The Energy Challenge 2004 -- Natural Gas

Posted on September 23, 2004
Posted By: Murray Duffin
 
Overview
Natural gas is a more difficult subject to address than petroleum, because the data is much less complete and reliable, and because the USA situation appears much more precarious than the world situation. BP/Amoco statistics imply that at 1998 consumption rates, the world has about 60 years of resources remaining. However, known reserves are much lower, resource estimates are highly speculative, and the major resources (approximately 70%) are in the Middle East and FSU (Former Soviet Union). Natural gas can be readily transported by pipeline, but cannot be transported either in large quantities or economically by ship. Japan, Korea, and Taiwan have long-term contracts that lock up nearly all existing LNG shipping capacity. Europe may be able to depend on the Middle East and the FSU for several decades of natural gas supply. The USA does not have that luxury. Because of transportation limitations, the USA has historically depended on North American natural gas. Mexico has long since reduced exports to zero and is now a small importer. Canada supplied about 16% of USA consumption in 2002, but has had very disappointing exploration results in recent years, and exports to the USA declined 8% averaged across 2003, reaching nearly a 14% y-o-y decline in the 4th quarter. Known USA reserves represent about eight years’ supply at recent consumption rates, while demand has been projected to grow by more than 50% during the next 20 years. In 2003 the EIA revised their USA production projections from steady growth to essentially flat through 2020, and even that seems very doubtful in the light of recent trends. In spite of major increases in drilling, production in North America declined at least 3% in 2003 vs. 2002, and is down another 3% YTD 2004. Included in natural gas resource estimates are:
  • Associated resources – discovered along with oil fields, through drilling for oil.
  • Non-associated resources – free flowing natural gas discovered without petroleum.
  • Tight gases – natural gas in dense shale or sandstone deposits that requires extensive drilling and fracturing to recover.
  • Coal bed methane – gas released from coal deposits that again requires extensive drilling and fracturing to recover.

Estimates for total USA resources vary widely from about 300 to 1,400 Tcf, (trillion cubic feet), and methods of estimating are very imprecise and speculative. Background data is not freely available to the individual, but databases can be accessed at the cost of a few thousand dollars. It seems likely that the higher resource numbers result from arithmetic addition of low probability estimates, and may therefore be meaningless. A number near 1,100 Tcf or 50 years is widely used, but is a very risky multiple of proven reserves. The hard data we do have is not encouraging. What we do know is:

  • Drilling for natural gas in the five years from 1980 through 1984 was about double the average during the decade of the ‘90s, but annual average discoveries were slightly less.
  • Because of the bad experience with wildcat drilling in the early ‘80s, drilling in the ‘90s tended to be concentrated near known large basins, extending their boundaries but not making major new finds.
  • 9,000 new gas fields were discovered from 1977-87, but only 2,500 from 1987-97.
  • With the application of new technology, especially hydraulic fracturing and horizontal drilling, initial production of new fields has been kept nearly constant for two decades, but depletion time has been shrinking rapidly. New wells average 56% depletion in the first year of production. Congressional testimony in 2004 stated that some tight sands wells deplete 50% in less than 6 months.
  • Wells drilled in 2000 were 60% above 1999, and early 2001 were about 50% above 2000. Production grew less than 2% in 2000, and less than 1.5% in 2001. After falling off in late 2001 and early 2002, drilling has increased steadily for the last 2 years while production continues to decline.
  • New finds are becoming progressively smaller.
  • Proved reserves of natural gas in the USA declined from a peak of 290 Tcf in 1967-70 to 167 Tcf in 1989, and, with some fluctuation, have been flat since, in spite of a major drilling peak in the early 1980s as noted above.
  • For 12 years through 2001, discovery just kept pace with production, and consumption growth was served by increasing imports.
  • Of 1999 EIA estimated resources of 1,280 Tcf, 890 Tcf were classified as “undiscovered,” and 220 Tcf as expected reserve growth. (Most of the discovery in the 1990s was reserve growth. How much can be left?)
  • Natural gas production in the USA peaked in 1973.
  • Natural gas supply from the Gulf of Mexico (GOM) shelf is in decline.
  • Natural gas discovery in the deep Gulf of Mexico is much lower than expected, and NRG Associates in 2001 projected peak supply as 3 Tcf in 2007 versus the National Petroleum Council forecast of 4.5 Tcf in 2010.
  • Simmons has noted that rig count in the Gulf of Mexico grew 40% from April 1996 to April 2000, and 60% in Texas from January 1996 to October 2000, with production remaining flat.

There is nothing in the known facts to support an optimistic resource estimate. Clearly the natural gas industry has to rapidly accelerate drilling, just to keep production flat. A large increase in wildcat drilling in the early ‘80s didn’t help and seems to be not helping much again. Is Alaska going to help? Resources are projected by the EIA as 237 Tcf, but proven reserves are only 10 Tcf. (Does that make you wonder?) A three-foot-diameter pipeline, moving gas at 2,200 ft./sec1 would deliver only 0.5 Tcf/year, less than 2%of 2020 needs. The energy to move the gas increases with the square of the velocity, and, at this velocity, would require more than 2% of the gas moved just to drive the compressors. It may not be economical to build a 2,000-mile pipeline. (Maybe the natural gas can be converted to liquid syn fuel in situ and shipped via the existing oil pipeline?) The National Petroleum Council has forecast natural gas demand as 29 Tcf in 2010, and the EIA as well as the NEPDG projected demand of 40 Tcf by 2020. Rising prices have already severely dampened such demand growth, with at least 25% of 2001 industrial demand already having been destroyed through closures or moves offshore. Unfortunately, because of low prices and high availability in the late 90s, and to meet emission restrictions, almost all new electricity generation capacity built in the last decade has been gas fired, with the bulk of it coming on stream in 2002/3. Only unusually benign weather during the last 15 or so months has saved us from severe natural gas shortages up to now. To make matters worse, if a curve of USA discovery is superimposed on production with a shift of 28 years, the two curves match very well up to now. However, discovery went into a sharp decline about 28 years ago, so we can expect a similar decline in production soon. (We can’t produce what hasn’t been discovered). Production is likely to “fall off a cliff” and be down by half before 2015. See http://www.peakoil.net/JL/BerlinMay20.pdf, figs. 78 and 89. The Current Situation
While NG supply tends to be quite flat year round, demand is distinctly seasonal, with highest demand for winter heating load. Demand varies widely even week-to-week dependent on "temperature degree days" (TDDS), either "heating degree days" (HDDs) in winter or "cooling degree days" (CDDs) in summer. Winter demand is higher than production, requiring a build up of storage during spring, summer and fall to supply peak demand in winter. This splits the year into 2 main seasons, about 30 weeks from near 1 April to near 30 Oct, the "injection" (to storage) season, and about 22 weeks, 1 Nov. to 31 Mar., the "withdrawal" (from storage) season. To get a good comparison from year to year one needs the "gas weighted" HDDs and CDDs. Historically injection has varied from a low of 1600 "billion cubic feet" (Bcf) to a high of about 2450 Bcf, mainly depending on how low storage got during the previous withdrawal season. The critical min. storage level is about 800 Bcf+-100. Above 900 Bcf the system operates fairly smoothly. Below 700 Bcf there is a high probability of severe price spikes, and inability to deliver sufficient gas to users, due to low system pressure. Withdrawal also varies from a low of about 1800 Bcf to a high of 2400 Bcf, with the last 10-year average about 2000 Bcf. Target end of injection season storage is above 3000 Bcf.

In spring of 2003 storage got down to 720 Bcf, and in Feb., when severe shortages were forecast, prices spiked to $18.00/MBtu interday and $28.00/MBtu intraday, vs. a base level near $5.00/MBtu. Because of this extremely low storage, Alan Greenspan began warning of an NG crisis in spring 2003. Then several factors worked together to provide record 2003 injections so that the '03/'04 withdrawal season started with ample storage (3200 Bcf). These factors were:
- a substantial degree of industrial demand destruction in 2002/3 due to high NG prices
- a sharp increase in liquefied natural gas (LNG) imports, from about 200Bcf/yr to 540 Bcf/yr
- the decision by suppliers to leave natural gas liquids (NGL) in the supply, supplying wet gas instead of dry gas
- an unusually mild summer with low CDDs until late Aug, that sharply reduced demand for peak electricity generation.
These factors were enough to offset declining production and rebuild adequate inventory for the withdrawal season. During 2002 the USA used about 23.6 trillion cu. ft. (Tcf) 0f NG, with about 16% imported from Canada by pipeline and a little under 1% supplied as imported LNG. During 2003 domestic production dropped sequentially by quarter by about 1%, 2%, 3% and 4%, for an average just below 3%. Imports from Canada dropped about 3%, 6%, 9% and 12%, for an average of near 8%. With supplies holding flat in 2004 at Q4'03 levels, we can expect domestic production to be down 3%, 2%, 1% and 0% for an average of 1 to 1.5%, and imports from Canada to be down 9%, 6%, 3% and 0% for an average of 4%. Offsetting these declines, LNG imports should be up about 200 Bcf, limited by regassification terminal capacity. Net, total supply was down about 1.5% in 2003 vs. 2002, and 2004 will probably be down another 1.5% vs. 2003. Demand has grown in both years due to high housing additions (80% of new houses are NG heated), increased NG fired electricity generation, and increased economic activity. These increases were fairly modest in 2003, mainly due to weather, but are quite sharp in 2004. During the last 3 weeks in May '04 total electricity generation was up 5% y-o-y after adjustment for TDDs and holidays, and manufacturing activity is up sharply since late '03.

Liquefied Natural Gas (LNG)
Most optimists and many analysts believe that LNG imports will save our bacon. That is not the case. Several countries with stranded natural gas are building liquefaction facilities so there will be plenty of LNG supply. The USA has expanded regasification facilities rapidly during 2002/3/4 and has enough capacity for near term needs. New projects are approved or under construction to provide enough capacity to meet EIA import projections of 2.2 Tcf for 2010. The first problem is that at a decline rate for North American availability of 2%/yr (remember 2003/4 declines have been much worse than this) we would need 2.6 incremental Tcf of LNG in 2010 to reach 2004 total NG supply level, and 3.7 Tcf to meet the 2002 level of consumption, not the 2.2 projected by the EIA. It is not clear that there will be enough regasification capacity to meet these numbers (there are a lot of NIMBY problems), and these numbers do not provide for any growth. A much larger limitation is shipping capacity. The world LNG tanker fleet in Q1 2004 was 156 vessels, with 62 more on order for delivery through 2008. World shipbuilding capacity for LNG tankers is 20 ships/yr. If this capacity is booked full another 50 or so vessels can be delivered by end 2008. All of the existing fleet is already under long-term contract, and not more than 18 of the vessels under order are available for shipments to the USA. Up to now about 40% of the USA LNG supply has come from Trinidad, 40% from North Africa, and the rest from the Middle East and Indonesia. Trinidad supply is now maxed out, but they will have some more capacity coming on stream in 2006. North Sea production is now in decline so Europe must become a much larger importer from North Africa. This means that most of the incremental USA supply will have to come from the Middle East, which means only about 10 deliveries per ship per year. One modern ship has a capacity of about 2.6-2.8 Bcf of regasified NG, but because of losses during transport, could only deliver about 2.3 Bcf per trip from Qatar to the USA. At 10 trips per year we would need an incremental 100 ships by end 2009 to meet 2010 demand equal to 2004 consumption, or 160 to meet 2002 consumption. Even if shipbuilding capacity is doubled by the end of 2006, (and the order book right now is not large enough to get that process started), and all of the incremental capacity went to serve USA demand, we would still be 50 ships short of minimum 2010 needs. NB. – None of the above even considers North American production “falling off a cliff”! We can be confident that total USA NG supply in 2010 will be at least 1 Tcf less than the peak year of 2002, and there is a high probability that it will be less than half. Other sources
Users of NG have been urging the government to open up restricted areas for drilling. That will not solve the problem either. At least 40% of government lands in the Rockies are already open, but there is no great rush to drill them. Most of the land in question, where it contains gas, contains tight sands gas. It doesn’t matter how much is available, it simply can’t be produced fast enough to offset decline in the present major fields. The eastern Gulf of Mexico holds some promise, but deepwater GOM has been largely disappointing relative to early expectations so far. Coal bed methane has the produceability problem of tight sands plus a major environmental problem of water pollution. If there were major attractive prospects in any of the areas in question the NG producers would be beating down the doors in Washington. That isn’t happening, even with as energy corporation friendly government as we have now. Conclusion
Natural gas is somewhere between a limit to growth and a disaster waiting to happen right now, and no one is doing anything about it. Only a few months of inclement weather will cause severe shortages and rocketing price spikes. There is a high risk of major availability declines with unimaginable economic impact, and there is no supply side solution. We urgently need a government driven, demand side oriented “Apollo Program” for energy. The wake-up call is already sounding, at least for natural gas, but the powers that be just aren’t paying attention, and the energy industry, both users and suppliers of fossil fuel, are asleep at the switch or in denial. The bad news is that it looks like we will have to experience a prolonged crisis before there is any reaction to the danger. The good news is that the crisis is likely to happen real soon. 1 The Ft. St. John BC to Chicago pipeline, completed in 1999, meets this specification. See Petroleum Review, November 2000, London, p 13.

 
 
Authored By:
The author is a 70 year old "concerned and informed citizen", retired from the position of Corporate Vice President for Total Quality and Environmental Management of a $5B+, 35,000 person, leading European based multi-national corporation in the field of microelectronics. Born in Canada and naturalized in 1964, he has lived and worked abroad, in Europe and Asia, for 27 of his 44 working years. He has a BScEE 1956 from
 

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Comments

September, 24 2004

Rodney Adams says

Murray: Thank you for an extremely informative article.

I am now far more knowledgeable and a lot more frightened about the future of the American economy.

Rod Adams www.atomicinsights.com

September, 24 2004

David Bush says

Murray - Very good analysis of the situation.

Those of us in the business have understood there is a problem but you have put it in perspective. I am a firm believer that the price will drive the technology. For the good news, it will encourage entrepreneurs, make the renewables more cost effective and drive conservation. For the bad news, I with you in that it will get painful before it gets better.

I also believe we need to promote all forms of energy generation including coal and nuclear in a true integrated resource plan. This must be done to minimize the future costs of energy, as those countries with the cheapest energy will win.

September, 24 2004

Len Gould says

Murray: Completely agree, but far more pesemistic on probable future. With another four years at least of big oil government in US we're not going to see this issue addressed until prices have gone to absolute maximum possible, with total "demand destruction" wreaking havoc on the domestic situation economically.

September, 24 2004

Murray Duffin says

Victor - I agree completely with your comments.

Len - I am not pessimistic long term because we have all the energy resource we need, the technology to tap it economically already exists, and we are so energy wasteful that the demand side could postpone real problems for decades at much lower cost than supply side solutions. Our barriers are ignorance, special interests, and a resulting lack of will. Crises and competition from Japan, Europe and China will change us in time. I would like to avoid or at least minimize the crises. Murray

September, 25 2004

Rodney Adams says

Murray:

What makes me a bit pessimistic is the fact that the reality that you have described in your article is not being seen by enough people in a timely enough fashion to respond before real pain is inflicted.

In fact, the pain is already being seen in those American industries that depend on natural gas as a basic feedstock. Most of them - chemicals for example - compete in world markets where they cannot raise their prices to reflect their increased costs, mainly because their competition still has access to lower priced gas from Russia or the Middle East.

Therefore, the American plants shut down and people lose their often lucrative jobs. There are few events more painful than losing a longtime job, especially when your skills are not immediately needed elsewhere.

When (not if) we have some extended periods of hotter or colder than normal weather, the strain on the gas supply is going to bring spikes in the market price. It may even result in some supply disruptions that cause people to simply have to do without for a while until the weather gets better. That might result in some vulnerable people paying the ultimate price. Of course, that will be a temporary situation that does not indicate that all the gas is gone, but the pain will be very real.

The real problem that I see is that most of the people who can see this train coming stand to pocket some pretty hefty profits when the prices increase and they do not personally experience much of the pain. Too many of those people are in decision making or influencing positions in the current administration, but I do not see that any alternative administration would be much better.

As you say, there is plenty of energy available to avoid the problems, but it takes some time to produce systems that can make that energy useful.

Rod Adams www.atomicinsights.com

September, 26 2004

Len Gould says

Murray: The basis for my pessemism is illustrated in the September issue of "Energy Markets" magazine.

On an editorial page (13) is a report on an energy forcast by Washington consulting group ICF Consulting in which they predict "Coal and natural gas prices will fall ... over the next several years" further "The turning point for gas markets was actually set in motion in 2003, when drilling investment turned upward and companies pushed to permit LNG regasification facilities."

On the same page in a different editorial article is an analysis titled "China Combats Power Shortages" e.g. "the shortfall for summer 2004 will total 30 million kW, even with all plants running full capacity" and "China's demand for natural gas will rise to 61 billion cu meters / yr by 2005 and 200 billion by 2020. To ready the country China ia considering building up to 10 LNG terminals in the next few years, four of which are already approved"

With much better physical access to the asian resources, what makes the Washington analysts think they will always be able to out-compete China for natural gas? This has large potential to be a much bigger problem than just a few cold nights.

September, 26 2004

Len Gould says

Of course I suppose that's what the Iraq War (on Terrorism?) is really all about. What I don't understand is how anyone ever thought it was winnable.

September, 26 2004

Murray Duffin says

Len, - ICF Consulting either hasn't done their homework, or has a stake in intentionally misleading their readers, or both. There will be short term crises (pessimism) and soon, but there are long term (5 to 30 years) solutions (optimism) which will be triggered by the crises and by competition from more forward looking or less special interest impeded economies, ie Europe, Japan and China. LNG prices will have a floor put under them simply by the cost of amortizing new liquification, regassification and shipping capacity. I didn't touch this point in my article because I had to stay under 3000 words. I estimate the floor price at about $5.00/MBtu assuming 6% 30 year financing, but given the risks, I doubt if such cheap financing will be available, especially for ships. No comment on Iraq. That's for another forum. Murray

September, 28 2004

Dwight Work says

Murray:This is an excellent article. It is in sharp contrast to what we hear from the major oil producers and pipelines. They indicate that LNG will solve all of our needs (by 2014) and at a price of $3.50.

What made the powers that be in this Country think that we could use a non-renewable resource (natural gas) to produce an inefficient energy source (electricity) with no detrimental impact on residential and small commercial customers?

September, 28 2004

Rodney Adams says

Dwight:

My answer to your question - great salesmanship and lots of political cash.

Rod

September, 28 2004

Steve Sturgill says

Don't forget that it burns cleanly, which was then and is still a priority. I'm not saying it should be burned for electricity, just responding to Dwight's post.

September, 28 2004

Len Gould says

Steve: I gues that's another one we can chalk up to the self-styled "environmentalists". Let me see now, so far that's a) anti-nuclear power b) total dependence on natural gas for electricity c) legitinacy for the worst sorts of NIMBY-ism and BANANA-ism d) complete ignorance of the detriments of coal-fired generation e) complete halting of hydro-electric development. I'm sure I've left a few credits out. Yucca?

In return what do we get? A lot of wind and no power. Where's aod when one needs him?

September, 29 2004

Rodney Adams says

Steve: I guess my standards for clean burning are different from yours. Since I spent a few years in a sealed tube underwater with a clean power plant, whenever I see one of the buses in our nation's capital emblazoned with the statement "Powered by Clean Natural Gas" I want to ask the author of that statement to suck on a tailpipe. "Clean Natural Gas" is a sales pitch, not a statement of scientific truth. The emission from those buses are definitely deadly, in that one would die if one shared a confined space with the exhaust. On a different note - when people worry about nuclear safety, I want to ask them to interview the families of the victims of the Belgium pipeline explosion that occurred within the same week as the Japanese steam pipe rupture. At last count there were at least 21 deaths and a dozen more people in the hospital suffering from massive burns. In a very very sad side note, the burn victims apparently need large doses of a medicine that is not covered by the national medical system and the pipeline owner has been reluctant to provide any compensation. Rod Adams www.atomicinsights.com

September, 29 2004

Steve Sturgill says

<>

Oh, it's not my standard, just one of the reasons for burning gas for electricity. I should have placed "burns cleanly" in quotes.

I'd have preferred a policy whereby using energy paid the costs of using energy rather than just the cost of extracting and distributing the combustible fuel. We might have avoided a lot of urban sprawl, a war or two, a huge contribution to the fouling of the atmosphere and so on.

September, 29 2004

James Hopf says

Dwight Work wrote:

DW: "They indicate that LNG will solve all of our needs (by 2014) and at a price of $3.50."

I read yet another article a day or so ago on the Energy Central site where some "expert" was quoted as saying that we will rely on LNG for most of our gas in the future, and that the LNG will cost "substantially less than $4/MBTU".

For many reasons, including several pointed out by Mr. Duffin, I am extremely disinclined to believe this. One other reason, not discussed, is one that I heard about in another EP article sometime back. Basically, it stated that even if we get most of our gas from imported LNG, the "incremental" gas supply, which sets the market price, will always be the high-cost, domestic supply.

In the free market, it is the last, highest cost supplier, who meets the last bit of demand, that sets the price. Lower cost suppliers simply rake in the difference as profit. Currently, domestic gas costs ~$6/MBTU, and this cost isn't going to get any lower as our reserves continue to dry up, and as demand continues to rise significantly. Unless we get all (not most) of our gas from LNG, the domestic sources will be the "incremental supplier" and will therefore set the price.

It is very unlikely that we will ever get ALL of our gas from LNG, not only due to the limitations Mr. Duffin points out, but also because the LNG investors will not ALLOW it to happen. These projects are very difficult and capital intensive, take long to build, and require a significant political fight. Investors/companies will not engage in such projects unless they can get a gas price that is high enough to pay off all the capital and interest costs, as well as give them a tidy profit.

That said, why on earth would these industries ever take it upon themselves to build the last few LNG terminals that would allow all of our gas to be supplied by low cost ($3.5-4.0??) LNG? After all that investment and work, the effect of these last few facilities would be to cause the bottom to fall out of the market, and a steep drop in the market price for gas. Not only would this greatly reduce the profit (if any) from the terminals that they just built, but would also greatly reduce the profits from all their existing terminals.

No, based on my (limited) understanding of economics, you can count on the fact that they will never do that. They may build enough terminals to supply some, half, or even most of our demand with LNG, but they will stop short of supplying it all, ensuring that at least some significant fraction of overall demand has to be met with very high cost domestic supply. And because of that, the price charged for gas, ALL gas, will remain above ~$6/MBTU. And the profits will be huge!!

Do I have this right? Thoughts?

September, 30 2004

Rodney Adams says

James: You have hit the nail on the head!

For the rest of you, please read what James said carefully and then consider applying the same logic to the first generation of nuclear plants.

IMHO "too cheap to meter" (that does not mean free, by the way) was well on its way, but ran into some serious vested interests that did not like the concept of cheap nuclear power very much. It would certainly put a crimp in their ability to extract massive profits by selling coal, oil and gas to electric companies (as well as commercial shipping companies, industrial users, etc.).

Rod Adams www.atomicinsights.com

September, 30 2004

Len Gould says

James: Agreed completely. Another factor to consider is the relative economics of transportation. Without going into details, it is an error to suppose that the existing North American economy would be supported by electricity generated by imported LNG. e.g. it is far cheaper to ship aluminum as ingots than the LNG required to generate the required electricity to produce it. The same logic can be applied to a great many existing domestic industries, e.g. steel, nickel, plastics, fertilizer, etc. etc. Murray, I'm sure you're aware of the energy inputs to silicon processing re. chip fabs for everything from cpu's to solar cells.

Define for yourself an economy where no energy-intensive industry is located domestically, because that's the only one you can get with inported LNG. What then, everybody becomes an investment trader?

September, 30 2004

Len Gould says

Another interesting article came on the domestic Canadian CBC television news recently. (I like the source, never once has it mentioned any sensational California murder trials) Apparently the Russians have made projections for when global warming at the current pace will have warmed Hudson's Bay to the point of allowing year-round navigation for LNG tankers and it's already looking economically sound given Russian icebreaker technology. They're serious enough that they already have a delegation of heavy hitters in the port of Churchill evaluating facilities. Notable is that there are points on Hudson and James bay which are only a few hundred miles from the huge Trans-Canada gas pipeline system which crosses north of lake Superior.

September, 30 2004

Bryan Kimmell says

Murray: Excellent piece on the long-term prospects for the natural gas market. Change comes slowly, but we are already seeing natural gas power plants priced out of many market scenarios. When someone is lost and walking down the wrong path, eventually they come to the realization that the road they’re on isn’t going to take them where they want to go. Unfortunately, it is usually easier to keep walking and hope for the best. Now is the time to cut our losses and start planning for a future without fossil fuels.

The solution to the impending natural gas shortage is really quite simple. Stop heating buildings with natural gas. Geothermal heat pumps (GHPs) are a superior proven technology to conventional HVAC equipment in all respects. GHP systems are cleaner, safer and quieter than conventional HVAC systems and require less maintenance. In addition, using electricity to run the geothermal heat pump systems provides an excellent segue to a renewable future. All new buildings should be equipped with this technology as well as retrofits. GHPs are the most energy efficient and cost effective space conditioning systems available. Not only would it eliminate the direct use of a dwindling resource, fossil fuels, it would also reduce the summer electricity load spikes. This would lessen the need for needlessly wasting resources on expanding the interstate electrical and natural gas supply infrastructures. These supply infrastructures are not only inefficient transporters of energy, they are also susceptible to terrorist activities and natural disruptions such as hurricanes. These business models are as outdated as the mindset that we can drill our way out of this mess. The money that utilities save could be used to subsidize renewable and distributed generation projects. If we were smart, (and that is a big IF), we would cap all wells in this country to save these resources until they truly are scarce. It doesn’t make any sense to subsidize companies to produce oil for $10-$15/barrel when the Saudis can produce it for under $5. The price of fossil fuels would rise in this country, thereby changing the breakeven analysis on all renewable and energy efficient projects. This de facto tax would position us more in line with other developed country’s fuel costs in the short term, but give us a competitive advantage after the transition was made. Victor’s concern regarding low cost fuel is relevant only if you consider ALL of the costs of energy, inclusive of social and environmental. We hardly “win” if the air is polluted and the natural environment is pockmarked with abandoned toxic drilling sites. This mentality that we are somehow “owed” the cheapest energy possible regardless of the consequences must end if we are to evolve to a more sustainable world.

Best Regards,

Bryan Kimmell

September, 30 2004

Len Gould says

Also on CBC news tonite. Russia has announced ratification of Kyoto today, which means a) the accord will certainly go into force in all ratifying countries, therefore a definite CO2 credits trading market and b) a need to find ways to equalize economic advantage (trade sanctions / taxes?) with non-participants, e.g. US and Australia.

This should make an interesting soap opera.

October, 04 2004

David Bush says

Brian - Good comments. But I wanted to address your comments on the true cost of energy, as I believe the discussion is beneficial.

I understand the argument that the true cost of generating energy must include all the environmental and social costs, which I agree should be the case but not all countries are on the same sheet of music. Those with the altruistic goals should be commended but they will also be disadvantaged at least in the near future.

November, 04 2004

Jonathan Beers says

While I share Bryan's interest in renewables and energy conservation, I'm less optimistic about ground source heat pumps (GSHPs). They still operate on electricity from the grid, they require digging a ground loop, and their real-world performance isn't as uniformly great as their advocates claim. Unless your source of electricity is renewable, their net emissions are likely higher.

Even with all these reservations, I still think GSHPs have their place. I just don't think they're a panacea. For more info:

The Energy Center of Wisconsin's links page: http://www.ecw.org/ecw/infopackagedetail.jsp?infoPackageId=5

And, their comparison of emissions from heat pumps vs. gas furnaces (heat pumps have higher net emissions): http://www.ecw.org/ecw/productdetail.jsp?productId=157

The Geo-Heat Center's "survival kit", including economic comparisons: http://geoheat.oit.edu/ghp/ghptable.htm

The International Ground Source Heat Pump Association, a site that actively promotes ground source heat pumps: http://www.igshpa.okstate.edu/faqs/general.html

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