ENVS 4261 MIDTERM
TOPIC 2: ECOLOGICAL ENERGETICS AND ENERGY FROM BIOMASS: What is "Ecological Energetics?"
The study of the flow of energy through ecological systems and the principles that govern the flow -Look at "trophic levels" and "food webs" -Use a number of methods to determine including remote sensing; stable and radioisotopic tracers; gut studies; and others -Also use complex computer models to approximate energy flow numerically
Laws of Thermodynamics: 1st Conservation of Energy
The total amount of energy in the universe is constant -What you have is what you get -You cannot create energy from nothing or de novo
What do we mean by prudently-incurred?
Typically defined as decisions that are made exhibiting reasonable judgment based upon the information known at the time of the decision. Does not require omnipotence or clairvoyance, but it does require good judgment that is consistent with industry practices and what a reasonable manager would be expected to do given known information and regulatory constraints. Decisions that managers make in competitive industries can also influence the evaluation of prudence.
What nuclear bomb was 3000 times more powerful than Hiroshima?
Tzar Bomba (Soviet)
The Limits to Growth (literary text)
Published in 1972. Predicted Critical Problems Related to Population, Resource Scarcity, Environmental Degradation, and Economy by the First Decades of the 21st Century. Led to Widespread Public Awareness For the First Time. Vigorously Attacked
The March of Folly (literary text):
Pursuit of policies contrary to long-term public interest by a large group - governments, industry, political parties • The policy must be perceived as counte productive in its "own time." A relative large number of thoughtful people kno that the policies are counter-productiv and damaging • Feasible alternative courses of action must have been proposed. And the suggested alternatives should come fro a group, not an individual leader, and should persist beyond one political lifetime • Alternatives are ignored and folly continues.
The LPSC succeeded the __________________ that was created by the 1898 Constitution.
Railroad Commission of Louisiana
Market Crash
Recent market changes not entirely unexpected: • Changes in dollar valuations due to the anticipated end of U.S. monetary easing. • Increasingly apparent global economic contraction, particularly in China. • Increases in non-OPEC production, including U.S. unconventional activity.
Market corrections
Sometimes, markets can fall into temporary dis- equilibrium positions and prices must change (go up or down) to "re-calibrate" or move to a new equilibrium.
So What, So Far? -Energy is a crucial factor in ecological systems -Energy_______ be created de novo. -Energy energy transformation (e.g., eating) is not even close to being _______% efficient -When something eats something else, there is a ____________ (loss) of energy as heat, and entropy (randomness) ___________. -Energy ________; materials ______. -Ecosystems can sustain at most about _______ trophic levels because of high losses at each step.
can't 100% dissipation flows; cycle 5
By the 19th century, a large amount of illumination was fueled by either __________, ________, or _________ that was also produced from the emerging wells in the Appalachian region (as well as "town gas" or manufactured gas production). Natural gas illumination was gaining market share quickly but required extensive infrastructure in order to develop - difficult for small, nondense areas.
candles, whale oil, or natural gas
Cost of capital: This phase of the regulatory process determines the appropriate __________ ____________ for the utility as well as a _____________ _______ of return on its investments. A utilities capital structure usually consists of its determining _____ _______ ______ (short term, long term) and_______ (common and preferred) and the _____ rates for each. The overall rate of return is usually a weighted average of these components. "Rate of return" regulation is a bit of a misnomer because rates are fixed based upon an allowed rate of return. The actual rate of return can vary in any given year (although rates are fixed).
capital structure; reasonable rate test year date; equity; cost
Level 3) Secondary Consumers
carnivores that eat herbivores
Level 4) Tertiary Consumers
carnivores that eat other carnivores
A movement along the demand curve is the change in quantity demanded associated with a ______________.
change in price
Well Integrity Issues: Fluids are overwhelmingly water (input), (99.2%) but there are small amounts of serious _______________ components. Output from process and disposal is challenge. Ex: methane causing fire in sink water
chemical
Louisiana Petrochemicals: The Second World War helped usher in the period of modern ____________ and ____________. Rubber and early plastics all came from _________ materials in relatively exotic places in the Pacific that were cut off during the war.
chemistry and plastics; plant
Regulators, therefore, have to __________ prices that reflect some middle ground that give utilities a "fair-return" for their investments. This results in prices ________ than what would occur under an unregulated monopoly, but _______ than those arising in competitive markets.
choose; lower; higher
Natural gas ____________________ originates (physically) from the supply side of the business and is the ultimate product delivered to end users. Natural gas is traded (and referred to) as a "commodity" because it homogeneous and fungible in nature (non-differentiable on qualitative basis). Is a highly traded and valuable commodity that can be volatile since prices are set by traders in the market and in its simplest form, represents the price for "as available" commodity. Trades are influenced by the "physical" deliverability that can be constrained. Physical constraints, coupled with the relatively inelastic nature of demand, can lead to volatile prices.
commodity
Creates a _______-_____________ ___________ for transportation. Prohibits pipeline companies from engaging directly in commodity sales and to provide transportation and storage service on equal and nondiscriminatory terms. Requires pipeline to provide "no-notice" transportation service, access to storage facilities, increased flexibility in receipt and delivery points, and "capacity release" programs. No-notice transportation services allow LDCs and utilities to receive natural gas from pipelines on demand to meet peak service needs for its customers, without incurring any penalties. These services were provided based on LDC and utility concerns that the restructuring of the industry may decrease the reliability needed to meet their own customers' needs.
common-carrier framework
Economic growth is dependent of energy ___________________.
consumption
• Historically, crude oil and natural gas prices were highly_______________.
correlated
What is an example of this?
cost of natural gas that a power generator purchases to make electricity increases
• Domestically, a significant amount of domestic natural gas production comes from _____________ drilling activities ("associated gas").
crude oil
"Materials __________; Energy ______"
cycle; flow
So What? -Energy can't be created __________- perpetual motion machines do not exist and will never be invented. -Energy transformations are typically not even close to being _____% efficient -When energy is transformed to something else, such as by combusting natural gas to drive a turbine and produce electricity, there is a ____________ (loss) of energy as heat, and entropy increases. -The more transformations that occur, the ______ the loss of the original energy present, thus, by using electricity to form H2, for example, you end up with even less usable energy -___________ is a consequence of the 2nd Law- for example, the atmospheric increase in CO2 associated with the burning of fossil fuels.
de novo 100% dissipation more pollution
Crude oil and natural gas prices became "__________________" during 2000-2001, and then after the 2008-2009 recession. ____________________ crude oil production is starting to bring those markets back into alignment.
decoupled; expansive
Considerable __________________ in natural gas drilling post-recession. (b/c of price decrease that started in 2007)
decrease
Natural gas production forecasted to ___________ starting in 2016. Remember this number: _____ TCF
decrease; 18.5
We have probably been saved from the peak by the ________________ following the 1970s.
depression
Secondary Energy Source
derived from primary source
Revenue Requirement Phase
determines the reasonable level of test year expenses that a utility can recovery in its rates These expenses include the annual operating expenses, taxes, and depreciation expense allowed to be recovered in rates. This process also determines the appropriate rate base (or investment base) upon which earnings will be allowed. This can be thought of as the "return of" component of the regulatory compact discussed earlier. This number is then spread across classes for rate making purposes.
We use prices as a means of ___________________ value (to sellers and buyers) and as a means of ____________________ resources.
determining; allocating
Shale (unconventional) Wells
differ from "conventional" wells since they are drilled horizontally and not vertically
This efficiencies are not unbounded and ______________ as out ____________. (i.e., diminishing returns to input factors). Ultimately marginal costs start to ________________.
diminish; expands increase
High Entropy
dispersed and random movements of objects
Economies of Scale: Recall that average total cost (ATC) are simply defined as total costs ____________ by output. • Average costs tend to fall, over a relatively large range of output, for many components of the energy industry. • The __________ the fixed costs, the more likely you will have a relatively _______ range of decreasing average costs. • When average costs are falling, we say that "economies of _______" exist. • However, economies of scale _____ EXIST OVER ALL RANGES OF OUTPUT (contrary to popular myth). • There are exceptions, like the transmission and distribution functions of electricity and natural gas systems, that ___ have economies of scale over their entire range of output - this is why they are regulated.
divided larger; larger scale Do Not do
"Cooperation" would drive ______ costs (through economies and innovation) and ___________ quality (hence the name "Standard"). However, one man's cooperation can be viewed as another man's monopoly. In effect, Rockefeller's strategy was to create a refining monopoly that utilized capacity and capital to drive down price, drive competitors either out of business or "merge" with Standard Oil. While Rockefeller was ultimately driven to break up his great monopoly, the break up lead him to become even wealthier and formed the basis of the modern petroleum industry we know today.
down; increase
Utility natural monopoly conditions: • Natural monopolies have large "__________ of ________" which means that a utility's average costs tend to decrease as output expands. • This cost advantage allows utilities to squeeze out potential _______-_______ competitors. • This cost advantage also means that the most efficient outcome for society is to let _____, lowcost firm serve the entire market.
economies of scale; higher-cost; one
Marginal costs begin to fall as....
efficiencies associated with the utilization of the fixed resources improves.
The Federal Energy Regulatory Commission (FERC) is composed of up to _____ commissioners who are appointed by the ___________ of the United States with the advice and consent of the _________. Commissioners serve ______-year terms, and have an equal vote on regulatory matters.
five; President; Senate; five
The LPSC consists of _____ elected Commissioners who serve overlapping terms of ______ years and a main office staff, created by Article IV, Section 21 of the 1921 Constitution of the State of Louisiana.
five; six
The Reality: -Idealized food chains are more conceptual than real - ________ _______ are typical. -______________("eat everything") like humans can feed off of different trophic levels at different times. -________________ can eat from a number of different trophic levels -One can assign a number approximating the _______ trophic level for a given species buy averaging energetic sources.
food webs Omnivores Predators mean
The U.S. has the ________ largest natural gas reserves in the world.
fourth
Considerable amount of "_________" natural gas ("associated gas") coming from unconventional crude oil production. Helps to explain (in part) the continued strength in natural gas production in the face of rapid rig count decreases.
free
*C6H12O6 represents a simple sugar such as ____________- obviously, there are other cellular components besides sugars, and these are formed through intermediary metabolism -Photosynthesis is the process by which _________ energy is transformed into __________ energy -I do not show ATP and NADPH, which provide the energy that come from "_________ reactions."
glucose light; chemical light
Drake's success, lead to the equivalent of a ______ _______ in petroleum development that ultimately exploded during years prior to, during and after the Civil War. Became a highly speculative business with _______ rules or regulations; no government controls in drilling, transportation (all rail), and refining.
gold rush; few
Firm transportation service
guaranteed transportation service for a fixed amount (capacity) and a fixed term. Gives you the right, but not the obligation, to call upon this capacity within given terms and conditions of the tariff. Has higher priority than interruptible service. Contracts are generally of longer-term nature.
Desirable Characteristics of Energy Production Sources: Explain Efficient.
have a high EROI- the higher the EROI, the better a source is in terms of efficiency
2nd Law of Entropy
heat cannot pas spontaneously from a colder to a hotter body -Processes that involve energy transformations are unidirectional and irreversible leading to dissipation of heat and increases in "entropy" (spontaneous dispersal of energy) with time -The "entropy" of the universe tends to a maximum -Every energy transformation comes at a cost and cannot be 100% efficient
Level 2) Primary Consumers
herbivores ("plant eaters") consume plants
A shift in the demand curve is a change in quantity demanded _____________.
holding the price constant
Both are traded (and referred to) as a "commodity" because they are________________ and ____________ in nature (non-differentiable on qualitative basis)
homogeneous; fungible
The fractionation process releases/liberates the ______________________.
hydrocarbons
TOPIC 9: RISE OF UNCONVENTIONAL CRUDE OIL AND NATURAL GAS DEVELOPMENT: TRENDS AND CURRENT ISSUES Unconventional development continues to dramatically change the U.S. economic landscape. • U.S. has already moved from being an anticipated _____________ to major ___________ of natural gas. • U.S. has moved being the largest crude oil producer and will likely become an active and considerable world trading participant (on the supply side). • Impacts go far beyond domestic energy resource independence and has large manufacturing implications. • Crude oil and natural gas markets are becoming more integrated and co-dependent.
importer; exporter
Unconventional resources are not a "flash in the pan" and are anticipated to continue to _________________ over the next two decades or more.
increase
Wells and stages fractured continue to ___________.
increase
Rig activity has______________ since summer and has been increasing rapidly since the OPEC announcement.
increased
One key factor behind rising food prices is the greatly ____________ price of energy • Increased biofuel demand in 2000-07 is estimated to have contributed to ______% of the weighted average increase of cereal prices • Recommendation: Change biofuel policies...to make more grains and oilseeds currently used for fuel available for food and feed [by] ______________ biofuel production at current levels...
increased 30% freezing
There is no sense to plan on fueling society with ______________ sources of energy that do not provide substantial amounts of ___________ energy.
inefficient; usable
Generalizations about elasticities and energy demand: -Most energy demand tends to be price ______________ (electricity, natural gas, gasoline, etc.) -Price elasticity is typically ___________ (in abs. value)for larger/more diverse customers than smaller ones (i.e., residential vs. industrial). -Income elasticity tends to be larger(in abs. value) than price elasticity. -Both elasticities (price, income) tend to be larger (in abs. value) in the ________ run than in the_______ run. Price elasticities usually see greater short-run/long- run differences.
inelastic larger longer; short
Order 636
initiated a broad platform for trading a wide range of transportation and storage services that are differentiated on price and quality (firmness) - no longer "plain vanilla" transportation.
Rockefeller's Legacy: One of the most controversial public figures of all time. His "good side was as every bit as good as his bad side was bad." Rockefeller help __________ and ____________ the modern petroleum industry. At its peak, the Standard Oil empire controlled as much as ___ percent of the crude oil refined in the U.S. Modern energy supply chain economics and organization can be attributed to Rockefeller. Application of economics of scale to energy refining is attributable to Rockefeller. Along with _____________, helped to establish modern philanthropy movement. Founded the University of Chicago, Spelman College, and other higher education institutions.
integrate and standardize; 90% Andrew Carnegie
Hedge
is a form of insurance where the contracting party enters into an agreement of some amount of natural gas at a fixed price over a fixed term. The contracting party pays a premium to the seller of the hedge. The contracting party purchases the agreement to defend a particular price or quantity position: the purchaser is indifferent if prices are higher or lower in the future so long as the actual contract price is maintained.
Park and loan service
is a form of interruptible service that gives customers the opportunity of putting gas in system for later use and borrowing later or borrowing gas and replace later in kind. (swapping).
Some costs are known as "_______ and _________" costs and may be difficult to assign to just one function or category. For instance, the CEO's salary, the cost of the billing functions and meter reading, the costs of certain general assets (mains, conductors).
joint and common
The Chalmette Refinery was originally developed in 1905 to produce _____________ for lighting purposes in the area but ultimately to fuel boats for the movement of fruits and produce for companies owned by the Vaccaro brothers (Joseph, Felice, and Luca), owners of what became the Standard Fruit Company in the early 1900s (rival to United Fruit). The refinery was ultimately acquired by Bay Petroleum and turned into a ____________________ in 1944 just as the offshore GOM was about to be developed. Was sold to Tennessee gas in 1953, who sold the facility to the Mobil Corporation in 1988 (which merged with Exxon).
kerosene; modern refining facility
Electric and natural gas utilities are ________ users of energy, but are not end-users themselves; they produce (or procure), transport, and distribute energy to end-users such as ___________, ____________, ___________, and ____________ customers. These industries are highly _________ and can have considerable impacts (positive and negative) on energy markets and the environment.
large; residential, commercial, industrial, and governmental; regulated
The U.S. (2015) is the world's ______________ natural gas producer.
largest
The U.S. is however the _______ producer of crude oil (2015).
largest
Recent key to increasing well efficiency has rested with increasing _______________ ____________ and _________ of __________.
lateral lengths; number of stages.
Louisiana ____________ production has been rapidly deteriorating, offshore production continued to be relatively strong, primarily due to federal OCS.
onshore
Current issues with regulatory lag: Today - a large number of utilities will argue that regulatory lag is a negative _____________ aspect of regulation - that rates should be updated more frequently to adjust for new industry realities. The argument is that traditional rate of return regulation worked good in the "old days" (pre-2000) when the industry was able to capture scale economies through growth - those opportunities, as the argument goes, are not as pervasive today. New industry "realities" are the new "public/social" investments that are being "required" by policy. These investments include those associated with technology, reliability, resiliency, energy efficiency, safety. These investments not only have difficult valuation aspects (in terms of benefits) they rarely, if ever, result in new revenues (i.e., they are not revenue generating).
outdated
Drake hit "______-_______" in 1859 using his new drilling technique (with his drilling partner "Billy" Smith). Drake actually "drilled" wells and used cast iron pipes to maintain well-bore integrity. His early wells produced at a very low rate (_____ Bbls/d) and had to be hand pumped: not at all they "gusher" type wells commonly associated with the wildcatter efforts of the day.
pay-dirt; 25 Bbls/d
Internationally, pricing in global natural gas trade is _____________ to crude oil and global economic factors impacting crude oil will have implications for natural gas, which in turn can have domestic natural gas pricing implications.
pegged
Our High Per Capita Energy Consumption: US citizens use more energy _____ _________ than most other nations • This is a real problem, because total demand is the product of total number of people x energy use per capita • We need to find ways to reduce per capita use, not increase it, without affecting _____ • Owing to increased global demand, supply of liquid fuel is tight - we now import about ____th of >18 million barrels petroleum we use each day • Electricity consumption rising <___% per year
per capita; GDP; 1/4; <1%
If markets are "________________ ______________" (or free of any significant imperfections) the equilibrium outcome is also considered "efficient" (no other allocation of resources will maximize benefits or output without additional costs).
perfectly competitive
The Solar Constant: -Calculated on an areal basis at a plane ______________ to the rays -Averages about _________ watt per square centimeter, but varies about _____% within a year because the Earth's orbit around the Sun is elliptical (have you heard of "apogee" and "perigee?") -_____________ variation also occurs
perpendicular 0.1366; 7% Interannual
Wellhead and Downhole Equipment: Drilling equipment will be removed from the hole and _______________ _________ (or piping) will be lowered into the hole to bring crude oil or gas to the surface and protect ______________ sources of water. Casing pipe is ____________ to ensure strength and well integrity and will be tied into a system of pipes and valves known as a "_____________." The natural ____________ in the well will force the oil to the tanks. If the natural pressure is not strong enough, pumps will inject _________ force (or artificial "lift").
production casing; subsurface; cemented; wellhead; pressure; artificial
The Commission (LPSC) has jurisdiction over ________-owned utilities providing electric, water, wastewater, natural gas, and telecommunication services, as well as all the electric cooperatives in Louisiana and these companies must obtain approval before instituting new rates, issuing stocks and bonds, transferring assets, and undertaking major construction projects such as additional power plants, transmission lines, etc. ___________ -owned utilities are not under the jurisdiction of the Commission.
publicly; municipally
Cost of service/rate design: • Per earlier discussion, it may appear that the rate setting process simply sets _____ equal to ______. • This should be relatively straightforward, but is not in practice since, while some costs are clearly identified and assigned to a specific function or category, other can not.
rates; costs
Further, not all petroleum is _______________. While extraction techniques have improved over the past several decades, it is usually the case that between ___ percent to ___ percent of the resource is left in the ground. There are still billions of barrels left in prior-developed fields that could be recoverable under certain economic conditions (and technologies).
recoverable; 40%-60%
Lower prices have _____________ upstream activity, but a recovery is ongoing due to recent OPEC announcements. • The strength of the recovery will be a function of how strongly OPEC upholds the agreement and how quickly US and other non-OPEC production response. • The "genie is out of the bottle," U.S. __________ production is a relatively known and secure resource opportunity. • Strong likelihood that prices will remain very rangebound (less than $60/Bbl) and could fall below $50/Bbl under certain scenarios. June will likely be the new inflection point for prices and supply - this is time period in which OPEC cuts are scheduled to terminate under current agreement.
reduced; shale
Energy Density
refers to the amount of energy contained in a given mass or unit volume of a fuel The higher the energy density of a fuel, the more energy may be stored of transported for the same amount of volume Other facets need to be considered (e.g. "burn efficiency"), but it is obviously better for a fuel to have high energy density
Take away _____________ __________ sources and fossil fuels will support the modern economy with little sacrifices, but little noticeable changes.
renewable energy
Other things equal, as the price of a good rises, its quantity will ___________, and vice versa.
rise
Petroleum literally means "________ _____" ("petra" (G) = rock; "oleum"(L) = oil) and is a naturally-occurring substance recognized by several civilizations in ancient times. Most petroleum was found from naturally-occurring seepages or from very shallowly-drilled (dug) "wells" or holes in the ground.
rock oil;
Oil was recognized by early American settlers, particularly in their interactions with Native Americans. Ultimately, early pioneer experience with petroleum was seen as a nuisance in the drilling of ___________ mining where oil (and natural gas) was often found (sometimes with surprising results).
salt/brine
Other studies in the 1960s and 1970s raised ___________ issues.
same
Ancient Mesopotamians and Egyptians discovered oil from various naturally occurring seeps and used the substance for ________, ________, and for _________ __________.
sealants, lubricants, and for ceremonial purposes
Natural gas demand is influenced by many of the same factors that drive the demand for other goods and services. There are some important differences, however, since natural gas demand is _____________ and highly influenced by the _____________.
seasonal; weather
Naturally occurring ______________, however, were not enough and in the early 1840s, speculators in the Appalachian region (primarily in PA) because "drilling" for petroleum (some early wells were "dug").
seepages
Spot Markets
short term markets that reflect current physical trades at various different market hubs. Are widely reported (although some trading hubs have greater liquidity than others) and are the more volatile.
Growth in electricity use _____, but still increases by _____% from 2012 to 2040.
slows, 28%
However, fracturing is only a _____ part of total large-scale water use. This use does, however, differ since most water used in the hydraulic fracturing proces______ (generally) be reused or re-injected into aquifers. (Hydraulic Fracturing, <1%)
small; CAN'T
Fuel from Biomass: -Corn, sugar can, soybeans, etc. grown specifically to harvest ________ energy as biomass- typically fermented into _________ or ________ fuel (ethanol, biodiesel, methane or other product) -Corn _______ only are used, not stalk, leaves, etc. -____________ ethanol production is not yet feasible, but will help some when developed -_______ may be used to make liquid fuels -____________ may also be similarly fermented- not considered here as it is a marginal source of energy (but may make sense)
solar liquid or gas kernels cellulosic algae Biowastes
Examples of renewable resources?
solar, wind, hydro, geothermal, biomass, ocean thermal energy conversion, waves and tides
Flexible transportation service
some variation of service that may have certain "firm" and "less firm" components.
"Light" Reactions: -Take energy from sunlight and use it to ________ water -Two different light reactions -_____ is a by-product -H+ and electrons (e-) are used to produce transitory energy-containing compounds: ______ and ________ from _____ and _______ respectively -ATP and NADPH, in turn, "_____" the dark reactions.
split O2 ATP and NADPH from ADP and NADP "fuel"
Crude oil may also be characterized as sweet or sour depending upon its _______ content.
sulfur
Drilling Rig
supports a variety of equipment used to physically drill into the earth's surface to considerable depths.
What is the primary component of a drilling rig?
the derrick that supports the drill-string and drill bit as it moves into the earth's surface
Explain Dark Reactions.
the Calvin-Benson Cycle, uses ATP and NADPH from light reactions, plus CO2, to form sugar (empirical formula C6H12O6)- these in turn are used to form more
Photosynthesis
the biological transformation of light energy into chemical energy for use in living cells
C (calories)
the quantity of heat necessary to increase the temperate of 1 g of water by 1 degree C
What are regulatory incentives for ratepayers?
to maximize benefits subject to budget constraints
What are regulatory incentives for utilities?
to maximize profits subject to regulatory constraints
What are regulatory incentives for regulators?
to maximize the public interest by reducing unnecessary rate increases.
Regulatory lag is an important means by which _________ regulation is through to inject discipline upon utilities similar to that arising in competitive markets.
traditional
Pipeline system was originally developed to move gas from _______________ basins to consuming areas. Today that system is being upgraded to accommodate new __________________ gas supplies
traditional; unconventional
Capacity is commonly thought of in terms of terms of _________________ (pipe capacity) or____________(cavern capacity), but can also reference the capacity of natural gas supplies (commodity) in the form of "reserves."
transportation; storage
________ ____________ factors may be developed to classify what are typically a large number of joint and common costs.
unique allocation
"Gross production" does not take into account EROI or _________ ____ ______.
usable net yield
Important to understand ________ regulation in order to understand other energy industries issues such as those related to coal use and emissions, carbon capture and storage, nuclear power development, power generation, pipelines, energy efficiency, and a wide range of renewable energy technologies that are _____________ to electric power grids.
utility; interconnected
Drilling is usually completed to ___________ depths depending upon initial geological research done at the prospective location.
various
s a highly traded and valuable commodity that can be ________ since prices are set by traders in the market and in its simplest form, represents the price for "as available" commodity. Trades are influenced by the "___________" deliverability that can be constrained. Physical constraints, coupled with the relatively _________ nature of demand, can lead to volatile prices.
volatile; physical; inelastic
State utility regulation (retail): Regulation conducted by state "Public Utilities Commissions" or "Public Service Commissions." Commissioners sit in tribunal form: quasi-_________ and quasi-_________ functions. Commissioners are _________ or _______. Rates typically set on rate of return (ROR or "traditional") basis or variation. "Rate of return" regulation is a bit of an _____________ term since service rates are what are fixed (through a tariff) and actual rates of return (profit/earnings) vary. An administrative law proceeding where arguments are made and evidence is taken. All parties that have "________" are allowed to participate and can include Attorneys General/Consumer Counsel (state agencies representing ratepayers), industrial customers, low-income groups, environmental groups, other state agencies.
legislative; judicial appointed or elected inaccurate "standing"
Crude oil may be considered ______ or _______ depending upon its density.
light or heavy
Bioethanol from Corn in the USA: -"The power per unit area of bioethanol from corn is astonishingly _______." -"1 acre produces _______ bushels of corn per year, which makes 122 x 2.6 US gallons of ethanol, which at 84,000 BTU per gallon means a power per unit area of just _______ W/m^2- and we haven't taken into account any of the energy losses in processing."
low 122; 0.02
Speculation:
market participant that engages in various types of future trades in anticipation of making a profit from price movements or price differentials. The sole goal is to make profits.
Standard's Atlantic and Richfield
merged...later became Sunoco
Concept of Net Energy Yield (NEY): -Analogous to net profit: "total energy profits" _______ "energy investments"- whether you break even or produce more energy than you invest. -Using any fuel takes an _________ energy investment- mining, pumping, collecting, refining, transporting, pollution abatement, etc. ("energy investments") -There is ____ fuel that is 100% efficient in producing useful work -Some fuels may require more energy to be invested than they ________ -Sometimes low net yield makes sense if you obtain a more _______ fuel- for example, you can't fuel your car with coal so you must convert coal to natural gas or liquid fuel
minus initial no yield usable
The problem with only allowing one firm to serve the market is that the single firm becomes a ___________ that has the ability to charge unnecessarily high prices and limit how much it produces.
monopolist
What are the percentages for the restricted areas?
West Coast: 21 TCF 100% Mid-West: 346 TCF 40% Gulf of Mexico: 43 TCF 56% East Coast: 31 TCF 100%
Energy Return on Energy Investment (C.A.S. Hall) -"EROI" or "EROEI" -The ___________ effect, how many times you get back in yield the energy you invested, or -Analogous to ROI, or "Return on Investment," which is financial __________ delivered relative to financial ____________ put in -What is the formula?
multiplier return; investment EROEI= (Energy Delivered to Society)/ (Energy Put into that Activity)
Drilling emphasis over the past 20 years has almost exclusively concentrated on developing new ___________ wells. This has shifted to crude oil drilling emphasis over the past two years.
natural gas
equilibrium
When we put supply (S) and demand (D) on the same graph, there is only one price where the quantity consumers want to purchase exactly equals the quantity firms wish to sell.
surplus
occurs when quantity supplied exceeds quantity demanded (surplus implies market price is too high)
Offshore development anticipated to __________- the gains anticipated to be primarly __________ and with ______________________ development.
offshore; onshore; unconventional
Wholesale transaction
one in which a willing buyer and seller exchange power or gas in which either the source and/or the sink are engaged in interstate commerce and the buyer is not an end user but reseller to ultimate customer (i.e., utility) . FERC regulated.
Retail Transaction
one in which a willing buyer and seller exchange power or gas in which the purchaser is within a state jurisdiction and is an end user.
Food chain
a linear sequence of organisms that consume other organisms -Largely a conceptual principle -Useful for conceiving what a "trophic level" isF
Arbitrage:
a market participant that takes advantage of pricing differentials in the market (over space and time). Trades are made to make a profit, not defend a price position. Participant usually does not take physical delivery of commodity.
Have a high ____________ yield of useable energy.
absolute
Some Worrisome Energy Facts: -US is an "oil-_____"- consumes the equivalent of one swimming pool full of oil each second -The US was effectively self-sufficient in terms of its petroleum and natural gas production until _______. -The EROI and ROI on energy production appear to be ___________ each year, meaning we need to produce more oil and spend more money to get the same net energy -Until recently, we were getting _____ self-sufficient, with respect to liquid fuels- it is unlikely we will be fully energy independent.
addict 1970 declining less
Capacity release
allow the resale of unwanted pipeline capacity between pipeline customers. A customer requiring pipeline transportation can refer to these bulletin boards, and find out if there is any available capacity on the pipeline, or if there is any released capacity available for purchase or lease from one who has already purchased capacity but does not need it.
-Sun is __________ available (somewhere). -Energy must be ____________, ____________ to a usable form, and ____________ to where it is used.
always collected; transformed; transported
Standard Oil of Louisiana
always owned by Standard Oil of New Jersey (now ExxonMobil)
BTU
amount of energy needed to raise one pound of water 1 degrees Fahrenheit.
Food chaine
an abstraction of the different trophic connections and patterns of feeding among organisms -Who eats whom -More "real life" than food chain"
Louisiana Public Service Commission (LPSC)
an independent regulatory agency dedicated to serving the public interest by assuring safe, reliable, and reasonably-priced services for public utilities and motor carriers.
This finding however, was premised upon a model with a number of ___________, one of which presumed there was no regulatory lag and that rates were set on a ______-__-_______ basis: in other words, rates were set on a "cost-plus" regulatory approach.
assumptions; period-to-period
Difference Between Material and Energy Processing in Ecosystems: -Very simple rule of thumb -A MUST-KNOW principle of ecology -Materials (e.g. nutrient elements such as N and P) remain in the __________, but get used over and over again. -Energy is used and ___________.
biosphere dissipates
Was later found that petroleum could be "_______" (i.e., distilled or "refined") is such a way that produced a very effective illumination fuel (i.e., kerosene).
boiled
Forward Markets
broad definition for physical and/or contractual trades of commodity for some future period of time that have some type of quantity/price guarantee that can be fixed or bounded. (examples: swaps, calls and puts, collars)
Chalmette Refinery
built on/near the grounds of the historic de la Ronde Plantation, which, like the Villere Plantation, was the site in which the historic Battle of New Orleans was fought (the Villere Plantation land itself is now part of the Murphy Oil Refinery).
TOPIC 10: NATURAL GAS MARKETS AND END-USAGE CHANGES IN THE CHEMICAL, MANUFACTURING AND POWER GENERATION SECTORS Natural gas markets are typical to many others and are comprised of ______________ and ________________ as well as a number of other market participants that facilitate the transfer (trade) of natural gas commodity to end-users (buyers).
buyers and sellers
Natural monopolies/market power
when you have few firms and/or one firm controls/dominates the market.
Natural gas that is placed into storage is ultimately moved to markets to supplement domestic production and imports during what is referred to as the "__________________ season" between the fall/winter peak usage months of November to March.
withdrawal
Practical Ramifications: First Law
you can't end up with more than you started with- energy can't come from nowhere
Natural gas commodity sales go back to the early to mid-1990s and were the byproduct of FERC's natural gas _________________. There are a ________ _____________ of participants in the natural gas commodity market including a number of large financial firms that offer both commodity and risk management services/instruments. Utilities are active participants in these markets as the wholesale purchaser of gas commodity that is resold to their customers. It is not uncommon for some natural gas utilities to have unregulated affiliates that also participate in these markets. Historically,_____________ market constraints (production, storage, transportation), coupled with a relatively inelastic (and seasonal) demand for this type of energy commodity, has led to price volatility. Natural gas markets (like power, unlike crude oil) are limited to North America given ______________________ constraints.
wholesale market restructuring wide range physical deliverability
Marginal Cost
- The cost of one more unit of production - MC = VCn- VCn-1 units
What are some fuel from biomass concerns?
-Net energy yield is low -EROI is marginal -Photosynthetic efficiency is typically <2%
Concept of Food Chain
-The movement of matter and energy from the primary producer level through succeeding consumer levels -Not always a chain- often a web -Every time trophic transfer occurs, a lot of energy is lost
Examples of fissionable nuclear fuels?
-Uranium isotopes -Plutonium isotopes -Thorium isotopes
What are five challenges with unconventional activities?
1) Decline curve characteristics 2) Well integrity/migration issues (chemicals/methane) 3)Water Use issues 4)Seismic issues 5)Land Use/Infrastructure
What are the two components of photosynthesis?
1) Light Reactions 2) Calvin-Benson Cycle (or "Dark" Reactions)
What three categories is industry organized into?
1) Production (Upstream) 2) Transport/Processing (Mid-stream) 3) Distribution (Downstream)
Crude oil reserves are expected to increase ___- percent by 2020 and increase by another ___ percent by 2040.
20%; 20%
And as of _______ the limits to growth model is almost exactly correct.
2007
Pre-_______ trends are all dominated by conventional oil and gas activities.
2008
Exchange rate adjusted value of crude oil starting to fall back to levels not seen since the financial crisis of ____________-_________.
2008-2009
Pimentel Calculate That... -Corn requires _____% more fossil energy than the fuel produced -Switch grass requires _____% more fossil energy than the fuel produced -Wood biomass requires ____% more fossil energy than the fuel produced.
29% 45% 57%
How many kerosene distilleries were there by 1850 in the country?
40
Dense Finite Energy Stocks account for >____%
>85%
market demand
A demand curve shows the relationship between price and the amount of a good consumers wish to purchase.
Market supply
A supply curve shows the relationship between price and the amount of a good firms offer for sale
kWh (kilowatts)
A unit of electric energy equal to the work done by 1000 watts acting for one hour
Risk and Uncertainty
Arises in markets influenced by a variety of random factors that can be partially known (can be assigned probabilities) or entirely unknown (cannot be assigned probabilities).
_____ are major renewable energy sources.
Dams
________ correlation between the firmness of a service and its price. As quality increases, price increases.
Direct
The birth of the U.S. petroleum industry is typically dated to the development of the "_________ wells" in 1859.
Drake
Drake invested a considerable amount of his own time and money into his drilling theories and theories on the nature of rock-oil. Ultimately, his investor supporters left him high and dry. Yet Drake continued on in his endeavors which were earned the sobriquet of "____________ _________."
Drake's Folly
_________ comes after a considerable amount of geological research and analysis that considers the structural geology (at the reservoir scale), sedimentary basin analysis, and reservoir characterization (mainly in terms of the porosity and permeability of the target structures).
Drilling
How much solar energy is in Gasoline?
Gasoline= ~115,000 BTU x gallon^-1 Conversion= 3,400 BTU x KWH^-1 Insolation = 6 KWH x m^-2 x day ^-1 At 15% PV efficient = 37.6 m^2 x day^-1 x gallon^-1 At 1% photosynthetic efficiency = 564 m^2 x day^-1 x gallon^-1
Opportunity Costs
defined as the value of the best alternative forgone, that arises between several mutually-exclusive alternatives given limited resources. In other words, what is the foregone cost of what you could have used the resource for... (here cost is the loss of benefit you would have gained from the alternative use) Can also be defined "the loss of potential gain from other alternatives when one alternative is chosen." Note, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit should also be considered opportunity costs.
elasticities
demand responsiveness to various factors
variable costs (VC)
directly related to variations in output (like fuel costs). In the long-run, all costs are variable
Every energy transformation comes at a cost and ________ approaches 100% efficiency (2nd Law of Thermodynamics).
rarely
In other words- a central planner cannot ___________ resources in a way that will improve market outcomes (total societal welfare).
reallocate
Increased production of tight oil and greater fuel efficiency ________ US oil imports.
reduce
Standard Oil of Indiana
renamed Amoco...now part of BP
Standard Oil of California
renamed Chevron...became ChevronTexaco, but returned to Chevron
Standard Oil of New Jersey
renamed Exxon...now part of ExxonMobil
Standard Oil of New York
renamed Mobil...Now part of ExxonMobil
Policy advocacy focused on _____________ areas as a potential solution to the resource constraint problem.
restricted
fixed costs (FC)
do not depend on the amount being produced, and are constant in the short-run (ex. Capital in energy business).
Tight World Grain Supplies: Up-and-down ethanol market is destabilizing grain prices, and production is ______. • "After trading around $___ a bushel for a decade, the price of corn -- the nation's biggest crop -- jumped above $___ a bushel last summer, then fell by half as the recession cooled demand."
down $2; $7
Native Americans used "______ ______" for a variety of purposes particularly for medicinal and ceremonial purposes. "________ _____," named for a tribe that was part of the Iroquois nation, is thought to be example of early Native American use of petroleum.
rock oil; Seneca Oil
Drake had new ideas on how to "_______" an oil well that he thought would lead to commercially profitable production levels.
drill
Two Components of Photosynthesis: Explain Light Reactions.
driven by light energy, produces ATP and a reduced electron carrier (NADPH)- these reactions convert light into energy carrying biochemicals that drive the dark reactions
The more "_______" the demand relative to a given factor, the more responsive quantity demanded is to that factor.
elastic
The overall goals of the Commission are to ensure a regulatory balance that enable utilities to provide customers with...
safe, adequate and reliable service, at rates that are just and reasonable, equitable and economically efficient, and that allow utilities an opportunity to earn a fair rate of return on their investment.
Big Challenge: U.S. will need new supplies of Liquid Fuel: -With increasing competition abroad for liquid fuel, the US will need to be ______-_________, develop alternatives or pay higher prices on global markets. -This in many ways is the __________ of our economy: autos, agriculture, day-to-day transportation, leisure transportation, etc.
self-sufficient backbone
Natural gas storage
serves two primary functions: to meet seasonal demands for gas (base-load storage); and to meet short-term peaks in demand (peaking storage). Peaks in natural gas demand can range from a few hours to a few days, typically during unusually cold winter weather.
long run
the time period in which ALL factors of production are variable.
What is Louisiana rated per capita energy consumption (consumption per person) out of each state?
third
Developers often use "_____________ ___________ techniques" to extract these prior-unrecoverable volumes.
enhanced recovery
short run
time period in which at least ONE factor of production is fixed. In the energy business, this is usually capital (or capacity).
The cost of U.S. shale production is _______-. For instance, the average breakeven cost per barrel to produce Bakken shale has fallen from about $60 in 2014 to just below $30 in 2016.
falling
AEO sugests "____" tails.
fat
Recall that we use the competitive market structure as a _________ for an efficient outcome (or optimal outcome).
gauge
Significant increase in natural gas drilling productivity largely due to ______________________ natural gas development.
unconventional
While capacity is not free, ______________ capacity can be resold to the market to offset overall cost.
unused
Standard Oil of Kentucky
was acquired by Standard Oil of California...currently Chevron
HSBC Chinese manufacturing activity continues to be ________.
weak
Asymmetric information
when one party has more information than another and uses that information for strategic gain.
Externalities
when one party's actions impose an unaccounted for cost (or benefit) onto another party.
To ensure that adequate natural gas supplies are available to meet seasonal customer requirements, underground natural gas storage facilities are filled during low utilization periods in what is commonly called the "__________ season," typically between April through October of any given year.
injection
Natural gas transmission systems can be either _________ or _________ systems. Interstate systems are regulated by the Federal Energy Regulatory Commission ("FERC") as a natural monopoly whereas intrastate systems are typically regulated by state utility commissions. (Natural Gas Act of 1938, Federal Power Act of 1935). At one time, natural gas transportation systems were integrated where pipelines owned (contracted for) the commodity and made those "bundled" sales to local distribution companies. Sales were "bundled" meaning that transportation and commodity were charged on one integrated rate. The trend towards _______ regulation and ______ competition in the late 1970s and early 1980s began the process of "___________" these systems: separating the commodity from the transportation component. Began the process of turning the interstate pipeline system into a _______________ _______________-based system.
interstate or intrastate; less; more "unbundling" common carrier
Government-created market distortions: price fixing: -Government has history of _____________ in energy markets in order to correct certain perceived market challenges. -Government often uses various price-______ arrangements - however, these price fixing schemes can often lead to other problems. -The government uses its ________ and _________ power to defend these particular policies. -Many common financial support mechanisms for renewable energy are based on fixing minimum prices. -Used all over the world and leads to energy "__________" and "_____________."
intervening fixing taxing; police winners; losers
In the 9th century, a Persian scholar named Rhazes is claimed to have been the first to distill __________ for medicinal purposes.
kerosene
price ceiling
legal maximum that can be charged for a good (results in shortage of product)
price floor
legal minimum that can be charged for a good (results in surplus of product)
What would happen if we didn't regulate?
If we did not regulate utilities, they could price far higher than what would normally occur in a competitive market.
What are important institutions where buyers and sellers come together to exchange goods and services?
markets
Capacity is ______ _____! You have to pay for the right to call up a resource and hold in "reserves."
not free
The Ohio Oil Co.
now known as Marathon Petroleum
shortage
occurs when quantity demanded exceeds quantity supplied (shortage implies market price is too low)
Primary Energy Source
original source of energy
What is an idealized food chain?
Level 1) Primary Producer Level 2) Primary Consumers Level 3) Secondary Consumers Level 4) Tertiary Consumers Level 5) Apex Predators
________ is the price that a project must earn per megawatt hour to break even.
Levelized Cost of Electricity (LCOE)
Prudence examples/challenges
Nuclear steam supply system that was put in backwards and required additional cost of $1.25 billion. • Purchase of long-term natural gas contract at $7.50 per MMBtu when natural gas prices fall to $3.50 per MMBtu 6 months later. • Decision to build a generator based upon a new technology that has resulted in cost overruns of over 150 percent. • Hardening investments that have failed to deliver adequate reliability benefits in terms of avoided outages or avoided outage durations. • Purchase of replacement power for a plant outage on a facility that expended 50 percent less than five year average O&M on comparable facility.
First Louisiana Oil Well
On September 21, 1901 the first successful oil well was completed in Jennings, LA. The well was called the Heywood #1 Jules Clement well and it drilled to a depth of 1,700 feet. This created an oil rush in Louisiana.
What are the percentages of U.S. Energy Consumption by Source?
Petroleum 36% Natural Gas 26.6% Coal 19% Renewable Energy 9.3% Nuclear Electric Power 8%
How is petroleum developed?
Petroleum is recovered mostly through drilling activities. This can occur at a few thousand feet to over 20,000 feet.
___________ refers to the void space, or the ability of the formation to hold hydrocarbons. ________________ refers to the ability of the formation to allow fluids to flow.
Porosity; Permeability
Potential vs. Kinetic Energy
Potential Energy is "stored"- examples; water behind a dam; gasoline; charged battery Kinetic Energy is "in action"- examples; wind, light, current, tides Often the challenge is to store kinetic energy for later use
_________ reflected the state of, and outlook for, energy markets.
Prices
If competitive industries set prices at marginal costs, why don't we force utilities to simply price their services at marginal costs?
Primarily, because they have a large amount of shorter run fixed costs that have to get recovered. If we priced at marginal costs, utilities would go bankrupt.
General Scheme for C3 Photosynthesis (most plants): What is RuBisCo?
Protein molecule present in plant cells and converts inorganic CO2 into organic forms containing C-C bonds and H atoms. These are used to sustain plants in the form of sucrose (table sugar) or stored as starch.
Stanacola Refinery
Refinery began operations as part of Standard Oil Company of Louisiana, with 1,800 barrels per day capacity on 225 acres in former cotton fields north of Baton Rouge (pop. 15,000).
Energy Policy Act of 2005:
Renewable Fuels Standard (RFS) created a renewable fuels phase-in.
• ____________ and _____ commercial customers typically fall into this under-represented category.
Residential; small
What is the total revenue impact for percent increase in price for Inelastic?
Revenues Increase
What is the total revenue impact for percent increase in price for elastic?
Revenues fall
Does most water used for fracturing come form surface water sources or ground water?
Surface water (81%) Ground (19%)
_____________ rubber, nylon, and fuel additive plants began emerging in large numbers during and after the war. (Far away from the Pacific theater) The River, large workforce, and proximity to other chemical companies, refineries, and hydrocarbon byproducts made the _______ Coast a very competitive region for chemical production.
Synthetic; Gulf
What did shell geologist M. King Hubbert predict?
The rate at which oil could be extracted from U.S. wells would peak in 1970's and decline sharply thereafter
Coastal and Estuarine Research Federation (CERF) on US Ethanol Biofuel Policy
US policy is to produce bio-ethanol from corn to reduce dependence on imported oil and lower greenhouse gas emissions to mitigate climate change • CERF questions policy because of (1) fuel and fertilizer required to support corn production and ethanol distillation, and (2) land clearing for agriculture • Increases in area planted to corn will greatly increase N pollution flowing down the Mississippi • US goal is to reduce "dead zone" in the Gulf of Mexico by reducing N flows in the Mississippi by 40% or more, but expansion of corn needed to meet ethanol- production targets will increase N inputs 30% or more
Unconventional Natural Gas
Unlike conventional resources, shale plays (natural gas, liquids, and crude) are located almost ubiquitously throughout the U.S. and are the primary reason for the decrease in overall and regional natural gas prices.
___________ wells can range from very shallow, to very deep and are drilled both on-shore and offshore.
Vertical
Level 1) Primary Producers
plants that make their own food using photosynthesis
The Limits to Growth Model predicted a variety of problems related to ______________ and ______________ by the early decade of the 21st century.
population and resources
There are sustainable development goes for _______________ and ____________________.
population and transportation
Electronic Bulletin Board ("EBB"):
post critical information about pipeline operations, services, terms and conditions, market opportunities, and other information. Goal: increase market transparency and reduce informational and transactions costs.
Standard Oil of Iowa
pre-1911- became Standard Oil of California
What are the two main elasticities utilized in energy demand analysis?
price elasticity of demand and the income elasticity of demand
Understanding the two components of photosynthesis will be essential to understanding ________ productivity and the potential for fuel from ___________.
primary biomass
Quatitative Defintions: J(Joules)
a unit of work or energy equal to the work done by a force of one newton (the force that produces an acceleration of one meter per second on a mass of one kilogram acting through a distance of one meter)
Standard Oil of Ohio
acquired buy BP
Practical Ramifications: Second Law
any energy transformation will be less than 100% efficient- useful energy is lost as wasted heat -This means that the more transformations that occur, the lower the net efficiency is. This has very important ramification for energy production and use.
Level 5) Apex Predators
are at the top of the food chain and themselves have no predators
Law of Demand
as the price of a good or service rises, its quantity demanded falls (all else equal)
Currently, the U.S. ranks well ________ other nations in crude oil reserves at ____ BBbls.
below; 30 BBbls
Energy does not cycle! When you "______" or metabolize energy, it dissipates as ________.
burn; heat
Crude oil & natural gas are tradable ________________.
commodities
Economists use ________________ market structure as a gauge for an efficient outcome (or optimal outcome).
competitive
Unconventional drilling sites are _____________________ areas of activity.
concentrated
Low Entropy
concentrated energy, organized and ordered states of being (e.g.) complex molecules)
What would be an example?
consumer's incomes rise
Consumers will purchase a good as long as its benefit outweighs the_________.
cost
Petroleum is an exhaustible resource that shows considerable decreasing returns over time. Some wells, such as those associated with unconventional resources, have very accelerated "___________ curves."
decline
Big influx of speculative capital led to ______ price swings. Lack of experience and oversight in refining led to _________ accidents that created apprehensions about using the new fuel/energy resource.
wild; safety
Light crude oil is more desirable than heavy crude oil since it produces a higher ______ of gasoline.
yield
Why is an Ecologist Interested in Energy?
"Energetics" is an important focus of ecological studies -Ecosystems, with few exceptions, depend on photosynthesis- "fuel from biomass" -Organisms need energy to survive The ultimate driver of energy use is the human organism Pollution is an offshoot of energy use -Other ecological effects as well Trained in the "Odum school of ecology"
Explain C4 Plants: "_____________________" ___ % of plant species, but _____ % of terrestrial primary productivity (e.g. sugarcane, corn, Spartina) Best for _____________, _______ temperatures, and ______________ for CO2 limitation Maximum conversion efficiency of solar energy to biomass is higher at ___% ___________________ is enzyme involved in the uptake of CO2
"Hatch-Slack Pathway" 1%; 30% drought; high; nitrogen 6% PEP Carboxylase
The Epoch of Fossil Fuel Exploitation
"Hubbert's pimple"
David Pimentel on Biomass Fuel 2005 Quote
"The government spends more than $3 billion a year to subsidize ethanol production when it does not provide a net energy balance or gain, is not a renewable energy source or an economical fuel. Further, its production and use contribute to air, water and soil pollution and global warming."
To make gasoline, "__________" and rearranging molecules adds value to the products. Fractions from the distillation towers are transformed into streams (intermediate components) that eventually become finished products. The most widely used conversion method is called cracking because it uses _______ and _________ to "crack" heavy hydrocarbon molecules into lighter ones.
"cracking" heat and pressure
Economics also attempts to define optimizing strategies linking choices among scarce resources. The strategies are often rank-ordered based upon an optimization defined by "______________." Note: efficiency is a "__________________" approach- as opposed to a "_______________" approach-of prioritizing decisions.
"efficiency" "positive"; "normative"
Generally, demand for a particular good is considered more elastic the "______" the demand curve and more inelastic the "_______" the demand curve.
"flatter" "steeper"
This is the source of the "_______-_______" argument in regulation- the higher your capital investment, the larger your earnings- so utilities would be biased into making capital investments to "____" their rates and increase shareholder earning even if it leads to capital investment inefficiencies.
"gold-plating" "pad"
Interruptible transportation service
"less firm" service that gives you the opportunity of transportation service based upon its availability in terms of amount (capacity) and period (duration).
Over $____ billion in surface structure and equipment needed to service deepwater wells. • Drilling costs $___ million to $1____ million per well. • Drilling crews between ____ to ____ for large drilling project. • Structures and wells are typically ____ miles to ___ miles from the coast. • Water depths between ______ feet to ______ feet. • Drilling depths of _______ feet to ______ feet (lower tertiary).
$1.5 billion $80 million-$120 million 200-300 100-200 miles 5,000-8,500 ft 15,000-28,000 ft
Why do we store natural gas?
(1) Reliability: insurance on supply interruptions (outages/curtailments). (2) Risk management: insurance on rapid and large price changes (volatility). (3) Profitability: opportunities for storage service sales related to market changes.
C3 vs C4 Plants: Explain C3 Plants: "________________" ______% of plant species Best for _______ light, ______ places, more efficient Maximum conversion efficiency of solar energy to biomass is ______% (at current CO2 levels) CO2 is captured directly by ______________
"Calvin-Benson Cycle" 95% lower; cooler 4.6% Rubisco
According to Nocera, how might we meet this need?
- Cut down all the plants in the world (except those needed for food) to make biofuel: seven terawatts. - Build a new billion-watt nuclear plant every 1.6 days until 2050: eight terawatts. - Cover every inch of land on earth with wind turbines: two terawatts.
Natural gas production and reserves are at levels not seen since the _______ and both U.S. natural gas production and reserves are now at an all time recorded peak.
1970s
Drilling rig productivity has been decreasing since _________.
1999
British Scientist C.P. Snow's View of the Laws
1st Law: you cannot win (that is, you can't get something for nothing) 2nd Law: you cannot break even (you can't return to the same energy state you started at, because there is always an increase in disorder and energy dissipates)
Biofuels and Food In 2005, bioethanol program consumed about 15% of U.S. corn production but displaced less than ___% of gasoline use (AEI/Brookings Joint Center) •"The increase in crop prices resulting from expanded biofuel production is also accompanied by a net ______________ in the availability of and access to food" (International Food Policy Research Institute, 2005)
2% decrease
According to Zhu: -"The highest solar energy conversion efficiency reported for C3 crops is about ______% and about ____% for C4 crops across a full growing season based on solar radiation intercepted." "A major factor that lowers the conversion efficiency below this theoretical value even for healthy canopies under optimal conditions is insufficient ___________ to utilize all ______________ incident on a leaf."
2.4%; 3.7% capacity; radiation
The Gulf of Mexico region accounts for: • Approximately ____ percent of total U.S. crude oil production; • Less than ___ percent of total natural gas production; • Over $__ billion in federal royalties and fees; • Over ___ percent of total U.S. petroleum refining capacity and ___ percent of the capacity east of the Rockies; • ___ percent of all U.S. crude oil imports; and • ___ percent of the Strategic Petroleum Reserve ("SPR") storage capacity.
20% 10% 4 billion 52%; 65% 40% 43%
The RFS requires that gasoline sold by refiners, importers and blenders must contain an increasing amount of renewable fuel, such as ethanol or biodiesel, starting at ____ billion gallons in 2006, increasing each year by ___ million gallons, and reaching a level of _____ billion gallons in 2012. -That is roughly ___% of our present consumption rate.
4 billion 700 million 7.5 billion 5%
Profile of U.S. Population and Energy: U.S. population is ___% of world population. U.S. energy production is ____ % of world energy production. U.S. energy consumption is ____% of total world energy consumption.
4.6% 15.1% 21.1%
There are currently ____ different legislatively-created ratepayer advocacy offices in the U.S.
40
Crude oil is refined into useable products One barrel is equal to ____ U.S. gallons which provides roughly ___ gallons of petroleum products once it is processed Products refined from crude oil help to make everything from gasoline for cars to crayons, tires and heart valves.
42; 44
Drought Risk: Percentage chance of drought in Central Plains: 1950-2000...? 2050-2099...?
45% 96%
On November 14, 1947 the first oil well out of the sight of land was built by KerrMcGhee It was located about ___ miles south of ________________, LA This marked the beginning of the offshore oil industry.
45; Morgan City
Relatively uninspiring U.S. crude oil production forecast. Remember this number _________ MMBbls
5.0
Over the past 20 years the water depth barrier has increase from _________ feet to about ___________ feet.
5000 to 9000 ft
Refineries: Refineries are industrial facilities that use combinations of heat, steam, and various catalysts to "crack" hydrocarbons into various components that result in gasoline, diesel fuel, jet fuel, kerosene, and many other products. • There are ___ operating refineries in the Gulf Coast region, with ___ MMBbls/d of operating capacity. This represents approximately ___ percent of the nation's refining capacity. • Refineries account for approximately ___ percent of Gulf Coast states' GDP. • Refineries employ over ________ people in the Gulf Coast region.
53; 9.3 MMBbls/d; 51% 1.4% 40,000
Oil and Gas Production: • In 2015, over _____ MMBbls of oil and ____ Tcf of natural gas were produced in the Gulf of Mexico OCS. • Employs over ______________ workers in the Gulf Coast region. Over ________________ workers associated with offshore activities. • Contributes over $_______ billion to Gulf Coast states' GDP. • GOM accounts for ___ percent of total U.S. crude oil production.
552; 1.3 200,000; 100,000 200 billion 20%
What is the empirical formula for Photosynthesis?
6 CO2 + 6 H2O --> C6H12O6 + 6 O2
U.S. production of crude oil is expected to increase at an average annual rate of ___ percent through 2019, and decreases thereafter at a average annual rate of ____ percent through 2040.
6.4%; 0.6%
Chinese economic growth officially reported at ____ percent, while some analysts believe close to 6.0 percent.
6.9%
Percentage change of drought in South-west: 1950-2000...? 2050-2099...?
62% 98%
World population is about ____________.
7,365,000,000
Total world coal production reached a record level of ______Mt in 2012. This represents an annual growth of _____%.
7.830 Mt; 2.9%
TOPIC 6: OVERVIEW OF WORLD AND U.S. ENERGY PRODUCTION AND CONSUMPTION What is the the primary energy production in US?
71.7 "quads" (quadrillion or 10^15 BTU) -Coal (33%) -Natural Gas (28%) - Oil (18%) - Nuclear (12%) - Renewable (9%)
Illustrative production decline from a convention vs. shale producing well. As much as ___ percent of total production thought to occur in the first two to three years.
80%
Fossil Fuels: "Burning Buried Sunshine" -Today's average US gallon (3.8 L) of gasoline required approximately ____ metric tons (200,000 pounds) of ancient plant matter as precursor material. -The fossil fuels burned in 1997 were created from organic matter containing 44 x 10^18 g c, Which >____ times the net (i.e., harvestable) primary productivity (NPP) of the planet's current biota."
90; >400
David Pimentel and Tad Patzek: -By 1850, wood accounted for _____% of US energy consumption and US population was less than _____% of current 300+ million: serious wood shortages already existed -Green plants in the US collect about 50 quads of energy per year from sunlight: The US consumes slightly more than __________ that amount -______% of the US corn crop now converted into _______ billion gallons of ethanol replaces only ____% of US petroleum consumption: using entire corn crop would replace only _____% of US petroleum consumption -This is not freedom from foreign oil!
91%; 10% twice 8%; 1%
What are the top coal exporting countries?
1) Indonesia 2) Australia 3) Russia 4) USA 5) Colombia 6) South Africa 7) Canada
What are the critical factors affecting light and plant productivity?
1) Latitude 2) Season and sun angle 3) Cloud cover 4) In water -Water turbidity, clarity, color -Depth of mixed layer
What are four common examples of market failures?
1) Natural monopolies/market power 2) Externalities 3) Asymmetric information 4) Risk and Uncertainty
Dependence of Fossil Fuels: What are the two main categories of examples?
1) Our economic well being 2) Our safety and quality of life
What are the top ten coal producing countries?
1) PR China 2) USA 3) India 4) Indonesia 5) Australia 6) Russia 7) South Africa 8) Germany 9) Poland 10) Kazakhstan
Natural gas is important for all consumers:
1) Residential 2) Commercial 3) Industrial -Furnace/Heat -Boiler/Steam -Feedstock -Power Generation 4) Power Generation
TOPIC 7: PETROLEUM: AN OVERVIEW AND THE HISTORIC EVOLUTION OF CRUDE OIL AND NATURAL GAS Petroleum (oil/natural gas) are the largest energy sources of a ____ quad market.
97
Fate of Solar Energy in Sea: >___% absorbed by atmosphere or reflected by sea surface. -Much of rest absorbed by _______ ________ itself -Photosynthesis itself is not efficient (<____%)
>50% sea surface <3%
TOPIC 5: ENERGY REGULATION Recall prior competitive market conditions that are based upon markets with...
- Many buyers and sellers. - Firms are price-takers (they are small enough that their decisions do not impact the market price). - Firms produce homogenous (identical) goods. - Freedom of entry and exit. - Consumers and producers have perfect knowledge about the market. - In the long-run firms make zero economic profit.
Natural Gas Vehicles
A natural gas vehicle ("NGV") uses compressed natural gas ("CNG") or, less commonly, liquefied natural gas ("LNG") as a clean alternative to other automobile fuels. • CNG produces nearly 40 percent less CO2 than refined products. • In 2014, NGVs used 260 million gasoline gallon equivalent ("GGE"). To compare, total gasoline usage in 2014 was almost 22 million gallons per day, or a total of about 8 billion gallons. • Currently in the U.S., about 20 percent of public transit buses in run on natural gas (either CNG or LNG). • States with the highest consumption of natural gas for transportation are California, New York, Texas, Arizona, Georgia and D.C. • One major limitation is that CNG vehicles require a greater amount of space for fuel storage.
What are the two subcategories of primary energy sources?
1) Technically speaking: solar, geothermal, geochemical, nuclear, the ultimate sources of energy 2) Practically speaking: solar, geothermal, nuclear and coal, crude oil and natural gas
What four factors does the quantity of a good that firms offer for sale depend on?
1) The price of the good 2) Available technologies 3) Cost of input goods needed for production 4) Expectations
Equilibrium satisfies what two conditions?
1) There is no inherent tendency for quantity demanded or quantity supplied to change (as long as neither S or D shift). 2) Quantity demanded equals quantity supplied
Traditional Regulation: What are the two reasons why utilities (electric/natural gas) are regulated?
1) Utilities are imbued with the public interest: utilities provide critical services (electric, natural gas) that are essential for a modern economy 2) Utilities are "natural monopolies." Utilities have (natural) cost characteristics that allow them to drive competitors out of the market and then price their services at rates higher than competitive markets. (These two conditions serve as the basis for utility regulation.)
What are four examples of fixed cost in the energy industry?
1)Power plants for generation: plant is fixed (and cost), variable costs are fuel and labor as generation is increased based on unit capacity (and utilization). 2) Refineries for refined product: plant is fixed, variable costs are crude oil, labor, other inputs based on refinery capacity. 3) Natural gas processing facilities: processor is fixed, costs variable given fixed scale based on the gas moved through the facility 4) Solar panels/arrays: costs fixed, variable costs are considered free.
Ecological Efficiency
A ratio expressing the fraction of energy passing from one trophic level to another, or "A ratio of the energy per unit time taken from some population (the prey) as yield by some other population (the predator) to the energy per unit time ingested by the prey population" A very important concept of ecological energetics very much a consequence of the 1st and 2nd Laws of Thermodynamics Typically, ecological efficiency ranges from 10-20%
Average total cost (ATC)
- The cost per unit of output - ATC=TC/Q - Also: average variable cost (VC/Q) and average fixed cost (FC/Q)
Total Cost(TC)
- The sum of all costs incurred in production - TC=FC+VC
Direct Solar Energy
-Energy directly from the sun -Tremendous amount of total energy from sun, but over a large area of the Earth's surface
Energy and Power
-Important distinction often ignored or confused -"Energy is a thermodynamic quantity equivalent to the capacity of a physical system to do work or produce hear"- a quantity of energy -"Power is defined as an amount of energy delivered per unit of time"-a rate of energy production or use
Units of Energy
-Joule(J)- standard energy unit in International System of Units (SI); also used is International Organization for Standardization (ISO)- part of the metric system -Calorie(C)- a measure of heat energy -Kilowatt-hour (kWh)- frequently used English system unit (not to be confused with kW, a measure of power) -British Thermal Unit(BTU)- another English system unit; 1 quad= 10^15 BTU
Competitive market conditions are based upon markets with...
-Many buyers and sellers. - Firms are price-takers (they are small enough that their decisions do not impact the market price). - Firms produce homogenous (identical) goods. - Freedom of entry and exit. - Consumers and producers have perfect knowledge about the market. - In the long-run firms make zero economic profit
Growing U.S. Electricity Use: U.S. overall projected increase is about ___% per capita per annum over the next decade • Household use expected to increase __% per capita per annum • Most rapid increases in demand projected for computers, office equipment, telecommunications, and miscellaneous small appliance uses
0.7% 1%
__ Bcf per day of processing capacity, the largest in the GOM. • Tie-back flow lines that are longer than __ miles, the longest in the GOM. • ___ miles of mooring lines. • The Gulf's deepest suction pile installation. • The Gulf's largest monoethylene glycol (MEG) reclamation unit. • The Gulf's deepest pipeline inline future tie-in subsea structure. • The Gulf's longest single subsea umbilical order. (carbon instead of steel) • The flow lines are ____ miles in total length, and the umbilicals contain about _____ miles of stainless steel tubing.
1 Bcf 45 miles 2.4 miles 210 miles 1,100 miles
What are five examples of our economic well being?
1) Agricultural system 2) Transportation system 3) Industrial system 4) Home heating and other domestic uses 5) Scientific research
What are three different definitions for regulatory lag?
1) Can be defined as the period of time between when a utility's rates go into effect, and its next rate case. 2) May also be represented as the period between when a utility investment is made and the time it enters into rates. 3) Can also be interpreted as the time in which a utility's achieved rate of return (meaningfully) differs from its allowed rate of return.
Three Words Sum It UP:
1) DIVERSIFY - Alternative energy projects will be critical but will not alone solve our problem - Coal and nuclear will become increasingly important relative to oil - We need more new supplies in ALL categories 2) CONSERVE - We need to get greater efficiency out of our energy production, delivery and use systems - Land-use and transportation policies must change 3) EDUCATE - Citizens need to be able to make informed choices - Tomorrow's scientists and engineers - Government leaders need to be knowledgeable and accountable
What are four major problems with solar power?
1) Diffuse -Not much energy x unit time x area 2) Intermittent -Averages 12 hours per day -Varies with latitude, day of year and cloud cover 3) Mostly not available where it is needed- deserts are far from cities 4) May require several chemical transformations to be usable
What are five examples of our safety and quality of life?
1) Disaster relief 2) Pollution Control 3) Entertainment and leisure 4) National defense 5) Police and homeland defense
What are the four main types of Primary Fuel Sources?
1) Fossil Fuels 2) Fissionable Nuclear Fuels 3) Nuclear Fusion (maybe) 4) Renewable Resources
Who were the three scientists who warned us?
1) H.T. Odum 2) M. King Hubbert 3) Jay Forrester
What are a few characteristics of good fuels (transportation especially)?
1) High energy density to maximize potential energy 2) Liquid at typical temperature ranges 3) transportable and easy to contain 4) Easy to ignite, but not highly explosive 5) Efficient burning 6) Relatively non toxic and non polluting 7) Thermodynamically efficient to produce and handle 8) Non-corrosive
Rejoinders to the research noted that two characteristics of the regulatory process tended to temper the likelihood and prevalence of the A-J effect: What are the two?
1. the possibility of disallowances through the prudence review process and 2. the positive efficiency incentives created by regulatory lag. In fact, a series of articles published soon afterwards noted that regulatory lag typically creates incentives for utilities to seek efficiency opportunities between rate cases since the gains (profits) from those investments inure to shareholders instead of ratepayers.
Total OPEC adjustments should range around ___ MMBbls/d - almost ___ MMBBls/d if non-member agreements hold.
1.4-2.0
Energy flow in the U.S. food system: Energy consumed is ______ Quads. Food energy available is ______ Quads.
10.3 1.4
EROI as Applied to Oil: -In 1930 U.S. got ____ barrels of oil back from each barrel invested in seeking it (EROI= 100:1) -In 1970 about ___ for ___ -In 1990s about ___ to ____ for one -Much less for finding new oil (EROI= 3:1)
100 25 for 1 11 to 18
This "regulatory compact" is the result of over ______ years of regulation. It is not necessarily defined in a specific code or statute, but the result of _______-standing practices and precedents. Rates are set in a fashion that is supposed to be consistent with this regulatory compact.
100; long
What is the total energy consumption of the U.S?
101.6 quads (about 25% of world demand)
Population projected to reach ______ million by 2100.
11 million
LNG provides ____% of the U.S. supply of natural Gass by 2025.
14%
Donner and Kucharik: -Increase in corn cultivation required to meet legislatively mandated goal of _____-______ billion gallons of renewable fuels buy 2022 would increase annual average Nitrogen exported by Mississippi and Atchafalaya Rivers by ______-______%. -Expanding corn-based ethanol production would make already difficult challenges of reducing Nitrogen export to Gulf of Mexico and attendant _________ practically impossible without large shifts in food production and agricultural management.
15-36 billion 10-34% hypoxia
Soon after its publication, Averch's and Johnson's article was met with a flurry of scholarly research attempting to empirically verify the __-__ effect, as well as examining the conditions under which the effect would, and would not, be sustained.
A-J
Who discovered the modern process for distilling kerosene (light oil)?
Abraham Gesner (1849)
Hubbert's Peak Oil: _________ techniques he used can estimate oil supplies elsewhere in the world. -The news is not good: on a global basis, we are not discovering new reserves of petroleum as fast as we used to while ____________ grows; also, "___________ peak oil" may exist. -Economic/societal ramifications are serious, particularly for _______-_____________ developed world.
Analytical demand political energy-dependent
"____________" in the natural gas business refers to the ability to "reserve" or "hold" the ability to move (or call upon) natural gas supplies at any point in time.
Capacity
What are natural gas capacity requirements?
Capacity requirements are associated with the reservation of capacity to serve future gas loads. Capacity payments are needed to guarantee future supply, transportation and storage capabilities.
The economy is held up by three primary energy pillars: ________, __________, and _____. (each pillar is proportional to its contribution to the primary energy mix).
Coal, Oil and Natural Gas
What is the total revenue impact for percent increase in price for Unit Elastic?
Constant
200 HP mechanic power
Controlled by 1 worker, recently takes nearly 10 cal of energy to produce 1 cal of food (when eaten)
Horse Power
Controlled by 5 workers plus feed, human work, water and soil, stables
"_________________ ____________" suggests excess capacity responsible for the big crude oil price contraction. However, excess capacity has been relatively steady for the last three years.
Conventional Wisdom
_____________________ natural gas production was primarily dominated by the federal OCS. Conventional onshore production flat. Post 2008 increases due to ___________________ development.
Conventional; unconventional
What is an example of a wholesale transaction?
Coral Energy sells 1 Bcf of natural gas to Centerpoint-Louisiana. (Merchant to utility) Calpine sells 200 MW to Entergy-Louisiana (Merchant to Utility) Entergy Louisiana sells 150 MW to Mississippi Power (Utility to Utility).
______________ production and reserves are climbing back to levels not seen since the early 1980s (reserves).
Crude Oil
Why is ratepayer advocacy important?
Customers (citizens) are usually represented in the ratemaking process through a special advocate - often a state agency. • Ratepayer advocacy is important because it provides official sanction and resources for the express purpose of representing the collective interests of ratepayers that typically do not have the collective organization, resources, or information to advocate individually before regulatory commissions.
Our second, quite different, definition of economics comes from the great Hungarian economic anthropologist Karl Polanyi (Trade and Market in Early Empires) who provided what he termed a Substantive definition of economics:
Economics is the study of how people transform nature to meet their needs.
"Colonel" ___________________ is commonly credited as being the father of the modern U.S. petroleum industry.
Edwin Drake
Where does petroleum come from?
Effectively "buried solar energy" from prior geological time periods. Sedimentation and changes in sea levels and geology trapped various organic materials that formed the basis for crude oil and natural gas.
_____________ and ______________ gas utilities represent special types of energy industries since they are "natural __________." If left unregulated they would dominate and distort energy market outcomes.
Electric; natural; monopolies
What is a major example of a secondary energy source?
Electricity
_____________ is no different since the trade of energy commodities and services occurs in a variety of different markets.
Energy
Which act gave FERC additional responsibilities as outlined and updated in the Strategic Plan?
Energy Policy Act of 2005
US Energy Policy: Now on our 8th president since Arab Oil Embargo - Nixon: unable to create a new Cabinet-level Department of Energy and Natural Resources, but did establish the ______________________. • Ford: signed the ___________________ Act of 1975 to establish Strategic Petroleum Reserve • Carter: established __________________ and developed a comprehensive energy plan based on conservation • Reagan: believed totally in _____-market approaches • Bush: 42, Clinton, Bush 43 were unable to alter or have essentially perpetuated ________-era policies • Obama: has made energy and environment a _______ focus, but will he, or can he do enough?
Energy Research and Development Administration (ERDA); Energy Policy and Conservation Act; U.S. Department of Energy; free; Reagan; major
Summary Continued:
Fossil Fuel Use Will Peak Before Mid Century Net Energy Return is Decreasing Renewables Cannot Replace Fossil Fuels for the Current Economy (Intermittency, low energy density, storage, substitutability, slow market penetration, low EROI, infrastructure needs, material constraints) Meeting Climate Goals Will Cause Profound Changes in Society and the Economy Modern Industrial Society and Economy are Inherently Unsustainable
Take away _________ ________overnight and the economic system would collapse; agriculture, global transportation and the industrial complex would fail. Famine and Societal Upheaval would take place, as people struggle to live off local resources.
Fossil fuels
What are the traditional conventional supply basins?
Gulf of Mexico region, onshore Texas/LA, Midcontinent, Appalachia and the Rockies
TOPIC 8: CONVENTIONAL CRUDE OIL: What are the traditional conventional supply basins?
Gulf of Mexico region, onshore Texas/La, Midcontinent, Appalachia and the Rockies
What is the Averch-Johnson effect?
Harvey Averch and Leland Johnson and published in the American Economic Review in 1962, posited that rate of return regulation creates an incentive for regulated utilities to overcapitalize, resulting in an inefficient utilization of resources and higher than optimal rates.
Recent Deepwater Structure
Has 5 independent E&P partners plus one midstream partner/operator. Operates in 8,000 feet water depth. Enterprise and the Atwater Valley Producers Group, which includes Anadarko, Dominion, Kerr-McGee, Spinnaker and Devon Energy. Process ultra-deepwater natural gas and condensate discoveries in the previously untapped Eastern Gulf of Mexico.
Explain Productive.
Have a high net energy yield- a corollary of high EROI
________ and ________ commercial groups typically have trade associations to represent their interests.
Industrial; large
What is capture theory?
Industrialists of the time saw advantages in public/private relationships.
What are some examples of opportunity cost in energy policy?
Investment in solar energy for energy security rather than the purchase of an aircraft carrier or guided missile cruiser. • The use of natural gas for export purposes rather than domestic use in higher value-added petrochemical production. • Investing in wind energy to offset the impacts of global warming versus building levies and other physical barriers to storm surge. • Use of surface water for hydraulic fracturing versus its use in agricultural irrigation. (Draws home the saying "there is no such thing as a free lunch.")
What is economics?
It is the study of the allocation of scarce resources among competing ends
John D. Rockefeller
John Rockefeller was a contemporary of Drake. Born in 1839 he lived to be almost 100 years old and during that time literally created the modern petroleum industry we know today. Rockefeller was born of hard times and a broken home. Was a committed individual who defined the rags-toriches industrial titans of the day. Started his career in what today would be known as a commodities trader- he quickly saw the promise of petroleum as a commodity and product and bought out his partners to focus on this line of business exclusively.
Who is Daniel Nocera?
MIT's Henry Dreyfus Professor of Energy Planet Earth now uses 15 terawatts of energy per year; by 2050, it's estimated that we'll need 30.
________________ can arise in energy and often have important implications for market outcomes as wells as _____________.
Market failures; public policy
In 1918 the _________ _____________ Refining Company purchased 366 acres of rice, indigo, and sugar cane fields from the Good Hope Plantation. When the New Orleans Refining Company first located to the area, it offered vast employment opportunities and unique incentives for those interested in joining the company. In 1919, the company provided its employees with on -site living quarters, schools, and recreational facilities. As the town grew around the facility, it adopted the name _________, which was the acronym for New Orleans Refining Company .
New Orleans; NORCO
Who is the Chairman of the FERC?
Norman C. Bay
Photosynthesis is ______ efficient.
NOT
Horizontal segments
These are "fractured" with higher pressure water, chemicals and silica to break up the formation.
Who are the four other Commissioners of the FERC?
Tony Clark, Cheryl A. LaFleur, Philip D. Moeller, Colleté D. Honorable
Entropy
-A measure of the temperature of energy -As heat dissipates and the temperature reduces, the energy becomes useless in doing work
Law of diminishing returns
-As inputs increase, outputs increase at a decreasing rate. -Every marginal unit of input leads to increases in total output, but the marginal contribution of each marginal unit is less than the unit before. -This explains why marginal cost ultimately increases as output rises (because incremental cost efficiency falls).
Examples of fossil fuels?
-Coal, peal, shale, tar sands, etc. -Oil -Natural gas
Examples of nuclear fusion?
-Deuterium and Tritium isotopes
In Most Cases, the United States Remains a _____ _________ Importer.
Net Petroleum
Homes ... consume ___% of all energy used in the U.S. That's more than cars, or planes, or offices. • U.S. homes commonly waste ___% of the energy they use. • About ______-______ of that energy loss could be stopped by such simple moves as caulking and insulating.
21% 30% one-third
Gas Processing: • Gas processing facilities clean or process raw or 'wet' natural gas immediately after the gas is produced. • There are ____ gas processing plants in the Gulf states representing ___ percent of US gas processing capacity • In 2005, gas processors in the Gulf Coast states processed over ____ Tcf of natural gas. This represents ___ percent of the gas processed in the U.S.
249; 58% 6.8 Tcf; 46%
Pipeline Industry: • Pipelines can transport a variety of raw, unprocessed hydrocarbons, or finished (refined) products that include natural gas, natural gas liquids, crude oil, gasoline, diesel, among others. • There are over _____________ miles of pipeline offshore in the Gulf of Mexico that carry produced oil and gas to onshore facilities. • Employ over ____________ people in the Gulf Coast region.
25,000 21,000
Growth goals not being met:Future renewable growth rate: • >30%/yr until 2020 • >10%/yr until 2030 PV growth rate was ___% in 2015, down from 75% in 2011 Wind growth rate was ___% in 2015, down from 24.5% in 2011
28% 17%
What is the Total energy "deficit" of the U.S?
29.9 quads
Coal provides _____% of global primary energy needs and generates ____% of the world's electricity. It is also used in the production of _____% of the world's steel.
29.9%; 41%; 70%
Prior to 1800, ___% or less of the human population lived in cities.
3%
How tall is the Mars Tension Leg Platform?
3,250 feet
U.S. population is nearly at ____________.
325,000,000
"Everyone Hates Ethanol" -2007 energy bill requires refiners to mix ______ billion gallons into gasoline supply by 2022 •Next year's gas demand unlikely to absorb current mandate of 13 billion gallons •Current regulations limit the ethanol content in each gallon of gas at ____% -industry is asking to lift cap to ___% or more •A wide coalition of "strange bedfellows" now in opposition
36 billion 10% 15%
TOPIC 4: ENERGY ECONOMICS: What is Economics?
A field of study that examines and attempts to explain how choices are made in the presence of scarcity.
The _______ regulates wholesale electric and natural gas transactions (engaged in "interstate commerce")
FERC
Rules promulgated starting throughout the 1980s to "unbundle" gas and power transmission systems and create greater competition on supply resources by creating open networks for delivery. What are the two FERC orders for natural gas and electricity?
FERC Order 636 (1992, natural gas). FERC Order 888 (1998, electricity).
Wide variety of structures used in GOM offshore oil and gas that increase with water depth in complexity...
Fixed Platform (FP): (1500 ft) Compliant Tower (CT): (1500-3000 ft) Sea Star (SStar): (500-3500 ft) Floating Production System (FPS): (1500 to 6000 ft) Tension Leg Platform (TLP): (1500 to 7000 ft) Subsea System (SS): (to 7000 ft) SPAR Platform (SP): (2000 to 10000 ft)
United Nations Sustainable Development Goals: (17 goals)
Goal 1: End poverty in all its forms everywhere Goal 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture Goal 3: Ensure healthy lives and promote well-being for all at all ages Goal 4: Ensure inclusive and equitable quality education and promote life-long learning opportunities for all Goal 5: Achieve gender equality and empower all women and girls Goal 6: Ensure availability and sustainable management of water and sanitation for all Goal 7: Ensure access to affordable, reliable, sustainable, and modern energy for all Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation Goal 10: Reduce inequality within and among countries Goal 11: Make cities and human settlements inclusive, safe, resilient and sustainable Goal 12: Ensure sustainable consumption and production patterns Goal 13: Take urgent action to combat climate change and its impacts Goal 14: Conserve and sustainably use the oceans, seas and marine resources for sustainable development Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss Goal 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels Goal 17: Strengthen the means of implementation and revitalize the global partnership for sustainable development
Greater Per Capita GDP=
Greater Total Per Capita Food Demand
Ancient Greeks, Romans, and later Byzantines also recognized and utilized petroleum. "___________," a type of petroleum (likely naphtha) was utilized by the Byzantines as a very effective and deadly combustible _______________.
Greek fire; projectile
How much oil can a structure hold and how does the petroleum flow through the structure?
High porosity and permeability is a good thing for petroleum flow
What are some examples of retail transaction?
Household buys electricity from Entergy-Gulf States, LLC. Dow Chemical purchases stand-by power from Entergy-Louisiana. Abita Beer purchases natural gas from Atmos.
What does a renewable economy look like?
Human's of all ages doing manual labor for sustenance Slow moving vessels Limited range of transportation How much can "new renewables" make the hard work like food production easier?
Big Challenge: Stagnant or Dwindling Supplies: -What economist defined inflation as "too much money chasing too few goods?" -We are in an unusual period of oversupply in 2015- _____ demand, ______ supply
Milton Friedman low; high
Were the energy shortages of 1970s just inconveniences?
NO! -In my view, they were a warning unheeded -Our response in the 1970s was to become more reliant on foreign supplies, but not to discover new sources of energy or to develop a sound national energy policy -Fortunately, hydraulic fracturing ("fracking") has come along to rectify that
A change in the quantity demanded is ______ equivalent to a shift in the demand curve.
NOT
A change in the quantity supplied is ____ equivalent to a shift in the supply curve. -A movement along the supply curve is the change in quantity supplied associated with a change in ______. - A shift in the supply curve is a change in quantity supplied holding the price _________.
NOT price constant
Wholesale transactions are facilitated by a regulatory requirement of "open access" on power and gas transmission systems. What are the three acts associated with wholesale transactions?
Natural Gas Policies Act of 1978 Public Utilities Regulatory Policies Act of 1978 Energy Policy Act of 1992
Conclusions:
Natural gas and crude oil markets continue to be resilient. Prices anticipated to remain affordable and less volatile. • While some (dry methane) wells have shut/back or are shut-in, this has not been enough to meaningfully stall production particularly coupled with associated gas and very mild winter. • The real key for crude oil prices will be: (a) maintenance of OPEC cuts; (b) economic growth; (c) U.S. unconventional production. • Likely looking for a price correct back to the low $50/BBl to upper $40s/BBl by mid-year. Price will rebound through the year to low/mid-$50s/Bbl.
What is natural gas transmission/transportation?
Natural gas transmission service is needed to move natural gas from producing areas to consuming areas. The long-distance pipeline is needed to move natural gas from "Point A" to 'Point B." Natural gas transmission operators receive natural gas from a source by a shipper, then move that gas to a delivery point defined by the shipper. The gas transmission company is paid for moving the gas from receiving the gas at "Point A" and moving that gas to the delivery point ("Point B"). Natural gas transmission service can be provided on either a "firm" or an "interruptible" basis
How do we regulate energy "utilities?"
Regulation for energy utilities in the U.S. primarily takes the form of pricing regulation.
Conclusion:
Regulation is an important component of natural gas and electric power industries. Highly influences industry profitability and service. Goal of regulation is to serve the public interest and balance the interest of utilities and ratepayers consistent with the regulatory compact. Regulation significantly influences the efficiency with which electric power and natural gas is: • Delivered to end-users • Used by end-users Also influences resource acquisition decisions that will be discussed in separate lecture.
Is regulation the only option?
Regulation is not the only way of governing industries that are "imbued with the public interest" and have "scale economies." Many industrializing/industrialized countries, during the course of the 19th century, "nationalized" large infrastructure industries that were important and thought to have national interest. Over time, the national interest criteria justified a large degree of government interaction in industrial and the industrialization process.
Formerly a railroad conductor, he was hired for his railroad connections by investors creating the ___________ Oil Company to drill a rock-oil well in ___________, PA.
Seneca; Titusville
Define: The Solar Constant
The average density of solar electromagnetic radiation measured outside Earth's atmosphere and at Earth's mean distance from the sun
Rockefeller believed that the industry was its own worse enemy. ________________ behavior was driving the industry to ruin. Rockefeller believed that the industry could be highly successful and socially responsible, if it only had some guiding force and control.
Speculative
_______ Utility Commissions regulate retail transactions since they occur within the state and are not in interstate commerce.
State
What is the FERC?
The Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines as well as licensing hydropower projects.
The amount of a good that any consumer wishes to purchase depends on...
The amount of a good that any consumer wishes to purchase depends on... - The price of the good (inverse relationship). - Income (positive relationship). - Tastes, Preferences, Expectations (ambiguous relationship). - Prices of related goods • Substitutes: goods consumed in place of one another (inverse). •Compliments: goods consumed jointly (positive).
If regulation eliminates "economic profits" then what motivates utilities to reduce costs and to be efficient?
The answer rests with a concept referred to as "regulatory lag" which is thought to in-cent firms to reduce costs and to increase efficiencies between rate cases.
What happens if markets are not competitive?
Usually, there is some form of market failure that leads to these distortions.
_________ often have considerable resources to adequately advocate for their interests on both an individual and collective basis.
Utilities
Overall, the regulatory process is said to be governed by what is often referred to as the "regulatory compact" between regulators and regulated firms stating:
Utilities are given a monopoly service territory and are allowed to utilized a set of regulated rates that provide them with an opportunity to recover their prudently-incurred expenses and a return "on" and "off" their prudently-incurred investments in return for providing safe, economic, and reliable service.
Salt Caverns
Very high withdrawal and injection rates. • Most salt caverns/domes in U.S. along GOM. • More expensive, but faster and more flexible. • The safest form of natural gas storage if originally designed for that purpose.
Do plans respire?
YES -They have metabolic needs that require them to use ATP, NADPH, etc., which they get form metabolizing photosynthetic products -Clearly, they have no option but to do this at night since photosynthesis does not occur then -Also, do it during day, even when photosynthesis is also producing ATP, NADPH, etc. -This is where a lot of energy goes
Gas Shortages of 1970s: -Arab _________ -______________ and supply-demand issues exacerbated by US peak oil -Burdensome __________ regulation
embargos overconsumption government
Some ____________________ and ________ use concerns expressed in some areas of the country on this drilling process.
environmental and water
Sweet crude oil commands a higher price than sour crude oil because it has fewer _____________ problems and requires _______ refining to meet environmental standards.
environmental; less
Prices are set in order to give a utility an opportunity to earn a ______ rate of _____ "ON" and "OF" its capital investments, as well as recovering its prudently-incurred expenses. However, that variation is somewhat ________- if utilities earn "too much" outside the bound in which those fixed prices are set they will be "brought in" for a rate adjustment and if rates are "too low" utilities themselves will request the increase. These requests (or reviews) are conducted through _______________ law procedures- much like a court-room process in which arguments are made and evidence is taken under oath.
fair; return bounded adminstrative
Future Markets
financial market for trade of commodity right at points of time in the future on a standardized contract. A graph of these advance monthly contracts is often referred to as the "forward curve."
Problems with NeoClassical Economics:
• Define economy independent of biophysical matrix • Describe economic production independent of physical work • Boundaries are inconsistent with, and take little consideration of, the environment • When (rarely) tested, basic assumptions often not supported • Not consistent with laws of thermodynamics • Not consistent with principles of ecology-continued growth, lack of absolute scarcity, infinite substitutability • Basic assumptions about human behavior not supported. Humans as likely to be altruistic or vindictive as "rational" • Accommodates and even justifies the amoral explotation of the weak and poor by the rich and powerful
Key Messages from World Energy Resources Surveys of 2013 and 2015
• Despite some notable progress, the rate of improvements towards cleaner energy is far slower than required to meet emissions targets; development of renewables has been considerably slower than expected 20 years ago • Fossil fuels will remain main energy resources in many countries as fuel-switching does not happen overnight • Incentive-assisted renewable energy companies have created a boom in certain countries and regions. However, as incentives are decreased, some companies might not be viable anymore • Future of nuclear is uncertain, [but] natural gas is expected to continue its grow • Heat generation and cooling technologies are lagging behind in terms of innovation • Increased use of natural gas combined with decreased use of coal will see energy associated carbon dioxide emissions from natural gas surpass those from coal. • Failure to timeously plan for replacement of decommissioned baseload power plants might pose a risk to energy reliability in some countries.
What are some important characteristics of Renewables?
• EROI is Lower than Fossil Fuels • Slow Market Penetration • Intermittency • Substitutability • Resource Constraints and Infrastructure Needs • Low Energy Density • Storage
Under traditional regulation, rates are set on a utility's prudently-incurred costs:
• If a utility improves its operating/investment efficiencies after a rate case, then the increased profits associated with these actions accrue to the utility much like they would in a competitive market. • The opposite occurs if a utility becomes less efficient or is unable to contain its costs after a rate case: profits will fall much like they would in a competitive market.
Global Constraints on Sustainability:
• Impacts of Climate Change growing. CO2 levels tracking at highest IPCC Scenarios, No warming hiatus. • Energy. Conventional oil and gas will peak soon. By 2nd half of century, coal will be the dominant energy source. Most non-conventional fossil fuels and renewables have low EROI. • Natural ecosystems that supply all energy and materials that support economy are being degraded • Population. World population now greater than 7 billion and expected to grow to 11 billion. More than half of population now lives in cities. 500 million in deltas. • Food production now energy intensive and globalized. Local food production cannot feed many areas. • NeoClassical Economics is inadequate for addressing global sustainability constraints.
Sustainability Depends On:
• Laws of Thermodynamics- govern flows of energy and materials into and out of human systems • All systems at all scales are embedded within Earth systems- Boundaries are important • Absolute constraints are imposed at the global scale. All sustainability ultimately depends on global sustainability
Depleted Reservoirs
• Most common - - has slower injection/withdrawal rates. • Conversion of a natural gas field from production to storage duty takes advantage of existing wells, gathering systems, and pipeline connections. • Some reservoir storage along the GOM.
Summary of Energy Sustainability Lecture:
• Need to understand how future trends will impact delta sustainability. • Need to Work With Deltaic Functioning • Maintaining Geomorphic Sustainability is Fundamental to Overall Deltaic Sustainability • Delta Restoration Will Have to Take Place on a Much Greater Scale. Climate Change Will Make Restoration More Difficult and Energy Scarcity Will Limit Options • Ecological Engineering Where Energies of Nature Are Primarily Used, is a Sustainable Approach to Delta Management • Below Sea Level Areas Will Become Increasingly Untenable
Why was the public regulation of private industries (generally) preferred in the U.S.?
• Privately-held firms are profit-maximizing and these profits are generally found through efficiencies and innovation. • Belief that public institutions were wasteful and would become large monoliths. Efficiencies and innovation more likely to be developed by private industry than government.
Aquifers
• Usually used only in areas where there are no nearby depleted reservoirs. • Single withdraw period (winter) & used to meet peak load requirements as well. • Least desirable and most expensive type of natural gas storage facility.
What are the five natural gas demand determinants?
• Weather (Heating Degree Days or "HDDs") • Overall Economic Conditions • Natural Gas Prices • Electricity Prices • Other Factors
