoline and diesel, greatly improving throughput at our nation’s refineries and lower the price of gasoline and diesel fuel.

v eGeneration believes in the rapid development of refineries on military bases, former military bases, and other federally owned lands.

ENERGY INDEPENDENCE FROM OPEC IMPORTS BY 2020

The United States consumes approximately 97 quadrillion Btu of energy each year to power all aspects of American life, from driving to cooking, to using the Internet.

Approximately four-‐‑fifths of that energy – 78 quadrillion Btu – is produced domestically. Domestic energy production includes coal, natural gas, nuclear, renewables, crude oil, and other types of energy.

The U.S. also exports a considerable amount of energy annually. In 2011, for example, the U.S. exported over two quadrillion BTUs worth of coal and nearly six quadrillion BTUs worth


of petroleum products. Though engaging in world energy markets is a good thing, the current state of these trade flows is a net imports balance of 18 quadrillion BTUs per year. In other words, we import nearly 20 percent of our nation’s energy consumption. Crude oil imports, at nearly 20 quadrillion BTUs, account for the vast majority of this deficit. The U.S. imported roughly 8.5 million barrels of oil per day in 2011, in net terms. Just over half of this amount – 4.6 million barrels per day – was imported from members of OPEC. This cartel, in which many Middle Eastern countries have a significant influence, is a powerful force in energy markets because it produces about 40 percent of global crude. Many of its members are friendly to the U.S., but several have been opposed to the U.S. over the years.

Dictatorships, war, insurgency, terrorism, and political turmoil frequently come into play in the Middle East and other OPEC countries, and too frequently have the potential to affect the global marketplace. Our present dependence on OPEC makes it difficult for us to advance our values and defend our interests.

The idea of energy “independence” has caused a great deal of confusion in today’s political rhetoric. Presidents and politicians have championed the idea since the 1973 OPEC oil embargo and ensuing energy shortages. In advocating energy independence from OPEC imports by 2020, it is important to clarify precisely what is meant by “independence.”

Over the past three decades, advances in energy markets and infrastructure have created a truly global marketplace, where the price of oil is based on demand, supply, and the perceived future of both. Our new reality is that the price of oil is set on a global market. We must accept this reality and set our national policies accordingly. In today’s world, isolation from this global market is neither possible nor desirable; “independence” can and should be defined differently.

While the U.S. cannot reasonably expect to control the global price of oil or OPEC-‐‑driven price shocks, we can certainly have a meaningful effect on prices and minimize our exposure to international volatility. We can further protect and advance our interests by eliminating our dependence on OPEC imports.

Skeptics who say this is impossible are needlessly pessimistic and are basing their conclusions on outdated information.

First, the U.S. has seen its reserve portfolio grow substantially in the past decade. The

U.S. intelligence community assessed in its long-‐‑range forecasting that the nation “could emerge as a major energy exporter” by 2020. This is due in large part to previously sub-economic resources, like shale oil, becoming economic on private and state lands. Technology is likely to


allow for exponentially higher reserve growth in coming years, and a modern seismic assessment would immediately expand the U.S. resource base by potentially huge margins.

Second, the trends are already in our favor. Total domestic energy production is rising – by nearly 10 percent over the past 10 years – even as Americans become more energy efficient, technology improves, and exploration continues. Crude oil production is at its highest in 15 years and exploration has doubled over the last decade. There were on average more rotary rigs in operation in 2012 than in any year since 1985, despite regulatory uncertainty and restricted access on federal lands. Based on these and other trends, the International Energy Agency recently predicted a bright future for American energy, including declining imports and rising exports.

Third, the U.S. stands to benefit from greater energy production in both Canada and Mexico. Both nations have significant resources and are eager to commercialize them in trade and partnership with the United States. Energy resources are natural phenomena irrespective of political borders. In 2011, Canada produced roughly 2.9 million barrels of crude oil per day, while Mexico produced 2.6 million. When added to the approximately six million barrels that the U.S. produces each day, total North American production (11.5 million barrels) is far greater than the nation’s net imports (8.5 million barrels in 2011) and more than double the imports from OPEC (4.6 million barrels). There is no scarcity of energy resources in North America. The only scarcity is in our resolve to take full advantage of our continent’s tremendous resource base – to produce more oil within our own borders, and to ensure that Canadian and Mexican exports are brought here whenever the opportunity arises. If we accomplish that, we can displace our OPEC imports by 2020.

In sum, the United States has made tremendous gains in energy production and the outlook is promising for years to come. By isolating transportation as the critical sector for petroleum consumption, and by situating U.S. production in the context of a wider continental boom, energy independence from OPEC by 2020 becomes an imminently achievable goal. We are headed in the right direction, but this course must continue. We must pursue two critical changes to current energy policy: increased access to reasonably regulated federal resources, and more collaboration with Canada and Mexico.

In order to reach this goal, the federal government needs to:

v Expedite federal permitting and review decisions for energy, natural resources, and related infrastructure projects.


v Permit the construction of the “Keystone XL” Pipeline and encourage the construction and full utilization of other pipelines to facilitate energy commerce among and between the U.S. and our North American neighbors.

v Require that the Department of the Interior (DOI) outline plans for development of Outer Continental Shelf (OCS) resources to more accurately estimate available resources and set minimum production targets taking into account necessary environmental requirements. Although these targets would be set administratively, they should be achievable and binding. If and when actual production is projected to fall short of such targets, additional leasing, onshore or offshore, should be made available to compensate for the shortfall.

v Streamline and simplify the federal permitting process to ensure that offshore leases are developed – specifically repealing many of the recent additional requirements on shallow water Gulf of Mexico drillers (predominantly involving natural gas development and production). Level the playing field for independent operators by reducing redundancies in

paperwork and refraining from notice-‐‑to-‐‑lessee regulation instead of formal rulemaking.

v Expand OCS leasing to the Eastern Gulf of Mexico and parts of the Atlantic OCS (off the coasts of Virginia, North Carolina, South Carolina, and Georgia).

v Pass organic legislation for a consolidated offshore regulator, with a reaffirmed and strengthened statutory authority to develop offshore resources expeditiously through a certain and fair permitting process, while incentivizing safety and best environmental practices.

v Direct a share of revenues to participating offshore energy producing states – including offshore wind, tidal, and wave generation – and establish permanent revenue sharing (as is established for onshore development) from leasing, bonus bids, rents, and royalty receipts at 27.5 percent with provision for direct partial payments to affected coastal communities. Allow an additional 10 percent to be directed to state funds to support energy research and development (R&D), alternative and renewable energy, energy efficiency, and conservation. Expand state territorial limits mandated by the Submerged Lands Act to 12 miles offshore, reducing federal management burdens and allowing for state resource development.

v Amend law to provide for an updated liability regime to ensure that no oil spill victim ever goes uncompensated, that U.S. tax dollars are never required to compensate for a spill, and that operators face substantial consequences for major avoidable incidents, while ensuring the U.S. oil and gas industry remains competitive throughout the world.

v Establish parallel four or five-‐‑year programs for federal onshore leasing and development. Require administrative establishment of achievable, binding production targets to be reconciled with available resources and environmental considerations.


v Restore onshore revenue sharing from the current 52 percent to 48 percent federal-‐‑state split to an even 50 percent to 50 percent split.

v Provide regulatory certainty for the continued use of carbon dioxide as a commodity for enhancing oil and gas recovery by continuing to treat injection sites as Class II wells under

the Underground Injection Control program. v Direct the State Department to prioritize negotiations with the government of Mexico to

allow for expanded foreign investment in Mexico’s previously state-‐‑run oilfields, even as

Mexico is already considering its own policy changes to enable such investment. Explore amending the North American Free Trade Agreement (NAFTA) to facilitate the free trade of goods and services to assist Mexico’s petroleum revival.

v Carefully observe and evaluate DOE processing of applications for exports of Liquefied Natural Gas (LNG), and, as necessary, update and clarify LNG export rules to provide

certainty both to gas-‐‑dependent industries and to potential investors in export facilities,

ensuring that the U.S. moves toward improved trade balance and energy security. At the very least, expedite the process for Lower 48 LNG exports to allies of the United States that face emergency or chronic shortages but with whom we do not have free trade agreements.

v Reinstate the DOI Royalty-‐‑in-‐‑Kind (RiK) program with improved management and

oversight. This would parallel practices of oil-‐‑producing states and create a more efficient

means for federal taxpayers to benefit by their resources, including the fulfillment of the (Strategic Petroleum Reserve) SPR to its statutory and international mandates.

v Include provisions to streamline approvals, improve exploration and help fund improved economic and environmental planning to increase energy production from Indian

reservations and Native-‐‑owned lands nationwide. Aid should also be provided to help Indian Tribes and Native Corporations partner with firms and benefit from energy developments on their lands. This is important because the 44.5 million acres owned by Indian tribes in the Lower 48 and the additional 44 million acres owned by Native Corporations in Alaska represent some of America’s best prospects for coal, oil, and natural gas discoveries. By some estimates, these lands hold up to a fifth of the nation’s unutilized energy potential. Indian and Native lands also contain top prospects for renewable energy development, ranging from Apache biomass prospects, to Blackfeet wind resources, to Ute and Pueblo solar prospects, to dozens of hydroelectric sites in Alaska owned by Native Corporations.

v Open 2,000 acres in the non-‐‑wilderness portion of the Arctic National Wildlife Refuge (ANWR) coastal plain (1002 area) to exploration and production. (The 1002 area is outlined in red in the adjoining figure.) To do this, we need to:


o Require timely lease sales o Streamline and simplify the permitting process o Designate a fund, in cooperation with the North Slope Borough and

derived from a fraction of the statutory revenue share, to mitigate the effects of exploration and development.

o Provide for a 50 percent to 50 percent federal-‐‑state revenue sharing split

rather than the 10 percent to 90 percent federal-‐‑state split as provided for under current law.

v The National Petroleum Reserve�Alaska (NPR�A) must be immediately placed into full availability for oil and natural gas leasing, consistent with its statutory designation. The reserve must be fully developed with roads, bridges, and pipeline facilities to promote broad onshore development of the diffuse resource base, while simultaneously accommodating the transportation of oil and natural gas from offshore fields in the Chukchi Sea to the Trans�Alaska Pipeline System (TAPS). “Roadless” options for the NPR�A should be expressly withdrawn from consideration. The leasing deferral in and around Teshekpuk Lake through 2018 should be honored.

CRITICAL MINERALS Minerals are the building blocks of our nation’s economy. From rare earth elements to

Molybdenum, we rely on minerals for everything from the smallest computer chips to the tallest skyscrapers. Minerals make it possible for us to innovate and invent – and in the process they shape our daily lives, our standard of living, and our ability to prosper.

There is no question that an abundant and affordable supply of domestic minerals is

critical to America’s future. And yet, our mineral-‐‑related capabilities have been slipping for decades. Rare earth elements garner most of the headlines, but according to the USGS, the United States was 100 percent dependent on foreign suppliers for 19 minerals in 2011 – and more than 50 percent dependent on foreign sources for some 24 more.

For the most part, this is not because the U.S. lacks reserves of these minerals. It is because our minerals policies have failed to keep up with the rest of the world, and those investing in production of these resources have decided to look elsewhere. According to the Metals Economics Group, the U.S. attracted 20 percent of the worldwide exploration investment dollars in 1993. Today, that has eroded to just eight percent.


This trend can and should be reversed through clear programmatic direction to revitalize the domestic critical mineral supply chain. Such action is needed to keep the U.S. competitive and ensure that the federal government’s mineral policies – some of which have not been updated since the 1980s – are brought into the 21st century.

The reestablishment of critical mineral designation, assessment, production, manufacturing, recycling, analysis, forecasting, workforce, education, research, and international capabilities within the United States is essential for economic prosperity and resource security. To accomplish these objectives, we believe the government needs to:

v Develop a rigorous methodology for determining which minerals are critical, and then use that methodology to designate critical minerals, monitor their status, and update designations in a timely manner.

v Establish as the policy of the United States the promotion of an adequate, reliable, domestic, and stable supply of critical minerals, produced in an environmentally responsible manner, to strengthen and sustain our nation’s economic security.

v Complete a comprehensive national resource assessment within four years for each designated critical mineral, including fieldwork.

v Optimize the efficiency of permitting – without reducing the environmental standards that must be adhered to – in order to facilitate increased exploration for and production of critical minerals by reviewing requirements, quantifying delays, recommending improvements, and developing a performance metric for evaluating progress.

v Conduct R&D to facilitate the efficient use and recycling of critical minerals, as well as alternatives that can reduce the demand for them.

v Undertake annual reviews of domestic mineral trends as well as forward-‐‑looking analyses of

critical mineral production, consumption, and recycling patterns. v Provide for workforce assessments, curriculum development, worker training, and

associated grants to academic institutions. v Promote international cooperation with allies on critical mineral supply chain issues and

provide an avenue for technology and information transfer via diplomatic channels. v It is critical to develop uses for the element Thorium if America has any hope of reviving its

advanced electronics industry and makes efforts to not rely on China for the manufacture and distribution of electronic containing Rare Earth Elements (REE). Thorium is always found with the most valuable REE’s, and the United States treatment of the element Thorium makes it cost prohibitive for the domestic production of REE’s. If the domestic


market develops a use for Thorium, such as for a nuclear fuel, then a revival of an American electronics industry is possible.

NUCLEAR ENERGY

Liquid Core Molten Salt Reactors are the most promising technology offering a permanent, environmentally friendly solution to meet energy needs. As a family of reactors, they will all operate at high temperatures. This heat energy can be used for:

v The production of electricity v Desalination of seawater into potable water v Liquefaction of coal to provide synthetic gasoline, diesel, and other liquid transportation

fuels, providing energy independence for the United States v Turning municipal solid waste and sewage into transportation fuels v A myriad of industrial processes that presently use fossil fuels (carbon producers) to

provide process heat, thereby encouraging the creation of many thousands of jobs in the United States

v Further, some LCMSR designs will produce medical isotopes for diagnostic imaging (over 300,000 procedures in the U.S. each week use Technetium 99. The precursor to which is Molybdenum-99). There is no domestic U.S. supplier of this isotope today. Some LCMSR designs will also produce a medical isotope, Actinium 225, presently in very short supply, needed for cancer research and treatment.

v Some LCMSRs designs will also produce an isotope, Plutonium-238, needed by NASA to power its deep space probes.

v LCMSRs will provide all these benefits safely, inexpensively, and without producing any CO2 or air pollution.

America’s current economic recovery and future competitive prospects are tied to investment in a modern and efficient energy infrastructure, but that cannot be accomplished by simply layering new ratepayer-funded mandates on top of outmoded rate and regulatory constructs. We must support reforms required to align investments with consumer needs.

v eGeneration believes in federal loan guarantees for the accelerated private development of LCMSRs to include the LFTR (Liquid Fluoride Thorium Reactor by Flibe), WAMSR (Waste Annihilating Molten Salt Reactor by TransAtomics), the General Atomics Energy Multiplier, the Areva Antares, Babcock and Wilcox M-Power reactor, NuScale reactor, the Terra Power Standing Wave Reactor, and the GE Prism, as powered with a mix of Thorium and Uranium or nuclear waste. These guarantees should give priority to those test projects that are on mobile, land, and surface and subsurface seaborne platforms, and priority given to reactors utilizing the Thorium fuel cycle and utilizing nuclear waste.


v eGeneration believes in smaller advanced nuclear propulsion sources for smaller naval ships, icebreakers, and civilian cargo transport ships.

v eGeneration believes in research and development regarding the use of Thorium-based fuel in Light Water Reactors.

With 104 nuclear power plants in 31 states, nuclear energy accounts for nearly 20 percent of our nation’s electricity. Nuclear power supplies 13.5 percent of the world’s electricity and 66 new Nuclear power plants are under construction in 14 countries with approximately 160 under design and consideration.

Nuclear power is one of the most reliable sources of base load electricity, and is one of the

lowest-‐‑cost suppliers of electricity per kilowatt-hour. Nuclear power is one of the cleanest sources of energy, emitting no pollutants or greenhouse gases in electricity generation and with lifecycle emissions comparable to wind and hydropower. In addition, the nuclear industry is a

source of good-‐‑paying jobs and large-‐‑scale job creation. Nuclear energy must remain a viable

contributor to America’s power supply.

At the same time, we need to advance the next generation (and beyond) of robust nuclear technologies, including Small Modular Reactors, Generation IV type reactors, and future fusion

reactors. We also need to address the back-‐‑end of the nuclear fuel cycle and fulfill the federal

government’s responsibility to take title to used commercial nuclear fuel and highly radioactive waste.

We believe the government needs to take the following steps to achieve these objectives:

v Authorize a quasi-‐‑federal entity to manage the back-‐‑end of the fuel cycle (e.g., Fed-‐‑Corp or an Independent Government Agency (IGA)).

DOE: Continue to conduct Nuclear energy research programs with emphasis on the following:

v Reduce the costs of Nuclear reactor systems v Reduce used Nuclear fuel and Nuclear waste products generated by civilian Nuclear energy v Support R&D for reactor life extension for continued safe and robust operation v Support technological advances in areas that industry would not undertake by itself because

of technical or financial uncertainty (e.g., waste fuel reprocessing and fast reactor technologies)

v Develop guidelines for advanced fuel reprocessing and recycling for used nuclear fuel


v Promote new technologies used in Small Modular Reactors (SMRs) and support the eventual deployment of SMRs. These reactors have the potential to replace aging power plants that are near retirement, incrementally add generating capacity as needed, provide

strong export potential to foreign markets, and provide reliable off-‐‑grid power supply. SMRs

could also be utilized by the military and other government installations as a secure and reliable backup or base load power supply with the potential of providing electricity needs for the surrounding communities (this application could also accelerate overall deployment and commercialization of these reactors). The modularity of design and the ability to construct all aspects of an SMR in the United States also means more jobs here at home. Light water SMR concepts build on existing light water reactor technology while others

(future concepts, such as gas-‐‑cooled reactors) employ very different technologies. Thus, beyond funding for R&D, we always must ensure that today's regulations evolve to meet tomorrow's technologies. As the nascent SMR industry develops, it needs to comply with safety regulations while striving to minimize plant lifecycle costs. Agencies should closely monitor how regulations affect operating costs and safety margins.

v Explore nuclear power plants that employ high temperature reactor concepts (e.g., Next Generation Nuclear Power Plants). Amend the Energy Policy Act of 2005 to remove the locational requirement for the Next Generation Nuclear Plant project and allow it to be built wherever it can be put to use.

v Preserve the Integrated University Program that trains engineers and scientists in nuclear engineering, nonproliferation, nuclear forensics, and nuclear safeguard missions.

v Revise the loan guarantee program to require the Office of Management and Budget (OMB)

to take each nuclear loan guarantee application on a case-‐‑by-‐‑case basis to determine the

credit subsidy cost. Assumed default rates, used to determine the credit subsidy cost, should be realistic and tailored to match the circumstances of each specific applicant.

v Continue supporting both domestic and international efforts to realize commercial scale power from fusion energy in a form other than the Tokomak fusion reactor in favor of other more promising fusion technologies that have a greater potential to be commercialized in the short term, like the Thorium Fusion hybrid reactor. Promote the transitioning of the domestic fusion program from its science focus (how do we achieve fusion) to a more

energy-‐‑focused program (fusion materials and technology) with a strong science component.

Support continued financial investment into fusion energy that will make fusion a viable and efficient energy source in the future.


v Support international collaborations to promote the safety of, and technological advancements in, nuclear energy and power production. These include activities at the International Atomic Energy Agency and the Nuclear Energy Agency that foster SMR design and licensing, advanced reactor technology R&D, and safe and efficient continued operation of current reactors.

v Explore the potential for U.S. participation in domestic and international nuclear energy markets. Identify and conduct government and industry dialogue regarding inherent issues of safety, security, intellectual property, treaties and economic stability and growth, in order to achieve the greatest contribution to national security through development and deployment of versatile technology.

v Support the encouragement of nuclear training for engineers, welders, operators, and other specialties required in the nuclear industry. This would include quality assurance personnel and health physics personnel.

INDIRECT JOB CREATION RESULTING FROM A RATIONAL THORIUM POLICY

Due to destructive outsourcing to foreign nations, the U.S. has lost, or is on the verge of losing, its ability to develop and manufacture a range of high-tech products. Why are we outsourcing these industries and the jobs they create? The problem originated in the early 1980’s with America’s policy and regulation of the elements Thorium and Uranium, and the cascading affect this had on REE (Rare Earth Element) mining by adding to that industry’s regulatory costs.

To address this jobs crisis, government and business must work together to rebuild the country’s industrial commons—the collective R&D, engineering, and manufacturing capabilities that sustain innovation with REEs. The public and private sectors should step up their funding of research and encourage collaborative R&D initiatives to tackle our manufacturing problems.

One of the single largest causes of massive out-sourcing of strategic industries has been America’s policy on the element Thorium.

At present, Thorium is not mined domestically for commercial purposes, but On March 16, 2009, Pennsylvania Representative and Vice Admiral Joe Sestak, USN (Ret.) introduced in the U.S. House of Representatives a bill directing the Navy to study all aspects of utilizing Thorium as reactor fuel for surface shipboard propulsion.

v Senators Orrin Hatch and Harry Reid introduced in the Senate a bipartisan bill to amend the Atomic Energy Act of 1954 to authorize the Nuclear Regulatory Commission (NRC) to study


Thorium fuel configurations, and to fund such studies. There is activity in Congress with regard to a metal, which although the U.S. has in abundance, is not mined here at all.

At the very beginning of the Nuclear age it was well known that there were two naturally occurring elements, which could be utilized to fuel nuclear (controlled fission) reactors: Uranium and Thorium.

The first use for such reactors, however, was to breed Plutonium, which had been determined to be the more practical of the two best-studied known fission weapon explosives, Uranium 235, and Plutonium-239.

The United States alone had by 1960 constructed nearly 20,000 Plutonium-based Nuclear weapons, and it wanted to conserve its supplies of Uranium, as did the Soviet Union. Both countries believed that global dependence on oil imported from politically unstable or immature states could not be relied upon as a safe source of electricity for civilian consumption. Both nations, therefore, were interested in looking at Thorium as a fuel base for civilian reactors to be used solely to produce electricity.

Between 1960 and 1980 the U.S.A. constructed or revamped several reactors to test Thorium-based fuel configurations. The Soviet Union is believed to have done the same. Both nations had the idea that Thorium reactors could be, among other things, safely given to less developed nations: those nations could not use such reactors to construct nuclear weapons, for which the Thorium-derived Uranium-233 produced in the reactor was particularly unsuited, yet could be made politically and economically dependent on their benefactors for reactor technology, maintenance, for the fuel, and for waste disposal.

However, by the mid-1970s, it was obvious that politically, the expansion of Nuclear power for civilian use was doomed due to the strong opposition of environmental groups and antinuclear activists, none of whom were interested in the facts about American vulnerability of reliance on foreign oil or the reduction of the emissions from fossil fuel plants.

By 1975, it was well known in the world nuclear industry that Thorium-based fuel could be utilized to dramatically reduce the waste volume from nuclear plants, and that such reactors could be seeded with Plutonium-239 from dismantled weapons, which in the operation of the reactor would be rendered difficult or impossible to be utilized for further weapons construction. Nonetheless, the development of such reactors under government funding and sponsorship ended in the early 1980s. In the U.S., no Nuclear reactor fuel can be used without first being certified by the NRC, and no further funding was available to do so. Thus,


commercial development of such fuels was effectively terminated. That situation continues to this day.

It is clear that now, a generation later, the world is awash in Plutonium from decommissioned weapons. There may be as much as 1,000 metric tons of bomb grade Plutonium just from decommissioned weapons. There is a growing belief that the supply of oil cannot keep up with demand, and that carbon dioxide emissions from burning fossil fuels are reaching critical levels affecting the world's climate or more realistically the quality of its air. Clearly, now is a good time to revisit Thorium as a non-proliferative, low waste production, abundant nuclear reactor fuel.

One caveat, however: there is not today, nor has there probably ever been, a primary Thorium mine. Thorium has been and is being recovered, in small amounts, as a byproduct of rare earth mining and from Uranium mining.

However, this could easily change, because Thorium is available and ubiquitous. America has a very large deposit of concentrated Thorium in the Lemhi Pass region of Idaho and Montana. If the Lemhi Pass deposits are, in fact, as large as they seem, America can develop a new industry that sells Thorium for reactor fuel to nations that have already shown an interest in such developments, including India, Norway, China, Russia, and even Canada.

Thorium cannot be used directly as a fuel. After being placed in a Molten Salt Reactor it must first be bombarded with neutrons and “bred” into Uranium-233 as the nuclear fuel using slow neutrons, thus avoiding the liquid sodium coolant of Uranium-Plutonium breeder reactors. This has additional advantages:

v Plutonium and Uranium could still be consumed in a Thorium reactor, but without the need to manufacture more plutonium.

v While Uranium-235 and Plutonium-239 can be shielded to avoid detection in a suitcase, Uranium-233 could not, because it is always contaminated with Uranium-232, which has a strong gamma-ray emitter in its decay chain. The resulting fuel is far less easily concealed and difficult to use in the making of a bomb. This is a strong disincentive to proliferation.

v There is the final matter of the exact means for obtaining energy from Thorium. One way is to use a very large accelerator driven systems (ADS). A more modest alternative is the “Liquid Fluoride Thorium Reactor” (LFTR), which is described and discussed in considerable detail here, and it appears most likely that the LFTR will provide the best means to achieve our future Nuclear energy program.


Affordable, abundant energy from coal, oil, gas, wind, solar, and nuclear sources has improved the quality and length of life of life for billions of people. Even modern wind turbines depend on rare earth minerals mined primarily in, and imported from, China. Unfortunately, given federal regulations in the U.S. that restrict rare earth mineral development, and China’s poor record of environmental stewardship, the process of extracting these minerals imposes significant environmental and public health impacts on Chinese communities adjacent to mining activities.

The United States has its own Rare Earth reserves, but most of our Rare Earth mines have closed due to the presence of Thorium that is almost always found with Rare Earth Elements, and is very costly to dispose of because of federal regulation.

Thorium is a rather benign radioactive material and is only harmful to humans in its natural state if it is ingested in powder form so the body can readily absorb it. It emits very little radiation because its half-life is so long, 14.05 billion years. It is however, an alpha emitter, which is the most damaging type of radiation when in the body.

With proper safety regulation with respect to Thorium, rare earth elements can be safely mined in the United States and could be competitive if the regulatory overreach can be resolved.

REEs are essential raw materials for computers, cell phones, GPS devices, and are used in the fabrication of high-performance permanent magnets used in hybrid cars and wind-turbines, among other devices. Rare Earth Elements are the building blocks of the green energy economy and the high tech electronics industry worldwide. We would be much better off mining, refining, and exporting them, than by continuing to import them. The reason why so many electronics and wind turbine components are made in China is because of that country’s monopoly on Rare Earth Element. If the REE industry were here, the electronics and wind turbine component industries would also likely be here in the United States.

A controversial REE processing plant is to be built by the Australian mining company Lynas in Malaysia, where it is argued that environmental protection laws are less rigorous than in the United States. The plant is predicted to produce one third of global demand for REEs in two years, thus breaking the Chinese monopoly. It is intended to bury the Thorium in concrete, but a better option would be to use the material as a nuclear fuel in place of Uranium, the price of which has recently risen above $100/pound.


Only by rejuvenating our manufacturing and high-tech sector can the U.S. hope to return to the path of sustained growth needed to pay down our huge deficits and raise our citizens’ standard of living.

As the United States strives for economic recovery, it is going to discover an unpleasant reality: The competitiveness problem of the 1990s did not really go away. It was just hidden during the bubble years behind a mirage of prosperity, and all the while the country’s industrial base has continued to erode.

Rebuilding America’s wealth generating machine—that is, restoring the ability of enterprises to develop and manufacture high-technology and low technology products in America— is the best way to revive the nation’s economy.

Beginning in 2000, the country’s trade balance in high-technology products— historically a bastion of U.S. strength—began to decrease. By 2002, it turned negative for the first time, and it has continued to decline through 2012.

Even more worrisome, average real weekly wages have essentially remained flat since 1980, meaning that the U.S. economy has been unable to provide a rising standard of living for the majority of our people.

What was actually happening when it seemed things were going so well?

Companies operating in the U.S. were steadily outsourcing development and manufacturing work to specialists abroad that had access to a steady supply of REEs and were cutting their own spending on basic research and development.

Sophisticated engineering and manufacturing capabilities that underpin innovation in a wide range of products have been rapidly leaving the United States as China and other countries have become more adept in the research and development of REEs. As a result, the U.S. has lost a mammoth amount of knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it originally invented.

A similar trend is now undermining adjacent industries such as the U.S. software industry. Initially, companies outsourced only relatively mundane code-writing projects to Indian and Chinese firms to lower software-development costs. Over time, as Indian and Chinese companies have developed their own software-engineering capabilities, they have been able to win more complex work, like developing architectural specifications and writing sophisticated firmware and device drivers.


Equally alarming is the U.S.’s diminished capacity to create new high-tech products.

Changing America’s regulatory environment to allow the development of Molten Salt Reactors that would utilize the element Thorium or regular nuclear waste as fuel would create a plethora of jobs in many other industrial and high tech sectors.

STRATEGIC PETROLEUM RESERVE The Energy Policy and Conservation Act established the Strategic Petroleum Reserve

(SPR) in 1975. Its purpose is to provide the nation with an emergency stockpile of crude oil in

case of serious supply disruptions and emergencies. Housed in enormous caverns along the Gulf

Coast, the SPR’s 700 million barrels constitute enough oil for approximately 80 days of “import protection” or 35 days of total consumption.

The SPR’s comparatively short intervals of supply highlight why it can and should be tapped only rarely. In fact, coordinated releases with the International Energy Agency (IEA) have been ordered by the president on only three occasions: during the Operation Desert Storm (1991), after Hurricane Katrina (2005), and during the Libyan civil war (2011). This later release was particularly controversial.

The SPR is the largest emergency stockpile of oil around the globe. The SPR is not an ATM. It is therefore imperative that the federal government reviews SPR release criteria and clarify that the release of SPR oil shall occur only when there is a significant supply disruption, and not simply an increase in energy prices.

For example, after Hurricane Sandy, DOE released a small portion of the Northeast Home Heating Oil Reserve, a specialized supply of distillate heating oil stocks also managed by

DOE, to offset genuine fuel supply disruptions in hard-‐‑hit areas.

Even as domestic oil production rises, the SPR’s strategic importance for mitigating risk is just as relevant. Geopolitical instability, particularly in the Middle East and Africa, present the risk of a severe and prolonged oil supply disruption. The far higher oil prices that are likely to result from such a disruption argue for the preservation of the SPR at its current level, at least in the near future. While price spikes to $100 a barrel were once unheard of, today a severe disruption could yield prices far above that level. Should that ever come to pass, the SPR will be

one of the few options available to help mitigate short-‐‑term economic damage.


In the absence of a supply disruption, it is short sighted to treat the SPR as a mechanism for lowering gas prices, especially given the size and complexity of global oil markets. If we become accustomed to releasing oil for temporary potential price relief at the pump, we may be caught unprepared when the SPR is truly necessary.

COAL Coal is an abundant, secure, and affordable energy resource. For more than a century,

coal has allowed our families and businesses access to energy and – at current levels of consumption - domestic coal reserves promise a stable supply of energy for 200 or more additional years. As a direct result of this abundance, coal has remained one of the most affordable fossil fuels on the market and avoided the price volatility associated with so many other commodities.

Over time, coal has also become a cleaner energy resource as its environmental performance has demonstrated substantial improvement. The rate of emissions per unit of

output for nitrogen oxide and sulfur dioxide from coal-‐‑fired electric generation have dropped

approximately 78 percent each since 1990, and further reductions are possible.

Because of coal’s domestic abundance, relative affordability, and increasing cleanliness, it will remain a cornerstone of energy supply in the U.S. In the years ahead, the opportunities for coal are significant. The diversification of its use includes electric power generation but also synthetic gas, synthetic gasoline and diesel fuel, chemical, fertilizer and liquid fuel production.

The United States needs to establish long-‐‑term policies to promote the continued, responsible production of coal, improve its environmental impact, diversify its use, and ensure robust access to export markets.

By 2020, we must diversify coal utilization while continuing to improve its environmental performance. To reach this goal, balance must be restored between coal’s role in providing affordable energy for robust economic growth and the environmental standards expected from the producers and users of this resource. These efforts will help to ensure that coal remains a contributor to the reliability of our nation’s electric grids, an improvement to our balance of trade, and a creator of jobs in the mining sector and elsewhere. In order to accomplish this goal, policies must be put into place to:

v Repeal prohibitions on the federal government, and the DOD in particular,

procuring certain coal-‐‑derived fuels.


v Establish long-‐‑term procurement contracting authority for the federal

government, which will facilitate private-‐‑sector confidence in the existence of

markets for alternative, coal-‐‑derived fuels.

v Support utilization of captured carbon dioxide as a commodity for enhanced oil recovery.

v Prohibit preemptive and retroactive vetoes of mining project permits.

v Reform DOE’s coal-‐‑related R&D programs, which have narrowly focused on

carbon dioxide emission reductions to the exclusion of other opportunities. These programs would benefit from renewed emphasis on broader environmental, gasification, and liquefaction technology development opportunities, in addition to carbon capture, utilization, and sequestration.

v Enable efficiency improvements at coal-‐‑fired power plants by reforming regulations that discourage investments in such upgrades. Specifically, this should include reforms to the New Source Review (NSR) Program that might narrowly exempt efficiency improvements from triggering NSR.

v Ensure that new regulations do not jeopardize the reliability or affordability of electricity, both of which rely heavily upon coal for base load power generation.

v Provide regulatory certainty regarding the definition of streams and the circumstances under which coal production can and should take place near them.

v Pursue permitting reform across the board, but for coal in particular, focus on eliminating duplicative requirements under the Surface Mining Control and Reclamation Act and the National Environmental Policy Act (NEPA) in a way that consolidates, but does not deteriorate, the input of the various federal agencies.

v Encourage coal exports, which will benefit the U.S. balance of trade, create jobs in the sector, and ensure that global supplies of this valuable energy resource are responsibly mined here at home.

UNCONVENTIONAL FOSSIL FUELS

The United States will never run out of energy.

The best evidence of this is our unconventional energy base. Oil scarcity is a myth.

Inaccessible and sub-‐‑economic resources continually become accessible and economic over

time. We have always found more energy, as we need it because rising global demand and improving technology enable explorers and producers to unlock access to new resources.


Practical oil scarcities do occur, are created, and can happen again as a result of government policies – especially those that impede development – as well as geopolitical events

and natural disasters that remove supply from the market. Not-‐‑withstanding market disruptions, the oil resource base is in no danger of depletion.

The history of the Bakken Shale oil resource demonstrates this phenomenon. From the 1980s through the early 2000s, the presence of this huge unconventional oil resource was known but largely ignored in energy policy discussions. Neither the price of oil nor the most advanced technologies were sufficient to develop the resource economically – and the Bakken

was therefore classified as “sub-‐‑economic” under these conditions. Since then, prices have risen and technology has advanced, making the Bakken economic and recoverable. As a direct result of this formation, North Dakota’s oil production has grown dramatically in recent years, and it

recently surpassed Alaska as the second largest oil-‐‑producing state.

With virtually every serious energy forecast projecting that oil will be used long into the future, it is critical that our unconventional resources be assessed and taken seriously, not just as potential solutions but as likely solutions to our future energy needs. A recent report found that unconventional oil and gas development will contribute mightily to our economy in the years ahead. By 2020, the firm forecasts that their production will generate three million jobs throughout our economy; $111 billion in yearly revenues for federal, state, and local governments; and $172 billion in yearly capital expenditures. These benefits continue to expand through 2035.

It is time to reconcile the reality of our resource base with misleading political statements of energy scarcity, the most egregious of which is the often repeated line: “America uses 20 percent of the world’s oil, but has only two percent of the world’s reserves.” This assessment does not account for energy resources that have not been drilled; such statements distract from a meaningful energy policy discussion.

OIL SHALE

Our nation contains the largest deposits of oil shale in the world. The Green River Formation's 11 million acres in Colorado, Utah, and Wyoming contain the equivalent of more than one trillion barrels in oil. Assessments fluctuate, but DOE estimates that combined U.S. oil shale deposits may hold as much as six trillion barrels of oil equivalent. While most of these are

non-‐‑recoverable, the fact that global proven crude reserves amount to a mere 1.5 trillion barrels should give us pause. Whether recoverable barrels from these deposits stand at 800 billion or


1.8 trillion, America truly is the Saudi Arabia of oil shale. For our country to take advantage of these resources we need to:

v Codify the oil shale lease program and restore leasing activities that were underway prior to being halted in February 2009.

v Accelerate oil shale permitting/leasing in the west – Utah, Colorado and Wyoming – with a comprehensive plan for addressing water scarcity risks and impacts.

v Renew R&D funding for viscous (heavy) oil technology/production research at the Department of Energy.

METHANE HYDRATES AND OTHER UNCONVENTIONAL GAS RESOURCES The U.S. contains an estimated 200,000 trillion cubic feet (TCF) of methane hydrates –

methane natural gas locked in solid, ice-‐‑like structures, underground or under the sea floor. According to the USGS, Alaska alone contains between 560 and 600 trillion cubic feet of methane hydrate onshore and approximately 160,000 TCF offshore. Once safely unlocked, Alaska’s methane hydrate resources could power America for nearly 1,000 years at current rates of gas consumption, according to the Alaska Division of Geological and Geophysical Surveys (ADGGS). Important steps we need to take to access these resources include:

v Expedite research on methane hydrate well flows to prove that methane will continue to “flow” to the surface after drilling efforts. Increase funding for environmental reviews of the effects of liberating methane hydrates, the resulting land impacts, and for research already underway by the DOE National Energy Technology Laboratory (NETL).

v Renew the hydrogen fuels research program to gauge the economic feasibility of powering America by hydrogen fuels.

v Fund greater research into the use of ammonia as a power-‐‑fuel source of the future. v Provide royalty relief from drilling on federal lands for the first five projects until a total of

25 TCF of gas is produced from federal resources.

RENEWABLE ENERGY RESOURCES “Clean energy” is a term that is widely used, but not well-‐‑defined. Too often, “clean” is applied to whatever resource or technology is politically favored, or is treated as an absolute when it should be a comparative term.


“Clean energy” should have a specific, verifiable definition based on actual impacts. “Clean” should be defined as “less intensive in global lifecycle impacts on human health and the environment than its likeliest alternative per unit of energy.” By 2020, the federal government should implement this definition of clean energy across all its programs and policies. After establishing a more appropriate definition for “clean energy,” we should develop more efficient and less invasive ways to promote it – specifically, by avoiding federal mandates. In order for new clean technologies to succeed, their costs must fall and they must be allowed to

mature in a way that enables sustained private investment. They must be freed from “boom-‐‑

and-‐‑bust” cycles caused by changes in government policy or the unintended consequences of

government spending.

Perpetual reliance on production and deployment subsidies can actually inhibit the long-‐‑term growth and development of new energy modes. Instead, the federal government should focus its attention and limited resources on R&D for clean energy. Deployment assistance should be primarily technical in nature. Financial assistance should be allowed only for compelling applications that make the most commercial sense, such as when the cost of competing energy is higher than the new technology, yet some other barrier still inhibits its adoption. Finally, we must leave room for new and big ideas, products, and services to come forward and take hold so that the cost of new energy technology can naturally decline. By 2020, the federal government needs to supplant its renewable resources programs and policies with a new system that is more cost effective and technology neutral. Getting the definitions right and reforming the federal government’s role in supporting clean energy technologies is critical to a national energy policy. Recommendations for reform are discussed at length below and under Clean Energy Technology.

To accomplish these goals by 2020, we believe the government should:

v Identify and remove barriers in federal law and policy that are hindering rapid and competitive deployment of clean energy. For example, provide for swift and certain leasing and permitting structures for wind, solar, and geothermal leases. Create fair and competitive royalty systems for these energy sources on public lands.


v Establish a program of highly-‐‑expedited permitting of renewable energy projects on reclaimed mine lands (abandoned and otherwise).

v Establish – through legislation, as necessary – an accelerated permitting process for offshore wind and marine hydrokinetics, including an Environmental Impact Statement (EIS) for such projects.

v Identify financing challenges for renewable energy and efficiency initiatives and subsequently develop institutions and means to lower their financing costs.

HYDROPOWER Hydropower is often excluded from consideration as a renewable resource because it has

been politically controversial. Political considerations should not be used to exclude a particular resource from the definition of “clean” or “renewable.” Hydropower is the largest source of clean, renewable electricity in the United States. Today, we have over 41 gigawatts of hydroelectric capacity, providing about eight percent of the nation’s electricity needs and

generating electricity without any emissions into the air. Further development of this cost-‐‑effective, clean energy option will support economic development and local job creation.

Some overlook the tremendous potential of hydropower under the mistaken assumption

that the resource is maximized. . To the contrary, hydropower is an under-‐‑developed resource. DOE’s estimates indicate that there could be an additional 300 gigawatts of hydropower

through efficiency and capacity upgrades at existing facilities, powering non-‐‑powered dams,

new small hydro development and pumped storage hydropower. This estimate is equal to almost 30 percent of total U.S. capacity – from every resource, not just hydropower.

Only three percent of the existing dams in the country are electrified, and between 20,000 and 60,000 megawatts of new capacity can be derived from efficiency improvements or capacity additions. Additional hydropower can be captured through existing conduits and new

small hydro development, and hydroelectric -‐‑pumped storage projects can help integrate intermittent renewable resources, such as wind. To advance and capitalize on hydropower’s potential, we need to:

v Recognize hydropower as a renewable resource for purposes of any federal program or standard.


v Federal Energy Regulatory Commission (FERC): Explore a potential two-‐‑year licensing

process for hydropower development at existing non-‐‑powered dams and closed-‐‑loop pumped storage projects.

v Allow the consideration of conduit hydropower projects (man-‐‑made water conveyances such as tunnels, canals, or pipelines that are operated for water distribution and not electricity generation) on federal lands. Direct FERC and the relevant federal agencies to develop a coordinated and more efficient approach to environmental review of these types of projects.

v Increase FERC’s rated capacity for small projects from 5 to 10 megawatts.

v Provide FERC with the authority to extend its three-‐‑year preliminary permit terms for up to

two additional years in order to allow a permittee sufficient time to develop and file a license application.

v FERC and the Bureau of Reclamation: Complete a new interagency Memorandum of

Understanding to improve the coordination and �timeliness of non-‐‑federal hydropower

development at Reclamation projects.

v Prohibit FERC from assessing federal land-‐‑use fees on hydropower projects when the federal government no longer owns the land at issue.

v Producing More Renewable Resources v Authorize FERC to set timelines for agency submissions in the hydropower licensing

process. v DOE: Develop and implement a plan to increase the nation’s use of renewable hydropower

through R&D, and provide technical assistance on applicable environmental analyses. v DOE: Study the potential quantity of hydropower that may be derived from existing

conduits.

v DOE: Study and identify federal and non-‐‑federal lands, in consultation with USGS that are located near existing or potential sites of intermittent renewable resource development and

are well-‐‑suited for pumped storage sites.

MARINE HYDROKINETIC POWER

The Electric Power Research Institute has estimated that our nation’s ocean resources contain enough energy to produce 2,640 million megawatt hours of electricity per year (TWh/yr). Of this available energy, 1,170 million megawatt hours per year are recoverable, equivalent to 30 percent of our annual electricity generation. To reach this potential we must


accelerate the development of renewable wave, current, and tidal energy across the nation. To move toward that goal, we should:

v Promote increased research into marine hydrokinetic devices and grid integration. Authorize the transfer of environmental data developed during research to other interested entities, and assist industry with environmental standard compliance.

v Develop or support up to four testing facilities for marine hydrokinetic technologies.

v Establish a marine-‐‑based energy device verification program. v Develop thematic environmental impact statements to cover marine hydrokinetic projects

to expedite permitting and reduce the cost of NEPA review.

SOLAR POWER Solar power has many advantages. Solar energy production meets the highest

environmental standards while producing negligible emissions. Solar energy is among the most abundant of renewable energy sources. Solar energy can be used for electricity, light, or heat; providing a wide range of options for residential, commercial, and industrial sectors. Its challenges have been related to costs and intermittency, and, to an extent in some applications, water use.

Different technologies are used to convert solar energy into other usable forms of energy: photovoltaic (i.e. solar electric), solar heating and cooling, and concentrated solar power. These technologies can be used in myriad ways. Photovoltaics can be deployed locally (e.g. on a rooftop), or even directly connected to a device or appliance. Concentrated solar power can be

built as a central utility station, in the manner of a traditional power plant. Utility-‐‑scale solar plants in the future may employ energy storage devices to supply energy even after the sunsets. The flexibility, abundance, and low environmental impact of solar energy production make it an attractive power supply. Moreover, diversifying our energy supply through solar power is an important goal for our nation.

When solar power is a source for generation of electricity, the challenge of its intermittent nature is manifest. As a practical matter, electricity cannot be stored the same way as other commodities. Electric supply and demand must be matched instantaneously. Electrons travel at the speed of light across networks of wires to power our homes, buildings, stores, and

factories. We value the on-‐‑demand nature of electricity; we need our electronics and appliances

to be highly reliable, and operable ‘at the flick of a switch.’ Likewise, the failure of electricity to


operate consistently and on demand – such as during a blackout or brownout – is simply unacceptable in modern life.

The electric grids operate by the same laws. Elaborate networks of electricity grids work

to meet constantly fluctuating real-‐‑time demand for electricity. In order to meet demand, this system needs to be able to count on electricity supply being ready instantaneously. As aggregate demand – or electricity “load” – fluctuates, the systems adjust to meet that demand.

Unfortunately, today electricity grids cannot readily integrate solar power to support the instantaneous demand for power. If there were more effective and economic ways to store electricity, solar power could better overcome its intermittency and would be more competitive. However, electricity storage or backup power-supply comes at a significant cost. Due to this cost, solar power (and other intermittent sources such as wind) are better utilized as a compliment to other, more consistent power sources.

Technologies that bring down the cost of storing solar energy are needed. Cost-‐‑effective energy storage will likely unlock the full potential of solar power. Rather than force solar power into the electricity supply through mandates or quotas, we should endeavor to use solar power where it naturally fits: in remote applications, to complement base load and intermediate supply, and to diversify our energy portfolio. Meanwhile, we should continue to fund R&D to discover and develop tomorrow’s solar technologies.

WIND POWER Wind power is abundant and renewable. Further, wind turbines do not produce air

pollution when they generate electricity. On land, turbines grouped in “wind farms” turn wind energy into electricity. Wind farms present unique environmental footprint challenges due to the height and placement of turbines.

Offshore wind farms can harness even stronger winds while presenting different

environmental challenges, and higher fixed costs. Wind power is usually less cost-‐‑competitive than traditional generation, but all forms of wind power are useful tools for meeting

environmental standards. Developing technology to make wind power more cost-‐‑competitive

has been a national goal for decades.

Wind power is intermittent. The winds are unpredictable. Moreover, wind speed

fluctuates on multiple time-‐‑scales: hourly, daily, and seasonally. Due to this unpredictability, wind power must be stored in order to meet electricity demand. As previously noted, storing


electricity is very challenging. To make wind power cost-‐‑competitive we should focus on R&D for energy storage technologies.

ELECTRIC STORAGE Broadly considered, batteries store energy in one form – chemical, mechanical,

electrostatic, or thermal – then convert that energy into electricity. A typical lead-‐‑acid battery

stores energy in chemical form, then transforms it into electrical energy through electrochemical processes. Capacitors and flywheels can also store energy. Capacitors store energy in electrostatic form and release the energy as electrical power. Flywheels store energy in mechanical form using a spinning wheel or tube, and then convert the energy to electrical power via a generator. Batteries and other energy storage technologies have myriad uses,

including the possibility of large-‐‑scale power storage technology that would help to lower the

cost – and overcome the intermittency – of wind and solar power.

Many federal programs supporting battery technology and research already exist. Currently, six agencies support 39 programs that the Government Accountability Office (GAO) categorized as follows:

v Basic research to explore and define scientific or engineering concepts, or investigate the nature of a subject without targeting any specific technology.

v Applied research to develop new knowledge to create new and improved technologies. v Demonstrations to operate new or improved technologies to collect information on their

performance and assess readiness for widespread use.

These programs should be consolidated and our government’s support should be

concentrated behind basic research. Basic research ensures a technology-‐‑neutral approach to federal programs, and shifts the burden of commercialization to the private sector. By 2020, we should direct federal funding of energy storage projects toward basic research. Prioritizing

basic research provides the best opportunity to develop the long-‐‑-awaited breakthroughs

desired to make wind and solar power cost-‐‑competitive. The basic research need not be directly tied to energy storage; physical chemistry, polymer chemistry, nanotechnology research, and related fields also have the potential to transform energy storage technology.

Better energy storage technologies are key to the future of solar and wind energy. But there is a solution at present for the variability and intermittency of these sources. Intermittent resources can be mixed with controllable, reliable resources to form a diverse energy portfolio.


Some technologies are better suited to supply base load electricity, while others are better used to complement base load supply. Indeed, solar and wind can complement hydropower well – a reliable, affordable, controllable, and renewable resource.

GEOTHERMAL POWER Geothermal power is an emerging factor in the diversification of U.S. energy supply.

Geothermal provides electricity, heating, and cooling for millions of Americans – and its use is expanding. U.S. geothermal net electricity generation totaled 10.9 Gigawatt hours (GWh) during the first eight months of 2011, up 10 percent from the same period in 2008. Although it may not

be as well-‐‑known as other resources, geothermal power is indeed one of the main renewable energy sources to generate electricity.

Current geothermal technology limits commercial power plants to areas with accessible deposits of high temperature and relatively shallow ground water. However, new enhanced geothermal systems (EGS) technology promises to expand power generation beyond natural geothermal locations. Now in early development, EGS allows water to be pumped underground

to be heated by the earth and then used to generate steam-‐‑generated turbine electricity upon recovery. Current cost estimates for EGS are higher than for conventional geothermal plants and other more mature renewable technologies like hydropower and wind power. To potentially bring geothermal in line with the costs of fossil fuels in the future, the federal government can fund more research to pursue these supporting objectives:

v Map subsurface heat zones and locating the resourceful “hot rocks.” v Understand the seismic impacts of geothermal projects to promote environmental

stewardship.

v Reduce the risk of drilling non-‐‑performing wells. v Reduce drilling, fracturing, and water retrieval costs with technology. v Expand the use of geothermal heat “pumps” for heating and cooling in both commercial

buildings and homes.

v Streamline land-‐‑leasing and permitting via statutory changes.

THE IMPLICATIONS OF ENERGY INDEPENDENCE

Ever since our brief experience with gas rationing in 1973, “energy independence” has been one of the long-range goals of U.S. policy. Presidents since Richard Nixon have promised that America would someday wean itself of its reliance on foreign oil and gas, which leaves us


vulnerable to the outside world in a way that was seen as a gaping hole in America’s national security. It also handcuffs our foreign policy, entangling America in unstable petroleum producing regions like the Middle East and West Africa that have many countries that support Jihad and terrorism against the Western World.

Given the United States’ huge appetite for fuel, energy independence has always seemed more of a dream than a realistic prospect. But today, nearly four decades later, energy independence is starting to loom in sight. Sustained high oil prices have made it economically viable to exploit harder-to-reach deposits. Techniques pioneered over the last decade, with U.S. government support, have made it possible to extract shale oil more efficiently. New Nuclear Technology stands poised and ready to eliminate any energy deficit of any kind if we just remove the economic hurdles that prevent the commercialization of a whole host of game-changing technologies in the nuclear sector.

When Richard Nixon was president, America consumed about one-third of the world’s oil, importing about 8.4 million barrels per day chiefly, from the Middle East. The status quo hummed along until the Arab-Israeli war of 1973. The United States sent weapons to Israel, and the Arab states retaliated with a six-month oil embargo, refusing to sell oil to America. It was the only time in history that the “oil weapon” was effectively used, and it made a permanent impression on the psyche of the United States.

Over time, the American response to the embargo came to include three major initiatives that still shape energy policy today. First, the government promoted lower oil consumption by pushing coal and natural gas power plants, home insulation, and mileage standards for cars. Second, the country drilled for more of its own oil. Third, and perhaps most important from a foreign-policy standpoint, the United States promoted a unified global oil market in which any country had the practical means to buy oil from any other. That meant that even if some countries couldn’t do business with each other—say, Iran and the United States—it wouldn’t affect the overall price and availability of oil. Other countries could fill in the gap.

The dreams of energy independence crossed party lines. Though liberals and conservatives differ on the means—how much we should rely on new drilling versus energy conservation, whether we should expand nuclear power or renewables, or should we supplant coal fired power plants with natural gas power plants—both parties have endorsed the quest. It was one of the few issues on which Presidents Carter and Reagan agreed.

America has made steady progress over the years, to the point where the nation’s total oil consumption has actually begun to drop. As this has happened, the high cost of global energy


has also made it profitable to increase domestic production of natural gas and oil. A few months ago, both the U.S. Energy Information Administration and the International Energy Agency predicted that if current production trends continue, the United States will overtake Saudi Arabia and Russia as the world’s largest oil producer in 2017.

Taken together, our slowing appetite and booming production mean that with a suddenness that has surprised many observers, the prospect of energy independence—technically speaking, at least—looms in the horizon.

Energy independence looks different today, however, than it did in the oil-shocked 1970s. For one thing, the energy market is a linchpin of the world order, and any big shift is likely to have costs to stability. Some analysts have warned that America’s growing oil production will create a glut that lowers prices, eating up the profits of oil countries and destabilizing their regimes. (That’s in the short term, anyway; worldwide, oil demand is still rising fast.) Falling prices mean that countries that depend on oil will face sudden cash shortages. It’s easy to imagine how destabilizing that could be for a natural-resource power like Russia, for the monarchs of the Persian Gulf, or for the dictators in Central Asia. No matter how distasteful their rule, the prospect of an unruly transition, or worse still, a protracted conflict, in any of those countries could cause temporary havoc in our quest for energy independence.

In the long term, this is not necessarily a bad thing: Weakening oppressive or corrupt governments could ultimately be beneficial for the people of those countries. And a shift in the balance of power away from the Gulf monarchies of OPEC and toward the United States could have a democratizing effect. In any event, lower oil prices and a dynamic energy market make the current stable order less predictable.

China’s economic rise has also changed the global energy equation. For now, China is largely without its own petroleum supplies and is replacing the United States as the largest importer. As China steps into the United States’ shoes as the world’s largest oil customer, it will gain influence in oil-producing regions as American influence wanes. It might also feel compelled to invest more heavily in an aggressive navy, fearing that the United States will no longer shoulder the responsibility of policing shipping lanes in the Persian Gulf and elsewhere—a costly security service that America pays for, but which benefits the entire network of global trade.

Domestically, there’s also the “resource curse,” which afflicts countries that depend too heavily on extracted commodities like minerals or petroleum. Such industries don’t add much value to a society beyond the price the commodity fetches at market, and that price is


notoriously fickle, meaning fortunes and jobs rise and fall with swings in global prices. The resource curse often implies corruption and autocracy as well. But economists are less concerned about that, since the United States already has an effective government and laws to thwart corruption, and because oil will still make up a minuscule overall share of the economy. Last year, oil and gas extraction amounted to just 1.2 percent of the American gross domestic product.

There are still plenty of people who think that America will reap countless political and economic dividends. It will help the trade deficit, give American companies and workers benefits when oil prices are high, and insulate the country from supply shocks. It will also give Washington wider latitude when dealing with oil-producing countries, on which it will depend less. There will be some downsides, but they’re outweighed by the positives.

One benefit that self-sufficiency won’t bring, it seems clear, is a sudden independence from the politics of the Middle East (long-term, yes, short-term, no). The region produces about half the world’s oil, and it is thought that Saudi Arabia alone has so much oil that it can raise its capacity at a moment’s notice to make up for a shortfall anywhere else in the world.

Already, America is largely independent of Middle Eastern oil as a consumer. Only about 15 percent of our supply comes from the region. But we do depend on a stable world market—even more so if we become a net exporter ourselves. So, even if we don’t buy Saudi oil, we’ll still need a stable Saudi regime that can add a few million barrels a day to world flows, at a moment’s notice, to offset a disruption somewhere else unless America alone can satiate demand by producing tremendous amounts of oil from many diverse sources (as is the case with LCMSRs, Liquid Core Molten Salt Reactors). The LCMSRs can increase the economic viability of many mature technologies that convert various carbon sources.

If there’s one part of the world with which America would wish to be less encumbered, it’s the volatile and oil-rich Middle East. Energy independence will not spell the end of American engagement in that region. On the contrary, lower energy prices will undermine the stability of the Persian Gulf monarchies, whose hefty oil revenues have allowed them to win their populations’ loyalties through patronage and a lack of taxation. These countries do not always share American values or help advance American interests, but anything that destabilizes them would create problems Washington could not afford to ignore.

Consider Bahrain, which earns 70 percent of its revenues through petroleum production and refining. The small island monarchy has undergone deeply destabilizing protests since the start of the Arab Spring. A drop in global energy prices would hurt the already weak


government, breathing new life into opposition forces. A populist revolution in Bahrain could empower the country’s long-repressed Shiite majority, who already resent Washington’s support for the ruling Sunni al-Khalifa family. A new regime in Bahrain might even seek to expel the Navy’s Fifth Fleet, complicating America’s efforts to protect international shipping lanes, fight piracy and check Iran’s regional ambitions.

Even more alarming is the prospect of instability in Saudi Arabia. In 2011, the Saudi royal family was able to head off an Arab Spring-style revolution because of its enormous oil revenues, doling out $130 billion in benefits to pacify the country’s younger and poorer inhabitants. Should lower oil prices make such patronage impossible in the future, the kingdom could face domestic unrest — making the country a far less reliable partner for America in fighting terrorism and countering Iran. Moreover, if Saudi Arabia has less of its own money to spend on regional security, Washington will have to make up for the shortfall.

Outside the Middle East, declining global energy prices could have equally destabilizing effects. Russia rode its way out of the post-Soviet doldrums on a wave of rising revenues from oil and natural gas sales. Today, roughly half the country’s 83 regions could not stay afloat without federal aid, which President Vladimir V. Putin has been able to supply generously, thanks to huge oil profits.

As in the gulf monarchies, such transfers have allowed the government to neutralize political opposition. But discontent is still on the rise, as evidenced by the occasional protests that have shaken Moscow since 2011. Even a temporary drop in oil prices would constrain Mr. Putin’s ability to pay off his enemies: experts at the Russian School of Economics predict that the country’s oil wealth fund, a stash of petrodollars reserved for times of need, would be depleted if prices fell to $60 a barrel for just one year.

If he’s unable to buy loyalty through patronage, Mr. Putin could turn to more pernicious methods like bullying neighbors and fanning the flames of nationalism. With outstanding border disputes and age-old rivals circling Russian territory, another conflict along the lines of the 2008 war against Georgia is not out of the question.

In the long run, of course, America would welcome a Russia that is more beholden to its people’s wishes than to fluctuations in energy markets. Washington should be under no illusions, however, that the transition to that point will be either smooth or linear, and it should prepare for turbulence along the way.


Many will argue that an energy-independent America could simply retreat into isolationism during such a period of turbulence. But American engagement abroad has never been purely about securing access to energy. The United States has benefited as much as any other country from the free exchange of goods, the safety of global sea lanes, the spread of democracy and the great-power stability that have characterized the entire post-World War II era. None of this could exist without the steadying hand of American power.

Americans should cheer the energy revolution. It will do wonders for the American economy, and the democracy promoting policies it could encourage in the Middle East and Russia may ultimately serve American interests. But in the meantime, Washington should expect a world far less stable than the one it is used to — and, in turn, prepare to adopt an even more outward-looking foreign policy.


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Documents

Pathway to Prosperity National Energy Plan: Draft