A Free-Market Energy Blog

Energy Misdirection: Revisiting Obama's U. of Miami Speech

By James Rust -- March 12, 2012

President Obama’s February 23 speech at the University of Miami supplemented his energy views in the State of the Union address and his 2013 Fiscal Year budget submitted to Congress. Playing defense in the face of high gasoline prices and an oil and gas boom not of his making, Obama’s pitch was long on misdirection and spin and short of true market-base reform.

Make no mistake: the President’s energy universe centers around curtailing the use of fossil fuels, in particular coal, due to fears that carbon dioxide (CO2) produced from combustion will cause catastrophic global warming.  This motivation will guide future energy policies until the Obama era is over.

The United States has the most abundant fossil fuel reserves in the world, the greatest agriculture system, and the most innovative population, all of which should ensure prosperity for centuries.  The question is: can market incentives unleash what Julian Simon called the ultimate resource to turn potential and opportunity into reality?

U.S. Resource Base

President Obama decried high gasoline prices and said his opponents will shout the 30-year old solution—”drill, drill, drill”—that has not worked. “Anyone who tells you we can drill our way out of this problem doesn’t know what they are talking about,’ he said. “The U. S. consumes more than a fifth of the world’s oil. But we only have 2% of the world’s oil reserves.”

President Obama could not be more wrong.

Our annual consumption of oil is about 7 billion barrels. Reserves in Alaska exceed 35 billion barrels of oil, offshore reserves 29 billion barrels, and oil shale reserves in Texas, Wyoming, Montana, and North Dakota one trillion barrels plus.

Another trillion barrels of oil reside in Canada’s Alberta province adjacent to Montana. TransCanada’s proposed Keystone XL pipeline, for which President Obama refuses to allow construction, is to transport 500,000+ barrels per day of Alberta’s oil to Texas.  Individuals with President Obama’s thinking have stalled developing the more than ten billion barrels of oil in the 2,000 acre portion of the 19 million acre Alaskan National Wildlife Refuge for more than 30 years.

Higher Production–In Spite of Obama

President Obama mentioned the United States produced more oil in 2011 than in the past eight years. This is not the outcome of any Obama directive; it is due to technological breakthroughs resulting in increased oil production on state and private lands in North Dakota, and natural gas wells in Texas, Ohio, and Pennsylvania.

The production uptick is in spite of millions of acres of Western land being declared out of bounds for exploration by the Department of Interior; delays in permitting exploratory drilling in Alaska; and delays in offshore drilling on the East Coast and the Gulf of Mexico.

Has Shell Oil Company been given permits to do exploratory drilling off Alaska that it has been seeking for years? Can they start this summer to start another grand chapter in the carbon-based energy renaissance?

In all, the economic brightness from increased private-sector oil and natural gas production occurred in spite of Obama Administration policies.

Obama’s Mexico Agreement

President Obama made a big issue of an agreement with Mexico to open 1.5 million acres (2,350 square miles) of the Gulf of Mexico for exploration that could yield 172 million barrels of oil and 304 billion cubic feet of natural gas.

These numbers may appear large; but they amount to only 9 days consumption of oil and 5 days consumption of natural gas by the United States.

This amount of oil could be delivered in 350 days by the Keystone XL pipeline. Just one of the new 1,100 Megawatt nuclear power plants in early construction near Augusta, GA, could save this amount of natural gas in 3.7 years.

All of the Above?

President Obama said we need to exploit “every available source of American energy—oil, gas, wind, solar, nuclear, biofuels, and more.” And more? What about coal, which is the leading source of electricity in the United States if not the world?

Obama complains that “four billion of your tax dollars subsidizes the oil industry every year.” At the same time, fiscal concerns banished, he said we need “to double-down on a clean energy industry that’s never been more promising.”

For years, solar and wind has received bountiful taxpayer subsidies, including tax credits, government-guaranteed loans for plant construction, requirements for utilities to buy back electricity from these plants at inflated costs (“feed-in-tariffs”), and purchase mandates (renewable portfolio standards–RPS). Hardly infant industries, politically correct wind and solar now face the fact that government budget deficits and taxpayer fatigue are setting in. “Green” energy subsidies are going south in the U.S. and also abroad.


California has one of the most stringent mandates in the nation with an RPS of 20 percent renewable electricity by December 31, 2013, and 33 percent by 2020. But efforts to reach this goal have been costly.

As of May 2011, the all-sector cost of electricity in California was 13.4 cents per kWh versus a national average of 9.9—36 percent higher than national average.  A string of bankruptcies from solar energy plants show solar energy is not economical; winners are bankruptcy lawyers, and losers are taxpayers and electricity ratepayers.


Biofuels consist mostly of ethanol produced from corn. In 2011, five billion bushels of corn was converted to twelve billion gallons of ethanol which caused the wholesale price of corn to rise to $7 per bushel against $2.50 a few years earlier. Much research show it requires more energy to make ethanol than is contained in the product. The situation will get worse in the future due to mandates from the 2007 Energy Independence and Security Act to use 35 billion gallons of ethanol as fuel by 2022.

Wikipedia states that a 2010 study by the U. S. Congressional Budget Office found the cost to taxpayers to replace one gallon of gasoline with ethanol was $1.78.  The whole country suffers because of food price inflation due to this program.  Some policy experts speculated increased worldwide corn prices may have been a primary cause of Arab Spring uprisings that started in January 2011 due to starvation level food prices.

Let our farmers export the five billion bushels or more of corn wasted on ethanol production, or its equivalent, to alleviate world hunger.

Electric Cars?

One of the “more” clean energy forms referred to by President Obama is battery-powered cars. Presently electric car purchasers are given $7,500 by the federal and various other amounts by state governments to stimulate sales. In order to stimulate more sales from the dismal 16,000 in 2011, President Obama is proposing raising the “gift” to $10,000 in 2013.

Because electrics cost from $35,000 to more than $100,000 per vehicle, these subsidies are clearly for the highest income people in the country. It is easy to show electric cars provide no energy savings because their energy use must be traced back to power plants from which electricity to charge batteries originated.

These cars are compacts and their equivalent energy consumption is on the order of 30 mpg versus 40 mpg from cars they compete against. About $5 billion has been given as subsidies to manufactures, buyers, and placement of charging stations in homes and elsewhere.

Nuclear: Whither CO2 Alarmism?

President Obama only mentioned nuclear power once in his speech; but it has the promise of extending our fossil fuels hundreds of years in the future. Just one of the two 1,100 Megawatt nuclear power plants under construction near Augusta, Georgia, could save the consumption of 230 million tons of coal or 5 trillion cubic feet of natural gas during its 60-year lifetime. These numbers represent 23 percent current consumption of coal or natural gas in the United States.

The public may not be aware that since 1983, all electricity produced by nuclear power paid a fee of 0.1 cents per kilowatt-hour to the federal government for future storage of nuclear waste. The annual fee today is $800 million, and the cumulative payments the past 28 years has to exceed $16 billion.

Back in the 1980s, a multi-year search was made all over the United States to find the best location to store nuclear wastes. After much study, it was decided the Nevada Yucca Mountain location was best and construction started to prepare the site. After $13 billion was spent on the project, President Obama decided to stop construction and revisit site selection. After all the work and money spent on Yucca Mountain, it seems inconceivable a better site could be found.

Only a few percent of materials in nuclear power plant spent fuel elements is considered waste. This is a small volume compared to fuel element volume. The majority of materials is uranium and plutonium that can be used as fuel for future power plants. These materials are reclaimed by a process called nuclear fuel reprocessing.

To date the United States has not built a facility to reprocess fuel elements from our commercial nuclear power plants. As a result of this policy, spent fuel elements are stored on site at nuclear power plants for times exceeding forty years.

One of the lessons learned from the Fukushima Daiichi nuclear power plant accident is the presence of spent fuel elements creates problems. It seems prudent for the United States government to reprocess nuclear fuels to remove spent fuels elements from plant sites. This dramatically reduces  nuclear wastes volume and allows a site like Yucca Mountain to permanently store materials for thousands of years. Building these facilities will create jobs.  Tax payers should not have to pay for this project–use fees will be paid by customers of nuclear power generation.

Rhetoric, Not Real Energy

President Obama’s energy speech was long on words and solved no problems.  He suggested expanding subsidies for renewable energy that are a total waste. Solar and wind power plants have lifetimes of 20–25 years. After this time there is nothing left to show for money spent. Biofuels are not needed at this time because of our vast fossil fuel reserves. Some projects to conserve oil can be achieved at no cost to taxpayers.

Eliminate use of heating oil by extending natural gas pipelines to areas where heating oil is used. Because heating oil costs 6 or 7 times what natural gas cossts, customers can pay for pipelines by lowering their heating bills by a factor of two. Once pipelines are paid for, customers receive true cost benefits. Use liquefied natural gas for producing electricity in Hawaii instead of oil. This could substantially reduce electricity cost of 36 cents per kWh paid by Hawaiian customers.

President Obama mocked the four billion dollar subsidy given oil companies each year. Is it in the form of taxpayer grants to oil companies for explorations, building pipelines, building refineries, or building filling stations? Is there a mandate forcing citizens to buy gas from a particular company or pay a government selected price? Or is it a tax deduction for costs of doing business akin to deductions received by other forms of business?

Oil companies seem like a nice whipping boy in times of stress. That can divert attention away from terrible mistakes in energy policy. There are vast oil reserves across the world. It would not be prudent energy policy to drive oil companies to other countries to search for oil, as was done in 2010/11. Multi-million dollar rigs that left the Gulf of Mexico in 2010 for exploration in Brazil, Africa, and the Middle East may never come back.

Much attention is devoted to the United State’s loss of employment in the manufacturing sector due to technology improvements and movement of jobs out of country for lower paid employees.  Production of energy as coal, uranium, oil, and natural gas is manufacturing.

Six hundred tons of coal, four hundred barrels of oil, or ten million cubic feet of natural gas has the same economic value as the making of a $30,000 car or the harvesting of 4,000 bushels of corn.  Millions of high paying jobs can be created to satisfy domestic energy use and an expanding export market.

These jobs can’t be outsourced because raw materials are domestic.  The beauty of this activity is no government subsidies are required and government revenues increase by trillions of dollars through royalty payments, business and income taxes.

It is difficult to find  reasons for the energy policies we have today. In the face of and oil and gas boom, and in the face of consumers who vote daily with their dollars toward real-deal energy, there remains inertia against affordable, reliable energy that powers industrialization and economic growth.

Obama is riding the wrong energy horse, and it will be hard in this election cycle to dismount or even pretend it is worthy.


James H. Rust (BsChE Purdue 1958, SM Nuclear Engineering M.I.T. 1960, PhD Nuclear Engineering Purdue 1965) is a retired nuclear engineering professor from Georgia Tech. Presently, he is a senior fellow at the Heartland Institute, where he actively lectures on energy policy and on climate change.

Dr. Rust has more than fifty years of experience in areas related to energy technology and related public policy through his consulting and publishing firms in Atlanta. He is author of Nuclear Power Plant Engineering (Haralson Publishing Company, 1979); editor of Nuclear Power Safety with Lynn Weaver (Pergamon Press, 1976); and contributing author of Elements of Nuclear Reactor Design (Elsevier Scientific Company, 1977). He also has written or co-authored more than 50 scientific reports and publications.


  1. Don B  

    Dr. Rust

    Is there a future for thorium nuclear power generation? China and India have plans for the future, and South Africa is scratching its head about that energy source.



  2. rbradley  

    More Obama Administration misdirection….

    Out today from the White House, “The Blueprint for a Secure Energy Future: One-Year Progress Report”

    “One year ago, the President put forward a comprehensive plan in the Blueprint for a Secure Energy Future that outlined the Administration’s all-of-the-above approach to American energy – a strategy aimed at reducing our reliance on foreign oil, saving families and businesses money at the pump, and positioning the United States as the global leader in clean energy.”


  3. Jon Boone  

    Obama’s energy blueprint, Rob, could have been written by Team Romney, Bush W, Gingrich, Santorum, et alia. Such a something for everyone “policy” increases political patronage and enriches mostly energy corporations suffused in conventional power generation. GE, AES, Shell, Chevron, and the rest of the gang, outfits grown bloated in “renewables” investment, surely are cheeerleading for this kind of Enronesque shell game (played with no pea). Perhaps you and others recall the concluding paragraphs of my article, Road to Nowhere: http://tinyurl.com/8aagnrk:

    “In short, what I’ve come to call rathole economics would hold illimitable dominion over all, in the process generating vast lost opportunity costs that might have, if invested with greater wisdom and less politics, yielded more productive results. Unquestionably, basic scientific research and development is important for a better world future. Investments in programs like the Hubble satellite and the large hadron conductor at CERN are examples that illustrate what can be accomplished on behalf of basic energy research.

    But in too many instances, the cup of good intentions slips from the lip of effective policy when government attempts to pick winners from the jumble of rent seekers out to improve their corporate bottom lines. Policy by consensus, the very essence of government predisposition, makes government ill-equipped to render knowledgeable decisions, for consensus works to spread the public’s wealth around, transmuting capital into the pork we have come to know so well. Even the National Academy of Sciences today routinely invites representatives of national and regional renewable energy trade organizations to take part in the Academy’s renewable energy reports—as if their interests were scientifically vetted and disinterested. As if the Academy has no obligation to militate against confirmation bias.

    As the record shows time and again, government is generally incapable of discerning the difference between technological chaff and wheat, between fact and fiction, made by energy promoters and lobbyists out from the din of the background noise. Imagine the blurry buzz made by those touting wind, solar, pumped hydro, ethanol, switchgrass, electric hybrids, plug-ins, smart grids, AC/DC, transmission highlines—all the armies of light and good (but mostly consisting of snake oil) arrayed against the forces of conventional evil: fossil fuels, nuclear, impounded hydro.

    No wonder politicians simply punt, giving something to everyone in the crowd.”


  4. Dr. James H. Rust  

    This is a reply to Don B. who asked the question, “Is there a future for thorium nuclear power generation?” He followed this by a March 3, 2011 reference to an article from South Africa “Thorium could be answer to South Africa’s energy woes”.

    I will qualify my reply by stating I have been out of nuclear power education for many years and no longer consider myself an expert.

    The article states “According to Prof. Mulder(SA Prof.) thorium was the preferred material for the nuclear industry for twenty years, before it was eventually replaced by uranium because it could not be weaponized.” I think the writer of the sentence wanted a comma after the word uranium (uranium,).

    During WWII and immediately afterword, scientists were thinking about the peaceful use of the atom inspite of the main mission of building an atomic weapon to end the war. By 1950, I would guess every combination of nuclear fuels and reactor coolants to remove the heat from the fission process had been carefully examined. Uranium, either as natural containing 0.7 percent U-235 or slightly enriched containing 2 to 3 percent U-235, was the winner for commerical power generation. Thorium was given small, if any, consideration.

    As an element, thorium, does not fission from being bombarded by low energy neutrons. Thorium can be used as a nuclear fuel by the reaction Th-232 + n becomes Th-233 which decays to U-233, a fissionable material like U-235.

    Thus any thorium-fueled reactor has to have a fissioning fuel like U-233, U-235, or Pu-239 to produce neutrons that will convert Th-232 to U-233. Such reactors would be a converter or breeder reactor. The breeder reactor makes more fissile material(U-233) than is consumed.

    Fission products from thorium-fueled reactors, which is from the fissioning of U-233, has to have the same characteristics as fission products of fissioning U-235 or Pu-239. So thousands of years for fission products to decay to negligible radioactivity would apply to all fuels.

    Practical thorium-fueled reactors would have to be fast breeder reactors because you have to make more fissile material than is consumed to keep the process going. Thus you have to have reprocessing of spent fuel to recover unused thorium and U-233 for future use.

    I don’t see any urgent need to rush to thorium-fueled power plants.

    Best regards,

    James Rust


  5. R. L. Hails Sr. P. E.  

    I have engineered a score of US nukes, two score fossil fueled power plants, and spent a decade assessing advanced technologies, mostly in energy and materials ( related disciplines). In my judgment, this article may be the best I have read in the open literature. (Faint praise. The vast majority of energy articles are authored by journalists, or political scientists, who make bone head technical statements. Most writings on energy are propaganda for some ideology, alien to examination. An example: “Anyone who tells you we can drill our way out of this problem doesn’t know what they are talking about,’. ) The truth is that if we had permitted drilling, digging, burning, and radiating thirty six years ago, when the last nuclear plant plant construction permit was allowed, we would have a far more robust economy, industrial and military strength than what we are struggling with today. (And maybe 7,000 KIAs would not have happened in oil land.)

    My greatest fear is that the US has lost perhaps two generation of experienced engineers, knowledgeable of energy infrastructure. A survey in 1991 revealed that 69 engineering schools had dropped coursework considered vital to power plant design. The nuke in Georgia, let last week, will be designed by green horns, from the lowest drafter, through the Chief Engineer, CEO, and regulators, people who have never done one. It is a certainty that blunders will occur. No one knows what they do not know. Nuclear expertise today resides in foreign nations. Complex technologies such as reprocessing have centers of excellence in France and Asia, but not in the US. Our experts are retired or in graves.
    My second level fear is cost. By law, our regulators are not allowed to consider cost in their deliberations. By definition, this renders any regulating engineer a contradiction in terms. Cost and schedule is the difference between an engineer and a scientist. The libraries of regulations, and the resulting megacosts, that flow from our regulatory requirements reflect this lethal reality. Example: a $41,000 car that can travel only 25 miles on one battery charge, which takes hours to refill, and which must be replaced several times during the life of the vehicle. Example: Wind generation which is proving to be so erratic and unmanageable that grid authorities are paying the wind generators to stay off the grid. Example: Solyndra, a $1/2 billion hit on the US taxpayer, because no private money would invest in this myth. They invested in Obama campaign instead.

    Our energy corundum was framed in part by President Eisenhower: We will either learn to use fission (and fusion) for peaceful purposes or it will annihilate man kind. The second Gordian knot is climate change (beyond my expertise). If carbon combustion is dangerous to humanity, then it is a certainty that billions will die. There is no green energy that will ever be cheap enough to sustain the US economy, or the two billion people worldwide who struggle to eat. Our sole technical choice: use carbon combustion or die.

    IMHO, the defacto US energy policy, for generations, ” Do nothing that works” has been both suicidal, and immoral.


  6. Gary W  

    Hold on a second, Dr. Rust. You quote Obama regarding our % of total global oil reserves, and switch to barrels in your response. Not so fast! What % of the world’s proven oil reserves lie in the US? Don’t include Canada; last I checked, it was a sovereign nation.


  7. Gary W  

    Regarding fast breeder reactors using Thorium: it s possible for such a reactor to consume all the actinides it produces, leaving radioactive waste that will decay to ambient levels in hundreds of years, not 20,000+ years as it is with the standard US design. The American nuclear industry has no reason to give up on designs they have developed since 1945. However, India, which has the world’s largest Thorium reserves, is working hard on Thorium. A demonstration power station using Thorium has started operation. In 10-15 years India expects to generate 10% of its electricity from Thorium-based reactors.


  8. Jon Boone  

    Extremely interesting point, Mr. Hails. I hadn’t even thought about the loss of intellectual skills brought on by the way specialized curricula had disappeared. Thank you.


  9. Dr. James H. Rust  

    These comments are for Gary W.
    From all the reading I am doing, those who work in the petrolem industry claim the U. S. has over one trillion barrels of oil–much as oil shale that is being produced in North Dakota today at the rate of about 600,000 b/d. President Obama is using old figures for proven reserves that assumes we have something like 70 billion barrels of reserves. This is an argument that has been used for many years by those who don’t want the U. S. to develop its own oil because it would be gone in ten years.

    All breeder reactors could theoreticaly recycle actinides back into the reactor and eliminate these long half-life materials as waste. Because thorium will not fission, it has to have U-233, U-235, or Pu-239 as a reactor fuel to produce the fissioning and provide the excess neutrons to breed U-233 from thorium. The waste– fission products, neutron induced activity in fuel cladding and other core materials–would be the same for any reactor. The waste will have to be safely stored for thousands of years because some of these materials are in reasonably large quantities and have half-lives in hundreds or even thousands of years.

    I believe Canada and the U. S. have larger thorium reserves than India, and also a lot of uranium. I would not hold my breath on India have 10 percent of its nuclear electricity in 15 years.

    Best regards,
    James H. Rust


  10. Dr. James H. Rust  

    Burning up actinides in nuclear reactors to eliminate super long lived radioactive products is not a characteristic that only thorium-fueled reactors can perform. Uranium- or plutonium-fueled reactors may also accomplish the same mission.

    It may be possible you can load a reactor with so many actinides you want to eliminate that are in a sense neutron poisons, you can’t get the chain reaction to occur.

    James H. Rus


  11. michael kors mk5020  

    “I don’t think there will be any


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