Technology
Federal fuels program termed insufficient ERDA advisory committee worries about government's lack of sense of urgency, thinks program couldn't avert an energy crisis Doubt is growing that current programs of the Energy Research & Development Administration will be able to avert a major energy crisis in the near future. At an early-December meeting of ERDA's Advisory Committee for Fossil Energy, held at Argonne National Laboratory, one of the chief concerns was that neither Congress nor the Administration has manifested the required sense of urgency over energy matters. Even if President Ford's energy program is completed on schedule, and some committee members doubt that it will be, the U.S. still will have to bargain with the Organization of Petroleum Exporting Countries. Prolonged Congressional vacillation over oil and gas deregulation and the apparent impotence of the Federal Power Commission are two more problems slowing development of a synthetic fuels industry. But more important are problems of financing an embryo coal conversion industry, achieving a reasonable compromise between environmental acceptability and quick action, and dealing with the possibility that reallocation of development funds will favor nuclear power. If there is no sense of urgency in Congress, there certainly is in the committee. As on previous occasions, energy
ERDA is planning on these plants for commercialization Type plant
Prob- Estiable mated num- capac- Affecting ity" ber industry
High~Btu coal 3 gasification Oil shale conversion 2 Substitute fue Is 4 Utility/ ind us trial users Biomass conversion 5 (gas/liquid) 14 TOTAL
40 50 25
6
Pipeline gas Petroleum Utilities/ industrial users Various
350
a Thousands of bbl per day oil or oil equivalent. Source: Environmental Research & Development Administration
24
C&EN Dec. 22, 1975
consultant Philip Sporn was the most persistent in calling for greater effort from ERDA to activate lawmakers in upgrading the priorities for a synthetic fuels industry. "Another Arab oil embargo," Sporn says, "would be a disaster." He would not be surprised if there was an embargo in late 1976 or early 1977. About the only positive result of another embargo, he believes, is that it would activate the government as nothing else would. ERDA's present plan, which follows the guidelines set up by the President's Interagency Task Force on Energy, concentrates on demonstration of technical, environmental, and economic feasibility of commercial-scale plants using available technology. At present, this means to ERDA from 12 to 15 plants of commercial size, using different energy resources, and having a total capacity of 350,000 bbl per day oil equivalent. If the plan succeeds, by 1978 the decision will have to be made on increasing the total capacity 650,000 bbl per day. One of the problems with a mixed bag of synthetic fuel plants, particularly in the prototype commercialization stage, is the difference in character between the affected industries. After raising such questions, the committee was told that highly regulated industries tend to be more conservative in their attitudes than do less regulated industries. Electricity generating companies, for example, operate on lower profit margins but can pass along more of the development costs. Oil companies, on the other hand, are more inclined to take risks but can't pass along as much of the development costs and, correspondingly, require higher profit margins. The varying character of affected industries also is evident in the financial incentives suggested by ERDA. Pipeline gas-from-coal plants are being encouraged with loan guarantees of up to 75% of project costs. The same is being suggested for biomass conversion. In the less regulated industries, the loan guarantees would be 50% or less. However, judging from committee discussion, most companies still are not convinced that they can enter the synthetic fuels business without additional incentives. One basic problem is the very high capital investment required for "first of a kind" plants. In some cases it is anticipated that there is simply too much risk for many companies to get involved at all. One uncertainty is the future competitive
price for oil. If OPEC producers were to drop the world oil price, even temporarily, this might result in investment default. There is no assurance that an investor could remain competitive over the next 20 years, and that is a basic requirement. However, ERDA believes that world oil supplies will decrease to a point where prices will be determined by supply-and-demand considerations and not by OPEC cartel pricing policies. Another uncertainty is inflation, with associated problems of materials and labor availability. When combined with the high ratio of risk to company assets, there is little prospect for eager participation in the program by private capital. ERDA believes that without federal incentives and/or regulatory changes, it is unlikely that significant quantities of synthetic fuels will appear before 1985 or that any large-scale private investment in a synthetic fuels industry will occur before 1995. Most of ERDA's projections of fossil fuel supply and demand are based on a model developed by Stanford Research Institute and Gulf Oil Co. But not all of the projections are acceptable to the members of the advisory committee. Alaskan oil, for example, is shown to have little effect on the long-term picture. Likewise, the use of shale oil and fuels and feedstocks from the continental shelf is projected to do little more than buy some time, maybe 10 years or so. Committee members expect a greater impact from both sources. One of the few optimistic presentations heard by the committee was ERDA's report on magnetohydrodynamics. Dr. William D. Jackson, director of ERDA's MHD division, said that some major accomplishments had been logged in the past year and that some of the time lost during the past 10 years probably will be made up. However, even the most optimistic outlook relegates significant amounts of MHD power to the long-term future. Despite the gloomy prospects, firstgeneration coal conversion technology is available, plants can be built, and there are second-generation processes nearing the demonstration stage. Most of the problems are organizational, political, financial, and environmental. The impact on U.S. society of a quickly developed industry of such massive proportions as a synthetic fuels industry will be hard to accommodate. Yet there is little doubt that it can be done, and, some observers say, the sooner the better. •
