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The Energy Report

Executive Summary

Introduction

In 1908, America was embarking on an exciting new course of technological development. The year saw several important energy-related advances. Howard R. Hughes, Sr. filed basic patents for the Sharp-Hughes rock bit, which revolutionized oil well drilling; the Hanford Irrigation and Power Company opened the first hydroelectric plant to be built on the Columbia River; and Henry Ford began production of the Model T, generally regarded as the car that “put America on wheels.”

Now, 100 years later, the ripple effect of those advances has continued, contributing to today’s explosive evolution of technology. Developments that were the stuff of science fiction – global air travel, computers, electronic media and climate-controlled habitats – are now commonplace. And all of these modern conveniences have one basic requirement: energy.

Texas’ population is expected to continue increasing for decades to come, and our economic growth will depend on the availability of energy.

As in the early 20th Century, we may be entering an era of technological change that will transform the way we produce and consume energy. The advances of a century ago helped make Texas, with its ample fossil fuel resources, the center of the world’s energy industry. And today’s Texas, with extensive energy resources and unmatched technical expertise, is well positioned to once again reap the benefits of technological advancement.

Reliable and affordable energy is a cornerstone of modern life. We use energy, mostly in the form of gasoline derived from crude oil, to power the vehicles that ferry us to work and play. Electricity from coal, natural gas, nuclear or wind power provides us with light, powered appliances, heating and cooling. And some sources of energy are used as a feedstock to make other products, an industry in which Texas is a world leader. Our standard of living, then, depends upon readily available sources of energy.

Energy use historically has been tied to population and economic growth. Texas’ population is expected to continue increasing for decades to come, and our economic growth will depend on the availability of energy.

Texas – like most of the world – has relied largely on fossil fuels such as oil, gas and coal to meet its energy needs. But the energy landscape is changing. Rapid economic growth in developing economies results in an increasing demand for existing sources of energy, raising prices for these resources. Rising prices, the finite nature of fossil fuel supplies and the expectation that government action may soon limit the use of some fossil fuels, have combined to spur an interest in alternative sources of energy, including renewable and nuclear energy.

Fortunately, Texas has both the natural and human resources to create a broader energy portfolio. We have an abundance of alternative fuel sources, including the winds of the Panhandle, West Texas and the Gulf Coast; the sunshine of West Texas; the forests of East Texas; uranium in South Texas that can be mined and enriched for use in nuclear reactors; and the land and climate needed to grow crops for the next generation of ethanol and other biofuels.

Texas also has the human capital needed to tap those physical resources. Thanks to its history as a leading energy producer, Texas is blessed with an abundance of technical, legal, financial and research expertise that can be deployed to meet the challenges of providing energy for its growing population and economy.

Texas is uniquely positioned to lead the way in developing new technologies that will allow us to use fossil fuels in a more efficient, environmentally friendly manner; to make the technological advances necessary to make better use of our abundant renewable resources; and to reduce the demand for energy through greater efficiency.

Texas has the opportunity to influence the expanding public debate over energy use and production. Our state – and our choices – can set a new direction for the nation.

This report is intended to provide policymakers with a basic overview of the varied energy resources available to Texas. It can be used as a tool in considering energy policy. It also is a resource for anyone seeking a better understanding of the Texas energy landscape.

About The Energy Report

Comptroller staff conducted exhaustive research on the existing and potential resources Texas can employ to meet its energy demands. We talked to scores of individuals in the energy sector; visited mines, power plants, research centers and control rooms; and studied hundreds of research reports.

One thing we heard repeatedly is that there is no single solution to meeting energy demand. And almost everyone seems to agree that Texas will have to rely on an array of resources to meet its energy needs. This new energy portfolio will include renewable resources, nuclear power and traditional fossil fuels linked with new technologies to reduce their environmental impact.

Texas will have to rely on an array of resources to meet its energy demand. There is no single solution to meeting our energy needs.

It is important to remember, however, that there are always tradeoffs to be considered in energy policy. The fuels we have relied on for decades, despite recent increases in the cost of oil and gas, will continue to be the dominant means to meet specific energy needs. Our current energy infrastructure is designed to take advantage of them. Any policies that discourage their use, directly or indirectly, will likely entail costs to taxpayers and consumers.

This report is intended to be a resource for policymakers as they consider such tradeoffs. It provides an overview of a variety of energy sources that Texas can use to meet its future energy demands, with a fact-based assessment of each. Our report frames the critical issues and presents the objective information Texans will need to make informed choices about one of the most important issues facing the state.

The report contains four major sections. First is an overview outlining the current mix of energy resources and their uses. This is followed by a series of chapters describing in greater detail a variety of fuel sources and their potential to meet Texas’ energy demands along with a discussion of efficiency. The third section describes Texas’ uses of energy and important issues related to those uses. The final section contains estimates of federal, state and local subsidies for each fuel source in 2006, the first such analysis ever developed specifically for Texas.

This executive summary of The Energy Report provides a condensed version of the full report, summarizing key information and data. It also contains summary tables listing important characteristics of each fuel source and three tables capturing critical information for each fuel source that can be used for direct heat, transportation or electricity generation. The complete version of The Energy Report, which contains substantially more detail than the Executive Summary, can be found at www.window.state.tx.us/specialrpt/energy/.

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