Stop Them, If You've Heard This One Before

By Bob Dinneen | February 14, 2013

Call it a blessing or a curse. But one of the realities of having worked for the Renewable Fuels Association for 26 years is that I’ve heard every argument against ethanol there is in Big Oil's bag of malarkey. Whether it's ethanol’s supposed impact on Mexican tamales or energy balance, I’ve heard it all before. One that I believed had been left to the scrapheap of history, however, is the incomprehensible notion that we don’t need biofuels because the U.S. will be energy independent. That idea should have been buried in 1971, when M. King Hubbert’s 1956 prediction of America’s peak oil production proved true, and the U.S. reliance on imported oil began a climb that went unabated until the renewable fuel standard (RFS) was passed. U.S. ethanol production proved to be the remedy to our imported oil addiction, driving America’s dependence down from 60 percent in 2005 to 41 percent last year. Incredibly, even that tired canard has been revived in Big Oil's desperate effort to repeal the RFS.

That’s right. The record oil prices we have seen over the past several years have encouraged new investment in nonconventional oil from shale and tar sands. As a result, domestic oil production has seen an uptick. Never missing an opportunity, oil stakeholders are now predicting North American energy independence and have insisted that the RFS is now an anachronism, passed at a time when Congress thought we were never going to be able to produce enough oil domestically to meet our transportation needs. We don’t need the RFS anymore, the misplaced narrative goes. “New day, new circumstances,” the American Petroleum Institute’s Jack Gerard has said. 

Big Oil’s narrative follows a time-honored tradition, one that an old codger like me remembers. In 1980, we were told there is “as much oil under the north slope of Alaska as there is in all of Saudi Arabia.” Well, maybe not. Alaska field production peaked in 1988 and today is less than a quarter of its peak production. Indeed, Alaskan production is falling so fast some wonder if there will be enough to keep the pipeline flowing economically. 

In 1999, BP trumpeted the Thunder Horse discovery in the Gulf of Mexico. It was supposed to be the biggest discovery ever in the Gulf with an estimated billion barrels of recoverable oil. Well, no. Thunder Horse never even saddled up. It never came close to the 250,000 barrels per day it was designed to produce, losing 63 percent of its production in a single year.

In 2007, oil analysts trumpeted the Elm Coulee field in the Bakken formation of Montana as the largest onshore discovery in the Lower 48 in half a century. Missed it by that much! After about five years of drilling, it was pretty much tapped out and the rigs dismantled and moved to new more promising sites.

This is the fact. Domestic production from conventional sources continues to fall. Increased production from nonconventional resources will make up some of the shortfall in the near term, but there will be no reduction in price. (Indeed if there were, investments in nonconventional oil recovery technologies would be uneconomic.) And there will be no long-term benefit. As the Elm Coulee experience demonstrated, these resources are fickle and finite. These are not long-term solutions to this country’s energy or economic issues. Consider this, technically recoverable tight oil from Bakken shale is 3-4 billion barrels according to the U.S DOE or 20 billion barrels if you believe the oil companies. Annual U.S. refiner input of crude oil is about 5.5 billion barrels. Thus, whoever you believe, the Bakken only promises six months to three and a half years’ worth of U.S. crude oil consumption. That doesn’t sound like energy independence to me.

Unfortunately, the media and the Congress don’t always remember their history. They seem to have forgotten the lessons of the past. Those of us who do remember must remind them—constantly. We cannot frack our way to energy independence. The need for domestic renewable fuels remains as important as ever. Don’t mess with the RFS!

Author: Bob Dinneen
President and CEO,
Renewable Fuels Association