The Future of Fossil Fuels in a Decarbonized United States

This interview was originally released on March 26, 2024. The transcript of this conversation has been edited for length and clarity.

Daniel Raimi: Let’s talk about the future of fossil fuels. Our conversation comes in the context of a report you coauthored from the National Academies of Sciences, Engineering, and Medicine, which is called Accelerating Decarbonization in the United States. 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. I was somebody who thought it was really important that we examine it.

We looked at a lot of different topics that were cross-cutting in the area of decarbonization. By that, I mean, What are some of the public health issues? What are some of the energy justice issues? The report also has chapters on public engagement, industry, buildings, the electric sector, and so forth.

The through line of almost everything in every chapter is, What happens with fossil fuels? My thought was that, if we didn’t call out the fossil fuels sector, it would almost be an obvious tone deafness to our report.

Decarbonization of the US economy—that topic 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’s clearly not the case that we will zero 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 different.

Modeling shows that, even with changes over the next decade that are associated with energy use in buildings, the direct use of fossil fuels, 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 the topic.

One of the issues that you and your coauthors talk about is the challenge of balancing climate goals and energy-security goals. Can you talk about whether you agree that there’s a tension in this balance, and what recommendations you give for this tricky balance of achieving climate goals while ensuring energy security and energy affordability?

I do think there’s a lot of interesting tensions and trade-offs. I’ll answer by broadening what we mean by energy security. Of course, energy security is about our national-security interests and our energy relationships with other parts of the world, but I think energy security also is about keeping the lights on and ensuring that people have access to safe and affordable energy. Let me talk about those various things associated with fossil fuels and energy security, broadly writ.

Liquefied natural gas exports from the United States have increased significantly since Russia invaded Ukraine and threatened gas supply in Europe. The projections of US exports of liquefied natural gas are such that they offset reductions in natural gas consumption in the United States in the power sector or the buildings sector, for example, so we do see an important role for the United States being the world’s leading exporter of natural gas.

Natural gas also is important for energy security in our electric system. As coal plants retire, those resources that are dispatchable (or that can provide power around the clock, like natural gas–fired generation) will be 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 of extreme weather events, during which we’ll need to ride out 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, heat pumps provide an efficient electric source of heating—but issues with cold-weather performance can arise in some parts of the country, where you would expect to see some people using other kinds of fossil fuels, like propane or natural gas, as back-up systems.

There’s a lot of ways in which these show up as tensions. But 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 volatile conditions contribute to variation in the forecasts for the future of oil and gas, in particular.

Let me just mention a small handful of these uncertainties: the technological uncertainty around hydrogen, how it will develop, what form it will take; the role of carbon capture and utilization, how fast and how deep a role it will play in industrial and power-generation facilities; the ability to repurpose natural gas and oil pipelines should there be changes to those flows of fossil energy. Those are uncertainties that one would expect to see playing out with decarbonization futures. They’re tensions, and they’re unknowns, and they make a very interesting set of challenges for the United States in the next decade.

One of the issues that the report focuses on is at the more local and regional scales in the United States. You all talk about how transitioning away from fossil fuels entirely, or just reducing fossil fuel production and use, can create big challenges for workers in communities that depend heavily on the fossil fuels sector. Can you talk about some of those risks and some related recommendations that come out of the report?

It’s no surprise that our fossil resources are located in certain parts of the country. It’s no surprise that the economy in these parts of the country 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 in the report trying to characterize what those footprints look like.

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 Rocky Mountains is very strong and has been hit less compared to 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. Let me 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 the two resources often are colocated. The development of shale gas in the eastern part of the United States is newer than production in the gas and oil regions down in the Gulf and the Lower Plains States.

But those economies really have developed around fossil fuels; fossil fuels are part of the culture and vernacular. Depending on the size of the state and the diversity of the economy, fossil jobs can play an outsized role.

For example, we most often think about Louisiana, Texas, Oklahoma, Pennsylvania, and Ohio as oil-and-gas country—but in fact, Wyoming has more fossil jobs as a percentage of total jobs than those economies. The same is true in North Dakota and 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. Your own research, Daniel, shows that changes or reductions in production and extraction of these fossil fuels is hitting public-revenue streams in places like North Dakota, Wyoming, and New Mexico, as a percentage of total state general revenues. Some states have done better than others in planning for that and in trying to diversify away from just fossil fuels, but it’s a big deal.

Let’s talk about some examples of what happens to communities when fossil fuel extraction related to fossil use in, say, power plants is changing. I think of coal-production communities as the exemplar here. We know that, over decades, we’ve seen mine closures and tens of thousands of job losses in those communities. When jobs are lost, and coal mines are closed in those communities, less revenue streams are going through those communities. That means less funding for schools, hospitals, and tax bases. There’s lower demand for people buying in shops. All those activities and induced impacts that are directly and indirectly associated with loss of jobs in coal communities—those are at risk, which 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 chapter on fossil fuels in the National Academies report. We discuss the impacts in different ways in our chapter on employment, but we put a microscope on community impacts in the fossil chapter itself.

Let me just mention two of our recommendations about things that have been happening in Washington, DC, to address these issues.

We are aware of the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization. That’s a big mouthful for the name of a working group. The group has focused predominantly on things related to coal—both mining and power production—and we have suggested that the work be expanded to incorporate oil and gas communities as well, because we think it’s important to have an eye on the outlook for production in those communities, the possible changes ahead, and what might be needed to address community impacts.

We members of the Committee on Accelerating Decarbonization have recommended that Congress authorize a multiyear authorization and appropriation, so that funding for transition offices will be available in each state that would be affected by these fossil transitions (whether coal, oil, gas, or multiples of these) to plan, look at lessons learned, and consider best practices about assistance with economic development and attracting new businesses into areas that have been seeing a decline in fossil fuel production.

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

Let me ask you about another section of the report in which you and your coauthors recommend that utilities and service providers, such as for electricity and natural gas, begin to plan for the transition. Can you talk about why the committee thought that was important, and can you say a little more about what it means for a utility or a service provider to actually plan for a transition?

Great question, and I’ll talk about a couple threads that run through our analysis and discussion. For example, we know that when facilities close—whether a sports arena, a mine, a nuclear plant—there are big disruptions. We know this from the long history of big facilities that employ a lot of people and are important to the tax base of communities. The more that communities can become aware of the expectation that there is going to be a closure and begin to plan for it—in terms of 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.

Take the case of a nuclear plant that’s going to close and which has provided hundreds of good-paying jobs in a community and served an important role in the tax base of its host community. Of necessity, there is a multiyear period of visibility before the plant actually closes and gets decommissioned. That occasionally happens with some power plants that might be burning coal, too, such that 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 know that a whole lot of facilities in the fossil industry are not regulated from a price point of view, and therefore there are fewer opportunities to see the decisions of an owner, or even require those disclosures in US Securities and Exchange Commission statements, that are specific to a certain plant or mine. There’s a huge risk that there’s no transparency whatsoever for a large number of facilities.

We thought a lot about related solutions, though not a lot of strategies are available. One idea we had was that, to the extent a facility receives federal funding or federal permitting in one way or another, an insertion could be put into the funding or the permit to identify that, x months in advance of a closure (it could be two years or whatever is appropriate for the size of the facility and the size of the investment), some kind of public disclosure gets associated with the anticipated closure. This transparency can help a workforce begin to plan. We also thought of other important ways in which a community can 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.

We identified a special case associated with planning for transitions: the regulation of a group of local gas-distribution companies, which provide gas service to buildings. They provide, for the most part, the investment, maintenance, and operations of the pipes between the interstate system and individual buildings. They are regulated by states from a rate point of view and from a safety point of view.

If we think about a situation of potentially less throughput going through those local pipes, there could be circumstances in which customers are dropping out of the system, because they are adding heat pumps, and they’re no longer going to need gas that moves 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, the expectation is that a decarbonization policy will preclude any additions to the gas pipeline system; rather, attention should be paid to which areas of the system should not be expanded, to make sure that we’re addressing both safe pipeline systems and decarbonization.

Having state regulators keep an eye out for this type of planning actually is complicated. Here’s the essence of the issue: As long as anybody is being served by these local pipes, or a local offshoot of one of the main branches of the pipeline system, service to everybody on that circuit of the pipe has to be maintained, and the pipe has to be operated 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, the system has to be maintained. Thinking about how to be strategic about that continued investment for maintaining the safety of pipeline systems, while one is thinking about a transition in the system as a whole, is really important going forward.

Political challenges accompany many of the recommendations that have been suggested in this report. I’m curious if you can talk about those challenges from the perspective of utilities that might resist some of the efforts that we’re talking about here, or any other political “flags” that come to mind.

The National Academies committee was asked explicitly not to render an opinion about whether we thought decarbonization was going to happen or not from a political perspective; rather, we were assigned to answer the question of what’s involved and required in decarbonizing the economy. That’s how we approached it.

But if you think about the situation today, there’s actually not one single answer to the question of how 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 electric utilities might actually think the transition is a great opportunity, if they expect to sell more electricity, given that buildings will be heated with electricity and vehicles are going to run on electricity. In fact, we see a real change in outlook that varies across electric companies.

We also could point to examples of, for example, publicly owned electric companies that may own a coal-fired power plant, but they are not ready to retire that plant, in part because they don’t have any shareholders on whom any underappreciated investment can be written off. “Electric utilities” are not a homogeneous group, but I would call out a sea change among some members of the electric industry who see that kind of opportunity in this transition.

The same is not the case for gas utilities. In the case of gas utilities, I would include interstate pipelines, whose only business is to invest in and operate and earn a return on investment in pipes; companies that own storage facilities; and local gas pipeline companies. If they don’t have an affiliate that’s an electric company that itself might be seeing an upside, then these companies are worried (if they're paying attention) about what this uncertain outlook is going to mean for them. We do see either opposition or not-yet-focused attention on addressing fossil transitions among gas utilities, similar to what we see for the electricity sector.

If I could point out one takeaway from today’s conversation, it would be that all utilities are not the same.

I often make the same point about oil companies. “Big Oil” is a term that people like to use, but there are lots of “Little Oils” in there, too.

Exactly.

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 into the report, which will be much deserved.