Energy Policy

NAM's McKinney, Apollo Alliance's Hendricks debate natural gas costs

Would passage of the energy bill really lower the high cost of fuel -- notably natural gas -- for industrial users? Will it make manufacturers more competitive? Darren McKinney with the National Association of Manufacturers and Bracken Hendricks, director of the energy policy coalition called Apollo Alliance, join OnPoint to debate these critical topics.


Colin Sullivan: Welcome to OnPoint. I'm Colin Sullivan. Today we're joined by Darren McKinney, the spokesman for the National Association of Manufacturers, and Bracken Hendricks, the executive director for the Apollo Alliance. Also with us is Mary O'Driscoll, a senior energy reporter for E&E Daily and Greenwire. Thank you all for being here today. Mr. McKinney, I'd like to start with you. U.S. manufacturers are facing competitive pressure from China while dealing with record high energy prices and losses of millions of jobs. The energy bill is moving on the Hill right now, if you had one minute to make a pitch to a swing senator about what you'd like to see in the energy bill specifically, what would you say?

Darren McKinney: I would urge such a senator to not allow the perfect to become an enemy of the good. The energy bill, as proposed by the president close to four years ago, is not a perfect bill. It is not a silver bullet that will solve all of America's energy problems, but it is a step in the right direction. It increases domestic production of energy sources that we know can be brought online and provide the kind of energy, at a reliable affordable rate, that our economy desperately needs to continue the growth that we obviously need. There are many good things in this bill and we're certainly hopeful that it will move this year.

Colin Sullivan: Mr. Hendricks, you have a minute to give your pitch. What's your pitch?

Bracken Hendricks: Well, I guess what I would stress is that the current energy bill does not do enough to focus on the industries of the future and investing in the jobs that we can reasonably see coming down the pike. We think that a comprehensive approach to energy independence would focus on diversifying our domestic supplies of energy, focus very strong attention on energy efficiency and new renewable sources of generation. We have an opportunity to rewire our electrical grid, bring new biofuels online and really start to focus on the opportunities that a strong investment in our domestic economy and in conservation and new energy solutions can provide for jobs and growth.

Colin Sullivan: Now you bring up renewables, your organization has targeted a goal of 15 percent nationwide, an RPS standard, renewable portfolio standard. Is that a realistic goal? And you tout that as saying that will increase jobs and how do you defend that?

Bracken Hendricks: Actually, we don't have a specific target for an RPS. We do think that a number of strategies should be employed to bring more renewable energy online. That includes a production tax credit to encourage financing for long-term investment in wind generation, investment tax credits to help put solar energy on a footing equal to other energy sources, and we absolutely believe it will create jobs. The solar industry is one of the, the solar industry is growing at a rate of 28 percent a year, wind is growing at about 38 percent a year, these are very rapidly growing technologies. The U.S. invented these technologies, but since the 1980s we have gone from an 80 percent market share down to 40 percent market share as other countries are investing in these new technologies and bringing them online. We've seen recently in Pennsylvania the Spanish wind turbine blade manufacturer, Gamesa, just located a new plant in a part of southwestern Pennsylvania that hadn't seen new plant and new job creation in a great while, creating 500 jobs during the construction phase, over 200 ongoing jobs. We've seen GE Wind start to invest in bringing some of their manufacturing capacity back to the U.S., but the most important thing is not only creating new technologies and investment in those technologies, but also that efficiency and energy diversity, which is a great deal more than renewables, actually lowers demand for natural gas and can take some of the pressure off of our natural gas spikes in demand which are driving prices up, which are hurting manufacturers probably more so than any other segment of the economy. So anything we can do the lower pressure on prices in the natural gas market is critical.

Colin Sullivan: Your response to that? Does renewables helped increase jobs?

Darren McKinney: Well, Bracken, I will certainly agree that natural gas prices in particular and the spikes there in during the course of the last several years, have been very difficult for U.S. manufacturers. I would, however, suggest that some of his allies within the environmental community, who are fighting tooth and nail to prevent further exploration and production within the continental United States, of natural gas I'm speaking of, whether that be in the Rocky Mountains, whether it be in coastal areas or even in ANWR, we have, within the domestic United States, we have sources of natural gas. We also need very much to get building some liquid natural gas ports, receiving facilities, within the United States. And not unlike the wind turbines Bracken spoke of, the LNG plants, receiving facilities, port facilities, are frequently resisted tooth and nail by various NIMBY groups, that is not in my backyard groups, who don't want a liquid natural gas port. Who don't want the wind turbines because they're killing bats or they're killing birds and I'm not suggesting that bats and birds ought not be looked after and aren't legitimate causes of concern, my point is, that regardless of what energy source, renewables, gas, fossil, there's always going to be somebody or somebodies, who will resist it for one reason or another. Lincoln said, "You can't please all the people all the time," and that hasn't changed. That's a fact. So trying to bring together, not only 535 members of Congress, but a nation of 300 million folks, to come to some general consensus on the general need to advance energy policy and to increase supplies of a variety of energy sources and yes, fossil fuels are the most efficient in terms of bang for the buck, energy bang for the buck, to drive an $11 trillion economy at the moment, but manufacturers are certainly all for research and development. The current bill provides quite a number of incentives for technology, research and renewables and other things and all of this stuff is good, but the time for delay, the time for not-in-my-backyard bickering and making sure the other guy's ox gets gored in partisan politics, those days are over. We've got to move past that. We've got to solidify our energy policy.

Mary O'Driscoll: Well I'm kind of curious about this, in the sense that the demonstrated need for some relief for manufacturers, for the economy, because of the high energy prices is pretty instant. It's pretty immediate at this point, but the energy bill, a lot of the provisions aren't going to be coming in, you won't see a lot of this construction and the fruits of any of this, if it passes, for another 10 years. So what do you do in the meantime? I mean, we've got some very short-term strategic goals that we need, which is to stop the hemorrhaging of jobs, stop businesses from shutting down and to create new jobs as you called for, but a lot of this is very long term policies stuff.

Darren McKinney: Well, unfortunately, there is no energy bill in anybody's imagination, that I'm aware of, that's going to solve things tomorrow. That will, to borrow the metaphor, flip a switch and miraculously give us all of the energy we can use as of tomorrow or next year. It is inherently a long-term undertaking. I mean, if you're going to explore for and extract natural gas or oil that takes time. If you're going to research and develop a Jules Verne-like energy technology that no one around this table is yet to imagine, needless to say, that's going to take time. Even wind turbines and solar, neither of which can, in the market, provide the energy bang for the buck that fossil fuels can today. All of that is going to take time to develop, but the sooner we start the sooner business investors can have some confidence. Well, all right, we're going to move in the right direction. There's legislation that will move us in the right direction, therefore I am now more confident in placing my chips behind XYZ technology or research or development. So at least we begin to move the ball and that's something we really ought not hesitate any longer with.

Mary O'Driscoll: OK. Well, Bracken, what about you? This kind of short-term, long-term situation, I mean it is pretty long-term when you're looking at developing the renewables. As much as the market strides that the solar and wind energy industries have made over the past years, they're really still a very, very small portion of the electric generation.

Bracken Hendricks: That's absolutely true. First I want to just clarify one thing, that I think there is fairly broad consensus among environmental groups and business that there is some need for expansion of our natural gas supplies, including sustainably extracted and well regulated increase of domestic natural gas, increased use of the imports, liquefied natural gas will play some part in that. Liquefied natural gas does present certain challenges from a security perspective and we need to be aware of that. It also increasingly does in the utility sector what's already happened in our transportation sector of relying on imported sources of energy from OPEC countries and from less stable, less democratic nations. So certainly, while we absolutely need to recognize the importance of natural gas and the importance of increasing supply, we want to do it in a mindful way and have a broad based approach that includes other technologies and diversifies our energy supply, because that only makes sense from an economic perspective. In terms of the short-term and long-term issues, energy efficiency is one of the most cost effective and readily deployable forms of energy. In fact, if you look at it as a source of energy, over the last three decades energy efficiency has met more of the increased demand by reducing the predicted growth of our demand for energy than imported oil or natural gas. It's a very substantial contributor to our overall mix. It's also 65 percent cheaper on average per kilowatt than investing in new plants. This is a cost effective strategy to create, to bring new sources of energy, diversified sources of energy online. It's not to diminish the importance of supply, but we're going to need both supply and demand reduction. The current energy bill actually rolls back investment in industrial energy efficiency technology by 25 percent. It cuts investment in the industries of the future program by 42 percent and reduces investment in building technology energy efficiency by 12 percent. We think that's a misplaced priority. Energy efficiency needs to be treated as a very serious contributor to our energy needs in the short term, as well as over the long term, reducing the burden that we placed on our businesses and on the planet.

Darren McKinney: Industry, manufacturers in particular, take a back seat to no one when it comes to energy efficiency. They, that is manufacturers, use roughly a third of the energy burned in America and it has been during the last 30 years, as Bracken notes, that the United States has improved its overall energy efficiency. The economy of the United States has improved its overall energy efficiency by nearly 50 percent and manufacturers have led the way, whether it be within their own energy usage or within the development of the technologies that are used throughout the rest of the economy in other economic sectors. So they have all the incentive in the world, particularly in light of inevitable shortages or at least decreasing supplies of fossil fuels and so forth, they have all the incentive in the world to become as efficient as they can reasonably afford to become and we would argue that government needn't take a lead role, much less taxing of businesses and citizens to make federal investments. The private sector is doing very, very well, evidence the 50 percent increase in efficiency during the course of the last 30 years. The private sector is on the right track. Taking money from that taxpayers who could otherwise invest and make private sector market oriented investments in the energy technologies of the future, we think, is a far better way to go than the government taxing people to make decisions about which technologies win and which will lose.

Mary O'Driscoll: OK, go ahead.

Bracken Hendricks: I'd love to follow on that. I think Darren and I are actually in pretty strong agreement about this point. The manufacturing sector has led the way on energy efficiency and there are strong market incentives to improve energy efficiency. There is more that could be done and when energy efficiency improvements are made they generally reduce bottlenecks in the production process and improve productivity, so where incentives for positive investments in modernizing technology, upgrading plants, retraining workers are in place, that's a benefit to our manufacturing establishments. It's also a benefit to the larger energy economy. One of the things that we're stressing in energy efficiency is manufacturing does use only 36 percent of energy and we have a number of very energy intensive industries. The aluminum industry is hurting on the West Coast right now. There's only two major aluminum manufacturers that are currently active and they're working at reduced capacity right now because of the spike in energy costs. We've seen in the chemical industry and fertilizers that 80 percent reductions, and also in the case of fertilizers, natural gas making up 80 percent of the cost of production. These are very, very serious pressures placed by price spikes. If we can reduce demand in commercial electrical use, in business and residential use, we can actually improve the overall economy. So what we're trying to do is use renewables where it's appropriate to shave peak load, to use energy efficiency to drive down the use of electricity in our built environment. So we need a broad-based approach. It's not a question of trying to place all the burdens on manufacturers or to place taxation as the only policy tool. In fact, policy does matter and where incentives exist markets follow.

Mary O'Driscoll: Well I'd like to know, especially on the subject of natural gas, with the fertilizer manufacturers and the chemical industry and the pharmaceuticals that are heavy users of natural gas. They've just, they've shut down and moved everything offshore and the loss of jobs, everything is very immediate at that point. Can you be expected to conserve your way out of that or can the rest of the economy be expected to conserve its way out of that to provide more gas? There's got to be new supplies coming in somewhere.

Darren McKinney: Conservation, efficiency are wonderful things. We believe, that is manufacturers believe, that they have all the incentive in the world as is, to pursue those laudable goals, as does much of the rest of the economy, but there are several other factors at play. Bracken seems to be a very reasonable gentleman and I'm not taking issue with him per se, but certainly many of the folks he knows in the environmental community want to have it both ways, we're talking about natural gas in this instance. Natural gas is so increasingly scarce for a variety of reasons, not the least of which is that there has been increasing pressure to use it to create electric power as opposed to using abundant coal. Whether you think that's good or not, that is to say, using less coal whether you think that's good or not, natural gas is driving more and more electricity generation plants around the country. At the same time, the same environmental groups that insist that coal be retired, even though we have coal till the cows come home in Appalachia and elsewhere, those that insist that coal be retired, even though there are promising technologies like carbon sequestration and clean coal, which are being developed and are soon enough to come on line, within a decade 15 years. They're also the same ones saying, well, no, but you can't drill for any more natural gas. You can't look in the Rockies. You can't go to ANWR. You can't look off the coastal shelf. So it seems to me they're trying to have it both ways. They're saying, hey look, you've got use more natural gas, but we're not going to let you produce any here domestically. You can't have it both ways without threatening the economy and the cost of energy, which is so critical to the economy. I think that we've got to have policy makers aware of that and be willing to take a stand and say, hey you know what, environmentalists, we agree with you. We need cleaner air. We need to reduce pollution and emissions, but we've got to be practical and the only way that you, history shows us, the only way you make environmental improvements, the only way you can afford to make environmental improvements is to have a growing economy.

Colin Sullivan: You addressed coal and you addressed air pollution, but your organization, you support Clear Skies.

Darren McKinney: Yes.

Colin Sullivan: As currently written, Senator Inhofe's bill, correct?

Darren McKinney: Yes.

Colin Sullivan: Now it looks like in order to get through the EPW Committee they're going to have to have some kind of compromise, potentially on carbon. Now what would your organization accept on carbon? You talk about sequestration, what exactly would you accept? I know you wouldn't accept a mandatory cap --

Darren McKinney: Right.

Colin Sullivan: But would you accept some sort of carbon compromise to get those swing votes, to get it through committee?

Darren McKinney: I don't, I mean the NAM is, at this moment, has not heard of any type of carbon compromise that is intriguing to us, that is attractive to us. Certainly, in general terms, the regulation of carbon dioxide is a non-starter for us in that we don't deem it a pollutant and thus it is out of bounds as far as the Clean Air Act is concerned and we've not heard anything that's attractive to date.

Colin Sullivan: Is your perspective on what he saying about coal, we need to rely more on coal, is that --

Bracken Hendricks: Well let me first clarify one thing, the Apollo Alliance is, in fact, not an environmental organization per se. We are an alliance that includes environmental groups, organized labor, community representatives with more of a social justice perspective and business leaders who are very concerned about the bottom line. So we've done is to try and assemble a coalition for a broad based, positive, investment driven energy policy. So we're trying to marshal a political coalition around positive solutions and we have taken on the issue of coal. I agree strongly that with over 50 percent of our electricity coming from coal, it's an issue you need to deal with. You can't wish it away. You can't wish away the issues of increasing supply shortages in natural gas. This is one of the reasons we take conservation and energy efficiency so seriously and the diversification of our energy mix. We believe that research and development and deployment of carbon capture integrated gasification and combined cycle generation of electricity using coal with a capture and sequestration of carbon is very likely to be a very important part of the future of our energy mix. I think you're seeing a number of people in the environmental community understanding that with a global energy economy poised to see explosive growth in coal, if they're taking threats to the global atmosphere and climate change seriously, they need to have a strategy for addressing the emission of carbon from coal generation specifically. So I think that the lines are not quite as clear cut or black and white as Darren suggests. However, we think it is important to address the environmental dimensions of this, the conservation dimensions, and we feel that we can actually build an effective coalition that is able to take action by focusing on the jobs that can be created, the security benefits of having a diversified domestic source of energy and by taking the environmental impact seriously, not only as putting the brakes on our economy, but really looking at it as a source of vitality creating new export products, creating new global markets for non-emitting non-polluting energy sources. It's very possible that this could be the new generation of export technology for America and the new source of jobs and growth within our domestic economy.

Colin Sullivan: We're out of time. So we're going to have to leave it at that. Thank you both for joining us. Mary O'Driscoll thanks for being here. Join us tomorrow for another edition of OnPoint. Until then, I'm Colin Sullivan for E&ETV.

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