(Global warming has a complementary issue: peak oil. This entry is about how oil availability must be another driving force behind out need to reduce our dependence on fossil fuels. – promoted by mataliandy)
The legislature is grappling with tremendously important issues related to energy. This work, however, has tacitly accepted the most optimistic projections of future oil availability, without any detailed consideration of how likely the projections are. Two hearings this week illustrated the gap between the amount of energy use reduction the legislature is striving for and what may be forced upon us by reduced oil availability.
On Wednesday, the Senate Natural Resources and Energy Committee heard testimony about peak oil, its effect on oil prices and availability, Vermont’s vulnerability, and policies that could reduce our vulnerability. On Thursday, the House Natural Resources and Energy Committee heard testimony about the benefits and funding of a buildings efficiency program. Everyone testifying agreed about the direction the state needs to move, yet the two sets of testimony displayed quite different assumptions about the need for speed.
On Wednesday, in a committee room packed with grassroots peak oil activists who had come from as far as Bennington and Brattleboro, I testified on behalf of the newly formed Vermont Peak Oil Political Action Group about the impacts that declining world oil production is likely to have on Vermont and Vermonters. (Scott Printz gave invaluable help in preparing the testimony.) I stressed that oil prices are five times higher than they were six years ago, and nine times higher than they were ten years ago. This has meant that Vermont households paid an average of $1833 more for gasoline in 2007 than in 2000, and that annual heating bills increased an average of $900 in the same period. Clearly, any attempt to make Vermont more affordable needs to consider how to protect Vermonters from rapidly rising oil prices.
I also pointed out that when there is less oil to go around, then reductions in oil use are not just a good idea, they’re a fact of life. The question is how we respond to them: are the reductions planned and orderly, or will we be unprepared and suffer because of it?
John Kaufmann of the Oregon Department of Energy followed, describing the Portland Peak Oil Task Force Report. He spoke from the slides (PDF) of his presentation at the North American conference of the Association for the Study of Peak Oil and Gas (ASPO) in Houston last year. Kaufmann said that the Portland Peak Oil Task Force set ground rules that they would not debate whether oil production would peak, or even when it was likely to occur, but just recognize that it is probably coming sooner rather than later. As a result, one of the major recommendations of the Task Force was that Portland reduce its use of oil and natural gas by 50% in the next 25 years.
Thursday, in a hearing held in Room 10 to accommodate all the interested listeners, Richard Sedano and Richard Cowart of Montpelier’s Regulatory Assistance Project (RAP) reported on the research that the legislature had asked them to perform on the benefits and funding sources for a program to increase the efficiency of buildings. Last year’s Energy Affordability and Climate Change bill included one version of such a program, the all-fuels efficiency utility. Jim Douglas vetoed the bill, citing his unwillingness to increase taxes on the out-of-state owners of Vermont Yankee. After the veto override failed in the House in June, the Senate passed the bill again without the Yankee tax, and the House is now considering that version of the bill.
The Department of Public Service commissioned a study which showed that money invested in the all-fuels efficiency utility would pay off for Vermonters at a rate of 3:1, using assumptions that oil prices would decline. Even with those questionable assumptions, the study projected over $450 million in energy savings for a $15 million/year investment over 10 years. The question left unanswered by both the vetoed and the new version of the bill is how to fund the all-fuels efficiency utility.
The first paragraph of Sedano and Cowart’s report echoes what we had told the Senate Natural Resources Committee the day before. It’s written so well, it’s worth quoting in full:
The average Vermonter and the Vermont economy are facing a fuel affordability challenge of historic proportions. In 2008, Vermonters will pay roughly $800 million to import fossil fuels for use in our homes, businesses, and other buildings. That’s about $340 million more [emphasis in original] than we were paying in 2004; the increase alone is more than $500 per person per year. The dollars Vermont families export for fossil fuels could otherwise stay in the Vermont economy, supporting our neighbors and our quality of life while buoying savings and local investment. By any standard, importing fossil fuels imposes a large tax on the Vermont economy. Even excluding the cost of transportation fuels, the statewide bill for fossil fuels in 2008 will be about $300 million larger than the dollars brought into the state by the entire agricultural sector, including dairy, in recent years.
The RAP report recommends “challenging but realistic goals” for blunting these cost increases through a buildings efficiency initiative, including reducing total fossil fuel consumption across all buildings by 0.5% annually, for a 6% reduction by 2017 and a 10% reduction by 2025. (By my math, a 0.6% annual reduction would be necessary to meet the 2017 and 2025 targets.) An annual investment starting at $30 million in 2010 and nearly doubling by 2015 would “save Vermont families and businesses a total of $1.5 billion on their fuel bills over the lifetimes of the improvements and measures installed between 2008 and 2017.”
There’s quite a contrast between the level of urgency that is brought to this discussion from a peak oil perspective versus an energy affordability perspective. I don’t know what assumptions the RAP calculations used about future trends in oil price and availability, but there’s no indication that they considered that oil prices would keep on their present trajectory, five times higher in six years than they are now. Nor does it appear they considered that Vermont might encounter shortages of oil, as global oil supplies diminish.
Portland, in planning to reduce their vulnerability to declining oil availability, chose to reduce total oil and gas use 2.6% per year for 25 years, to halve it. The “challenging but realistic” goals recommended in the RAP report are for a 0.6% annual reduction in the building sector, which is a mere 14% if carried out over 25 years.
The Portland goal came from their desire to adhere to the Oil Depletion Protocol, in which oil-importing nations reduce their oil consumption by a rate equal to the annual depletion in the world’s supply of recoverable oil. The Oil Depletion Protocol is viewed as a means of staying ahead of the curve of declining oil supply. However, oil exports are likely to diminish faster than world oil production, as exporting countries’ economies burn an increasing share of the oil they produce. Even the 2.6% annual reduction in oil use may not be enough to prevent supply disruptions in the US, which imports almost two thirds of the oil it uses.
I hope the legislature will seriously question whether the “challenging but realistic” goal of shaving only 1/7 of building energy use over the next quarter century is adequate for a vulnerable, oil-importing country in a world that has burned through its easily recoverable oil supplies.
Carl Etnier
You can reach me at relocalizingvermont[AT]yahoo.com