THE ECONOMIC ADVANTAGES OF ENERGY SECURITY AND INDEPENDENCE

1. THE ECONOMIC ADVANTAGES OF ENERGY SECURITY AND INDEPENDENCE Roger H. Bezdek, Ph.D. Management Information Services, Inc. Oakton, Virginia Presented at the American Energy Security Summit: “Energy Independence Through Domestic Alternative Liquid Fuels” Alexandria, Virginia April 2007

2. THIS PRESENTATION • Risks and concerns • Strategic and economic issues • Magnitude of the problem • U.S. resources and technologies available • SSEB study • Path to U.S. energy independence • National economic benefits -- Oil imports displaced -- Industry sales and profits -- Employment -- Jobs and skills -- Tax revenues • Benefits to a state

3. No, we’re facing a liquid fuels crisis

4. U.S. ENERGY IMPORTS ARE INCREASING EIA forecasts that by 2030 U.S. will be importing 2/3 of its oil and nearly 25% of its natural gas Source: EIA, Annual Energy Outlook 2007, December 2006

5. SECURITY CONCERNS: U.S. IMPORTS CONTINUE TO INCREASE

6. SERIOUS RISKS TO U.S. OFINCREASING ENERGY IMPORTS • Excessive dependence on imported oil from OPEC and others. • Potential of excessive dependence on imported natural gas • World oil production may soon peak and begin to decline. • Record trade deficit ($764 billion in 2006) driven by energy prices • Increased global competition from China, India and others. • Supply disruptions by natural disasters or terrorism • National security concerns

7. PRES. BUSH: “REDUCE OIL IMPORT DEPENDENCE”First Thing to do: Stop Digging! Just to keep oil imports at current level will require an additional 5 MMbpd U.S. production of liquid fuels by 2030

8. Remember the 1970s? Stagflation. . . Recession That was only a short-term disruption

9. STRATEGIC ISSUES • World Oil Demand is Rising • U.S. Energy and Economic Security is Increasingly at Risk • World Oil Supply will Peak and Decline • Military Preparedness and Homeland Defense Requires Secure Fuel Sources • Current Energy Policy Relies on Middle East • Energy Options are Limited America’s Unconventional Fuel Resources Can Help Bridge the Gap to Future Fuels

10. AMERICA’S OIL CONSUMPTION 22 MILLION BARRELS A DAY

11. U.S. ALTERNATIVE OIL RESOURCES RIVAL TOTAL WORLDWIDE CONVENTIONAL OIL RESERVES World Conventional Oil: 2 - 3 Trillion Barrels U.S. Alternative Oil: 2 - 4 Trillion+ Barrels

12. U.S. RESOURCES AVAILABLE Slide courtesy of the U.S. Department of Energy

13. COAL FIELDS OF THE UNITED STATES – LOWER 48 STATES ____________________________________________________________________________________________________ Note: Alaska also has substantial coal reserves.

14. EASTERN & WESTERN OIL SHALE RESERVES U.S. Geological Survey’s Reserve Estimate: 2.1 Trillion Barrels

15. RESOURCE POTENTIAL OF 500+ MILLION DRY TONS PER YEAR

16. COAL, OIL SHALE, AND BIOMASS PLANTS

17. A PLAN TO REPLACE IMPORTED OIL • Goal of 5% reduction per year for 20 years, beginning in 2010. • We must start programs now as lead times are long.

18. WHY SO LONG TO MITIGATE? • Energy is inherently very large scale. • - It’s not computers or electronics • - No magic bullets • Long time to build capacity & savings • Long lifetimes • Inherently expensive • The only solution: Start Early!

19. SSEB STUDY “American Energy Security: Building a Bridge to Energy Independence and a Sustainable Energy Future” U.S. faces 4 oil-related risks: • World oil production may soon peak • Dependence on unstable foreign supplies • Increasing global competition for oil • Natural disasters (e.g. Katrina) and terrorism To mitigate these, U.S. must produce its own liquid fuels

20. SSEB STUDY - 2 This study: • Developed a plan for the U.S. to establish energy security and independence through the production of alternative oil and liquid fuels from U.S. domestic resources that include coal, biomass, and oil shale • Emphasized need for domestic enhanced oil recovery programs using CO2, increased transportation fuel efficiency, and sensible energy conservation

21. SSEB STUDY - 3 The study focused on: • Oil market analysis and forecasts • U.S. resource assessment of biomass, coal, oil shale, CO2 enhanced oil recovery (EOR) • Technology assessments and cost estimates for biomass, coal, and oil shale to liquid fuel production plants and CO2 EOR • Forecasts and analysis of the U.S. economy • Environmental challenges and benefits • Policy recommendations to stimulate growth of the alternative liquid fuels

22. SSEB STUDY - 4 Impacts on variables of interest: • GDP, inflation, and interest rates • Oil imports • Price and price volatility of liquid fuels • Federal, state, and local government revenues • Federal budget deficit • U.S. trade deficit • Industry sales and profits • Employment created (industries and occupations) • Capital formation and requirements • Export opportunities • Personal income

23. THE PATH TO U.S. ENERGYSECURITY AND INDEPENDENCE i

24. ESTIMATED CONTRIBUTIONS OF EACH RESOURCE TO ELIMINATION OF U.S. OIL IMPORTS IN 2030

25. TOTAL LIQUID FUELS CONTRIBUTIONSFROM EACH INITIATIVE IN 2030

26. REDUCTION IN U.S. OIL IMPORTS

27. ECONOMIC IMPACT

28. ECONOMIC IMPACT OF THE AESINITIATIVES WILL BE ENORMOUS The AES initiatives will reduce risk and lower oil prices, facilitate an industrial boom, create millions of jobs, foster new technology, revitalize the manufacturing sector, enhance economic growth, and help eliminate the trade and budget deficits. In 2030 they will generate annually (2005 dollars): • New investments of nearly $200 billion • One-third of a trillion dollars in increased industry sales • More than 1.4 million new jobs • $14 billion in profits • Nearly $100 billion in increased federal, state, and local government tax revenues • A reduction of over $600 billion in the U.S. trade deficit

29. THE AES INITIATIVES WILL CREATE $100’SOF BILLIONS OF SALES FOR INDUSTRIES

30. THE AES INITIATIVES WILL CREATE MILLIONS OF NEW JOBS IN DIFFERENT INDUSTRIES

31. THE AES INITIATIVES WILL GENERATE MILLIONS OF PROFESSIONAL AND SKILLED JOBS

32. THE AES INITIATIVES WILL CREATE SKILLED, WELL-PAYING JOBS NOT SUBJECT TO FOREIGN OUTSOURCING The AES initiatives will create many jobs in two categories that states and localities are eager to attract: 1. College-educated professional workers, many with advanced degrees 2. Highly skilled, technical workers, with advanced training and technical expertise, many of them in the manufacturing sector The initiatives thus generate jobs that are disproportionately for highly skilled, well-paid, technical and professional workers, who provide the foundation for entrepreneurship and economic growth. These are the high-skilled, high-wage, technical and professional jobs that states seeks to attract

33. THE AES INITIATIVES WILL GENERATE $100’S OF BILLIONS OF TAX REVENUES FOR FEDERAL, STATE, & LOCAL GOVT.

34. BENEFITS TO A STATE • Volumes and timeframes of oil displacement • Total industry sales • Industry profits • Total (direct and indirect) employment created • Specific jobs created by occupation • Tax revenues for the state and local governments • Technology development and spin-offs • Revitalization of coal mining regions

35. BENEFITS TO A STATE OF A 30,000BARRELS/DAY COAL LIQUEFACTION PLANT • Development & Construction Expenditures: $2.5 billion • Annual O&M expenditures: $400 million • Direct development & construction jobs: 2,000 + • Development & construction payroll: $100 million • Annual direct O&M jobs: 400 • Annual O&M payroll: $25 million • Expenditure, job, and payroll multiplier: 2.0 – 2.6 • Total new jobs annually: 1,000+ • Annual industry profits: $50 million+ (national) • Annual state & local govt. tax revenues: $10 - $20 million

36. HOWEVER, UNLESS AGGRESSIVE MITIGATION INITIATIVES ARE BEGUN SOON…….. It could happen again!

37. THANK YOU! ROGER H. BEZDEK, PH.D. PRESIDENT MANAGEMENT INFORMATION SERVICES, INC. 202-889-1324 rbezdek@misi-net.com www.misi-net.com

38. www.ASPO-Australia.org.au Association for the Study of Peak Oil and Gas International Australia LOCAL CONTACT INFORMATION While in Australia through July 6, Dr. Bezdek can be contacted via ASPO Australia