Page last updated at 15:28 GMT, Monday, 2 November 2009

America's energy policy dilemma

By David Shukman
Environment correspondent, BBC News

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David Shukman gets knee-deep in an algae-filled pond to find out how these swampy waters could transform the oil industry

Stand in the warm sunshine of an autumn morning near Houston, Texas, watching an immense rig towering over a new oil well, and the future of the fuel that made this state rich looks rosy.

With me is a third-generation oil man, "Tad" Mayfield, a spokesman for Texan producers. He doubts that climate change is man-made and is campaigning hard against measures planned in Congress to limit greenhouse gases.

"The question is how much difference does CO2 really make in our atmosphere? That question should be debated," he says.

"There are a lot of climate drivers. You can see the sun shining on my face right now, you know the sun is obviously one of the biggest climate drivers."

Mr Mayfield's views put him at odds with the Intergovernmental Panel on Climate Change (IPCC), whose Fourth Assessment Report concluded it was more than 90% likely that humanity's emissions of greenhouse gases were responsible for modern-day climate change.

Nodding donkey (AP)
Conventional oil has an impressive production record

Yet picture a parallel scene nearly 1,500 miles away, where bubbles are rising through lurid green tubes of algae in a laboratory near San Diego, southern California.

Explaining his research is Jason Pyle, chief executive officer of Sapphire Energy, a firm pushing to develop "green crude oil".

To support a new bill on climate change, he sent a car powered by an algae blend all the way to Congress.

"What I think is clear is that the most notable scientific bodies in the world have all unanimously agreed there's a problem to be dealt with here so continuing to ignore that is at all of our peril."

These are two snapshots - a tale of two oils - from the polarised debate in America over whether and how to tackle climate change.

The battle-lines are not straightforward.

The American Petroleum Institute opposes the plans for a system of "cap and trade" to limit emissions but several large oil firms support them.

We could see a bio-refinery in five years producing oil, diesel and jet fuel
Jim DeMattia

Renewable energy companies are fighting for the new laws but Greenpeace and Friends of the Earth are against them (arguing that they are not ambitious enough).

So what are some of the arguments from the two camps?

Tad Mayfield is clear: the new laws risk costing jobs. As president of the Texas Independent Oil Producers and Royalty Owners Association (TIPRO), he fears that curbing emissions will stifle growth.

He runs through the figures: Texas is America's largest oil producing state. The oil and gas industry supports 190,000 jobs in Texas alone. Texas is home to a quarter of America's refining capacity.

"This is a very serious situation. We're talking about trying to transition a carbon-based economy on to alternate fuels. It may have unintended consequences both for our economy and for our environment," he says.

'Green Houston'

As we speak, the "nodding donkeys" keep pumping oil from a mile below us. This particular field was opened in the 1920s, not long after the first oil discoveries in Texas, and it is still yielding black gold.

Mr Mayfield explains: "If we cap our carbon, that will harm jobs and send manufacturing and jobs overseas - to countries like China, India and Russia which don't have the same pollution control that we have here in the United States. Is this an unintended consequence of carbon capping?"

These are the views of a traditional industry that has long provided the lifeblood for America's highly mobile economy.

Contrast them with the perspectives of the "new" oil industry, starting on the shores of the Pacific.

Algae vat (BBC)
Paddle wheels circulate the algae around "racetracks"

Jason Pyle is convinced that America must move beyond fossil fuels and he has the backing of a venture capital firm owned by Bill Gates and the giant medical research charity, the Wellcome Trust.

His labs are in the San Diego area, home to hundreds of biotech companies, a hothouse community billed as a "Green Houston".

"There's never a good time to talk about change," he says.

"But we believe there is a way to stimulate our economy, be mindful about our environment and develop new energy products that we can use sustainably for the next 50 to 100 years. I believe algae is one of those ways.

"We're creating new industries and they'll create new jobs."

The attraction of algae is that, as the tiny organisms grow, they absorb carbon dioxide and the oil extracted from them can be processed into fuel to be used as a normal part of the existing fuel infrastructure.

Will they ever replace fossil fuels?

Inland, in the desert of Southern California, Jim DeMattia manages the algae ponds of Biolight Harvesting and has more experience than most at cultivating algae on a large scale.

Paddle wheels keep the algae circulating around vast shallow "racetracks".

Competing for supplies

In the past year, he's seen a surge in interest: Nasa, the Pentagon, oil giants, Toyota have all visited the farm, as has genetics pioneer Craig Venter who is teaming up with ExxonMobil in a $600m algae fuels venture.

Mr DeMattia says the good news is that the algae will thrive even in brackish water, such as run-off from farmland, so fuel production will not compete for quality supplies.

Less good is a challenge from nature itself: the fastest-growing strains of algae are not necessarily the ones that yield most fuel.

And although cultivation is suited to the powerful desert sun - a reliable source of energy - producers have yet to find cheap ways of drying the algae and then harvesting the oil.

I ask if he expects to see a typical truck powered by algae.

"Definitely. We could see that within ten years. We could see a bio-refinery in five years producing oil, diesel and jet fuel."

Mr DeMattia believes that algae fuel producers will need to find another source of income to make the process pay - either by selling carbon offsets or farming fish in the algae ponds or extracting valuable dyes from the microscopic plants.

It is early days. Jason Pyle says this fledgling industry is about 12 years behind wind energy. But his hope is to be producing one million gallons a year by 2011 and one billion a year by 2025.

It is impressive until you compare the numbers to those of conventional oil. In 1901, the first big well in Texas, at Spindletop, yielded at least three million gallons every day. And current consumption in the US runs at about 378 million gallons a day.

But scale is the key and advocates hope that as the industry grows, new techniques will be developed that enhance production and lower prices. At the moment, a gallon of green crude probably costs about $10 a gallon.

So is this green ambition realistic?

Jim DeMattia reckons it does have the potential to "dent" consumption of fossil fuel oil, maybe by 20-30%.

The future of both oils - black and green - will be shaped by the debates in Congress. And that's why oil producers, old and new, are so anxiously trying to shape the outcome.



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