Natural gas a key to future
BY ROD WALTON World Staff Writer
Saturday, May 01, 2010
5/01/10 at 3:09 PM
OKLAHOMA CITY — The OSU Energy Conference theme song — "Beautiful Day" by U2 — played over and over again Friday at the Cox Convention Center.
The conference's content at times seemed connected to the song's lyrics. Energy industry speakers repeatedly hit warning notes about the challenge of clean-energy mandates, China's growing role right in front of the U.S. and not letting competitive opportunities slip away.
"We've got to up the ante," Cornell University biofuels researcher Larry Walker said.
Most of the conference, however, centered on the desirability of domestically produced natural gas to satisfy the nation's electrical generation and fleet vehicle needs.
One of the fuel's key proponents was Chesapeake Energy Corp. CEO Aubrey McClendon, whose $30 billion company is one of the nation's top independent natural gas producers.
Natural gas is priced cheaply — as low as $4 per million British thermal units — while $80 oil is really $250 per barrel when national security, military and social costs are factored in, McClendon said.
Gas is cleaner than coal and more reliable and yet complementary to wind and solar power, he added.
"We enable these renewable technologies," McClendon said.
During a question-and-answer session, McClendon shared the stage with Oklahoma State University President Burns Hargis and Devon Energy Corp. CEO Larry Nichols. The two titans of Oklahoma City's energy industry share an intense desire to push for more natural gas production and a fear that government intervention may hamper domestic efforts.
An immediate case in point, they pointed out, is the well blowout, explosion and growing oil spill in the Gulf of Mexico. Regulators should not rush to judgment but instead determine the cause of the accident, they said, but both CEOs agreed that the Obama administration's recent crack in the door to welcome offshore drilling probably is closed now.
"The political challenge is that people will use or misuse a tragedy like that," Nichols said. "Until we know what went wrong, it's hard to fix it."
Drilling costs will rise and approval will be harder to gain for offshore projects, McClendon said.
"At the end of the day, I think it's a real setback for our country," he said.
OGE Energy Corp. CEO Pete Delaney, whose company runs electricity utility OG&E, said the U.S. will have enough challenges just keeping up with energy demand fueled by enormous economic growth in China. Domestic electrical consumption is growing by a modest 1 percent annually, he estimated, while Chinese power-generation production rises 6 percent each year.
China generates 80 percent of its electrical power from coal, while the developing giant also has 22 new nuclear plants under construction, Delaney pointed out. The U.S. hasn't built a nuclear faculty since the 1980s.
He said America will need immense investment in nuclear power, which does not emit carbon dioxide, to meet proposed federal mandates on reducing CO2 emissions by 2050. In fact, $2 trillion in overall investment on a combination of natural gas, wind, solar, nuclear and demand efficiencies is required to meet an 85 percent CO2 reduction in the next 40 years.
"If it's just us, it's not going to work very well," Delaney said, referring to U.S.-only environmental mandates. "They're very aggressive assumptions, which leads us to an honest debate about whether they're achievable."
OG&E is "fuel agnostic" and doesn't really care which mix of sources meet the market demand for clean technology and competitive pricing, Delaney said, and the push for cleaner, abundant power will need government help.
Nichols and McClendon said most international oil companies are state-run entities that receive government support. Chinese oil operatives face no barriers at home and have huge financial backing to grow their holdings in countries such as Sudan and Venezuela, they added.
The U.S. — and the Obama administration's — view toward its own energy industry is significantly less enthusiastic, McClendon said.
"Russia has a national holiday to celebrate its oil industry," he said. "I'm not thinking we're gong to get one soon."
Cornell's Walker was quick to point out that oil and gas are not the only liquid transportation fuel options.
Leaps in genomic and other agricultural research and development will play a big part in new fuels derived from switchgrass, algae or other plant sources, he said. While the number of crops wanted for food is relatively limited, the potential for fuel feedstocks grows.
"In nature, plant diversity is unreal," Walker said.
He recalled that Henry Ford and Rudolf Diesel were strong proponents of biofuels more than a century ago.
Rod Walton 581-8457
Aubrey McClendon (left) of Chesapeake and Larry Nichols of Devon: Executives from two of the industry's major corporations were at the OSU Energy Conference in Oklahoma City.