Daschle’s revenge

Last week, Federal Reserve Chairman Greenspan told Congress he was worried about the recent run-up in the “wellhead” price of U.S. natural gas.

In 2001, the average wellhead price was $4 per thousand cubic feet (MCF) and that resulted in an average price to residential consumers of about $9 per MCF. Now, the wellhead price is about $6.50, and rising. Greenspan is concerned that rising methane prices might choke off economic recovery.

We depend upon natural gas (methane) to meet a quarter of our total energy needs, consuming about a quarter of all methane produced, worldwide. We produce, ourselves, about 19 trillion cubic feet (TCF) per year and import, by pipeline, another 4 TCF from Canada.

Methane is clean-burning, so it is displacing coal and oil as a fuel in “stationary” applications.

Of course, uranium is clean-burning, too. So, nuclear power should be displacing coal and oil, not natural gas.

But, given half a chance by Congress, clean-burning methanol – made by steam reforming methane – could and should displace oil as a fuel in “mobile” applications, as well.

There is an almost inexhaustible supply of methane in Alaska, Russia and elsewhere that is not now being produced. It’s too remote to be brought here by pipeline, but it could be liquefied or converted into methanol at the wellhead and then shipped here.

Liquefied natural gas has to be transported in specially built pressurized cryogenic tanker ships to LNG terminals, where it is re-gasified and introduced into existing natural gas pipelines.

On the other hand, methanol is cheaper to produce and can essentially be transported like gasoline or fuel oil. Furthermore, almost anything that runs on oil or natural gas will run – after slight modifications – on methanol.

So, the obvious thing to do is to generate all electricity with non-polluting nuclear power. Then, convert almost everything else that isn’t mobile to either electricity or methane and everything that is mobile to imported methanol.

Of course, the corn farmers won’t allow that to happen.

They had assumed that the Clean Air Act amendments of 1990 would result in a leading role for ethanol in “reformulated” gasoline and the Energy Policy Act of 1992 would make ethanol the leading “alternate” fuel. But both acts focused on reducing atmospheric pollution – not enriching corn growers.

The Clean Air Act amendments required gasoline to be “reformulated’ with “oxygenates” in certain regions and at certain times of the year. MTBE (Methyl tertiary butyl ether) – which is made from methanol – turned out to be a far more cost-effective oxygenate than ethanol.

What a success story!

The Energy Policy Act of 1992 required federal and state governments and certain private-sector entities to purchase fleets of Alternative Fuel Vehicles. EPAct provided tax credits and subsidies to the purchasers of AFVs as well as to owners and operators of AFV refueling stations.

Now, Ford had already developed vehicles that could run on methanol or gasoline or any mixture, thereof. Called “fuel-flexible vehicles,” these FFVs qualified for EPAct subsidies and tax credits. So, the California Energy Commission – in association with auto manufacturers and oil companies – sited M85 (85 percent methanol, 15 percent gasoline) service stations all around the state.

An M85 FFV, when it is actually running on M85, produces about one-half the smog-forming emissions of a comparable vehicle running on gasoline. By 1997, there were more than 20,000 M85 FFVs operating, mostly in California.

What a success story!

Inexplicably, Ford quit making M85 FFVs that year, but continued to make and market E85 (85 percent ethanol, 15 percent gasoline) FFVs. Daimler-Chrysler, General Motors and Mazda soon followed suit.

Why?

Well, EPAct only required a vehicle be capable of operating on an alternative fuel. Consequently, most of the 600,000 fuel-flexible vehicles now on the road – nearly all of them E85 FFVs – are running, at best, on reformulated gasoline.

The Energy Policy Act of 2003 would have been an opportunity to solve the natural gas availability problem by increasing imports of LNG and methanol, as well as to exploit the smog-reduction success of the M85 program.

Instead, we got “Daschle’s Revenge.”

• It bans MTBE – completely, not just as an oxygenate.

• It eliminates the oxygenate requirement in the reformulated gasoline program, but requires the Environmental Protection Agency to continue administering the program.

• It requires refiners participating in the program to use 2.3 billion gallons of ethanol in their reformulated gasoline in 2004 and 5 billion in 2012.

With men like Daschle running things, Greenspan is right to be worried.