Energy
Testimony of
R. James
Woolsey
Mr. Chairman and Members of the Committee. It’s a real pleasure to appear before this
Committee today on this issue. I am
appearing solely on my own behalf and represent no organization. By way of identification I served as Director
of Central Intelligence, 1993-95, one of the four Presidential appointments I
have held in two Republican and two Democratic administrations; these have been
interspersed in a career that has been generally in the private practice of law
and now in consulting. A major share of
the points I will make today are drawn from an August 2005 paper by former
Secretary of State, George P. Shultz, and myself, although I have updated some
points due to more recent work; the two of us are Co-Chairmen of the
Committee on the Present Danger and the full paper may be found at the
Committee’s web site (www.fightingterror.org).
Energy security
has many facets – including particularly the need for improvements to the electrical grid to
correct vulnerabilities in transformers and in the Supervisory Control and Data
(SCADA) systems. But energy independence
for the
Powering vehicles is different.
Just
over four years ago, on the eve of 9/11, the need to reduce radically our
reliance on oil was not clear to many and in any case the path of doing so
seemed a long and difficult one. Today both assumptions are being
undermined by the risks of the post-9/11 world, by oil prices, by increased
awareness of the vulnerability of the oil infrastructure (as illustrated in the
al Qaeda attacks ten days ago on the large Saudi oil facility at Abquaiq) and
by technological progress in fuel efficiency and alternative fuels.
There
are at least seven major reasons why dependence on petroleum and its products
for the lion’s share of the world’s transportation fuel creates special dangers
in our time. These dangers are all driven by rigidities and potential
vulnerabilities that have become serious problems because of the geopolitical
realities of the early 21st century. Those who reason about these issues
solely on the basis of abstract economic models that are designed to ignore
such geopolitical realities will find much to disagree with in what
follows. Although such models have utility in assessing the importance of
more or less purely economic factors in the long run, as Lord Keynes famously
remarked: “In the long run, we are all dead.”
These dangers in turn give
rise to two proposed directions for government policy in order to reduce our
vulnerability rapidly. In both cases it is important that existing
technology should be used, i.e. technology that is already in the market or can
be so in the very near future and that is compatible with the existing
transportation infrastructure. To this end government policies in the
United States and other oil-importing countries should: (1) encourage a
shift to substantially more fuel-efficient vehicles within the existing
transportation infrastructure, including promoting both battery development and
a market for existing battery types for plug-in hybrid vehicles; and (2)
encourage biofuels and other alternative and renewable fuels that can be
produced from inexpensive and widely-available feedstocks -- wherever possible
from waste products.
PETROLEUM DEPENDENCE: THE DANGERS:
1. The current transportation
infrastructure is committed to oil and oil-compatible products.
Petroleum and its products
dominate the fuel market for vehicular transportation. This dominance
substantially increases the difficulty of responding to oil price increases or
disruptions in supply by substituting other fuels. With the important
exception, described below, of a plug-in version of the hybrid
gasoline/electric vehicle, which will allow recharging hybrids from the
electricity grid, substituting other fuels for petroleum in the vehicle fleet
as a whole has generally required major, time-consuming, and expensive
infrastructure changes. One exception has been some use of liquid natural
gas (LNG) and other fuels for fleets of buses or delivery vehicles, although
not substantially for privately-owned ones, and the use of corn-derived ethanol
mixed with gasoline in proportions up to 10 per cent ethanol (“gasohol”) in
some states. Neither has appreciably affected petroleum’s dominance of
the transportation fuel market.
Moreover, in the 1970’s about 20 per cent of our
electricity was made from oil – so shifting electricity generation toward, say,
renewables or nuclear power could save oil.
But since today only about three per cent of our electricity is
oil-generated, a shift in the way we produce electricity would have almost no
effect on the transportation or oil market.
This could change over the long run, however, with the advent of plug-in
hybrid vehicles, discussed below.
There are imaginative
proposals for transitioning to other fuels for transportation, such as hydrogen
to power automotive fuel cells, but this would require major infrastructure
investment and restructuring. If privately-owned fuel cell vehicles were
to be capable of being readily refueled, this would require reformers
(equipment capable of reforming, say, natural gas into hydrogen) to be located
at filling stations, and would also require natural gas to be available there
as a hydrogen feed-stock. So not
only would fuel cell development and technology for storing hydrogen on
vehicles need to be further developed, but the automobile industry’s
development and production of fuel cells also would need to be coordinated with
the energy industry’s deployment of reformers and the fuel for them.
Moving toward automotive fuel
cells thus requires us to face a huge question of pace and coordination of
large-scale changes by both the automotive and energy industries. This poses a
sort of industrial Alphonse and Gaston dilemma: who goes through the door
first? (If, instead, it were decided that existing fuels such as gasoline
were to be reformed into hydrogen on board vehicles instead of at filling
stations, this would require on-board reformers to be developed and added to
the fuel cell vehicles themselves – a very substantial undertaking.)
It is because of such
complications that the National Commission on Energy Policy concluded in its
December, 2004, report “Ending The Energy Stalemate” (“ETES”) that
“hydrogen offers little to no potential to improve oil security and reduce
climate change risks in the next twenty years.” (p. 72)
To have an impact on our
vulnerabilities within the next decade or two, any competitor of oil-derived
fuels will need to be compatible with the existing energy infrastructure and
require only modest additions or amendments to it.
2. The Greater
Home of around two-thirds of
the world’s proven reserves of conventional oil -- 45% of it in just
Even if other production comes
on line, e.g. from unconventional sources such as tar sands in Alberta or shale
in the American West, their relatively high cost of production could permit
low-cost producers of conventional oil, particularly Saudi Arabia, to increase
production, drop prices for a time, and undermine the economic viability of the
higher-cost competitors, as occurred in the mid-1980’s. If oil supplies have
peaked or are peaking in
3. The petroleum
infrastructure is highly vulnerable to terrorist and other attacks.
The radical Islamist movement,
including but not exclusively al Qaeda, has on a number of occasions explicitly
called for worldwide attacks on the petroleum infrastructure and has carried
some out in the Greater Middle East. A more well-planned attack than the
one that occurred ten days ago at Abquaiq -- such as that set out in the opening
pages of Robert Baer’s recent book, Sleeping With the Devil, (terrorists
flying an aircraft into the unique sulfur-cleaning towers at the same facility)
-- could take some six million barrels per day off the market for a year or
more, sending petroleum prices sharply upward to well over $100/barrel and
severely damaging much of the world’s economy. Domestic infrastructure in
the West is not immune from such disruption.
Last summer’s accident in the
In view of these overall
infrastructure vulnerabilities policy should not focus exclusively on petroleum
imports, although such infrastructure vulnerabilities are likely to be the most
severe in the Greater Middle East. It is there that terrorists have the
easiest access, and the largest proportion of proven oil reserves and low-cost
production are also located there. But nothing particularly useful is
accomplished by changing trade patterns. To a first approximation there
is one worldwide oil market and it is not generally helpful for the
4. The possibility exists,
both under some current regimes and among those
that could come to power in the Greater
It is often said that whoever
governs the oil-rich nations of the Greater Middle East will need to sell their
oil. This is not true, however, if the rulers choose to try to live, for
most purposes, in the seventh century. Bin Laden has advocated, for example,
major reductions in oil production and oil prices of $200/barrel or more. As a
jihadist Web site has just stated in the last few days: “[t]he killing of 10
American soldiers is nothing compared to the impact of the rise in oil prices
on
Moreover, in the course of elaborating on Iranian
President Ahmedinejad’s threat to destroy Israel and the US, his chief of
strategy, Hassan Abbassi, has recently bragged that Iran has already “spied
out” the 29 sites “in America and the West” which they (presumably with help
from Hezbollah, the world’s most professional terrorist organization) are
prepared to attack in order to “destroy Anglo-Saxon civilization.” One can bet with reasonable confidence that
some of these sites involve oil production and distribution.
In 1979 there was a serious
attempted coup in
Even if one is optimistic that democracy and the rule of
law will spread in the Greater Middle East and that this will lead after a time
to more peaceful and stable societies there, it is undeniable that there is
substantial risk that for some time the region will be characterized by chaotic
change and unpredictable governmental behavior. Reform, particularly if it is
hesitant, has in a number of cases in history been trumped by radical takeovers
(Jacobins, Bolsheviks). There is no reason to believe that the Greater
Middle East is immune from these sorts of historic risks.
5. Wealth transfers from
oil have been used, and continue to be used, to fund terrorism and Its ideological support.
Estimates of the amount spent
by the Saudis in the last 30 years spreading Wahhabi beliefs throughout the
world vary from $70 billion to $100 billion. Furthermore, some oil-rich
families of the Greater Middle East fund terrorist groups directly. The
spread of Wahhabi doctrine – fanatically hostile to Shi’ite and Suffi Muslims,
Jews, Christians, women, modernity, and much else – plays a major role with respect
to Islamist terrorist groups: a role similar to that played by angry
German nationalism with respect to Nazism in the decades after World War
I. Not all angry German nationalists became Nazis and not all those
schooled in Wahhabi beliefs become terrorists, but
in each case the broader doctrine of hatred has provided the soil in which the
particular totalitarian movement has grown. Whether in lectures in the madrassas
of
On all points except allegiance to the Saudi state
Wahhabi and al Qaeda beliefs are essentially the same. In this there is another rough parallel to
the 1930’s -- between Wahhabis’ attitudes toward al Qaeda and like-minded
Salafist Jihadi groups today and Stalinists’ attitude toward Trotskyites some
sixty years ago (although there are of course important differences between
Stalin’s Soviet Union and today’s Saudi Arabia). The only disagreement between Stalinists and
Trotskyites was on the question whether allegiance to a single state was the
proper course or whether free-lance killing of enemies was permitted. Stalinist
hatred of Trotskyites and their free-lancing didn’t signify disagreement about
underlying objectives, only tactics, and Wahhabi/Saudi cooperation with us in
the fight against al Qaeda doesn’t indicate fundamental disagreement between
Wahhabis and al Qaeda on, e.g., their common genocidal fanaticism about Shia,
Jews, and homosexuals. So Wahhabi
teaching basically spreads al Qaeda ideology.
It is sometimes contended that
we should not seek substitutes for oil because disruption of the flow of funds
to the Greater Middle East could further radicalize the population of some
states there. The solution, however, surely lies in helping these states
diversify their economies over time, not in perpetually acquiescing to the
economic rent they collect from oil exports and to the uses to which these
revenues are put.
6. The current account deficits for the
The
For developing nations, the
service of debt is a major factor in their continued poverty. For many,
debt is heavily driven by the need to import oil that at today’s oil prices
cannot be paid for by sales of agricultural products, textiles, and other
typical developing nation exports.
If such deficits are to be reduced, however, say by domestic production of
substitutes for petroleum, this should be based on recognition of real economic
value such as waste cleanup, soil replenishment, or other tangible benefits.
7. Global-warming gas
emissions from man-made sources create at least the risk of climate change.
Although the point is not
universally accepted, the weight of scientific opinion suggests that global
warming gases (GWG) produced by human activity form one important component of
potential climate change. Recently in the Wall Street Journal the
Nobel-Prize winning economist, Thomas Schelling, surveyed the data and
concluded that we should, if effect, buy “insurance” against climate change by
reducing our emissions. Oil products
used in transportation provide a major share of
THREE PROPOSED DIRECTIONS FOR POLICY:
The above considerations
suggest that government policies with respect to the vehicular transportation
market should point in the following directions:
1. Encourage improved vehicle mileage,
using technology now in production.
The following three
technologies are available to improve vehicle mileage substantially:
Diesels
First, modern diesel vehicles
are coming to be capable of meeting rigorous emission standards (such as Tier 2
standards, being introduced into the
Heavy penetration of diesels
into the private vehicle market in
Hybrid gasoline-electric
Second, hybrid
gasoline-electric vehicles now on the market generally show substantial fuel
savings over their conventional counterparts. The National Commission on
Energy Policy found that for the four hybrids on the market in December 2004
that had exact counterpart models with conventional gasoline engines, not only
were mileage advantages quite significant (10-15 mpg) for the hybrids, but in
each case the horsepower of the hybrid was higher than the horsepower of the
conventional vehicle. (ETES p. 11)
Light-weight Carbon Composite Construction
Third, constructing vehicles
with inexpensive versions of the carbon fiber composites that have been
used for years for aircraft construction can substantially reduce vehicle
weight and increase fuel efficiency while at the same time making the vehicle
considerably safer than with current construction materials. This is set forth
thoroughly in the 2004 report of the Rocky Mountain Institute’s Winning the
Oil Endgame (“WTOE”). Aerodynamic design can have major importance as
well. Using such composites in construction breaks the traditional tie
between size and safety. Much lighter vehicles, large or small, can be
substantially more fuel-efficient and also safer. Such composites have already
been used for automotive construction in Formula 1 race cars and are now being
adopted in part by BMW and other automobile companies. The goal is
mass-produced vehicles with 80% of the performance of hand-layup aerospace
composites at 20% of the cost. Such construction is expected
approximately to double the efficiency of a normal hybrid vehicle without
increasing manufacturing cost. (WTOE 64-66).
2. Encourage the
commercialization of alternative transportation fuels that can be available
soon, are compatible with existing infrastructure, and can be derived from
waste or otherwise produced cheaply.
Biomass (cellulosic) ethanol.
The use of ethanol produced
from corn in the
Although human beings have
been producing ethanol, grain alcohol, from sugar and starch for millennia, it
is only in recent years that the genetic engineering of biocatalysts has made
possible such production from the hemicellulose and cellulose that constitute
the substantial majority of the material in most plants. The
genetically-engineered material is in the biocatalyst only; there is no need
for genetically modified plants.
These developments may be
compared in importance to the invention of thermal and catalytic cracking of
petroleum in the first decades of the 20th century – processes which made it
possible to use a very large share of petroleum to make gasoline rather than
the tiny share that was available at the beginning of the century. For
example, with such genetically-engineered biocatalysts it is not only grains of
corn but corn cobs and most of the rest of the corn plant that may be used to
make ethanol.
Such biomass, or cellulosic,
ethanol is now seeing commercial production begin first in a facility of the
Canadian company, Iogen, with backing from Shell Oil, at a cost of around
$1.30/gallon. The National Renewable Energy Laboratory estimates costs will
drop to around $1.07/gallon over the next five years, and the Energy Commission
estimates a drop in costs to 67-77 cents/gallon when the process is fully
mature (ETES p. 75). The most common feedstocks will likely be
agricultural wastes, such as rice straw, or natural grasses such as
switchgrass, a variety of prairie grass that is often planted on soil bank land
to replenish the soil’s fertility. There will be a
decided financial advantages in using as feedstocks any wastes which
carry a tipping fee (a negative cost) to finance disposal: e.g. waste paper, or
rice straw, which cannot be left in the fields after harvest because of its
silicon content.
Old or misstated data,
frequently dealing with corn ethanol, are sometimes cited for the proposition
that huge amounts of land would have to be introduced into cultivation or taken
away from food production in order to have enough biomass available for
cellulosic ethanol production. This is incorrect. The National
Commission on Energy Policy reported in December that, if fleet mileage in the
U.S. rises to 40 mpg -- somewhat below the current European Union fleet average
for new vehicles of 42 mpg and well below the current Japanese average of 47
mpg – then as switchgrass yields improve modestly to around 10 tons/acre it
would take only 30 million acres of land to produce sufficient cellulosic
ethanol to fuel half the U.S. passenger fleet. (ETES pp.
76-77). By way of calibration, this would essentially eliminate
the need for oil imports for passenger vehicle fuel and would require only the
amount of land now in the soil bank (the Conservation Reserve Program (“CRP”)
on which such soil-restoring crops as switchgrass are already being
grown. Practically speaking, one would probably use for ethanol
production only a little over half of the soil bank lands and add to this some
portion of the plants now grown as animal feed crops (for example, on the 70
million acres that now grow soybeans for animal feed). In short, the U.S
.and many other countries should easily find sufficient land available for
enough energy crop cultivation to make a substantial dent in oil use. (
Some also have an erroneous impression that ethanol generally
requires as much fossil fuel energy to produce it as one obtains from it and
that its use does not substantially reduce global warming gas emissions.
This is also incorrect. The production
and use of ethanol merely recycles in a different way the CO2 that has been
fixed by plants in the photosynthesis process. It does not release carbon
that would otherwise stay stored underground, as occurs with fossil fuel use.
But when starch, such as corn, is used for ethanol
production much fossil-fuel energy is consumed in the process of fertilizing,
plowing, and harvesting. Much of this is the natural gas required to produce
fertilizer. But corn ethanol still
normally produces a very large (over 90 per cent) reduction in the use of oil
compared to gasoline. Starch-based
ethanol reduces greenhouse gas emissions to some degree, by around 30 per
cent.
But because so little energy is required to cultivate
crops such as switchgrass for cellulosic ethanol production, and because
electricity can be co-produced using the residues of such cellulosic fuel
production, the energy requirements for converting switchgrass and other
cellulosics to ethanol is very small.
Indeed, with the right techniques reductions in greenhouse gas emissions
for celluslosic ethanol when compared to gasoline are greater than 100 per
cent. The production and use of cellulosic ethanol can be, in other
words, a carbon sink. (ETES p. 73)
Biodiesel and Renewable Diesel
The National Commission on
Energy Policy pointed out some of the problems with most current biodiesel
“produced from rapeseed, soybean, and other vegetable oils – as well as . . .
used cooking oils.” It said that these are “unlikely to become economic
on a large scale” and that they could “cause problems when used in blends
higher than 20 percent in older diesel engines”. It added that “waste oil
is likely to contain impurities that give rise of undesirable emissions.” (ETES
p. 75)
The Commission notes, however,
that biodiesel is generally “compatible with existing distribution
infrastructure” and outlines the potential of a newer process (“thermal
depolymerization”) that produces renewable diesel without the above
disadvantages, from “animal offal, agricultural residues, municipal solid
waste, sewage, and old tires”. (This was designated “Renewable Diesel” in
the Energy Act of this past summer.) The
Commission points to the current use of this process at a Conagra turkey
processing facility in
There have also been promising reports of the potential
for producing renewable diesel from algae.
Other Alternative Fuels
Progress has been made in
recent years on utilizing not only coal but slag from strip mines, via
gasification, for conversion into diesel fuel using a modern version of the
gasified-coal-to-diesel process used in
In the realm of
non-conventional oil, the tar sands of
3. Encourage the
commercialization of plug-in hybrids and improved batteries.
A modification to some types
of hybrids can permit them to become “plug-in-hybrids,” drawing power from the
electricity grid at night and using an all-electric mode for short trips before
they move to operating in their gasoline-electric mode as hybrids. With a
plug-in hybrid vehicle one has the advantage of an electric car, but not the
disadvantage. Electric cars cannot be recharged if their batteries run down
at some spot away from electric power. But since all hybrids have tanks
containing liquid fuel, plug-in hybrids have no such disadvantage.
The “vast majority of the most fuel-hungry trips are . .
. well within the range” of current (nickel-metal hydride) batteries’ capacity,
according to Huber and Mills (The, Bottomless
Well, 2005, p. 84). Current Toyota Priuses sold in
Indeed the
Moreover the attractiveness to
the consumer of being able to use electricity from overnight charging for a
substantial share of the day’s driving is stunning. The average residential
price of electricity in the
Although the use of off-peak
power for plug-in hybrids should not require substantial new investments in
electricity generation for some time (until millions of plug-ins are on the
road), greater reliance on electricity for transportation should lead us to
look particularly to the security of the electricity grid as well as the fuel
we use to generate electricity. Even
though plug-in hybrids would be drawing power from the grid to charge their
batteries and drive the first 30- or so miles each day, ongoing studies suggest
their use would sharply reduce global warming gas emissions compared to driving
the same amount of mileage on gasoline.
Conclusion
The dangers of dependence on
conventional oil in today’s world require us both to look to ways to reduce
demand for it and to increase the supply of alternatives.
The realistic opportunities
for reducing demand soon suggest that government policies should encourage
hybrid gasoline-electric vehicles, particularly
whatever battery work is needed to bring plug-in versions thereof to the
market, and modern diesel technology. Light-weight carbon composite
construction should also be pursued. The realistic opportunities for increasing
supply of transportation fuel soon suggest that government policies should
encourage the commercialization of alternative fuels that can be used in the
existing infrastructure: cellulosic ethanol, biodiesel/renewable diesel,
and (via plug-in hyrids) off-peak electricity. Both of the liquid fuels
could be introduced more quickly and efficiently if they achieve cost
advantages from the utilization of waste products as feedstocks.
The effects of these policies
are multiplicative. All should be pursued since it is impossible to
predict which will be fully successful or at what pace, even though all are
today either beginning commercial production or are nearly to that point.
Incentives for all should replace the current emphasis on automotive hydrogen
fuel cells.
If even one of these technologies
is moved promptly into the market, the reduction in oil dependence could be
substantial. If several begin to be successfully introduced into
large-scale use, the reduction could be stunning. For example, a 50-mpg
hybrid gasoline/electric vehicle, on the road today, if constructed from carbon
composites would achieve at least 100 mpg. If it were also a Flexible Fuel
Vehicle able to operate on 85 percent cellulosic ethanol, it would be achieving
hundreds of miles per gallon (of petroleum-derived fuel). If it were also
a plug-in, operating on either upgraded nickel-metal-hydride or newer
lithium-ion batteries, so that 30-mile trips could be undertaken on its
overnight charge before it began utilizing liquid fuel at all, it could be
obtaining in the range of 1000 mpg (of petroleum). If it were a diesel utilizing biodiesel
or renewable diesel fuel its petroleum mileage could be infinite.
A range of important objectives – economic, geopolitical,
environmental – would be served by our embarking on
such a path. Of greatest importance, we would be substantially more
secure.
R. JAMES
WOOLSEY
R. James Woolsey joined Booz Allen Hamilton in July 2002 as a Vice President and
officer in the firm’s Global Resilience practice, located in
During
his 12 years of government service Mr. Woolsey was: Director of Central Intelligence from 1993 to
1995; Ambassador to the Negotiation on Conventional Armed Forces in Europe
(CFE),
Mr.
Woolsey is currently Co-Chairman (with former Secretary of State George Shultz)
of the Committee on the Present Danger.
He is also Chairman of the Advisory Boards of the Clean Fuels Foundation
and the New Uses Council, and a Trustee of the Center for Strategic &
International Studies and the Center for Strategic & Budgetary
Assessments. He also serves on the
National Commission on Energy Policy.
Previously, he was Chairman of the Executive Committee of the Board of
Regents of The Smithsonian Institution, and a trustee of
Mr.
Woolsey is presently a managing director of the Homeland Security Fund of
Paladin Capital Group. He also serves as
Vice Chairman of the Advisory Board of Global Options LLC, and as a member of
VantagePoint Management, Inc.’s Cleantech Advisory Council. He has served in the past as a member of
boards of directors of a number of other publicly and privately held companies,
generally in fields related to technology and security, including Martin
Marietta; British Aerospace, Inc.; Fairchild Industries; Yurie Systems, Inc.;
and USF&G. He also served as a
member of the Board of Governors of the Philadelphia Stock Exchange.
Mr.
Woolsey was born in
Mr. Woolsey is a frequent contributor of
articles to major publications, and from time to time gives public speeches and
media interviews on the subjects of foreign affairs, defense, energy, critical
infrastructure protection and resilience, and intelligence. He is married to
Suzanne Haley Woolsey and they have three sons, Robert, Daniel, and Benjamin.