Dow Chemical released its outline of recommendations for the U.S. Energy Policy, Dow’s Energy Plan for America.

Dow has once again demonstrated a depth of understanding of the macro level issues that affect not only the petrochemical and energy industries, but also the United States economy. Dow has written a comprehensive and insightful paper outlining the needs and proposals for the U.S. energy policy. The plan emphasizes improving energy efficiency and accelerating the development of alternative energy sources.

Dow Chemical comprehensive plan for U.S. Energy Policy includes Coal-to-Liquids plants. The recommendations in the paper call for a bold and bipartisan energy plan for the United States. The recommendation for boldness is because the measures in recent years have been weak and have not been sufficient to achieve the desired outcome and bipartisan, because bold measures will require a bipartisan support.

One of the recommendations in the Dow plan is that the U.S. develop coal-to-liquids or polygeneration coal gasification plants. These plants will utilize the vast coal reserves in the U.S. to provide a self sufficient source of fuel and power for the U.S. The CTL plants cost between $5 – $8 billion and one of the biggest challenges to developers is getting financing. Dow states that the U.S. government should provide loans or loan guarantees for 50% of the cost of these plants.

The Dow plan recognizes the importance of the U.S. to focus on domestic sources of energy.

T. Boone Pickens is right about the strategic importance to stop spending $700 billion each year on imported foreign crude oil. This is the equivalent of a Federal bailout equal to the 2008 bailout every year. The Obama administration should include coal derived liquid fuel as a key component of the U.S. Energy Policy.

Coal-to-Liquids is proven technology. The U.S. does not have many coal gasification plants, because we’re a capitalist society. Our plants are built for profit by private for-profit companies. This means that as long as it is more profitable to use crude oil for energy, private for-profit companies will do so. But, this does not necessarily mean that this strategy is the best long term energy policy for the United States.

The best long term strategy for a domestic energy policy may not be utilization of whatever energy source is cheapest today. T. Boone Pickens hits a nerve with the American public with his television advertisements that the U.S. is going broke purchasing crude oil for its oil based energy.

The Chinese government refuses to be dependent upon foreign import crude oil and is building coal gasification plants to provide electricity, diesel, gasoline, jet fuel, substitute natural gas, fertilizer, hydrogen and other chemicals. South Africa used it’s coal reserves to develop energy through the operations of SASOL.

It’s reasonable to consider that the current U.S. energy policy based on purchasing foreign crude oil could bankrupt the county in the future. Most people still remember President Reagan’s famous speech towards the end of the Cold War with Russia, “Mr. Gorbachev knock down this wall.” The primary reason that the U.S. won the Cold War is that Russia went bankrupt. The specter of the U.S. going bankrupt by continuing to import foreign crude oil shoud be considered a national security risk.

The United States should develop coal-to-liquids energy projects as one component of a comprehensive energy policy designed to relieve national dependence on imports of foreign crude oil. These projects will cost between and $4 and $8 billion and Federal loan support is needed to get this industry jump started. The Federal government should provide loan guarantees for 50% of the cost of the projects.