New Mix Needed to Fuel Energy Future

For all the debates about President Bush’s national energy policy, the issues are more simple than complicated.

The most basic fact pushing the new policy is an Energy Department projection that U.S. use of electricity will grow seven times faster in the next two decades than it has in the last 10 years. And, of necessity, that growth will have to be satisfied with a different mix of fuels.

Today 52% of the nation’s electric power is generated by burning coal and 16% comes from burning natural gas.

But natural gas is the growth element, projected to supply 33% of U.S. electricity 20 years from now. Coal will continue to be the largest factor in electricity generation, the Bush plan states, but its role will decline because of environmental considerations.

Techniques already in use--such as turning coal to gas before burning--can eliminate most of the polluting sulfur and nitrogen oxides. But coal’s inefficient combustion generates high levels of carbon dioxide and accompanying concerns about global warming, so its use will be in relative decline.

That’s why the energy policy talks of increasing the use of nuclear power, which supplies 20% of U.S. electricity. And that’s also why the heart of the program supports exploration for natural gas and the building of pipelines to increase the availability of that efficient, relatively clean fuel.

Why is energy use projected to rise faster than it has in the recent past? Because the use of computer networks that today control the functioning of most institutions in society--companies, schools, government--is already increasing. Such networks demand electric power that is far more reliable than ever before. And those demands have pushed the infrastructure of transmission lines and other facilities to the breaking point.

So a major thrust of the new policy is to support the modernizing of transmission systems and other infrastructure.

The plan’s very existence is positive, business people say. It’s an antidote to local bickering.

“We now have a plan about energy expansion, so a national dialogue can begin,” says Mark Stevens, head of strategic planning for Fluor Corp., a major engineering and construction company based in Aliso Viejo in Orange County.

The new policy offers a stark contrast to the past. During the last major energy crisis, which began with the 1973 oil embargo, government policy aimed to allocate scarce resources. Utilities were restricted from burning natural gas to produce electricity, for example. Now the aim is to increase production of fuels and energy.

A sure consequence will be lower prices for oil and natural gas within a few years, energy experts say. From current levels of $4 to $5 per thousand cubic feet, natural gas “will be selling for $3 to $4 by 2003,” says Thomas Robinson of Cambridge Energy Research Associates.

Such price levels, however, still will be more than double those of most years in the last decade. So the businesses of exploration, production and delivery of natural gas will remain brisk. Current U.S. consumption of natural gas is nearly 23 trillion cubic feet a year, up 21% from a decade ago.

Pushed by such demand, industry is investing in major projects--such as the natural gas pipeline from Prudhoe Bay in northern Alaska down through Canada, on which design and engineering are underway.

Oil field and gas service companies such as Halliburton Co. and BJ Services Co. have been working flat out for more than a year. Companies that survived lean years when oil and natural gas prices were low, such as Global Marine Inc., now are thriving.

Under the Bush proposals, exploration for natural gas in the Rocky Mountains and other land areas would increase. That would mean even more work for drilling and production companies such as Helmerich & Payne Inc., Noble Affiliates Inc. and Noble Drilling Corp., which have been reaping higher sales and earnings after half a decade of lean times.

Imports of natural gas will grow. Mexico’s natural gas, now being flared as it comes up with oil in the Bay of Campeche, surely will find its way north to markets in the U.S. and northern Mexico, either as liquefied natural gas or through pipelines that will be constructed.

A main thrust of the Bush proposals will be to modernize and expand electric transmission lines. And here again the new policy is focused on programs already underway.

The Federal Energy Regulatory Commission is working to set up new kinds of private companies, called regional transmission organizations, that would buy transmission lines from investor-owned and municipal utilities and ultimately meld them into a national grid.

Such RTOs, financed by institutional investors, would increase the flow of electricity across the country and, in theory, eliminate bottlenecks. That would enhance the growing practice of many utilities and companies such as Enron Corp. of trading electricity in financial futures markets. PG&E; Corp. and Sempra Energy, the holding companies for two of California’s three big investor-owned utilities, operate large power trading businesses.

But legislation would be required to establish RTOs and to acquire local transmission lines, and that issue should lead to pitched battles in Congress.

With its devotion to infrastructure, the White House energy plan is certain to give increased work to engineering and construction companies--Fluor, Bechtel Group Inc., Jacobs Engineering Group Inc., URS Corp. and Washington Group International Inc.--that already have heavy backlogs.

“We’ll be hiring engineers,” says Fluor’s Stevens--if he can find them.

The numbers of engineering graduates from U.S. universities have been declining, but as a result of opportunities presented by the Bush energy program, enrollments in engineering schools could increase. Or U.S. companies could draw on engineering expertise at their subsidiaries in Asia and Europe, where engineering graduates still are in abundance.

Bush’s energy plan, if most of its proposals win approval in Congress, would serve as a catalyst for investment in electric power generation and oil and natural gas production, as well as research on coal, nuclear and, to a lesser extent, wind and solar power and other forms of renewable energy.

Such investment always has a ripple effect on other industries. Even in the 1970s, this brought surpluses and lower prices for energy, which benefited companies in sectors as diverse as chemicals, food processing and tourism.

That is this plan’s aim also, as we look ahead to “interesting times,” in the Chinese proverb’s ambivalent phrase, for U.S. energy prospects and the economy.

*

James Flanigan can be reached at jim.flanigan@latimes.com.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Energy Disparity

Fuel sources for electricity in California and other states contrast sharply. California burns less coal but uses more renewable energy--chiefly wind, solar and geothermal power.

Sources: California Energy Commission, U.S. Department of Energy