Kenneth T. Derr
Chairman and Chief Executive Officer
Chevron Corp.
San Francisco
Adapted from a talk given to the Commonwealth Club of California in San Francisco.
U.S. consumers are being urged to make a rapid transition to new fuels because the pollution associated with consuming petroleum and other fossil fuels is doing irreparable harm to the environment.
It's very important to understand that U.S. industry has been making tremendous progress in reducing air pollution.
Across the nation, air emissions have declined dramatically during 1970-90. Particulates dropped 59%, volatile organic compounds 29%, sulfur dioxide 25%, and carbon monoxide 41%.
Yet, in the same period, gross domestic product grew 69%.
The rate of progress is intensifying. In 1990, 98 areas failed to meet new Clean Air Act (CAA) standards for ozone, the main component in what we usually call smog. By the end of 1992, 46 of them met the standard for clean air.
It's worth asking how this was achieved. The cities that still have unacceptable ozone levels can learn something from the cities that managed to attain the clean air standards.
SAN FRANCISCO SUCCESS
One real success story is in the San Francisco Bay area, where we are now meeting CAA standards and have applied for redesignation.
Back in 1969, all nine counties of the greater bay area had a serious ozone problem. Except for a narrow band right on the coastline, the entire area failed to meet the clean air standard for ozone. By 1992, the ozone problem had virtually disappeared.
In 20 years, the bay area has gone from 50 days/year of nonattainment throughout the region to 1 or 2 days/year in very small parts of the bay area.
And how did the bay area achieve this?
First, the region minimized conflicting bureaucracies and streamlined the regulatory process under one agency. Second, the Bay Area Air Quality Management District (Baaqmd) wisely resisted the temptation to apply any and all measures to clean up the air.
Instead, the regulators tried hard to utilize a cost benefit approach in selecting remedies. The most economical solutions were tried first, and the least economical weren't tried at all,
However, one of the few tasks Baaqmd performed that fell short of its goals was the task of communicating that success to the rest of us.
Last year, the San Francisco Chronicle published a fascinating chart that compared improvements in air quality with public perception of air quality. Every year, as the air got cleaner and cleaner, the public believed it was getting worse and worse.
How can we make good public policy with such a misinformed public?
In spite of this progress, we still have some distance to go in really putting our air quality problems behind us. And that's what the issue of alternate fuels is all about.
RFG'S ROLE
The U.S. CAA amendments of 1990 will require the sale of a reformulated gasoline (RFG) in nine U.S. cities, including Los Angeles and San Diego, starting in 1995.
The new formula is a special gasoline blend that results in less emissions of hydrocarbons and other pollutants. As usual, our state has gone the federal government one better. California will require an even more stringent RFG for the entire state, starting in 1996.
Finally, new laws requiring auto manufacturers to reduce tailpipe emissions will force gradual changes in the cars we see on the road in California. The specific fuel formulas and some alternative fuel vehicles are all mandated by legislation or regulation.
Other states, primarily the urban areas of the Northeast, also are considering adopting some or all of these born-in-California requirements.
The public debate about alternative fuels has been heavy on emotion but often very lean on facts.
Back in the 1960s, a typical car, driving 10,000 miles/year, generated 324 lb/year of ozone precursors. Today, according to the California Air Resources Board (CARB), the average per car is only about 59 lb/year, an 80% reduction.
That average, however, is made up of all the cars on the road today. But the worst 10%, the old or poorly maintained cars, generate more than 200 lb/year of ozone precursors. A new 1994 car produces just 21 lb/year, a reduction of 94% from 1960.
By 1998, when state mandates for low emission vehicles are well under way, a new car burning California RFG will generate only 12 lb/year of ozone precursors, a 96% improvement compared with cars of the 1960s. Getting there is neither cheap nor easy, but it is feasible. We know how to make the fuel, and Detroit knows how to make the cars.
The biggest difference most people will notice is that gasoline will cost more. The federal RFG that will appear in January will add something like 5/gal to the cost of making gasoline. CARB has estimated that California RFG, the kind that the whole state will get in 1996, will add 12-17 to the cost.
In the context of an ozone problem as severe as the one in southern California, these costs may be reasonable. However, requiring the California RFG for our entire state is somewhat questionable.
CNG
Let's compare RFG with some of the other candidates for "fuel of the future."
One that's been getting more and more attention lately is compressed natural gas (CNG).
A CNG vehicle can be slightly cleaner than its gasoline counterpart. A 1998 style ultralow emissions vehicle (ULEV) running on CNG would emit only 8 lb/year of ozone precursors compared with 12 lb for new cars burning the gasolines required that year.
But the necessary vehicle and refueling system modifications make CNG less economical and far less convenient for the average motorist. The U.S. Department of Energy estimates that new CNG vehicles will cost $2,300-5,000 more than a conventional car. In addition, expensive new fueling facilities are required.
CNG's application appears to be in a special niche-large vehicle fleets, where the longer time of refueling can be accommodated at night and the high cost of the special compressors can be minimized through a central facility.
METHANOL
Methanol is another alternative you hear mentioned.
In fact, several years ago, it was the favorite of the alternate fuel proponents.
However, after quite a bit of scientific study, it turned out that methanol really doesn't offer any environmental benefits over reformulated gasoline. In fact, the toxic effects can be quite a bit more serious if ingested or inhaled.
And using methanol is considerably more expensive than RFG-30-30% more.
Thus, I think even methanol's most avid supporters of several years ago are now looking elsewhere.
ELECTRICITY
Now the latest celebrity alternative seems to be electricity. Everywhere you look, you read claims and counterclaims about the viability of battery powered cars.
We'll begin seeing these cars on the road in California as soon as 1998 because that's when state regulations mandating their introduction will take effect.
Let me focus on that mandate for a moment because it's really quite an unusual bit of legislation. The law requires major automakers to produce and offer for sale zero emissions vehicles (ZEVs) equal to 2% of their total sales in California. So far, the only thing that qualifies as a ZEV is electric.
The percentage ratchets up over time, reaching 5% in 2001 and 10% in 2003.
Offhand, I can't think of another instance of a law that requires a manufacturer to make a specified percentage of any product.
How will they do it? In part, by supplying vehicles to fleet owners, who are required by other laws to purchase a certain percentage of alternate fuel vehicles as they replace older vehicles.
But I have to assume the primary mechanism will be by lowering the price of the electric cars-even far below the actual cost-until they finally appeal to some buyers. Of course, that means they will have to raise the prices on all the other cars they sell.
just a couple of weeks ago, Robert Eaton, the chairman of Chrysler, was quoted as saying that he expects his company will have to sell their electric minivans for less than $18,000 even though they cost as much $45,000 to build.
And he said he would make up the loss by charging an extra $2,000 for every other car and truck sold in California.
Why are the costs so high? Because the technology is still so primitive. In order to get even barely acceptable miles per charge-up-say, 40-50 miles-you need lots of batteries - arrays of batteries that can weigh 1,060 lb or more.
If these batteries are of the lead/acid type, the kind we all use to start our conventional cars, they wear out and need replacing in a couple of years at a cost of something like $2,000. If they are a more advanced, longer lasting type, they cost a great deal more.
BENEFITS DOUBTFUL
There is no question that electric vehicles can offer emissions benefits. But they are most certainly not-as they are sometimes called - ZEVs.
You should take into account emissions released by generating the electricity. They may not come out of the tailpipe, but they do go into the air someplace.
A power plant burning natural gas in the Los Angeles basin will by 2001 be extremely clean. An electric car using power from this source would account for less than 0.9 lb/year.
But if the power comes from a gas fired generator outside the Los Angeles basin, the ozone components rise to about 7-12 lb/year-in the same ballpark as the low emission cars that will run on RFG.
And if the electricity comes from a coal fired plant-and coal currently supplies 30% of southern California's electric power-the associated emissions would work out to 30-42 lb/car/year. That's three times what the gasoline LEVs produce.
Since those emissions are out of the area, maybe that level of emissions won't bother the folks in Los Angeles. But I have a hunch the people in Arizona and Utah might have a few things to say about it.
And certainly, if you study the side effects of electric vehicles in the Northeast, where 50% of the power is generated by coal or oil fired plants, it's clear that what might look like a solution to, say, Pittsburgh, would look like added pollution to Philadelphia.
The main point to keep in mind in all the fuss over electric vehicles is that, feasible or not, affordable or not, they simply aren't going to make that much of a difference.
The Los Angeles area, for example, will get essentially the same reduction in emissions by 3-010 whether electric cars or gasoline cars are part of the solution.
The South Coast Air Quality Management District estimates that in 2010, total emissions of ozone precursors from all man made sources will be 2000 tons/day. That scenario includes about 1 ton electric vehicles on the road, and it does not include any power plant emissions outside the Los Angeles area.
But if each of those electric vehicles was replaced by the cleanest running gasoline car, the increase in total emissions would be only 14 tons/year -less than 1% of all emissions.
The bottom line is this: Without major technological breakthroughs, which don't appear on the horizon, electric vehicles are not a viable solution.
VEHICLE TURNOVER
The single biggest factor in future air quality improvements in California will be simple fleet turnover-the continuing replacement of older gasoline cars with new gasoline cars that produce only 12 lb or less.
The best thing the state or local authorities could do to get further reductions sooner would be to take steps to speed the buying of new cars because a better car burning cleaner gasoline truly makes a big difference.
Earlier, I told you that each of the worst 10% of the cars on the road the old or poorly maintained cars generates more than 200 lb/year of ozone precursors.
Scrapping or repairing those cars should be the focus of any extra effort-and any use of public funds-to reduce automobile emissions.
Industry has been making this point for years. And vet, so far, the only people who have acted on it has been private industry. Unocal started a program a few years ago to buy and scrap old cars in the Los Angeles region. And Chevron has a similar program going right now in that area.
But, as far as I know, no government agency has done more than agree it's a good idea.
On Oct. 5, Baaqmd approved a plan to grant emission reduction credits for vehicle buyback efforts. Apparently the selling point was that the credits could offset trip reduction requirements in the Baaqmd plan.
It's a lot more than a good idea. Replacing one clunker with any newer well-maintained car gives 10 times the benefit of adding one more electric vehicle to the road. And it can be done at a fraction of the cost.
By the same logic, doing whatever can be done to keep low emission gasoline vehicles affordable would be sound policy. After all, these are the new vehicles that most of us will be buying in the future.
SUMMERY
Let me reemphasize that:
- The U.S. has made great progress in improving air quality the past 20 years. We still have a distance to go in some of our largest cities, but we have come a long, long way toward clean air.
- Alternatives to gasoline, while they may have some very limited niche applications, have too few environmental advantages and too many economic disadvantages to justify the high expectations that some regulators have put upon them.
- The clearest and best alternative to today's gasoline for improving our air quality-the only alternative likely to be widely available for the foreseeable future-is a cleaner reformulated gasoline running in a cleaner car.
- Know this is an unpopular conclusion in some quarters, but fossil fuels are likely to remain the world's primary energy source for a long time to come.
All over the world, in many nations, there are hundreds of millions of people striving to modernize, to learn the secret of economic growth, to enter fully into the promise of the 21st century.
Their hopes depend on acquiring as rapidly as possible the amazing and still evolving technology of the industrialized nations. Petroleum is still the driving force in that technology.
Until our policymakers come to terms with that conclusion, we can't have a meaningful discussion about our energy future.
Those discussions are going on in many venues.
As I participate in what's now my third high level commission on national and international environmental issues, I can tell you there is a growing realization among all participants-industry, government, and environmental advocates-that economic growth is a prerequisite for environmental improvement.
At the same time, I see a strong new philosophy on the part of industry. At the center of it is a firm commitment to conduct operations and continually improve technology to provide real - and realistic - solutions to the environmental effects of development and growth. That is the path of true progress. That is the road to a sustainable future. And I am hopeful that is the path we will take.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
