January 09, 2015 11:19 AM UTC

KeystoneXL and New Energy Strategies in an Era of Abundance

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• by: MichaelBowman

(Promoted by Colorado Pols)

Just over 40 years ago the US economy experienced a first: an oil embargo by (then) OAPEC that quadrupled the price of oil.  It was our first 'oil shock', to be followed by a second 'shock' in 1979.  The US response, in part, was the creation of the Strategic Petroleum Reserve (SPR).  Our national response, rational for the time, was rooted a mindset of scarcity. 

Like relics of Cold War mentality, it's time to move ourselves from a mindset of scarcity to a mindset of abundance.  SRP has the pumping capacity to bring a maximum of 4.4 million barrels/day in to the market place in a national emergency from it's maximum holding capacity of 727 million barrels.  To put that in perspective, our national fleet of ethanol plants today produce an annual equivalent of roughly one-half the total supply of what is the largest emergency oil supply in the world!!

In the past there have been Congressional attempts to manipulate the SRP for various reasons:  Democrats have sought to tap the reserve to lower prices in times of high prices, Republicans have hinted at doubling the capacity of the reserve in anticipation of continued Middle Eastern conflicts.  It all depends on what your definition of 'strategic' might be on any given day through a political lens.  One on hand, using the supply to lower prices robs the unconventional oils from market prices high enough to establish a legitimate economic model for extraction; on the other, as we are experiencing today, low oil prices are putting hundreds of millions of dollars daily in new, disposable income in Americans pockets.  Given the interconnectedness of global markets and global energy production today, our definition of 'strategic' must be increasingly understood in a more comprehensive systems approach: the economy, our national security, rural development and our soft power in international diplomacy.

Our changing climate is also proposing a new threat to the SPR: located in four Gulf states, refinery capacity for the oil is located in some of the most vulnerable areas for disruption for hurricanes and rising ocean waters.

The $4 billion invested by Congress in 1975 to create the SPR equates to $18 billion in today's dollars; that level of strategic investment by Congress in the USDA/DOE advanced biofuels programs would deliver us an abundance.  An abundance of jobs, an abundance of economic activity and a much needed new tax base in rural America.  This begs the question, "where do we go from here?".  How do we capitalize on our abundance of resources to keep the price of oil from ever choking our economy again? Our lack of a national energy policy remains problematic; the inability for Congress to get beyond end-of-year-retroactive policy borders the criminal.  It's time we put American back in the American Petroleum Institute – and it's time we recognize that today's technology and vast natural resources give American agriculture the ability to bring billions of new, liquid fuel supplies in to the marketplace.  A recently-completed study by DOE quantified that we produce in excess of 1.2 billion tons of agricultural and forest waste annually; converting just 1/7th of those resources to advanced biofuels would produce more energy than would flow down the proposed KeystoneXL.

We are no longer a petroleum nation, we are a liquid fuels nation, and Colorado is no wallflower in the research institutions and private enterprises who call our Front Range home. A new focus on the 'strategy' of the 'Strategic Petroleum Reserve' would be good for our state – and good for our agricultural communities.

It's been some time since we've seen such an opportunity. What better time to address the structural problems in our national infrastructure and non-existent energy policy than when prices are at current levels?  We can find the necessary balance – but it won't happen in a vacuum, nor by itself.  A new Congress has been seated, and with it more rural representation than ever before.  Let's hope they don't forget where they came from – and that it's time to be strategic in a very American kind of way: doubling of our strategic reserves through the establishment of a national, distributed, advanced biofuels infrastructure.