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The U.S. Department of Energy has announced the modeling system it plans to use to derive energy and emission multipliers in future energy conservation standards.
     The system, called the National Energy Modeling System, would be used for calculating full-fuel-cycle measures of energy use and greenhouse gas and other emissions. It was developed by the DOE’s Energy Information Administration.
 The DOE also had evaluated the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation model for the purpose.
 The announcement was made as a DOE policy amendment, and said comments would be accepted.

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One thing about Cheniere Energy, Inc. (NYSEAMEX:LNG), Chevron Corporation (NYSE:CVX),
Southwestern Energy Company (NYSE:SWN), and Tesoro Corporation (NYSE:TSO) is that they are all making growth moves; spending ‘now’ on what will turn a profit down the road on a long-term horizon.

While the U.S. doesn’t have a definite “Marshall Plan” type of energy policy, it’s easy to see that the country and its people, its Oil and Gas companies, and even sectors of the government want the U.S. to be much, much more self-sufficient.

Controlling energy is a means of controlling economies to a large degree and there has been a “Stealth” movement underway for years. I think the North Dakota shale play and the Keystone pipeline really cemented the turnaround and it will evolve as a diversified picture with a single common interest: Making a profit while providing independence.

Last Thursday Houston-based Cheniere Energy said it had completed all milestones and has issued a full notice to proceed to Bechtel Oil, Gas and Chemicals to construct the first two liquefaction trains of the Sabine Pass liquefaction project. The first liquefaction train is expected to start operations as early as 2015, with the second liquefaction train expected to commence operations six to nine months thereafter.

“The Sabine Pass Liquefied Natural Gas (LNG) terminal will become the first facility in the contiguous U.S. capable of exporting natural gas as LNG,” a Company spokesperson said.

LNG is into building Pipelines… The Company operates in three segments: LNG terminal business, natural gas pipeline business, and LNG and natural gas marketing business. The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its 88.8% ownership interest in Cheniere Energy Partners; LNG  also owns and operates the Creole Trail Pipeline, which interconnects the Sabine Pass LNG terminal with natural gas markets in North America.

As the U.S. turns to alternative forms of energy, like natural gas, one energy think tank has pointed out that a quarter of a trillion has already been spent for natural gas development in the next five years and that number will increase as that money is spent: a headwind if you will.

So the change is on… for real… The U.S. has cut its crude oil imports by 17% in seven years according to the DOE. With new domestic energy sources, companies are discovering that pipelines and railways are cheaper than tankers.

“North America, the New Middle East?” is a question posed by Citigroup and reported by Bloomberg which estimates that the U.S. could become the world’s largest producer of crude and natural gas liquids such as propane by 2020, overtaking Russia and Saudi Arabia. Maybe.

The recent Chevron refinery fire in Richmond California made it all to clear ‘at the pump’ that the infrastructure of domestic delivery is just as important as finding the energy source: No good if you can’t get it to market.

In the refinery space, I think that Tesoro has taken a bold step into the future. TSO recently said it would pay $1.18 billion plus the cost of inventories for oil major BP Plc’s 266k barrel-per-day Carson City refinery and its associated marketing network. If completed, the transaction would make Tesoro the largest refiner on the U.S. West Coast.

I also like Southwestern Energy in the Oil and Gas arena as it is working the Arkansas side of the Arkoma Basin, the Fayetteville Shale play, in addition to a number of other shale plays. The Fayetteville play has a big potential and I’m sure LNG will be more than glad to get the natural gas to market.

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On the eastern bank of the Mississippi River, about an hour upstream from New Orleans, the outline of Nucor Corp. (NUE)’s new $750 million iron-processing plant is rising between fields of sugar cane and sweet gum trees.

Surveying the facility from the road, Michael Eades, president of Ascension Economic Development Corp., says it’s part of a wave of investment lured by low natural gas prices to this stretch of Louisiana’s industrial riverfront. Companies such as Westlake Chemical Corp., Potash Corp. of Saskatchewan Inc. and Methanex Corp. (MX) have projects in the works. Ormet (ORMT) Corp. reopened an alumina refinery last year, bringing back 250 jobs.

“We’re just seeing an incredible amount of activity,” said Eades, who tallied $1.1 billion in new projects last year in Ascension Parish alone, where his private, nonprofit group promotes development. He expects twice that this year.

It’s a harbinger of a nationwide investment boom spreading from the oil fields of North Dakota and the Marcellus gas shale in Pennsylvania to power plants in California and chemical refiners in Texas. A surge in U.S. natural gas development has spurred $226 billion in spending plans on pipelines, storage, processing facilities and power plants, most slated for the next five years, according to Industrial Info Resources, a market- intelligence provider in Sugar Land, Texas.

U.S. energy supplies have been transformed in less than a decade, driven by advances in technology, and the economic implications are only beginning to be understood. U.S. natural gas production will expand to a record this year and oil output swelled in July to its highest point since 1999. Citigroup Inc. (C) estimated in a March report that a “reindustrialization” of America could add as many as 3.6 million jobs by 2020 and increase the gross domestic product by as much as 3 percent.

Narrow Gains

So far, the economic benefits have been confined to states such as Louisiana, Texas and North Dakota, while the national jobless rate has stayed above 8 percent for 42 straight months in the wake of the worst recession in seven decades.

“It is definitely a positive for the economy, but one can overstate how much of a positive,” said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. (JPM) Oil and gas production account for about 1 percent of gross domestic product, and will have a limited impact on the country’s unemployment, he said.

Even so, there are signs the economic gains have begun to expand beyond the oil and gas fields and that the promise of abundant, low-cost fuels will give a competitive edge to industries from steel, aluminum and automobiles to fertilizers and chemicals.

Jobs Debate

That would provide a boost to a U.S. manufacturing sector that has lost 5.12 million jobs since 2001 and become the focus of a national debate over how to revive factory employment. Manufacturers have added 532,000 jobs since January 2010 as the economy started to recover, Bureau of Labor Statistics data show.

The expansion of fossil-fuel production — coupled with a weak economy and increased energy efficiency — has helped the U.S. pare its crude oil imports by 17 percent since the 2005 peak, Energy Department data show. Imports in 2011 accounted for 45 percent of U.S. consumption of crude and refined products. The department predicts the share will fall to 39 percent next year, which would be the first time since 1991 that imports dropped below 40 percent of demand.

“The impact on the global petroleum market and the natural gas markets is really palpable and wildly underestimated,” said Ed Morse, head of commodities research at Citigroup Global Markets Inc. who led the team that wrote the March report. The economic activity that comes with higher energy production will boost incomes, increase consumption and create wealth, he said.

Cheaper Energy

Increased production and swelling domestic stockpiles have helped make U.S. energy cheaper than in other countries. U.S. oil futures have slid to a $20 a barrel discount to London- traded Brent, a benchmark for more than half the world’s oil. Natural gas in the U.S. fell to $1.902 per million British thermal units in April, the lowest in a decade. The fuel costs almost three times as much in the U.K. and more than five times as much in Japan.

“This is one of those rare opportunities that every country looks for and few ever get,” said Philip Verleger, a former director of the office of energy policy at the U.S. Treasury Department and founder of PKVerleger LLC, a consulting firm in Carbondale, Colorado. “This abundance of energy gives us an opportunity to rebuild our economy.”

Cycle of Growth

Verleger envisages a virtuous cycle of economic growth as producers, flush with cash from oil and gas sales, will buy more equipment and put more people to work, while low-cost energy puts cash back in consumers’ pockets, stimulating spending.

Companies plan to invest $138 billion in more than 700 natural gas storage, pipeline and processing plants in the U.S., and another $88 billion in more than 500 gas-fired power generation units, according to Joseph Govreau, vice president and editor-in-chief of Industrial Info Resources. The firm tracks projects from planning stages through construction.

The IIR estimates don’t include petrochemical and fertilizer projects, which are undergoing a revival because of the low cost of natural gas feedstock.

Cairo-based Orascom Construction Industries (OCIC) is investing $250 million restarting an ammonia and methanol plant in Beaumont, Texas. Another Orascom subsidiary may build a $1.3 billion fertilizer plant in Iowa that would create as many as 2,000 construction jobs and 165 permanent positions, according to Tina Hoffman, a spokeswoman for the Iowa Economic Development Authority.

‘Massive’ Investment

“The amount of petrochemical investment that the U.S. will have in the next 10 to 15 years is massive,” said Omar Darwazah, head of investor relations for Orascom. “Given the shale gas boom, gas prices in the U.S. are arguably more competitive than the Middle East, because you don’t have the political risk.”

Increased U.S. production has already wrought significant shifts across the energy industry. Plans for gas-import terminals, thought indispensable five years ago, have been shelved in favor of export facilities such as Cheniere Energy Inc. (LNG)’s $10 billion plant in Louisiana’s Sabine Pass.

Enterprise Product Partners LP and Enbridge Inc. this year reversed the Seaway pipeline that once carried oil imports from the Gulf Coast to a storage hub in Oklahoma. Now, it carries crude produced in states such as North Dakota and Colorado to refiners in Texas and Louisiana, which process and, increasingly, export it. East Coast refiners, dependent on more expensive tankers of foreign crude, are working to develop rail links and pipelines to bring oil east.

Environmental Concern

Environmentalists say cheap fossil fuels come with a high price, including air pollution that can cause respiratory difficulties, and drinking water contamination from hydrofracturing, or fracking, in which a high-pressure stream of fluid is shot underground to crack rock and release hydrocarbons. Lower gas and oil costs have also undermined investment in power sources that produce less carbon dioxide, including wind, solar and nuclear, raising concern that climate change will accelerate.

“The state is just overjoyed at all the jobs that will be coming to Louisiana without looking at the health side effects and environmental side effects,” said Darryl Malek-Wiley, a community organizer at the Sierra Club in New Orleans.

The report from Citigroup — “North America, the New Middle East?” — estimated that the U.S. could become the world’s largest producer of crude and natural gas liquids such as propane by 2020, overtaking Russia and Saudi Arabia.

China Consumption

U.S. natural gas prices may eventually rise if planned export terminals increase demand for the fuel, putting domestic consumers in competition with foreign markets willing to pay more. China will drive global gas consumption higher by 2.7 percent a year through 2017, the International Energy Agency said in a June report. The U.S. already competes with global consumers for refined products such as gasoline and diesel.

Still, the promised bounty from lower prices can be seen along the highways and back roads of Ascension Parish, in the heart of Louisiana’s plantation country.

In November, cheap natural gas prices convinced Hannibal, Ohio-based Ormet to reopen the refinery that makes alumina, used in aluminum production. The facility was shuttered in 2006, said Chief Financial Officer James Riley.

In nearby St. James Parish, Nucor has begun construction on the plant that will process iron using natural gas. The product will supply its steel mills, said Katherine Miller, a spokeswoman for Charlotte, North Carolina-based Nucor. Five hundred people will be needed to build the plant and 150 will be employed there once completed, she said.

Doubling Workforce

Eades gestures toward construction trailers parked on the site where Vancouver-based Methanex said in July that it will reconstruct a plant moved from Chile, white, football field- sized domes that will store Nucor’s iron ore, and chutes that carry bauxite over the Mississippi River levy into Ormet’s rust- colored plant.

All this construction means new jobs. MMR Group, a Baton Rouge-based industry contractor, will double its workforce of 2,800 in the next two years, said Grady Saucier, vice president of marketing.

A five-minute drive from MMR’s offices in Ascension Parish, Associated Builders & Contractors, a trade group, can’t keep up with demand for its training program for would-be electricians, pipefitters and welders. Steven Allen graduated from the school’s pipefitting certification program this year. Now, he earns as much as $28 an hour working in petrochemical plants, up from the $9 an hour he made as a construction laborer.

Family Struggle

“Being a laborer and a helper isn’t going to cut it when you’ve got a family to support,” said Allen, 30, a father of 6- year-old twins.

Smaller businesses, including valve manufacturers, electric-motor companies and rental lots packed with heavy equipment, also feed off the boom, Eades says. One company, Rain for Rent, provides fake downpours seen on movie sets — as well as storage tanks and water pumps to the petrochemical industry.

Closer to Interstate 10, which connects New Orleans to Baton Rouge, a TownePlace Suites by Marriott and a Holiday Inn Express have opened in the past year next to an outlet mall and a Cabela’s outfitters store, all benefiting from the influx of new workers to the region, Eades said.

“If you have gas prices in the U.S. that are substantially cheaper than Europe or Asia, it has to have a substantial impact,” said James Brick, an analyst in Houston with Wood Mackenzie, an energy and metals researcher. “The question we’re now asking is, ‘Is this the tip of the iceberg?’”

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The US Congress approved punishing new sanctions targeting Iran’s energy and shipbuilding sectors, a day after President Barack Obama unveiled measures to cripple Tehran’s nuclear drive.

The House of Representatives voted overwhelmingly 421-6 for the measure, which Foreign Affairs Committee chair Ileana Ros-Lehtinen described as the toughest sanctions yet imposed on the Islamic republic over its refusal to rein in its nuclear program.

The new rules — which target any person or company which works with Iran’s petroleum or natural gas sector, provides insurance to the National Iranian Oil Company, engages with uranium mining with Iran, or sells oil tankers to the country — passed the Senate by a unanimous consent vote.

“This bipartisan, bicameral agreement seeks to tighten the chokehold on the regime beyond anything that has been done before,” Ros-Lehtinen told the House.

She said the sanctions effectively put Iran’s energy sector “off limits, and it blacklists any related unauthorized dealings,” ultimately “depriving Iran of hard currency and funds needed to sustain its nuclear program.”

The legislation, which goes to Obama for his signature, is a reconciliation of a bill passed by the House in December and one passed by the Senate in May. Lawmakers wanted to move on the bill before going into their August recess.

It beefs up sanctions passed by Congress last year which imposed penalties on foreign financial institutions that do business with the Central Bank of Iran or other Iranian finance firms, essentially barring Iran’s business partners from the lucrative US market.

The House’s number two Democrat, Steny Hoyer, said the bill would deny Iran 80 percent of its hard-currency earnings.

“As long as Iran continues to pursue nuclear weapons, call for the destruction of Israel, and provide arms to terror groups like Hamas and Hezbollah, it will face the consequences in the form of sanctions, isolation and the continuing reality of the option of military action,” he said.

White House policy is “prevention, not containment,” and Obama “is keeping all options on the table,” Hoyer said.

The debate about sanctions comes amid deliberation over a possible first strike against Iran’s nuclear facilities by Israel. Iran has insisted its nuclear program is for peaceful purposes.

Last weekend Israeli Prime Minister Benjamin Netanyahu expressed his doubts about the effectiveness of sanctions on Iran, saying that “all the sanctions and diplomacy so far have not set back the Iranian program by one iota.”

Republican White House hopeful Mitt Romney entered the fray last weekend, when he met with Netanyahu in Israel and said a nuclear Iran was “unacceptable” and that he would back Israel’s right to defend itself.

In the wake of Netanyahu’s remarks, and amid stalled negotiations with Iran, Obama on Tuesday tightened sanctions, targeting Iran’s oil export sector and a pair of Chinese and Iraqi banks accused of doing business with the country.

The American Israel Public Affairs Committee, one of the most powerful lobbies in Washington, applauded the bill, calling it “the strongest set of sanctions the United States has ever imposed on any country during peacetime.”

“The implementation of this bill would subject virtually all of Iran’s energy, financial, and transportation sectors to U.S. sanctions,” AIPAC said in a statement.

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The term “logical” may not be strong enough – “only” is certainly more appropriate. The story however remains the same. We are finding more reserves of natural gas, drilling more, watching prices decline, and yet using only slightly more.

It is clear that the U.S. is between the proverbial rock and a hard place with respect to its dependency on fossil fuels. We are indeed a carbon based economy, and with low prices and abundant availability one would think the demand for natural gas would be sky-high.  So then why is the consumption of natural gas stick in the mud?

A look at the energy industry from source to demand sectors may shed some light on this anomaly.

The figure below shows the big picture: U.S. primary energy consumption by energy source from 1980 to 2010, with projection to 2035. The consumption of each fuel changed accordingly:

• from 1980 to 2010: liquid biofuels (>1500%), nuclear (208%), coal (35%), renewables (28%), natural gas (22%), and oil and other liquids (5%), and

• projected from 2010 to 2035: liquid biofuels (260%), renewables (68%), nuclear (11%), natural gas (10%), coal (4%), and oil (-5%). Note: percent change based on quadrillion BTUs per pear.

A snap shot of the energy mix for any given year shows only a slight shift towards less carbon-intensive fuels.

• 1980; oil (42%), natural gas (26%), coal (21%), renewables (7%), nuclear (4%) and liquid biofuels (0%).

• 2010: oil (37%), natural gas (25%), coal (21%), nuclear (9%), renewables (7%), and liquid biofuels (1%).

• 2035: oil (32%), natural gas (25%), coal (20%), renewables (11%), nuclear (9%) and liquid biofuels (4%).

While the consumption of liquid biofuels was shown to grow by a factor of 587, biofuels are projected to remain a negligible part of U.S. energy inventory by 2035. Similarly, while the consumption of renewables is projected to double by 2035, total renewables are vastly overshadowed by fossil fuels in 2035.

These statistics necessitates clarifying what exactly constitutes renewables. In this analysis, renewable fuels are an aggregate of wood, municipal waste, biomass, and hydroelectricity in the end-use sectors; hydroelectricity, geothermal, municipal solid waste, biomass, solar, and wind for generation in the electric power sector; and ethanol for gasoline blending and biomass-based diesel in the transportation sector.

Today, it’s somewhat controversial whether hydropower should be classified as a renewable source of energy. There are many schools of thought and qualification varies state-by-state. One argument against qualification is that most hydroelectric facilities were already built prior to adoption of renewable standards and policies by many states.

Another argument states that damming interrupts the flow of rivers and can harm local ecosystems, and building large dams and reservoirs often involves displacing people and wildlife. However, unconventional hydropower using currents, waves, and tidal energy to produce electricity is less disruptive and qualifies as renewable.

U.S. Energy Consumption in 2011 by Energy Source is shown below. As opposed to the previous figure, this chart breaks out the various energy sources that makeup renewable energy.

A closer look at the renewable energy component shows that solar, geothermal and wind are less than 2% of the total energy mix of the U.S. (see following chart). Whether surprising or not, these renewables are not substantially reducing our thirst for fossil fuels.

Reasons for the lack of renewable’s foothold include high cost to produce and use, location in remote areas, additional expense to build power lines , lack of reliability to deliver power, 24/7, as and when needed (for e.g.— night-time and cloudy days reduce solar power and calm days reduce wind power.)

To understand how these energy sources are used, kindly refer to the following figure, which shows U.S.’s primary energy consumption by source and sector for 2010. The electric power generation sits between source and sector because it holds a dual role of being both an energy consumer and an energy generator and by definition it is not a primary source of energy.

On the demand side, electric power generation is the major consumer of fuels (39.6%), followed by transportation (27.5%), industrial (23.3%), residential (11.8%) and commercial (8.7%)

Electrical generation is primarily fuelled by coal and natural gas and to a smaller degree by nuclear power. Transportation is fuelled almost exclusively by petroleum. Industry is a mixed bag of petroleum, coal and electricity. Here renewables are ranked fourth and only slightly below electrical consumption. Residential and commercial are somewhat similar in that they run by electricity and natural gas. From this it’s difficult to see a sector other than electrical generation that can truly benefit from and increase the usage of renewable energy. That is unless there is some paradigm shift in the way the U.S. consumes fuels.

Taking a closer look at fossil fuels, the trend in consumption by the electrical power generation industry is shown in the following chart. For over 60 years, coal has been the predominant fuel used to generate power in the U.S.,  however, there has been an upward trend in natural gas consumption and a downward trend in coal usage. This is due to replacing coal-fired generation plants with natural gas-fired generation stations.

Increased consumption of natural gas for electrical generation is due to the combined effect of ever increasing natural gas production, declining natural gas prices and an increased use of efficient and low-cost combined cycle technology. Also, due to regulatory pressure to reduce greenhouse gas emissions and pollution from coal-fired power plants, electric utilities had no other choice but to adopt natural gas as a logical alternative.

Coal Age recently announced: “Recently published electric power data show that, for the first time since the Energy Information Administration (EIA) began collecting data, generation from natural gas-fired plants is virtually equal to generation from coal-fired plants, with each fuel providing 32% of total generation. In April 2012, preliminary data show net electric generation from natural gas was 95.9 million megawatt-hours (mw-hr), only slightly below generation from coal, at 96 million mw-hr. In April 2012, demand was low due to the mild spring weather. Also in April, natural gas prices as delivered to power plants were at a 10-year low. With warmer summer weather and increased electric demand for air conditioning, demand will increase, requiring increased output from both coal- and natural gas-fired generators.”

It’s a well-proven fact that natural gas is clean, in fact the cleanest of all fossil fuels. Since natural gas is an organic compound, it does has a carbon footprint; however, its emissions level of CO2, CO, NOx, SO2, particulates and mercury are anywhere from 40% to 100% cleaner than coal and 28% cleaner than petroleum.

The point is that while coal will most likely continue its decline in fuelling electrical generation facilities; natural gas needs another demand sector to increase demand and further replace dirty fossil fuels from our energy inventory. The sluggish U.S. economy has reduced expectations for new construction in the industrial, commercial and residential market, all potential users of natural gas.

This leaves the transportation industry as the only other viable sector that can make a significant impact on the energy mix by using an alternative fuel.

While there are reports of U.S. hybrid and electric vehicle sales jumping in March, the overall penetration of EV are far less than many in the industry would have you believe. A March 2012 report in the New York Times stated: “…the state of the electric car is dismal, the victim of hyped expectations, technological flops, high costs and a hostile political climate. General Motors has temporarily suspended production of the plug-in electric Chevy Volt because of low sales. Nissan’s all-electric Leaf is struggling in the market. A number of start-up electric vehicle and battery companies have folded. And the federal government has slowed its multibillion-dollar program of support for advanced technology vehicles in the face of market setbacks and heavy political criticism.”

It must be noted that almost every conventional gasoline and diesel internal combustion engine can be converted to run on compressed natural gas (CNG). No innovations technological advancements are needed to power vehicles on CNG. Furthermore, natural gas is an abundant resource base that complements U.S. national energy security initiatives.

Not that incentives are a good thing, but to play on a level playing field with petroleum, either oil subsides should be reduced or incentives given to end users of CNG powered vehicles (see Oil Subsidies 101). All CNG incentives offered by the federal government have expired. There is rhetoric, and just that, on Capitol Hill to do something to stimulate usage of natural gas in the transportation sector.

Taking these factors into consideration, some forward thinking states such as Oklahoma offer a one-time income tax credit up to 50% of the incremental cost of purchasing a new CNG vehicle from an original equipment manufacturer or to cover the cost of converting a vehicle to operate on an alternative fuel such as natural gas.

According to the Natural Gas Vehicles for America,

• “There are about 120,000 NGVs on U.S. roads today and more than 14.8 million worldwide.

• There are about 1,000 NGV fueling stations in the U.S., about half of which are open to the public.

• There are also “Home Refueling Appliances” available.

• In the U.S., about 30 different manufacturers produce 100 models of light-, medium-, and heavy-duty vehicles and engines.

• Natural gas currently costs from $1.50–$2.00 less per gasoline gallon equivalent (GGE).

• In the U.S. alone, NGVs offset the use of nearly 360 million gallons of gasoline in 2011.

• NGVs meet the strictest emission standards, including California’s AT-PZEV standard.

• NGVs are as safe as or safer than traditional gasoline or diesel vehicles.”

There are a few disadvantages of using CNG, these include the limited number of models offered for sale or that can be retrofitted for CNG. A good part of this limitation is due to EPA regulations that make the CNG certification process rather lengthy and costly. Also, there are few certified conversion shops and CNG kits suppliers. CNG is less readily available than gasoline & diesel.

Conversion is not cheap; passenger vehicles can be converted for $10,000 each, parts and labor.

In closing, like it or not, renewable energy has a long way to go to make an impact on U.S.’s energy inventory. Natural gas, being the least disruptive fossil fuel, could serve as a ‘bridge’ to a low-carbon future. Natural gas will buy time to further develop, cleaner fuels; hopefully there will be something at the end of the day, whether it takes 25 years or the end of the century. Then why are our lawmakers asleep to the needs of the country?

By. Dr. Barry Stevens

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In China, they are building things. Big things. Whether you’re driving north from Beijing, through lesser known cities such as Qinghuangdou, or standing atop a high-rise in Shanghai, the view is the same: cranes that are erecting tomorrow’s China. Some economic developers are starting to refer to these machines as the national bird.

At this moment, more than one-third of the world’s construction cranes are in China. A massive investment in infrastructure is building new housing, new roads and bridges and new centers for commerce throughout the Middle Kingdom.

The reason is simple: tens of millions of Chinese are moving into urban areas, continuing the modernization that has typified Chinese demographic trends since the nation opened itself to international investment and global markets.

Just how urban is China? Consider that while the U.S. Census lists only nine U.S. cities with an official population of more than 1 million people, China has 160. Ever heard of Chongqing? I doubt it. It’s a city with an estimated population of more than 30 million, bigger than any city in the United States by far. Even more shocking is that China is not finished growing, with experts comparing the nation’s current urbanization rate with the United States of 1900. In other words, China is still heavily rural.

Behind this burgeoning nation is an appetite for energy that is having consequences worldwide. Like a growing teenager, China is eating the world out of house and home, consuming the world’s coal and steel at a record pace and exerting tremendous pressure on global markets for commodities of almost every kind.

The Chinese are heavily coal dependent, with about 80 percent of current electrical generation powered by coal-fired plants. Coal that is being diverted by U.S. Environmental Protection Agency regulations away from U.S. power plants is ending up half a world away in China, where environmental controls are much less prevalent and government regulation far more lax.

In recent months, the EPA has waged an aggressive campaign of regulation aimed at significantly reducing — maybe ending altogether — the use of coal for electricity in our nation. Buoyed by groups such as the Sierra Club with its “Beyond Coal” mission and armed with reams of scientific reports that claim coal is murder, the EPA under Administrator Lisa Jackson‘s leadership has extended its reach into nearly every nook and cranny of America’s coal-fired power infrastructure.

Earlier this year, the agency finalized Utility MACT, a rule the EPA claims is aimed at reducing mercury emissions from power generation. The only problem is that the vast majority of the stated benefits of Utility MACT — 99.98 percent to be exact — have nothing at all to do with mercury. The regulation is really aimed at particulate matter, a subset of air pollutants covered by existing agency rules. Most predict the rule to be the most expensive in the history of the EPA.

The agency has also gone so far as to regulate carbon dioxide itself by restricting its emission from power plants nationwide. Keep in mind that humans breathe carbon dioxide and plants consume it.

Add those regulations to others such as the Cross-State Air Pollution Rule, Coal Combustion Residual regulations, Boiler MACT, Cooling Water Intake Structure rules, new rules governing hydraulic fracturing (known popularly as fracking) and looming rules establishing new thresholds for ozone levels, and it is easy to see why American energy producers, mostly of the fossil fuel variety, are calling for relief from EPA.

To most Americans, these new rules are nothing more than incomprehensible acronyms. To those who understand how we keep the lights on and power bills affordable in the United States, they are the death knell for life as we know it in the world of highly inexpensive, nearly perfectly reliable power.

Therein lies a fundamental divide between Chinese and U.S. energy policy. They are building. We are blocking.

The United States today has the world’s biggest reserves of coal and natural gas and yet policy makers are taking every step possible to ensure that those fuels end up powering China’s growth and not ours.

Last year, thanks in part to U.S. exports, China overtook Japan as the world’s largest importer of coal, with 182 million tons entering China’s ports. Much of this is coking coal that will power steel production, with much of the rest being steam coal for China’s growing number of coal-fired power plants.

The United States has the means to be energy independent, and Americans have consistently called for that, but national energy policy is taking us precisely in the opposite direction, to China’s benefit.

A closer examination yields even more substantial differences between our nations. While the United States today only devotes about 2.5 percent of annual gross domestic product to infrastructure like roads and bridges, the Chinese earmark four times that to build the pathways that will enable its economic future.

Even Europe, plagued by debt and riddled with financial controversy, is spending twice what we spend on infrastructure. Meanwhile, America’s roads and bridges, many built 50 or more years ago, stand in disrepair and at the horizon of their usefulness. Ground transportation capacity in China will surpass the United States by 2015. An empire famous for building a wall has turned to building bridges.

America’s greatness in the modern era has always been tied to reliable, affordable power. It is in this way that campaigns such as the Sierra Club’s “Beyond Coal” and “Beyond Gas” do disservice to the people of our nation.

By convincing us that environmental gains, diminishing as they may be, are more important than economic security. By disregarding the empirical truth that America’s air and water are cleaner than they ever have been and calling instead for new regulatory measures that are not economically sound, and are certainly not practical. By preaching that austerity and deference are more important than boldness and self-preservation. By promising that solar panels and wind turbines are the key to our energy independence, when the United States has all of the coal, gas and nuclear resources it needs to power a new American renaissance in manufacturing and job expansion.

These messages, ingeniously crafted and laced with heavy doses of guilt and fear, have penetrated the American consciousness and left too many of our lawmakers willing to trade America’s potential for a thumbs-up from America’s environmental industry chieftains.

While China is busy raising skyscrapers, America seems content to raise only objections. The first step to changing this must be reining in the EPA and returning control of America’s energy future to those elected by the American people. We can never be truly independent without the power to compete.

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Conservative thinkers are playing host to a liberal idea: the enactment of carbon taxes. The issue is making news right before the national elections in the fall, and it could gain increasing momentum.

The American Enterprise Institute, which just held a conference on the subject, is saying that the fundamentals underpinning carbon taxes deserve to get aired. Many liberals would agree. But most — if not nearly all of conservatives — would disagree that the idea has validity. Contrary to that thinking, however, carbon constraints is a policy that is making international headway, and one that over time will ingratiate itself into U.S. energy policies.

“We have to have a system where all forms of energy bear their full costs,” says George Shultz, former U.S. Secretary of State under President Reagan. “For some, their costs are the costs of producing the energy, but many other forms of energy produce side effects, like pollution, that are a cost of society.

“The producers don’t bear that cost, society does. There has to be a way to level the playing field and cause those forms of energy to bear their true costs. That means putting a price on carbon. We’ve studied a variety of ways to do that, and to me the most appealing way is a revenue-neutral carbon tax. That is, you distribute all the revenue from the carbon tax in some fashion back to taxpayers, so there is no fiscal drag on the economy,” Shultz concludes.

The GOP legend, who issued his remarks to Stanford University, goes on to say that British Columbia has such a carbon tax. In that case, the government there gradually increased the tax and then redistributed it to individuals, making it popular.  He adds that the Republicans have historically been known as the party that issued policies to protect the environment, noting that it was under President Nixon that the 1970 Clean Air Act passed.

Schultz’ comments are coming on the heels of the AEI confab. There, both Republicans and Democrats gathered to discuss the potential policy. According to news reports, representatives from Al Gore’s climate campaign and AEI’s own scholars represented the Republican view point, as did a former congressman from South Carolina who is starting the Energy and Enterprise Initiative. The progressive view is one led by U.S. Representatives Henry Waxman, D-Calif., and Ed Markey, D-Mass., both of whom have chaired key energy committees.

Technologies Key

Among those scholars not present at the AEI meeting  was AEI’s Ken Green, who used to favor the carbon tax but now says the idea is “anti-competitive.” A carbon tax, he fears, would simply go into general revenues. He adds that unilateral action by developed countries would give unfair advantages to those developing countries that would have no such curtailment efforts.

“I naively thought that a revenue-neutral carbon tax might be possible, and if done right, might offer economic benefits that might mitigate its economic harms; if we replace taxes on productivity with taxes on consumption, we might get a net economy-wide benefit,” writes Green, in an EnergyBiz Insider column appearing a year ago.

Most of the earlier discussions centered on a carbon tax or cap-and-trade scheme, where carbon ceilings are set and utilities must meet them, or buy credits that allow them to exceed such limits. But those debates occurred after President Obama came to Washington and when his party controlled both legislative chambers. When the Republicans took over the U.S. House in 2010, those ideas died.

Under a carbon tax, government would tax utilities according to their carbon footprints that can be readily measured. NextEra Energy says that it is a fairer way to compute results and that it is easier to administer than a cap-and-trade system. The proceeds from the carbon fee would then be targeted directly to an account that would help fund the development of new technologies.

“Although both a tax on emissions and a cap-and-trade system use the power of markets to achieve their desired results, a tax is generally the more efficient approach,” adds Peter Orszag, former director of the Congressional Budget Office. “Studies typically find that over the next several decades, a well-designed tax would yield higher net benefits than a cap-and-trade approach.”

But if the president is re-elected, the notion of carbon constraints will get resurrected. And while such policies would still have an uphill climb over the next four years, that will slowly change as the technologies to enable the capture of carbon dioxide are developed and potentially commercialized.

EnergyBiz Insider is named a 2012 Finalist for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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The US is lagging way behind in terms of energy efficiency, according to a new report from the nonprofit American Council for an Energy-Efficient Economy (ACEEE).

The UK comes in first, followed closely by Germany, Italy, and Japan. But the US is ninth on the list, trailing the EU as a whole, Australia and even China, having made ‘limited or little progress toward greater efficiency at the national level,’ the report concludes.

“The UK and the leading economies of Europe are now well ahead of the United States when it comes to energy efficiency. This is significant because countries that use energy more efficiently require fewer resources to achieve the same goals, thus reducing costs, preserving valuable natural resources, and creating jobs,” says ACEEE executive director Steven Nadel.

“While many countries achieved notable success, none received a perfect score in any category – proving that there is much that all countries can still learn from each other. For example, the United States scored relatively high in buildings, but was at the bottom of the list in transportation.”

The rankings are modeled on ACEEE’s existing energy efficiency ranking of US states. They include both ‘policy metrics’ and ‘performance metrics’ to measure a country’s overall energy efficiency.

Examples of policy metrics include the presence of a national energy savings target, fuel economy standards for vehicles, and energy efficiency standards for appliances.

The performance metrics measure energy use and provide quantifiable results such as the amount of energy consumed by a country relative to its gross domestic product, average miles per gallon of on-road passenger vehicles, and energy consumed per square foot of floor space in residential buildings.

The ACEEE says its report raises a critical question: How can the United States compete in a global economy if it continues to waste money and energy that other industrialized nations save and can reinvest?

It has a number of suggestions, including the introduction of a national energy savings target, and commitments to greater efficiency in manufacturing, power plants and other facilities.

“While energy efficiency has played a major role in the economies of developed nations for decades, cost-effective energy efficiency remains a massively underutilized energy resource,” says ACEEE senior researcher Sara Hayes.

“Fortunately, there is a lot countries can do to strengthen their economic competitiveness through improvements in energy efficiency.”

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