The Future of Fossil Fuels in a Decarbonized United States, with Susan Tierney

Notable quotes

• Phase-out of fossil fuels has an uncertain trajectory: “It is clearly not the case that we will be zeroing out fossil fuels during the next decade in the United States. There’s a lot of uncertainty about what happens after that, and even though coal production and coal use are certainly diminishing and have been for decades, the outlook for oil and gas is really different. The modeling shows that, even if there are changes associated, over the next decade, with building use of energy and the direct use of fossil fuels, or with electric vehicles and so forth, there’s still a lot of uncertainty about what happens with fossil fuels beyond that.” (5:24)
• Energy security may require fossil fuels: “As coal plants retire, and as we are not at the moment adding … nuclear plants, those resources that are either dispatchable or have the ability to provide power around the clock, like natural gas–fired generation, are really important for balancing the output of solar and wind projects. Even if we are going to add new battery storage and other kinds of storage, we have the expectation that we’ve got extreme weather events when we’ll need to ride through long periods when there may not be a lot of wind or solar.” (8:50)
• Preparing fossil fuel–dependent communities for an economic transition: “The more that communities can become aware of the expectation that there is going to be a closure and begin to plan for it—how they will diversify their workforce and their industrial activities, if they can, and try to think about other forms of tax revenue—that’s important.” (21:56)

Top of the Stack

• Accelerating Decarbonization in the United States: Technology, Policy, and Societal Dimensions by Stephen W. Pacala, Danielle Deane-Ryan, Alexandra Fazeli, Julia H. Haggerty, Chris T. Hendrickson, Roxanne Johnson, Timothy C. Lieuwen, Vivian E. Loftness, Carlos E. Martín, Michael A. Méndez, Clark A. Miller, Jonathan A. Patz, Keith Paustian, William Pizer, Ed Rightor, Patricia Romero-Lankao, Devashree Saha, Kelly Sims Gallagher, Susan F. Tierney, and William Walker
• “Community Engagement for an Equitable Energy Transition, with Julia Haggerty” from Resources Radio
• “Our Homes and Our Climate, with Carlos Martín” from Resources Radio
• The Covenant of Water by Abraham Verghese

The Full Transcript

Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today, we welcome back Sue Tierney, a senior advisor at the Analysis Group and chair of the board of directors at RFF. This is the third episode where we dig deep on a chapter from the recent National Academies report on accelerating decarbonization in the United States.

This time, we'll talk about the future of fossil fuels in the United States. Specifically, I'll ask Sue to help us understand how ambitious climate efforts might affect fossil fuel workers and communities, the new challenges and incentives that electric and natural gas utilities might experience, and what recommendations she and her colleagues have to address these challenges as they arise. Stay with us.

Sue Tierney from the Analysis Group and, of course, the chair of RFF's board of directors. Welcome back to Resources Radio.

Susan Tierney: Thanks, Daniel. It's such a pleasure to be here.

Daniel Raimi: Because we've had you on the show before, we're not going to ask you the same, usual question we ask all of our guests, but instead, something a little different. I'm curious, Sue, what is your favorite personal environmental or natural resource activity? On the weekends, do you like to ski? Do you like to hunt? Do you go out and chop down trees? What do you like to do?

Susan Tierney: Well, I'm one of those gals who's not that coordinated, but I really am steady as you go, and the thing I love doing is walking in the woods, walking in mountains. Back in the day, over many decades, I have hiked very long tracks in mountains. That's some of the favorite times of my life in the field.

Daniel Raimi: Where have some of your favorite hikes been?

Susan Tierney: I would have to say in the Sierras. I was raised in California. I had the unbelievable honor and joy of going to base camp at Everest, and I got to the top of Kilimanjaro. That was amazing and pretty; I didn't stay very long at the top, I can tell you that. Then, I visited some of the volcanoes in the Pacific Northwest. Just amazing, amazing stuff.

Daniel Raimi: That sounds great. A couple people on the podcast have recently recommended Kim Stanley Robinson's new book, which is all about the Sierra.

Susan Tierney: I love that book. It's just wonderful, and it brought a lot of joy and smiles to my face.

Daniel Raimi: Let's move on to the topic of our conversation today, which is talking about the future of fossil fuels, and this comes in the context of a report from the National Academies where you were a coauthor. The report's called Accelerating Decarbonization in the United States. We've actually had two previous episodes on this report. We had Julia Haggerty on the show talking about community engagement. We had Carlos Martín on the show talking about housing, and as I mentioned today, we're going to talk about the future of fossil fuels.

But to get us started—it might not be intuitive to people why it makes sense to talk about the future of fossil fuels in a report that's all about decarbonization. Why did you and your coauthors choose to dedicate a whole chapter to this topic?

Susan Tierney: I'm really glad you asked that question. It is not intuitive, and it was not obvious to the committee that it was something that we needed to look at, and I was somebody who thought that it was really important that we look at it.

We looked at a lot of different topics that were cross-cutting in the area of decarbonization, and by that, I mean, What are some of the public health issues? What are some of the energy justice issues? As you know from Julia's interview with you, we have a chapter on public engagement, and we also have chapters on sectors in industry. You heard from Carlos about buildings. We have something on the electric sector, and so forth.

There is a through line of almost everything in every chapter, which is, What happens with fossil fuels? And my thought was, if we didn't call it out, it would almost be an obvious tone deafness to our report if we didn't focus on what's happening to our fossil sector. Everybody agreed that that was important so that we didn't lose out on the issue. I'm really glad that we talked about it. Can I just mention one surprise that came as a result of that?

Daniel Raimi: Please do.

Susan Tierney: Decarbonization of the US economy—that topic really makes people imagine that we are zeroing out fossil fuels in the economy. Our report focused on what's happening in the next decade, and it is clearly not the case that we will be zeroing out fossil fuels during the next decade in the United States. There's a lot of uncertainty about what happens after that, and even though coal production and coal use are certainly diminishing and have been for decades, the outlook for oil and gas is really different. The modeling shows that even if there are changes associated, over the next decade, with building use of energy and the direct use of fossil fuels, or what happens with electric vehicles and so forth, there's still a lot of uncertainty about what happens with fossil fuels beyond that. I'm really glad that we looked at it.

Daniel Raimi: I am, too, and as you know, I have thought a lot about this topic, so I was really pleased to dig deep into this chapter, which was done so nicely.

One of the issues that you and your coauthors talk about early on in the chapter is the challenge of balancing climate goals and energy-security goals. This is, of course, in the news right now in light of the Biden administration's pause on authorizing new liquefied natural gas export facilities. We actually did an episode recently about that with Ben Cahill, if folks are curious. But can you just talk a little bit about how you all frame this tension—or tell me if you agree that it's a tension, and what recommendations you give in terms of balancing these tricky goals of achieving climate goals but also ensuring energy security and energy affordability?

Susan Tierney: Thanks for that question, too, Daniel, and I do think there's a lot of interesting tensions and trade-offs. I'm going to answer by broadening what we mean by energy security. Of course, that is about our national-security interests and our energy relationships with other parts of the world, but I also think energy security is also about keeping the lights on and ensuring that people have access to safe, affordable, and accessible energy, so let me talk about those various things associated with fossil fuels and energy security broadly writ.

First, you mentioned liquefied natural gas, and clearly, this is really important. Liquefied natural gas exports have significantly increased from the United States since Russia invaded Ukraine and similarly threatened gas supply in Europe. The projections of US exports of liquefied natural gas are such that they offset reductions in natural gas output in the United States that would be associated with reduced gas in the power sector, for example, or reduced gas in buildings, so we do see an important role for the United States being the world's leading exporter of natural gas.

That's one, but natural gas is also important for energy security in our electric system. As coal plants retire, and as we are not at the moment adding—and haven't for a long time—nuclear plants, those resources that are either dispatchable or have the ability to provide power around the clock, like natural gas–fired generation, are really important for balancing the output of solar and wind projects. Even if we are going to add new battery storage and other kinds of storage, we have the expectation that we've got extreme weather events when we need to ride through long periods when there may not be a lot of wind or solar.

Certainly, one of the concerns that we know about in buildings is that, in cold weather climates, when you are adding heat pumps, which are very efficient electric sources of heating, there could be really cold-weather performance issues in some parts of the country where you would expect to see some people using some other kinds of fuel like a fossil fuel, propane, or a natural gas.

There's a lot of ways in which there are tensions. I think these are less tensions, literally, than they are uncertainties around what's going to happen with commodity prices for fossil fuels, what's going to happen with policy, changes in technology, unforeseen events—and those unforeseen things and those volatile conditions really contribute to variation in the forecast for the future of oil and gas, in particular. Let me just mention a small handful of the technological uncertainty around hydrogen, how it will develop, what form it will take; the role of carbon capture and utilization, and how fast and how deep it will play a role in industrial and power-generation facilities; the ability to repurpose natural gas and oil pipelines if there are changes in those flows of fossil energy—those are really uncertainties that one would expect to see playing out with decarbonization futures. They're tensions, and they're unknowns, and they make it a very interesting set of challenges that is going to face the country in the next decade.

Daniel Raimi: Those uncertainties are many, as you say, and make all of us humble when we think deeply about them.

One of the issues that the report focuses on is at a more local and regional scale in the United States. You all talk about how transitioning away from fossil fuels either entirely, or just reduction in fossil fuel production and use, can create really big challenges for the workers in communities that depend heavily on that sector or those sectors. Can you talk a little bit about some of those risks and then what some of the recommendations are that come out of the report?

Susan Tierney: I'd love to, and your listeners know this issue really well—and Daniel, this is a perfect opportunity for me to tell you how much I respect your own work and research in this area. You might have noticed that we did a little bit of referencing of your studies.

Daniel Raimi: Thank you, Sue. I appreciate that. I saw a couple maps that looked vaguely familiar.

Susan Tierney: Exactly. As I say, you've done great work in this area, so we stood on your shoulders when we were looking at these kinds of community impacts and employment impacts. Let me talk a little bit about that—but as I say, it won't be any news to your listeners, but here we go.

It's no surprise that our fossil resources are located in certain parts of the country, and it's no surprise that the economies in these parts of the country really developed around extraction, production, delivery, and consumption of fossil fuels. There's a whole political economy associated with fossil industries, and we spend some time trying to characterize what those footprints look like. As I say, we draw on your own research and that of others, so let's take a look at what that might appear to be.

In the area of coal, which has been changing over decades, the famous and legacy mining industry in West Virginia and Kentucky clearly has been in decline for many years, as it has been in Pennsylvania. Coal production in Wyoming and other parts of the Rockies is very strong and has continued to be less hit as quickly or as recently as it has in the Appalachian region, but coal is in decline in a lot of places, and different communities in the Rockies are experiencing this, as well.

Natural gas is a different footprint, and let me, of course, give a big shout-out to Texas and Pennsylvania, which are the two places that lead the country in gas production and oil production, because they're often colocated, and the development of shale gas in the eastern part of the United States is newer than the gas- and oil-production regions down in the Gulf and in the Lower Plains states.

But those economies really have developed, as I say, around fossil fuels, and it's part of the culture, part of the vernacular, and so forth. But depending upon the size of the state and the diversity of the economy, fossil jobs can play a really outsized role. For example, even though we think about Louisiana, Texas, and Oklahoma as oil and gas country—and Pennsylvania and Ohio, as well—in fact, Wyoming has more fossil jobs as a percentage of total jobs in those economies. The same is true in North Dakota. The same is true in Alaska. The fossil dependency of those communities is very high in places that are new compared to the long legacy development of oil and gas production, say, in Texas and other parts of the South.

When we think about public revenues associated with oil and gas and coal production, it's in royalty payments or severance taxes, and your own research shows that, as a percentage of total state general revenues, North Dakota, Wyoming, New Mexico—those are the places where changes or reduction in production and extraction of these fossil fuels is really hitting those public-revenue streams in those locations. Some of the states have done better than others in planning for that and trying to diversify away from just fossil, but it's a big deal.

Let's talk about some examples of what happens to communities when fossil extraction or fossil use in, say, power plants is changing, and I think of coal-production communities as the exemplar here. We know that, over decades, we've seen mine closures, and we've seen tens of thousands of job losses in those communities. When there are job losses in those communities and closing of coal mines, there's less revenue streams going through those communities. That means less funding for schools, hospitals, and tax bases. There's lower demand for people buying in shops. All of those activities that both are directly and indirectly, and induced impacts, associated with loss of jobs in coal communities—those are at risk, and that makes it so that, in many places, we've seen a real existential risk for these communities.

We do talk in detail about these kinds of community impacts in our fossil chapter. They are discussed in different ways in our chapter on employment, but we really put a microscope on them in the fossil chapter itself. Let me just mention two of our recommendations or our notes about things that have been happening in Washington, DC, to try to help here. One of them is that we are aware that there has been an Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization. That's a big mouthful for the name of a working group. It has focused predominantly on things related to coal, both mining and power production, and we have suggested that that be expanded to incorporate oil and gas communities, as well, because having an eye on an outlook for production in those communities and what might be changes ahead and what might be needed to address community impacts—we think that's important.

We have recommended to Congress—“we” being the Committee on Accelerating Decarbonization—that Congress authorize a multiyear authorization and appropriation so that for each state that would be affected by these fossil transitions (whether they are coal, oil, gas, or multiples of these) there is funding for transition offices to do planning and look at lessons learned and best practices about what can be assisted with economic development and changes of attracting new businesses into areas that have been seeing a decline in fossil production.

We think that that's an important thing, and we do note that there are elements of the Inflation Reduction Act that are important for implementation. An example of that would be the US Department of Energy's Energy Infrastructure Reinvestment Program, where there is $5 billion in appropriations that has been made available for loans that are provided that can go to retooling, repowering, repurposing, and replacing energy infrastructure that no longer operates in part because of these transitions. Let me stop there.

Daniel Raimi: That's great, Sue, and you've covered a lot of ground, but there's a lot of ground to cover. Let me ask you about another section of the report where you and your coauthors recommend that utilities and service providers, like electric and natural gas utilities and service providers, begin to plan for the transition. Can you talk about why the committee thought that was important, and also say a little bit more about what it means for a utility or a service provider to really plan for a transition?

Susan Tierney: Great question, and I'm going to talk about a couple of threads that come through our analysis and discussion. One of them is that we know that, when facilities close—it could be a sports arena, it could be a mine, it could be a nuclear plant—from the long history of big facilities that employ a lot of people and are important to tax bases of communities, there are big disruptions. The more that communities can become aware of the expectation that there is going to be a closure and begin to plan for it—how they will diversify their workforce and their industrial activities, if they can, and try to think about other forms of tax revenue—that's important.

An example is that we know, when there is going to be a closure of a nuclear plant which has had hundreds of good-paying jobs in a community and a really important role in the tax base of a host community, that of necessity there is a multiyear period of visibility before that plant actually closes and goes into decommissioning. That occasionally happens with some power plants, for example, that might be burning coal, where the owner of the power plant has identified that it's going to close in five years when another set of replacement facilities are up and operating. Sometimes there's runway for visibility, but often there's not.

We think that there are a whole lot of facilities, actually, that are in the fossil industry that are not regulated from a price point of view, and therefore there are really fewer opportunities to see the decisions of an owner or even that have to have disclosures in US Securities and Exchange Commission statements that are plant specific or mine specific. There's a huge risk for a large number of facilities that there's no transparency whatsoever.

We thought a lot about what you could do here, and there are not a lot of hooks that can be used, except one idea that we had, and that was that to the extent that a facility receives federal funding or federal permitting in one way or another, there could be an insertion put into the funding or the permit that identifies that x months in advance of a closure—and it could be two years or whatever is appropriate for the size of the facility and the size of the investment—that there be some kind of public disclosure associated with the anticipated closure. This can help a workforce begin to plan. We thought that there are also important ways in which a community can begin to grab hold of and try to take responsibility for coming up with some other solutions—perhaps not with the owner of that facility, but through other economic development means, as well.

There's a really special case here that we identified that is associated with planning for transitions, and this is the case of a group of energy companies that is regulated, and this is local gas-distribution companies. These are the local companies that provide gas service to buildings. It's your local gas company. They provide, for the most part, the investment, the maintenance, and the operations of the pipes between the interstate system and your building. They are regulated from a rate point of view and from a safety point of view by states.

If we are thinking about a situation in which there is potentially less throughput going through those local pipes, there could be circumstances in which either customers are dropping off the system, because they are adding heat pumps, and they're no longer going to be buying gas that's going to move through that local pipeline, or there could be a theoretical expansion of a gas pipeline system into a new area. Yet, in the larger community, there are expectations that there will be a decarbonization policy that will make it so that there shouldn't be additions to the gas pipeline system; rather, there should be attention to where might there be planning to identify which areas of the system should not be expanded in order to make sure that we're addressing both safe pipeline systems and decarbonization, as well.

Having state regulators have an eye out for planning for these is actually very complicated, and here's the essence of the issue: As long as anybody is being served off of these local pipes or a local offshoot of one of the main branches of the pipeline system, everybody on that circuit of the pipe has to be maintained, and the pipe has to be at safe pressures. You can't just assume that the local gas company can say, "Okay, there's going to be less use, so we don't need to invest in that pipe." In fact, there has to be maintenance on the system. Thinking about how to be strategic about that continued body of investment for maintaining the safety of pipeline systems as one is thinking about a transition on the system as a whole is really important going forward.

Daniel Raimi: Absolutely. That's a topic that is so interesting. We've talked about it on the show a little bit before with Catie Hausman and Emily Grubert, two really thoughtful people on both of these topics.

Sue, just one more question before we go to our Top of the Stack segment, which is about the political challenges that face many of the recommendations that are coming from this report. I don't need to explain them all to our audience. I think they can probably get the gist of what some of them might be. I'm curious if you can talk about them from the perspective of utilities who might resist some of the efforts that we're talking about here or any other kind of political flags that come to your mind.

Susan Tierney: Sure. The National Academies committee was explicitly asked not to render an opinion about whether we thought decarbonization was going to happen or not politically, and rather we were assigned what it would take if you wanted to decarbonize the economy. That's how we approached it, but if you think about today's situation, there's actually not a single answer to the question of how do utilities feel about this transition.

For one thing, “utilities” really is a phrase that represents a whole lot of different kinds of regulated firms. You can imagine that if one expects to have more electricity sold, because buildings are being heated with electricity and vehicles are going to be running on electricity, electric utilities might actually think that this is a great opportunity. In fact, we see a real change in outlook by electric companies.

There are, of course, electric companies, such as ones that are publicly owned, where they may own a coal-fired power plant, and they are not ready to retire that plant, in part because they don't have any shareholder that they can write off an underappreciated investment onto. It's not a homogeneous group, these things that are called electric utilities, but I would call out a sea change amongst the electric industry members who kind of see opportunity in this transition.

That is not the case of gas utilities. In that sense, I want to include both interstate pipelines whose only business is to invest in and operate and earn a return on investment in pipes and storage facilities and local gas pipeline companies. If they don't have an affiliate which is also an electric company that might be seeing an upside here, these companies are worried, if they're paying attention, to what this uncertain outlook is going to mean for them. We do see either opposition or not-yet-focused attention on addressing fossil transitions amongst the gas utilities in the same way that we see on the electric side. If there's one takeaway from today's conversation, it is that all utilities are not the same.

Daniel Raimi: That's great. I often make the same point about oil companies. “Big Oil” is a term that people like to use, but there's lots of little oils in there, too.

Susan Tierney: Exactly.

Daniel Raimi: Great. Well, Sue, I wish we had more time to talk because there's so much richness in this chapter of the report and the report itself. I hope some of our listeners will be able to take a deep dive that is much deserved in the report.

But now, I'd love to ask you the same question we ask all of our guests at the end of our shows, which is to recommend something that you think is great. It can be something you've read or watched or heard or can consume it in any way you want. Sue, what's at the top of your literal or your metaphorical reading stack?

Susan Tierney: Well, this is a great bookend question for me, because I mentioned at the top of the podcast that I love walking in nature, and I walk my dog long in nature twice a day, so I get a lot of time for audiobooks, and I want to mention one of them that I have recently finished, and I just loved it. It's The Covenant of Water by Abraham Verghese, and it's just an epic novel about three generations of a family in India in the twentieth century, and it’s joy, tragedy, struggles, and colorful. It is really extraordinary. I hope your listeners can take a look there, although it's 900 pages, so it was a lot of walking.

Daniel Raimi: Well, yeah, if you've got a lot of walking to do, then go for it—get a long audiobook. That sounds great. Sue, thank you again so much for joining us on the podcast, for your work on this report, for your recommendation. We'll have links to all of these things in the show notes so people can access them easily, and we really appreciate you taking the time.

Susan Tierney: Thanks, Daniel.

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