Dallas, TX –
High gasoline prices and concern about energy security are driving entrepreneurs in the United States to explore a variety of ways to produce transportation fuels. For example, researchers are experimenting with technologies to turn turkey, chicken and pig litter, and used tires, into gasoline.
On the less exotic side, Congress is pushing ethanol, a homegrown, renewable fuel, processed from corn, sugar and, theoretically, grass or biomass. Increasing U.S. biofuel production and building new bio-refineries could modestly reduce America's dependence on fossil fuel imports while diversifying our fuel supply. Accordingly, the Senate recently passed an energy bill that would increase the ethanol mandate nearly five-fold to 36 billion gallons produced per year. Fortunately, though rarely discussed, the United States also has abundant reserves of coal, shale oil and conventional oil.
There is a well-developed process to turn coal into oil. South Africa's Sasol Co. produces 40 percent of the country's oil from coal each day and China plans to produce as much as a million barrels of oil a day from coal by 2020.
Commercial coal-to-oil plants have not been built in the United States because conventional oil has been relatively abundant, thus, prices have been far below what would be needed to make synthetic oil competitive. This has changed.
The Energy Department has estimated that coal-to-liquids can compete if the price of conventional oil is above $30 per barrel. The potential is substantial with U.S. production of oil from coal estimated to reach 1.7 million and 2.6 million barrels per day by 2030. As a side benefit, the process of transforming coal to transportation fuel also produces natural gas that can be used for heating or electric power generation, and it removes more than 30 percent of the pollution released when coal is burned for electricity.
Another potentially huge supply of oil and natural gas is trapped in oil shale, largely in the western states. Rocks in Colorado, Utah and Wyoming alone contain 1,500 billion barrels of oil, and worldwide oil-shale could equal more than 500 years of oil.
Previous government efforts to extract oil from shale were very expensive, used a lot of energy and labor, and produced relatively little oil. However, research at private companies has produced a technological revolution - a process to heat the rocks in the ground, trap the oil and profitably extract it as long as the price of conventional oil is above $30 per barrel. Based on successful tests, Shell Oil, Co. estimates it could produce more than one million barrels of oil per acre or a billion barrels per square mile. In the Green River Basin of Colorado alone, there are more than 1,000 square miles of oil shale.
There are also vast untapped conventional oil reserves under the Outer Continental Shelf and the coastal plain of the Arctic National Wildlife Refuge (ANWR). The OCS contains more than four times as much oil as the current U.S. oil reserves. In addition, ANWR coast contains 6 billion to 16 billion barrels of economically recoverable oil at $20 a barrel and up to double that amount at $40 a barrel.
Each of these options, of course, has environmental benefits and drawbacks that should be analyzed and debated before ramping up production. However, compared to the net amount of ethanol that can be produced, coal, shale or conventional oil from ANWR and the OCS hold greater promise of reducing America's dependence on foreign oil.
H. Sterling Burnett is a senior fellow with the National Center for Policy Analysis in Dallas.
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