Sunday, April 20, 2014

Perverse outcomes: Lifting U.S. oil export ban would mean greater dependence on foreign oil

The United States today is a large net importer of crude oil and refined products. And, yet the story that the country can somehow export crude oil as a foreign policy measure to help reduce Ukraine's dependence on Russia won't die. Oil executives and their surrogates keep bringing it up, and unsuspecting reporters amplify a message that has absolutely no basis.

The reason for this oil industry public relations blitz on the Ukraine is rooted in the industry's desire to end a decades-old ban on U.S. crude oil exports--one which the industry hopes to persuade Congress and President Obama to overturn. There is, in fact, a case regarding market efficiency for overturning the ban, but this is NOT the one the industry is using in its public relations campaign.

Here's why: The major effect of lifting the ban would be to allow domestic producers to sell lighter grades of crude oil--which U.S. refineries have little remaining capacity to refine--to foreign refineries which do have spare capacity. Perversely, that would lead to GREATER imports of foreign oil--mostly heavier grades--more suitable for the current U.S. refinery infrastructure. Net imports would remain unchanged, of course, even as the country's oil supply becomes more vulnerable to events abroad.

But the new arrangement would allow domestic producers to receive a higher price--the world price--for their lighter crude which comes increasingly from wells in deep shale deposits such as the Bakken in North Dakota. This oil has been selling at a discount to world prices since there is more of it in the United States than domestic refiners can currently handle. The oil market would become more efficient, but at some cost to energy security.

You don't have to take my word for any of this. Here's what Ken Cohen, Exxon’s vice president of public and government affairs, told The Wall Street Journal:

Exxon has long supported free-trade policies, and argued that the same rules of trade should apply to oil and natural gas as to any other product made in the U.S.A. Beyond the ideology, too much crude from Texas and North Dakota has been pushing down oil prices in the U.S. Exxon, as the nation’s largest energy producer, wouldn’t mind getting higher prices for its crude.

How do I know that this change in policy would lead to greater imports of foreign oil? Cohen again confirms this:

But when it comes to oil, refiners are particular about the flavor of crude they use. The rise in fracking has unleashed a large volume of light, sweet crude oil – while American refineries along the Gulf Coast are generally set up to handle heavier crudes from Mexico and Venezuela. So there’s a mismatch. U.S. oil producers want the option of exporting some high-value light oil, leaving refiners to import lower-cost heavy oil.

At least in this interview Cohen is being straight about the real reasons the industry wants the export ban lifted. And he has a point when he says that U.S.-based companies--with the exception of oil companies--are generally free to sell their products and services to the highest bidder worldwide. Whether his complaint carries weight depends on whether you believe energy is just another commodity or one that has a special role in the economy. That special role can be simply stated as follows: Nothing gets done without energy and so energy is, in fact, a unique commodity that deserves special treatment.

Now, you can imagine that the above argument is not one that will move Congress or the president to act. So, the industry--which can now say that it has already acknowledged its real argument--is making another argument, albeit a specious one, that we can somehow exert influence on the Ukrainian crisis in a way that will undermine Russia if only the United States would allow oil exports.

I tried to put this nonsense to rest in a previous piece citing America's continuing dependence on imports which remain close to 50 percent of our true petroleum consumption. But, let me try another simpler, visual way to show how ridiculous this argument is. Jim Hansen of Ravenna Capital Management pointed to the following graph available on the website of the U.S. Energy Information Administration. It's a graph of U.S. imports of crude oil and petroleum products from Russia.

U.S. imports from Russia remain above 400,000 barrels per day. Is it the plan of those who advocate U.S. oil exports to the Urkaine to import more oil from Russia so we can export it to the Ukraine? How exactly would this weaken Russia? Or change the world oil supply situation?

It really has gotten that absurd.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, April 13, 2014

Did crude oil production actually peak in 2005?

"Wait a minute," you must be saying. "Haven't we been hearing from the oil industry and from government and international agencies that worldwide oil production has been increasing in the last several years?" The answer, of course, is yes. But, the deeper question is whether this assertion is actually correct.

Here is a key fact that casts doubt on the official reporting: When the industry and the government talk about the price of oil sold on world markets and traded on futures exchanges, they mean one thing. But, when they talk about the total production of oil, they actually mean something quite different--namely, a much broader category that includes all kinds of things that are simply not oil and that could never be sold on the world market as oil.

I've written about this issue of the true definition of oil before. But Texas oilman Jeffrey Brown has been bending my ear recently about looking even deeper into the issue. He makes a major clarifying point: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil. It's such a simple and obvious point that I'm ashamed to have missed it. And, Brown believes that if we could find data that separates all these other non-crude oil things out, the remaining worldwide production number for crude oil alone would be flat to down from 2005 onward.

Brown says the current dual approach to price and supply is like asking the butcher the price of steak, and then, instead of finding out how much steak he has to sell, you inquire about how much beef in total he has on hand--which will, of course, include roasts and ground meat. And, then you proceed to calculate the butcher's total supply of steak by lumping everything together and simply calling it steak.

"Basically, crude oil peaked [in 2005], but natural gas and natural gas liquids [including lease condensate] didn't," he believes. Natural gas production has continued to grow, and as it has, its coproducts have also grown--many of which have been lumped in with the oil production statistics.

The general message from the oil industry is that the free market should determine what's best for our energy economy. There is much to dispute in this view. But, if we take the industry at its word, then we should see what Mr. Market has to say about all the things the industry lumps into total oil production.

Here's what's being added to underlying crude oil production and labeled as oil by the oil companies and reporting agencies:

  • Biofuels - Essentially ethanol and biodiesel.

  • Natural gas plant liquids - Butane, ethane, pentanes, propane and other non-methane components of raw natural gas.

  • Lease condensate - Very light hydrocarbons gathered on leased production sites from both oil and natural gas wells, often referred to as "natural gasoline" because it can in a pinch be used to power gasoline engines though it doesn't have the octane of gasoline produced at refineries.

  • Refinery gain - The most puzzling addition of all to crude oil supply calculations. This is merely the increase in the volume of refinery outputs such as gasoline, diesel and jet fuel versus the volume of crude oil inputs. It is due entirely to the expansion of the liquids produced, but indicates no actual gain in energy. In fact, great gobs of energy are EXPENDED in the refinery process to give us what we actually want.

Let's see if any of these non-oil things are acceptable as oil at major exchanges. Perhaps the most recognizable oil futures contract is the so-called Light Sweet Crude Oil contract. The exchange sponsoring that contract details in seven pages (of a much longer rulebook) what is acceptable to deliver to those who choose to take delivery on their contracts.

A search for three of the four items (and their subitems) listed above predictably comes up empty. But, the search for lease condensate produces a hit. Here's what the exchange says about lease condensate when discussing acceptable delivery of oil: "For the purpose of this contract, condensates are excluded from the definition of crude petroleum."

It's true that some lease condensate does make its way into the crude oil production stream of refineries. But, its contribution is small and because of its chemical structure, it's not very versatile compared to crude oil which can be refined not only into gasoline, but also diesel and jet fuel which are more valuable to refiners. Typically, crude oil blended with lease condensate is discounted to refiners in recognition of its lower value. (For the technically minded, this excellent article explains the growth and uses of lease condensate.)

It's worth noting that the same futures exchange that sponsors the Light Sweet Crude Oil contract has separate contracts for biofuels.

Maybe across the ocean in Great Britain where the world's other premiere crude oil futures contract is traded, the exchange is a bit more forgiving. Alas, the exchange sponsoring Brent Crude is exceedingly picky about what it will accept as proper delivery to those who take delivery on their contracts. The exchange accepts crude from only four North Sea fields: Brent, Forties, Oseberg and Ekofisk.

This look at what the market actually prices as oil tells us a lot about why Brent Crude, for example, has been trading at the highest average daily price ever for three years running, higher than even 2008, the year of the nominal all-time price peak.

So, if oil production hasn't really been growing or at least not growing much in the last several years, what's all the hoopla about? As petroleum geologist and consultant Art Berman likes to say, it's a retirement party. There is one last, very difficult, costly and energy-intensive store of oil in low-quality deep shales containing crude. These shales--which are accessed using hydraulic fracturing or fracking--would never have been tapped if we were not already seeing a decline in the production of conventional, easy-to-get crude oil, the kind I refer to as Beverly Hillbillies bubbling crude as seen in the opening credits of the popular 1960s sitcom of that name.

The oil from deep shales (properly called "tight oil") is allowing production to grow in the United States even as production sinks elsewhere in the world. Other countries having shales containing oil will likely try to exploit them. But, the retirement party will only be a few years later for them as a result.

Despite what the public is being led to believe, oil wells in deep shales suffer from very high annual production decline rates--40 percent per year compared to the worldwide average of 4 percent. This implies that swiftly rising production will be followed by equally swiftly declining production in a compressed time frame--a classic boom-bust pattern.

Okay, so what do the worldwide oil production numbers actually look like if we strip out all the non-oil components? Well, we don't actually know. Brown has been unable to find such numbers anywhere. While the search continues, he thought he'd do a back-of-the-envelope calculation of his own. Here's what he came up with:

Estimated Global Crude Oil Production
2002 to 2012 in million barrels per day


2002: 60
2003: 62
2004: 65
2005: 67
2006: 65
2007: 65
2008: 66
2009: 64
2010: 66
2011: 65
2012: 67

(For the technically minded, here are the assumptions behind his numbers: The global condensate to crude plus condensate ratio was 10 percent for 2002 to 2005--versus 11 percent for Texas in 2005--and condensate production increased at the same rate as the rate of increase in global dry processed gas production from 2005 to 2012, 2.8 percent per year, according to the U.S. Energy Information Administration. Crude oil is defined as oil with an API gravity of 45 or less per RBN Energy. Data are rounded off to two significant figures.)

This is really a guess based on incomplete information. But if Brown is roughly correct, his estimate explains why crude oil prices remain near record levels (based on the average daily price) despite all the talk about abundance and an oil renaissance in the United States. Simply put, there is no new abundance. Oil supplies remain constrained.

This does not deny that natural gas production continues to grow and that natural gas and its coproducts (butane, ethane, propane and pentanes) are useful. But our current infrastructure is desperate for oil, particularly the transportation sector which is still dominated by oil derivatives. Some substitution in various areas including transportation and chemical feedstocks is taking place. But the rate is slow and the conversion can be costly.

Moreover, the energy content per unit of volume is significantly lower for natural gas plant liquids, between 30 and 40 percent lower than crude oil. To say that barrels of butane are equivalent to barrels of crude oil is more than just a rounding error.

Brown says the reason for the seeming stall in world oil production is actually quite simple. The remaining oil is harder to extract. We've taken the easy oil out of the Earth first. He explains that in the seven years ending in 2005, the oil industry invested $1.5 trillion on finding and developing new oil and natural gas fields and the capacity to refine and distribute the products that come from them. During that period oil production consistently rose. In the seven years after 2005 the industry spent $3.5 trillion for what Brown believes is no net increase in the production rate of actual, honest-to-god crude oil.

The notion that oil is becoming abundant all over again is contradicted by the levitating price and by the evidence that actual worldwide crude oil production is either flat or growing at an infinitesimal rate. But the industry doesn't want the public or policymakers to know this because the current belief in abundance tends to slow down an energy transition away from fossil fuels and toward renewables.

That transition must come sooner or later. But the industry would like to see it come later. And, if policymakers are fooled by the abundance story, that transition will almost certainly come later.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, March 23, 2014

A Three-Week Hiatus - Posting to Resume April 13

A crush of consulting work, a heavy travel schedule and an impending move (closer to downtown Portland) necessitate a three-week hiatus in posting. I expect to resume posting on Sunday, April 13.

Sunday, March 16, 2014

Net vs. gross energy: Is it wise to be complacent?

Everyone knows that when a potential employer makes a job offer, the salary or wage he or she proposes isn't what you'll be taking home. What you'll take home is your net pay. The number the employer offers you is your gross pay, and that's just what it says on your pay stub.

It's not quite a perfect analogy with net energy versus gross energy. But it's an everyday analogy that most people can understand. Net pay is what you have to pay your bills today. And, net energy is what society has in order to conduct its business (and its fun) on any given day. Net energy is what's left after the energy sectors of the economy--oil and gas, coal, nuclear, hydroelectric, renewable energy industries, and farming which provides food for human and animal energy and crops for biofuels--expend the energy they must to extract energy from the environment and then sell the surplus to the rest of us.

We don't often think of these sectors of the economy because for most people they are out of sight and therefore out of mind. And, until the last decade food and energy have been so consistently cheap in the last 60 years or so, that few people ever paused to ponder the fact that it takes energy to get energy. And, after all, cheap energy is an indication that it takes very little energy to extract huge amounts of energy from the environment. So, why worry about that?

However, as food and energy costs have risen dramatically in the last decade, the public and policymakers have begun to notice. What they don't seem to understand is that this rise results from the fact that it is now taking significantly more energy (and therefore money) to extract the energy we desire, both from fossil fuels in the ground and farm crops on the land (yields of which are currently heavily dependent on fossil fuel inputs). An obvious symptom is that wealth is flowing into the energy-gathering sectors of the economy mentioned above. But, that means there is less wealth left for the other sectors of the economy where the vast majority of people work, at least in so-called developed countries.

Still, as costs to extract energy continue to rise for those in the energy-gathering sectors of the economy, even their profits and wages will ultimately get squeezed. Yes, everyone eventually suffers when society must use more and more energy just to get the energy it needs to allow the non-energy parts of the economy to function properly.

Since 86 percent of the energy consumed worldwide is derived from burning finite fossil fuels, we are faced with a serious dilemma. Eventually, the energy we get from these fuels will turn down--and not for the reason that most people think. The world continues to extract more gross energy in the form of oil, natural gas, and coal each year. And yet, it takes energy to find, extract, refine and deliver that energy to society. So, are we still getting more net energy from those fuels each year? No one knows the answer.

One thing is clear. Because fossil fuels are finite, one day their rate of extraction will peak and then begin an irreversible decline. When that will occur, no one can know. But, before that happens--perhaps many, many years before it happens--the net energy from fossil fuels will peak and then begin an irreversible decline.

There are clues, obvious clues, that we may be nearing a net energy peak, even as the energy companies tout new records of gross fossil fuel extraction. High prices and now shrinking profits are evident in the oil and gas industry. Executives in the linked article give many explanations for falling profits, but none of them have to do with the declining net energy from their extractive activities. And, if the executives understand the latter cause--and I'm not sure they do--announcing it would hardly boost oil company stock prices.

But the word is out now that high costs for developing new fossil fuel energy sources are finally biting into energy company profits despite continuing high prices for oil and rebounding prices for natural gas.

One way the companies are fighting the high cost of developing new resources is simply to cut back on investment. But, this could create a self-reinforcing cycle in which exploration and development cutbacks lead to supply reductions worldwide which lead to higher prices which lead to recession and thus lower demand--and finally to much lower prices which discourage exploration and development.

But, back to my answer to the question, "Are we still getting more net energy from those [fossil] fuels each year?" My answer was that nobody knows. It's curious that in the information age no one has thought to examine this question very deeply except a few energy researchers who have been too ill-funded to gather and analyze extensive data on the subject. Charlie Hall and his students come to mind. They have gone to heroic lengths to obtain at least some data and analyze it in order to explore this question.

It is instructive that the premier energy statistics agency on the planet, the U.S. Energy Information Administration (upon which I rely heavily for accurate historical energy statistics), does not even have a category in its tables for net energy, nor any mention of it (in the sense I mean it) anywhere on its site that I can find.

The real peak then in fossil fuel energy will come not when the rate of extraction of oil or coal or natural gas peaks. As far as society is concerned, it will come when the net energy from these sources peaks and begins to decline. The fact that we won't even be able to see this when it arrives means we're headed for trouble already.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, March 09, 2014

Ukraine, Russia and the nonexistent U.S. oil and natural gas "weapon"

Commentators were falling all over themselves last week to announce that far from being impotent in the Ukraine crisis, the United States had a very important weapon: growing oil and natural gas production which could compete on the world market and challenge Russian dominance over Ukrainian and European energy supplies--if only the U.S. government would change the laws and allow this bounty to be exported.

But, there's one very big problem with this view. The United States is still a net importer of both oil and natural gas. The economics of natural gas exports beyond Mexico and Canada--which are both integrated into a North American pipeline system--suggest that such exports will be very limited if they ever come at all. And, there is no reasonable prospect that the United States will ever become a net exporter of oil.

U.S. net imports of crude oil and petroleum products are approximately 6.4 million barrels per day (mbpd). (This estimate sits between the official U.S. Energy Information Administration (EIA) numbers of 5.5 mbpd of net petroleum liquids imports and 7.5 mbpd of net crude oil imports. And so, to understand my calculations, please see two comments I made in a previous piece here and here. My number is for December 2013, the latest month for which the complete statistics needed to make my more accurate calculation are available.)

The EIA in its own forecast predicts that U.S. crude oil production (defined as crude including lease condensate) will experience a tertiary peak in 2016 around 9.5 mbpd just below the all-time 1970 peak and then decline starting in 2020. This level is far below 2013 U.S. consumption of about 13.2 mbpd of actual petroleum-derived liquid fuels. (This number excludes natural gas-derived liquids which can only be substituted for petroleum-derived liquids on a very limited basis.)

So, when exactly is the United States going to drown the world market in oil and thereby challenge the Russian oil export machine? The most plausible answer is never. And, the expected 2016 peak in U.S. production is only about 1.5 mbpd higher than production today. That's really quite small compared to worldwide oil production of about 76 mbpd. And, there's no guarantee that the rest of the world isn't going to see a decline in oil production between now and then. So much for the supposed U.S. oil "weapon" taming the Russian bear.

But what about natural gas? Surely, America's great bounty of natural gas from shale could challenge the Russians. Well, not really. It's true that U.S. natural gas production trended up significantly from its post-Katrina nadir in 2005. But the trend has now stalled. U.S. dry natural gas production has been almost flat since January 2012. The EIA reports total production of 24.06 trillion cubic feet (tcf) for 2012 and 24.28 tcf for 2013, a rise of only 0.9 percent year over year.

Not mentioned by any of the commentators touting the U.S. natural gas "weapon" is that U.S. natural gas imports for 2013 were about 2.88 tcf or about 11 percent of U.S. consumption. So, let me see if I understand this: The plan seems to be to import more so we can export more. And this would change exactly what in the worldwide supply picture?

Certainly, it is true that low U.S. natural gas prices have reduced drilling and exploration dramatically. But prices will likely have to rise above $6 and trend higher as time passes as the easy-to-get shale gas is used up and only the more costly and difficult reservoirs remain. Drillers don't keep drilling unless they can make money and that will require significantly higher prices.

And, here's the kicker. In order to ship U.S. natural gas to Europe or Asia, it has to be liquefied at -260 degrees F, shipped on special tankers and then regasified. The cost of doing this is about $6 per thousand cubic feet (mcf). So, the total cost of delivering $6 U.S. natural gas to Europe is around $12 per mcf. With European liquefied natural gas (LNG) prices mostly below this level for the last five years, it's hard to see Europe as a logical market. Japan would be a better target for such exports with prices moving between $15 and $18 per mcf in the last five years. But a U.S. entry into the LNG market could conceivably depress world prices and make even Japan a doubtful destination for U.S. LNG. And, what if U.S. prices rise significantly above $6?

But all this presupposes that the United States will have excess natural gas to export. As my colleague Jeffrey Brown has pointed out, "Citi Research [an arm of Citigroup] puts the decline rate for existing U.S. natural gas production at about 24%/year, which would require the industry to replace about 100% of current U.S. natural gas production in four years, just to maintain current production."

It seems that U.S. drillers are going to be very, very busy just keeping domestic natural gas production from dipping, let alone expanding it to allow exports. And remember, we are still importing the stuff today!

How many companies will actually risk the billions needed to build U.S. natural gas export terminals to liquefy and load exports that may never appear? I doubt that very many will actually go through with their plans.

What is truly puzzling is that all the information I've just adduced--except the cost of liquefying, transporting and regasifying natural gas--is available with a few clicks of a mouse and a little arithmetic performed on tables of data. I got the cost information on LNG from a money manager specializing in energy investments. And yet, commentators, reporters, and editorial writers don't even bother to check the internet or call their sources in the investment business.

Perhaps the facts have become irrelevant. Only that would explain the current hoopla over the nonexistent U.S. oil and natural gas "weapon" in the face of the all-too-obvious and readily available evidence.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, March 02, 2014

Taking a short break--No post this week

Other responsibilities have made it impossible to find time to write my weekly piece. I expect to post again on Sunday, March 9.

Sunday, February 23, 2014

Is ammonia the holy grail for renewable energy storage?

"If you want to beat carbon, it's the only way to do it unless you change the chemical charts." So says Jack Robertson about the prospects for making ammonia the world's go-to liquid fuel and renewable energy storage medium.

Robertson is chairman and CEO of Light Water Inc., an ammonia energy storage startup. The carbon he mentions refers, of course, to the major carbon-based fuels of oil, natural gas and coal that provide more than 80 percent of the world's energy. The charts he mentions refers to the periodic table of elements, a listing of the basic elements of the universe which are about as likely to change their properties as the proverbial leopard is to change his spots.

Most of us think of ammonia as a pungent household cleaning agent that disinfects and deodorizes. Farmers are familiar with anhydrous ammonia (essentially ammonia that is not mixed with water) that is a common nitrogen fertilizer.

But the idea that ammonia can be used as a fuel, while not new, is not widely known. That's not really surprising since the last 150 years have been powered by another better-known liquid fuel called oil. And, the ubiquitousness and historically low price of oil prevented other liquid fuels from gaining a foothold in the marketplace. The use of historically cheap coal and natural gas has kept ammonia on the sidelines in the electricity market as well.

But now, two things have changed. First, concern about climate change has policymakers scrambling to figure out how to reduce carbon emissions. Second, the world's primary liquid fuel, oil, has been trading at its highest daily average price ever for the last three years. In 2011 the average daily price of Brent Crude, the world benchmark, was a record $111.26 a barrel--which was followed by another record in 2012 of $111.63. The year just finished saw Brent Crude a bit lower on average at $108.56, a figure higher than all but the two previous years.

(Despite all the hoopla about rising American crude production, the rate of oil production worldwide has eked out only a small gain of 2.7 percent between 2005 and 2012, about a quarter of the growth rate of the previous seven-year period. And, this slower growth in the face of rising demand in India and China has led to record prices.)

What makes ammonia so attractive as a fuel is sixfold. First, it contains no carbon. The ammonia molecule is composed of one atom of nitrogen and three atoms of hydrogen. Therefore, when ammonia-based fuel is burned, it produces very little in the way of greenhouse gases. The small amount of oxides of nitrogen that it does produce can be neutralized by ammonia itself. Second, we already have well-known processes for making ammonia. We don't need new or exotic technology to produce it. Third, these processes have long ago demonstrated that they can be scaled up to form a worldwide ammonia production industry. Fourth, an ammonia distribution system is already in place that includes rail tankers, tanker trucks, ships, barges and ammonia pipelines, a system that uses pressures no higher than that found in a bicycle tire to keep ammonia in its liquid state. While that infrastructure would need to be expanded, no new technology is required to transport ammonia from where it is made to where it is used.

Fifth, ammonia has an enviable safety record. There have been mishaps. But they don't involve fire since ammonia is not easily combustible. Those who've used ammonia cleaners will understand that it is the fumes which pose a danger if they are too concentrated. On the other hand, humans can detect the strong smell of ammonia at very low levels, long before it ever reaches toxic concentrations. And, this means that in the event of an accident, humans can flee or take measures to protect themselves from harm before it's too late.

Sixth, if manufactured using renewable energy, ammonia, when produced and then burned as a fuel, creates little that can be classed as pollution (except a small amount of oxides of nitrogen mentioned above which can be neutralized by the ammonia itself). When ammonia molecules are broken down into their constituent parts during combustion, the nitrogen returns to the atmosphere and the hydrogen reacts with the oxygen in the air during combustion to form water.

Ammonia energy research is part of the hunt for a cheap method of storing intermittent flows of energy from wind and solar power generation, a major problem that has plagued the expansion of these low-carbon technologies. The wind, of course, doesn't always blow and the sun doesn't always shine. To make matters worse, when the wind blows most and the sun shines its brightest, sometimes too much electricity is produced and some of it must essentially be dumped. A similar problem plagues hydroelectric dams as I will explain below.

So, how exactly would ammonia be used for renewable energy storage? While others have been working on this problem, Robertson's story is instructive. After many years as an aide for the late U.S. Senator Mark Hatfield of Oregon, Robertson returned to Oregon to work for the Bonneville Power Administration (BPA) where he eventually rose to the rank of deputy administrator.

Each spring from his perch at BPA he watched enormous amounts of water run down the Columbia River, much of which would never generate electricity at the agency's hydroelectric dams because there was simply too much water. Even the electricity that was generated from the dams and later from the huge wind farms installed along the river would often be sold for almost nothing during the spring. Occasionally, the BPA actually had to pay others to take its excess electricity.

Robertson wondered if there might be some way to store all this excess power and then use it in other seasons when supply from the dams and wind farms was lower and electricity prices were higher.

After an early retirement he went to work on the problem in a more systematic way, first founding a nonprofit that studied the issue. One of the possible answers was to produce ammonia using the excess power. Robertson realized that in order to bring that idea to fruition he would need to raise private capital and formed Light Water Inc.--so named because ammonia produces light if used to generate electricity and also water as hydrogen combines with the oxygen in the air during combustion (as previously noted).

Robertson's aim is to produce "green" ammonia. By "green" he means produced using only renewable energy to separate hydrogen from oxygen in water molecules using electrolysis. (Ammonia is currently most often made using hydrogen stripped from methane or coal.) The "green" hydrogen would then be combined with nitrogen drawn from the air (which is 78 percent nitrogen) to form ammonia through the well-known and widely used Haber-Bosch process. The huge excess power available in spring from the BPA's system of dams and wind farms along the Columbia now doesn't have to be wasted, he believes.

It could be used to make ammonia in quantities so large that the resulting volumes could be sold to provide power and fuel for other parts of the country. The most likely interim step would be to trade green ammonia certifications to utilities and others that have access to fossil-fuel based ammonia but would benefit from that certification for regulatory reasons such as credits and incentives for using renewable energy. It would be similar to buying carbon offsets. Once the green ammonia certification is traded, the actual green ammonia would lose its certification and enter the general ammonia supply. The arrangement provides incentive for producing green ammonia that displaces fossil-fuel based ammonia locally without incurring the financial and energy costs of transport.

Of course, wherever hydroelectric power and wind and solar energy are in large surplus at various times of the year (or in the case of wind and solar energy, various times of the day), ammonia-producing plants could be set up to store that excess energy for later use and/or sale to or certification trading with more distant locales.

Robertson has combined his efforts with several others to seek funding from the California Energy Commission to test high-efficiency, high-compression engines fueled by ammonia as a way of producing electricity. (Even standard diesel and gasoline engines can be adapted to burn ammonia. But this is not the focus of Robertson's project.)

If the project is funded, a successful test could pave the way for private funding that would take the concept to the next step, a working pilot plant and then a commercial-scale plant that make ammonia and use it to generate electricity for utilities during peak load hours.

Robertson's project is but one example among many of experiments with ammonia as a fuel. The NH3 Fuel Association lists several efforts on its website.

The public has been previously tantalized by supposed energy breakthroughs such as ethanol and cold fusion--only to be disappointed when the results failed to match the hype or were nonexistent. But, the world already has long experience with ammonia, and so most of the questions surrounding its use, safety and scalability have already been answered--except one. Can it become a breakthrough alternative liquid fuel and storage medium for renewable energy?

The evidence so far suggests that it has a far better chance of succeeding than many of its current competitors.

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This piece was updated on 2/26/14 to reflect additional information and corrections discussed in my comment below.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.