End of Energy
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The End of Energy The End of Energy The Unmaking of America ’ s Environment, Security, and Independence Michael J. Graetz The MIT Press Cambridge, Massachusetts, London, England © 2011 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. For information about special quantity discounts, please email special_sales@ mitpress.mit.edu. This book was set in Stone Sans and Stone Serif by Toppan Best-set Premedia Limited. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Graetz, Michael J. The end of energy : the unmaking of America’ s environment, security, and independence / Michael J. Graetz. p. cm. Includes bibliographical references and index. ISBN 978-0-262-01567-7 (hbk. : alk. paper) 1. Energy policy— United States. 2. Energy resources development — United States. 3. Energy industries— United States. 4. United States — Economic policy. I. Title. HD9502.U52G685 2011 333.7900973 — dc22 2010040933 10 9 8 7 6 5 4 3 2 1 For my daughters Casey, for her unfl agging support and encouragement Dylan, whose skepticism proved an inspiration and Sydney, for her estimable judgment and great good humor Contents Acknowledgments ix Prologue: The Journey 1 1 A “ New Economic Policy ” 9 2 Losing Control over Oil 21 3 The Environment Moves Front and Center 41 4 No More Nuclear 61 5 The Changing Face of Coal 79 6 Natural Gas and the Ability to Price 97 7 The Quest for Alternatives and to Conserve 117 8 A Crisis of Confi dence 137 9 The End of an Era 147 10 Climate Change, a Game Changer 155 11 Shock to Trance: The Power of Price 179 12 The Invisible Hand? Regulation and the Rise of Cap and Trade 197 13 Government for the People? Congress and the Road to Reform 217 14 Disaster in the Gulf 249 Key Energy Data 265 1 Crude Oil Prices 265 2 U.S. Petroleum Production and Net Imports 266 viii Contents 3 U.S. Petroleum Imports by Country of Origin 267 4 U.S. Net Electricity Generation by Energy Source 268 5 Carbon Dioxide Emissions by Sector, 2008 269 Chronology 271 Bibliographic Essay 279 Index 355 Acknowledgments I have had much generous and excellent help in writing this book. My idea to write about the development of energy and environmental policies emerged after several years of teaching a seminar on the 1970s for Yale law and history students with my colleague and friend Daniel Kevles. I am greatly indebted to him and the students in those courses for increasing my understanding of this transformative period not only for energy and the environment, but also for our country. As this project unfolded, several students at the Yale Law School contributed important research for various aspects of this book. I thank in particular Tom á s Carbonell, David Chao, Miles Farmer, Steve Fisher, Brian Frazelle, Andrea Gelatt, Christopher Hurtado, Daniel Luskin, Jeffrey Tebbs, and Benjamin Zimmer. Brian Mahanna and Carrie Pagnucco were present from the inception of my efforts to transform inchoate ideas into this book and offered thoughtful comments and excellent research from beginning to end; they were more like collaborators than research assistants. John Nann of the Yale law library also provided valuable research. A number of my colleagues and friends from the Columbia and Yale law schools and elsewhere pro- vided enormously helpful comments on a draft of the manuscript: Bruce Ackerman, Anne Alstott, Hannah Chang, Daniel Esty, Michael Gerrard, Linda Greenhouse, Doug Kysar, Daniel Markovits, Jerry Mashaw, Peter Merrill, Tom Merrill, Emma Neff, Alex Raskolnokov, and Ian Shapiro. Par- ticipants at the faculty workshop at Columbia Law School and a group of anonymous referees for MIT Press offered useful comments. I also learned much from conversations with Peter Merrill, Gilbert Metcalf, David Weisbach, and a number of other experts on the energy sector. My good friend Adam Haslett, an extraordinarily talented and successful writer, read early drafts of the manuscript and offered detailed comments and x Acknowledgments suggestions for how to make it better. His contributions were invaluable, and I marvel at his talents. Karen Williams began the typing of the manu- script and offered her enthusiastic support throughout. Margaret Symuleski typed, retyped, and retyped changes in the manuscript with great care and unfl appable good humor. Yale Law School deans Harold Koh and Robert Post and Columbia Law School dean David Schizer provided both encouragement and fi nancial support, as did Ian Shapiro, director of Yale’ s MacMillan Center. My agent, Wendy Strothman, helped shape the project and bring this book to fruition. I also thank my editor at MIT Press, John Covell, for his enthusiasm and comments and for shepherding the manu- script into print. Finally, I thank my family— my wife, Brett Dignam, and my children, Lucas, Dylan, Jake, Sydney, and Casey— for their unwavering support and patience. Without them nothing would be possible — or any fun. Michael J. Graetz New York City September 2010 Prologue: The Journey It remains a basic fact of American life that, despite forty years of political fulminating, global confl ict, and ever-increasing environmental awareness, most of us still take energy for granted. We take for granted that when we come home at night and fl ip on the light switch, the bulb will illuminate. We assume that when we turn up the thermostat, the heat will come on. And however acutely aware we may be of the price per gallon we pay, we take it as something close to a right of citizenship that when we drive an automobile up to one of the more than 100,000 gas stations in the United States, there will be fuel for our cars and trucks in the tanks beneath the asphalt. Without gasoline, the country would not run, and so there is gaso- line, and barring extraordinary circumstances, there is plenty of it. The fuels that let us take energy for granted come from all over our country and our planet: mines in West Virginia, wind farms in Texas, and nuclear power plants in California. But no doubt the most vexed fuel we use is petroleum, and although we now import it from more than 60 dif- ferent foreign countries (Canada now fi rst among them, Saudi Arabia second), it has been the need for supply from the Middle East that has exercised such an outsized infl uence on our foreign policy, our environ- mental politics, and our national security. By the accidents of geology, the fossilized remains of prehistoric zoo- plankton and algae when heated over millennia form crude oil and are nowhere more plentiful than in a 174-mile long reservoir known as the Ghawar Field in Saudi Arabia. Ghawar lies along the eastern edge of the Arabian Peninsula, in the middle east of the Middle East, and buried beneath its sweltering sands is the biggest oil fi eld in the world, having thus far produced 60 billion barrels of crude and providing to this day half the Saudi kingdom ’ s daily output. For decades, Saudi Arabia has been able 2 Prologue to act as a kind of central bank of oil, calming world markets at times of maximum scarcity by increasing output, as it did during the two gulf wars, and cutting supply when prices fall. Ghawar is what allows them to do this. It is their mother lode; in all of Iran, Iraq, Russia, and Nigeria, there is no deposit remotely its size. The story of how the crude oil pumped out of the ground at Ghawar travels to the United States to become the gasoline, the jet fuel, and the ingredient in tens of thousands of plastics and consumer goods that together keep the American river of commerce fl owing tells us much about the shape of our world today: about the vastly complex and tenuous system of global transport whose constant smooth functioning under- writes our complacency about the sprawl that requires two-hour commutes and makes sport utility vehicles (SUVs) even imaginable. It tells us about the consequences of failed states in blood and treasure. And it tells us something about the strange and constantly shifting balance we in the United States have tried to strike between unharnessing all of energy ’ s potential to fuel economic growth and trying to limit its corrosive effects on our environment and our foreign policy. In short, to see how oil moves from Ghawar to our gas pumps depicts many of the most important issues this book confronts. The journey begins innocuously enough, with oil suffi cient to fi ll 5 million barrels (or 210 million gallons) a day moving from beneath the sands of Ghawar along a pipeline to the coast of the Persian Gulf, where it arrives at Ras Tanura, the largest oil terminal in the world. Already by this point, however, security is an issue. Given Al Qaeda’ s stated goal of overthrowing the Saudi monarchy and its desire to disrupt Western econo- mies, every yard of pipeline is a potential target. To guard against the dangers of attack and the supply disruptions it would cause, the Saudis have the largest inventory of spare pipeline parts of any nation, much of it stored remotely along the pipeline route itself so that repair teams can be fl own in by helicopter, access the needed materials on site, and get the oil fl owing again as quickly as possible. The terminal at Ras Tanura, which processes 10 percent of the global output of crude, is itself a fortress with multiple security checkpoints along the highway leading to it and on the grounds itself.