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1 Sustanablty 2011, 3, ; do: /su OPEN ACCESS sustanablty ISSN Artcle Relatng Fnancal and Energy Return on Investment Carey W. Kng 1, * and Charles A.S. Hall Center for Internatonal Energy and Envronmental Polcy, Jackson School of Geoscences, The Unversty of Texas at Austn, 1 Unversty Staton, C9000, Austn, TX 78712, USA Programs n Envronmental and Forest Bology, Envronmental Scence and Envronmental Studes, State Unversty of New York College of Envronmental Scence and Forestry, Syracuse, NY 13210, USA; E-Mal: chall@esf.edu * Author to whom correspondence should be addressed; E-Mal: careykng@mal.utexas.edu, Tel.: Receved: 8 February 2011; n revsed form: 18 July 2011 / Accepted: 18 August 2011 / Publshed: 11 October 2011 Abstract: For many reasons, ncludng envronmental mpacts and the peakng and depleton of the hghest grades of fossl energy, t s very mportant to have sound methods for the evaluaton of energy technologes and the proftablty of the busnesses that utlze them. In ths paper we derve relatons among the bophyscal characterstc of an energy resource n relaton to the busnesses and technologes that explot them. These relatons nclude the energy return on energy nvestment (EROI), the prce of energy, and the proft of an energy busness. Our analyses show that EROI and the prce of energy are nherently nversely related such that as EROI decreases for depletng fossl fuel producton, the correspondng energy prces ncrease dramatcally. Usng energy and fnancal data for the ol and gas producton sector, we demonstrate that the equatons suffcently descrbe the fundamental trends between proft, prce, and EROI. For example, n 2002 an EROI of 11:1 for US ol and gas translates to an ol prce of 24 $2005/barrel at a typcal proft of 10%. Ths work sets the stage for proper EROI and prce comparsons of ndvdual fossl and renewable energy busnesses as well as the electrcty sector as a whole. Addtonally, t presents a framework for ncorporatng EROI nto larger economc systems models. Keywords: EROI; return on nvestment; net energy; energy busness; proft

2 Sustanablty 2011, Introducton What s the mnmum energy return on energy nvested (EROI) that a modern ndustral socety must have for ts energy system for that socety to survve? To allow a proftable busness venture? To afford arts, culture, educaton, medcal care? To grow? Is t the same as the mnmum EROI that a fuel must have to make a meanngful contrbuton to a socety s materal well-beng? And what s the prce of energy at ths mnmum EROI? There has been remarkably lttle dscusson of ths ssue n the last 50 years outsde of our own prevous papers on the subject [1] even though we beleve that t mght be a defnng aspect of future socetes. Many earler authors, ncludng anthropologst Lesle Whte [2], economst Kenneth Bouldng [3], anthropologst/hstoran Joseph Tanter [4,5] and ecologst Howard Odum [6] have argued that for a socety to have cultural, economc and educatonal rchness t must have a large quantty of energy resources wth suffcent net energy. That s to say complex socetes need a hgh EROI bult on a large prmary energy base. Wth the excepton of the consderable dscusson around whether corn-based ethanol s or s not a net energy yelder [7,8] there has been almost no contemporary dscusson of the mplcatons of changng EROI on ndustral socety. The lack of such studes seems curous as ths wll be a very mportant ssue relatng to our future, durng whch the mutual mpacts of peak ol and declnng EROI of fossl resources are lkely to cause a very large overall declne n the net energy delvered to our ndustral socety. Furthermore, a lack of consstent and suffcent net energy comparsons among fossl fuels and renewable energy alternatves for lqud fuels and electrcty prevents adequate understandng of our nvestments n alternatve energy systems wth dfferent EROIs. Ths ssue s exacerbated by the falure of the publc at large, the meda and even most of the scentfc communty to be able to see through the generally self-servng and shallowly analyzed pronouncements of varous energy possbltes. For example, a wnd farm and coal-fred power plant wth equal EROI are not fully equal n terms of provdng the same energy servce untl the wnd farm s as dspatchable (on mnute to daly tme scales) as the coal plant. Addtonally, a coal-fred power plant has more long-term uncertanty n EROI than a wnd farm based upon the mnng energy requrements. The wnd farm long term certanty stems from the fact that the average wnd speed wll occur over the decadal lfe span of the turbnes. Of course, envronmental mpacts and externaltes (e.g., equvalent CO 2 emssons) also could play a major role, but we restrct the scope of ths paper to the pure energy economc mplcatons of changng EROI. If n the future envronmental externaltes are prced nto the economc market, our general methodology would stll hold, but wll need to be updated. There may already be very large mpacts of declnng EROI on our socety, although ths s dffcult to untangle from peak ol mpacts and the recesson that started n 2007, whch was at least partly due to ncreasng ol prce [9,10]. Whatever the partcular causatve chan of events, a few recent trends appear: both ol and energy use have been declnng n the Unted States, ncludng a drop n total energy consumpton from 99.3 quads n 2008 to 94.6 quads n 2009 [11,12]; global peak crude ol producton-or somethng lke t has occurred or s occurrng (see Fgure 1) [13,14] wth many agreeng that world crude ol producton peaked n 2005; the US s Great Recesson offcally lasted from December 2007 untl June 2009 [15]; many fnancal enttes are stll n very rough shape after the fnancal crses that began n 2008, ncludng many banks and Wall Street frms; the average nflaton-corrected value of stocks has ceased ncreasng over the last decade [10], bonds have

3 Sustanablty 2011, outperformed stocks over the last decade; and over the last two years most States and many muncpaltes have been forced to cut socal and cvl servces to balance budgets. To what degree all of these effects are related to EROI s speculatve, but worth speculatng on. Fgure 1. The world total ol supply has leveled between MBBL/d from 2004 to 2009 [13,14]. Producton n the frst 10 months of 2010 show t at slghtly above the 2008 peak (~86.1 MMBBL/D), but world producton of crude ol + lease condensate peaked at 73.7 MMBB/D n Mllon BBL per day Total Ol Supply 10 Crude Ol + Lease Condensate only The most explct analyss of the EROI needed by socety that we are aware of s Hall, Balogh and Murphy (2009) [1]., who made calculatons on the energy requred to refne, shp and transport fuels to ther use destnaton, as well as to develop and mantan the nfrastructure necessary to use them They used drect and ndrect energy costs (EROI stand ) as recommended by Murphy and Hall n ths specal ssue [16]. They concluded that the mnmum EROI requred for transportaton fuels appeared to be n the vcnty of 3:1. That s to say, for every unt of energy consumed at the pont of use, as n a car, at least three unts of energy must be produced n order to (1) extract, refne and dstrbute the fnal fuel to the pont of use n the form requred by consumers, (2) manufacture the end-use machnery, and (3) buld and mantan the nfrastructure (.e., roads and brdges) wthn whch the fuel system operates. If the EROI was less than 3:1, then the fuel mght be extracted but t could not be used to drve a transportaton system. But ths appears not to be the whole story. No energy-producng entty (EPE,.e., frm, Natonal Ol Company, etc.) can produce a fuel over tme (wthout subsdy) f t does not make a monetary proft, and t s not an EPE f t has a long-run EROI < 1:1. In other words, an EPE has the economc proft constrant of any other frm, so that t must sell ts product (energy) for more than the monetary cost of the energy (drect and ndrect) nputs requred to produce t plus t has to pay for the labor, profts and so on for the entre supply chan

4 Sustanablty 2011, leadng to the energy contanng products t uses. These cost factors are normally accounted for n cash flow analyses of energy producton busnesses and processes, but are not always accounted for n EROI analyses. If we have a value for EROI that correlates to the same monetary costs of the full supply chan for energy producton, then we should be able to estmate the cost of energy. But the fnancal constrants are even strcter. For a frm to make a proft, t has to have some value of postve EROI because the energy flows assocated wth ts costs (roughly MJ per $2005 for the US ol and gas extracton ndustry, ncludng drect and ndrect costs [17,18]) are much less than the energy assocated wth a dollar s worth of ts product. For example, f ol sells n 2005 for $61 per barrel (BBL) (contanng 6,100 MJ), then each dollar ganed by the ol company s assocated wth 100 MJ that has come out of the ground. If the EROI for the ol was 2:1, then the frm could not make a proft because for each 20 MJ nvested n the busness, at a cost of $1, only 40 MJ are output can be sold at a value of $0.40 [19]. Hence, at $61/BBL to make a proft a frm needs to have an EROI of at least 5:1, or alternatvely f the prce of ol were hgher the frm could make a proft at a lower EROI. The conundrum s that as the prce of ol goes up so does, hstorcally, the prce of everythng else, at least eventually, ncludng those thngs requred to produce the ol. For example, cost for drllng US ol wells ncreased 270% from $150/ft n 2000 to $590/ft n 2007 (n $2007) [20] as the US frst purchase prce of ol ncreased 110% from $30/BBL to $63/BBL (n $2005) durng the same tme frame [21]. Over tme the mnmum EROI for a proft can be used as an nvestment gude for the company. Our objectve n ths paper s to relate the EROI of energy produced by an EPE to the cost of energy and monetary return on nvestment (MROI) of that same frm, both theoretcally and compared to hstorcal emprcal nformaton for US energy sectors. Ths s not merely an academc exercse. As the EROI of our major fuels contnues to declne [18,22] a major extenson of ths analyss s that economc proftablty could stop long before EROI reaches 1:1. Our hypothess for the analyss of ths paper s that the bophyscal characterstcs of producng avalable energy, namely the EROI of the energy producton process, dctate a lmt on the prce and proft margn for a frm to engage n energy producton and explotaton. At least one other paper has addressed the mportant ssue of relatng EROI to prce of energy, where the authors appled a statstcal analyss of varous ftted curves that are based upon a smlar structure as we present [23]. Here, rather than optmze for a statstcal correlaton, we formulate an underlyng bass for the relatonshp between prce and EROI such that there s a physcal bass for prce and a framework for projectng future trends. 2. Methods Our basc method was to develop a mathematcal expresson for the relaton of the bophyscal characterstc, EROI, of an explotable energy resource to the economc condtons that makes the explotaton possble. We derve an equaton that descrbes the general trends of certan parameters of nterest, namely the EROI, the monetary return on nvestment (MROI), and the unt prce of produced energy, p (e.g., $/BBL, $/MWh, etc.) sold n the market. At MROI = 1, the predcted prce equals the producer prce, or cost of producton. The defnton for EROI s as shown n (1). EROI s the energy output (E out ) from an energy producton system dvded by the requred energy nputs (E n ) to the system. Most EROI analysts

5 Sustanablty 2011, calculate (1) wthout dscountng future energy producton versus energy produced and consumed today, and for smplcty, our analyss also assumes smple energy and cash flow accountng (.e., we do not dscount energy or money) [24]. EROI E E out n (1) Most analyses also mply that the relaton for nvestments today are reflectng producton today, whereas today s producton s partly from yesterday s captal nvestments and today s captal nvestments are partly for tomorrow s producton. The data from [18] used n ths paper ndcate that the rato of ndrect E n /drect E n for US ol and gas has vared from less than 0.3 to over 2 n the years n whch hgh ol prces nduced large ncreases n exploraton and drllng (see Fgure 2). Fgure 2. The captal ntensty (rato of ndrect E n over drect E n ) of the US ol and gas ndustry has ncreased over tme wth large ratos represented by tmes of hgh drllng actvty n 1982 and 2007 (data from [18] assumng that a nomnal 14 MJ was consumed for each real 2005 dollar nvested for ndrect E n ). ndrect E n /drect E n : US ol and gas We now deconstruct (1) nto a form used to calculate results for ths paper. However, for prevous descrptons of the general framework for characterzng how to nclude dfferent nputs and outputs n (1), see [25-29]. Note that both the numerator and denomnator of (1) can be composed of multple factors: M forms of energy outputs and N forms of energy nputs. For example, an analyss of a drllng operaton producng ol, natural gas, and natural gas lquds must count the energy content of all three (e.g., M = 3) resources to calculate E out. The same premse holds for calculatng E n. Relatons for the energy outputs and nputs of an energy producton system are shown n (2) and (3) as a functon

6 Sustanablty 2011, of energy ntensty, e, of producton (or consumpton), multpled by the number of unts of producton (or consumpton). Here, we assume e s expressed n unts of energy dvded by any other unt whether that by a physcal quantty (e.g., tonnes), money (e.g., dollars), or otherwse. In (2), M s the number of output energy products, and m represents the unt producton of the th energy product. In (3), N s the number of nput products that have drect or ndrect emboded energy, and n represents the unt consumpton of the th nput. Example unts of energy producton are barrels (BBLs) of ol, megawatt-hours (MWh) of electrcty, thousand cubc feet (MCF) of natural gas, etc. An example calculaton s E out for ol producton where the energy content of a barrel (BBL) of ol s approxmately e = 6.1 GJ/BBL, and f m = 10 BBLs of ol are produced, then E out = 61 GJ. For Equaton (3), the th unt nput can descrbe drect energy (e.g., a BBL of ol) or ndrect energy (e.g., energy emboded n a ton of steel, hour of labor, etc.). See [25] and [30] for a full dscusson of how to consder dfferent energy nputs and outputs, ncludng usng energy qualty factors, when calculatng E n and E out. M m 1 E out e N n 1 E n drect energy ndrect energy e (2) (3) Equaton (3) should nclude both drect and ndrect energy nputs and represents the common methodology for performng process-based and nput-output based lfe cycle assessments (LCAs) [31]. Hence wth proper data we can assess what part of the expendture dollar went for drect energy and what part for the ndrect energy that s responsble for the dfferent energy/monetary ratos of nputs and products. For example, n an ol producton system, the drect E n calculated n (3) can be a summaton of electrcty (or better the fuel consumed durng electrcty generaton) for runnng tralers, pumps, compressors, and computer equpment as well as desel fuel consumed for operatng trucks, pumps, and the drllng rg. However, t s nsuffcent to nclude only the drect energy nputs to capture all of the energy necessary for the full operaton of the energy producton system. EROI researchers addtonally nclude measures for ndrect energy nputs to consder energy nputs from operatons outsde of the energy producng operaton tself. For example, ol derrcks have towers made from steel, and one company may nstall and operate the drll, but another made the steel tower. Because the energy nputs requred to make the steel are not performed on the ste of the ol well, they are consdered ndrect energy and can be ncluded n the analyss by knowng the energy requred per unt or dollar of producton (e.g., energy ntensty e) and followng (3). For example, n 2004 the average mass energy ntensty of steel was e st = 20,000 MJ/tonne [32]. Thus, to nclude the ndrect energy nputs from steel n (3), n s number of tonnes of steel and e = e st = 20,000 MJ/tonne. When physcal unts are not avalable analysts must use dollars of steel (e.g., n n unts of $) and monetary energy ntensty (e.g., e n unts of MJ/$) for such dollars spent. It s possble to estmate ndrect E n usng nomnal data from nput-output (I-O) analyses of the entre economy. Examples of such analyses are those by Bullard, Herendeen, and Hannon n the 1970s [33], Costanza and Herendeen n the 1980s [34,35], and the somewhat less comprehensve or detaled but more recent Economc Input-Output LCA analyses by Carnege Mellon [36]. These I-O analyses blend natonal-level economc and energy consumpton data to analyze the mpacts of complete economc sectors rather than ndvdual technologes or processes. In usng I-O analyses,

7 Sustanablty 2011, the most aggregated value of e that characterzes energy consumpton and economc cost s the economy-wde energy consumed for every one dollar of nvestment by the energy sector of nterest (e.g., ol and gas extracton sector). If monetary e (e.g., n unts of MJ/$) s not avalable for the sector or project of nterest va an I-O analyss, then the overall monetary energy ntensty, e, of the economy (e.g., state, country, world) can be used as the best proxy. However, nvestments of energy ndustres have hgher than average energy ntensty. Equaton (4) represents energy nputs as a functon of money nvested and energy ntensty of the nvestment, e nvestment, n unts of energy per money (e.g., MJ/$). En $ nvestment envestment (4) Alternatvely, one can calculate e nvestment usng Equaton (3) to calculate all energy nputs and dvdng them by all money spent to purchase those nputs. For reconstructng the value of e nvestment wthout I-O analyses, we can use (5). e nvestment E $ n nvestment N 1 N 1 n e n p (5) To relate EROI to the e nvestment, we substtute (2) and (4) nto (1) to obtan (6), a workng defnton of EROI. E EROI E out n $ M 1 nvestment m e e nvestment (6) Thus, the hgher the e nvestment for energy busness operatons, the lower the EROI. Note that n the case of ol producton, as the ol resources left to explot get deeper, heaver or from more nhosptable areas, t s mportant to understand not only how much more drect energy (e.g., desel fuel and electrcty) s requred for drllng deeper and pumpng up the ol but also how much ndrect energy (e.g., nfrastructure, engneerng, and plannng) s requred. If an ol resource prmarly requres drect energy, ths rases e nvestment because fuels have hgh ratos of energy/$ by defnton (e.g., f a fuel was sold for an energy/$ rato below that of the average of the economy, then the frm sellng the energy would be a net energy consumer and not a net energy producer). Therefore, as e nvestment ncreases, ths produces a further feedback on decreasng the EROI of the resource. Addtonally, the steel, alumnum, and other heavy manufacturng materals that are requred for new drllng and constructon of power plants are also characterzed by e nvestment hgher than economy average (but lower than for fuels), agan creatng a feedback for lowerng the EROI per Equaton (6). We next create (7), where m are n physcal unts of produced energy and e are n unts of as an analog to (6) to enable a relaton between smple monetary return on nvestment, MROI and EROI. MROI $ M $ out 1 nvestment $ m p nvestment (7)

8 Sustanablty 2011, From (7), we solve for the total money nvested as: $ nvestment M m 1 p MROI (8) Substtutng (8) and (5) nto (6) and we obtan an equaton that shows EROI as a functon of mportant economc factors: EROI M 1 M 1 m e m p MROI e nvestment (9a) M 1 M 1 m e m p N 1 N 1 n p n e MROI (9b) We use Equaton (9b) to explctly solve EROI as a functon of the ndvdual components of e nvestment. Assumng for smplcty that there s only one type of energy producton (e.g., M = 1), we easly solve (9) for one output varable of nterest as a functon gven values for all other varables. For example, useful relatons are (10) and (11). Equaton (10) specfes the requste sales prce, p, of a unt of energy producton (e.g., $/BBL of ol) as a functon of EROI and MROI, and (11) specfes the monetary return on nvestment as a functon of EROI. In the followng results secton, we use (10) and (11) to demonstrate the current methodology. p MROI EROI e nvestment The beneft of the relatons descrbed by (4 11) s that we have derved an equaton wth both EROI and MROI explctly stated together. Prevous research ether defnes EROI wthout relaton to monetary profts, or derves EROI from economc data of a specfc year, but stll wthout a closed form functon relatng EROI and MROI. To properly use (10) and (11), one must make sure that the parameters all correspond to the same tme frame and system boundares or pont n the supply chan of an energy producton technology, busness, or system. For example, f analyzng the prce of ol from a specfc feld, then the nputs to (10) and (11) must be the expected MROI, EROI, and e nvestment of producton for that feld only. If one s nterested n the average prce of ol from the entre Unted States ol and gas sector, then the nputs to (10) and (11) must relate to the entre sector. Thus, the structure of (4 11) should allow researchers to do both top-down economc sector analyses as well as bottom-up technology-specfc analyses to analyze the entre energy supply chan. By reconstructng the top-down results from bottom-up technques, better future energy projectons may be possble. However, n practce, bottom-up process LCAs are more easly performed usng E n as defned n (3) because values for process-specfc e nvestment are generally not avalable. e EROI pe MROI e nvestment (10) (11)

9 Sustanablty 2011, In (9 11) the varous factors are not ndependent of each other. Ideally, data and calculatons for EROI can be made ndependent of economc nputs, and ths s most plausble when consderng drect energy nputs only n (3). In consderng ndrect energy nputs, however, (e.g., that energy requred for producng steel used n ol well casng), often tmes only monetary data are avalable (e.g., money spent for purchasng steel), requrng a blend of avalable economc and energy ntensty data (e.g., an aggregate value of e n unts such as MJ/$) to estmate energy nputs. Addtonally, when consderng sector level analyss, economc data are generally all that are avalable. Thus, t s mportant to understand that EROI s not an ndependent functon of e nvestment as t appears to be consdered n (9 11). For example, ol as refned desel s a major nput nto drllng for ol (e.g., as fuel for drllng rgs). Thus, f the bophyscal descrptor (.e., EROI) decreases because of the need to consume more desel n drllng to deeper ol resources, other nput products (e.g. steel) can become more expensve n both money and energy f they depend upon ol for producton and shppng. That s to say, as the prce of ol gets hgher, t can have a feedback makng t more expensve to produce more ol. Addtonally, EROI s nversely proportonal to the energy ntensty of nvestment n energy producton whle at the same tme beng proportonal to the energy output per unt of producton (e.g., BBLs of ol producton at 6,100 MJ/BBL). By usng (9), we can account for a stuaton n whch the EPE pays a prce for an energy resource nput that s dfferent than the prce for whch the EPE sells the same energy resource as an output. By breakng e nvestment nto a weghted sum of many nvestments as n (5) and (9), we can gan nsght nto the couplng of nputs from each sector or fuel (drect or ndrect) upon EROI, and ultmately the prce of energy requred to make a gven fnancal return. In practce such assessments often are very dffcult because the energy companes (especally natonal ol companes) keep much of ths nformaton to themselves. Also, Equatons (10) and (11) show that as energy gets more expensve, partally characterzed by decreasng energy ntensty (e.g., energy per dollar) of nvestment n energy producton, e nvestment, then energy prce ncreases at constant EROI. The counter-ntutve result from (10) s that as the energy ntensty of nvestng n energy producton ncreases, the prce of energy necessary to make a constant proft decreases. The reason s that hgher energy ntensty purchases represent cheap energy nputs and the ablty to make hgher monetary returns for a gven EROI. 3. Results To gan nsght nto our methods, we use Equaton (10) to estmate results under representatve hstorc economc condtons. We frst use the example of US ol producton and later repeat the analyss for natural gas and coal producton. Our results ndcate that Equatons (9 11) act as broad but vald representatons of the relatons between EROI, MROI, and the stated technoeconomc factors Calculatng Ol Prce as a Functon of EROI and Fnancal Parameters Assumng for the moment that barrels of ol are the only energy output unt from ol and gas operatons, we use (10) to plot estmated ol prce for a range of expected nputs. Equaton (10) has four nputs on the rght hand sde, and we must choose sources of data for these data nputs. Because there are no defntve values to nput nto Equaton (10) for calculatng ol prce, we calculate prce as

10 Sustanablty 2011, a functon of EROI usng a range of reasonable nputs. We estmate nput values for estmatng the prce of ol va Equaton (10) as follows and plot the results n Fgure 2: (1) e ol : We assume that the energy content for a barrel of ol s 6,100 MJ/BBL. (2) e nvestment : Per Equaton (9b) energy nputs are a combnaton of drect and ndrect energy. By summng all energy nputs and dvdng by all monetary nputs we obtan the estmate for total e nvestment. For estmatng the total e nvestment for ol and natural gas we use the drect and ndrect energy nput values from Gulford et al. (2011) of ths specal ssue of Sustanablty [18]. Relable fuel prce data (for cost of drect energy from natural gas, fuel ol, gasolne, and electrcty) exst from the EIA after 1949, and we only calculate total e nvestment for dates after Gulford et al. (2011) assume a nomnal estmate of e nvestment = 14 MJ/$2005 for cost of captal, or ndrect energy nputs [18]. The Appendx shows the values for e nvestment for each year of data n [18]. (3) MROI: We use estmates of monetary return on nvestment, MROI, from two sources for comparson and senstvty analyss: the EIO-LCA ol and gas extracton ndustry (NAICS 211) and a document of the Amercan Petroleum Insttute (API) [37]. The API quotes a 7% annual proft assumpton for the entre ol and gas ndustry and s lkely an underestmate, but represents a typcal long term value. The EIO-LCA model specfes 40% and 51% annual profts for 1997 and 2002, respectvely, for the targeted NAICS 211 ol and gas extracton sector producer prce models [36,38]. Thus, we plot Equaton (10) for both MROI = 1.1 and MROI = 1.5 to sgnfy the expected range of profts. (4) EROI: We plot estmates of EROI for US ol and natural gas from two sources alongsde our results plotted usng Equaton (10) (see references below for dscussons of how EROI vares over tme):. The frst EROI estmates are those of the US ol and gas ndustry from Cleveland (2005) reported for every ffth year from 1954 to 1997 [26], and. the second EROI estmates are those of the US ol and gas ndustry from Gulford et al. (2011) [18] of ths specal EROI ssue for every ffth year from 1919 to The most dffcult factors to obtan accurately n (10) are the EROI and MROI for any gven tme perod, and thus the methods of ths paper should not be expected to predct short term prce fluctuatons, but rather they contrbute nsght nto long term trends. For a gven EROI, however, t s easy to see the prce effect of the energetc cost of producton and takng hgher profts. In Fgure 3 we plot the general trends of the prce of a BBL ($2005/BBL) [21] of ol versus the EROI and expected range of MROI for the ol and gas ndustry. In recent hstory, EROI for ol and gas has been between [22,26,28,39]. Whle ths range appears to be large, t translates to an ol prce of less than $70/BBL at annual proft ratos less than MROI = 1.5. Ths prce has been exceeded regularly only n the last few years, whch mght reflect the apparently rapd declne n EROI that we have seen recently (see many papers n ths specal ssue of Sustanablty). In Fgure 3 the modeled range of ol prce and EROI brackets most of the data ponts composed of lterature EROI values and hstorcal ol prces (only the average annual prces are plotted). Each sold and dashed lne n Fgure 3 represents the Equaton (10) estmate and assumes a constant value for both e nvestment and MROI. These data ponts confrm the general nverse trend of prce relatve to

11 Sustanablty 2011, EROI. If EROI becomes less than 10, as may soon be the case for average US ol, the requste ol prce ncreases dramatcally and at a nonlnear ncreasng rate. For example, consder the EROI of Canadan ol sands extracton that s now a sgnfcant source of petroleum and nfluental n settng the worldwde margnal ol prce. Assume that each barrel of btumen brought to the surface usng steam asssted gravty dranage (SAGD) technque s 6,100 GJ/BBL, the same as crude ol (an overestmate). Addtonally, assume a typcal need for 2 3 BBL of steam per BBL of extracted btumen and natural gas for creatng steam at 0.45 Mcf/BBL of steam [40]. Usng the natural gas as the frst energy nput (clearly not the only energy nput) the EROI of ol sands s no larger than 4 6:1 nearly an order of magntude lower than the average ol and natural gas EROI of the past. From Fgure 3, we see that ol producton wth an EROI of 4 6 and annual profts between 10% and 50% requres a prce of $2005/BBL. Realstc EROI for ol sands near 3 4 ndcate ol prces of $2005/BBL: wth the md-range beng hgher than the economy was able to support runnng up to the recesson started n late 2007 [15]. A revew of ol shale n ths specal ssue of Sustanablty ndcates that ol shale EROI s between 1 and 2.5 wth the major energy nput beng drect energy for heatng the shale [41]. Thus, our analyss suggests ol prces (at the mne) of $80/BBL $200/BBL (n $2005) at 10% annual proft assumng the hghest value of e nvestment = 33 from Gulford et al. (2011; red sold lne n Fgure 3) [18]. Fgure 3. The prce of a barrel of ol necessary for a frm to make a target proft s heavly dependent upon the EROI of ol producton. As the EROI of producton gets lower than approxmately 10, the prce of ol must ncrease dramatcally for realstc proft ratos below MROI = 1.5. Each sold and dashed lne represents the Equaton (10) estmate and assumes a constant value for both e nvestment and MROI. The EROI O&G Gulford (2011) values are from [18], EROI O&G Cleveland (2005) values are from [26], and ol prces are from the Energy Informaton Admnstraton [21]. Ol prce ($2005/BBL) Ol prce ($2005/BBL) EROI EROI MROI = 1.1; MJ/$2005 e nvestment = 33 MJ/$2005 MROI = 1.5; MJ/$2005 e nvestment = 33 MJ/$2005 MROI = 1.1; MJ/$2005 e nvestment = 19 MJ/$2005 MROI = 1.5; MJ/$2005 e nvestment = 19 MJ/$2005 MROI = 2.1; MJ/$2005 e nvestment = 19 MJ/$2005 EROI O&G Gulford (2011) ( ) EROI O&G Gulford (2011) ( ) EROI O&G Gulford (2011) (2007) EROI O&G Cleveland (2005) ( )

12 Sustanablty 2011, In lookng further at the plotted EROI and prce ponts n Fgure 3 we fnd an nterestng pattern. Recall that the EROI values can only be calculated every ffth year due to data avalablty (see references for descrpton). Frst, the EROI values from Cleveland (2005) predct hgher prces at the same EROI [26]. Also, the only two outlers from the data ponts assocated wth ol prces less than 25 $2005/BBL are those for 1982 and The slopes are almost dentcal for the relatve ncrease n prce wth decreasng EROI for both the prce ncrease from 22.7 $2005/BBL n 1977 to 51.5 $2005/BBL n 1982 and also the prce ncrease from 24 $2005/BBL n 2002 to 63 $2005/BBL n For the change from 1977 to 1982 the slopes are 9.1 and 9.4 (unts of $2005 per EROI, or $2005) for Cleveland (2005) [26] and Gulford et al. (2011) [18], respectvely. The slope from 2002 to 2007 s 8.3. Each of the fve lnes plotted n Fgure 3 usng Equatons (9) and (10) assumes a constant e nvestment and MROI. The sold and dashed red lnes (lower left lnes) use e nvestment = 33 MJ/$2005 whch we calculated as typcal for all years after 1958 except for 1982 and For both 1982 and 2007 our calculated e nvestment = 19 MJ/$2005. See the Appendx for detals on calculatng e nvestment. Assumng 10% 50% annual proft suffcently descrbes the actual prces except for 1982 (Cleveland, 2005) [26] and 2007 (Gulford et al., 2011) [18]. Durng the tme spans of and real ol prces rose more than $7/yr too fast for ol companes to brng new producton onlne to beneft from the prces. Thus, ther exstng producton that planned on makng a proft at lower prces made consderably larger profts (hgher MROI than normal) durng these years of abnormally hgh ol prces. Thus, Equatons (10) and (11) as exhbted n Fgure 3 show that ol prces n 1982 and 2007 allowed for sgnfcantly hgher profts Calculatng Natural Gas Prce as a Functon of EROI and Fnancal Parameters We repeated the calculatons of Secton 3.1 usng natural gas as the output nstead of ol (see Fgure 4). We use e NG = 1,085 MJ/Mcf where Mcf s one thousand cubc feet of natural gas, the common US unt to descrbe natural gas transactons. We plot natural gas prce ($2005/Mcf) [21] versus the same EROI for ol and gas from Cleveland (2005) [26] and Gulford et al. (2011) [18], and our relaton agan predcts the prce trends relatve to measured EROI. One mportant feature to notce n Fgure 4 s the group of data ponts that le below the bounds of the predcton Equatons (10) and (11). These ponts correspond to prces and EROI for the year 1977 and earler before the Natural Gas Polcy Act of 1978 ended regulaton of wellhead natural gas prces. After 1977, natural gas producer prces rose to ncentvze new producton and more accurately reflect costs. However, our results show the general ablty of the basc formulaton of the present work to relate EPE monetary and energy profts over long term trends. The formulaton also shows that EROI < 10 generally relates to natural gas prces greater than 6 $/Mcf. Thus, t s very mportant to understand the EROI of new natural gas resources, such as from shales, because these are more decoupled from ol prces n accessng resources that do not coproduce natural gas wth ol. Knowng the vable range of EROI for delvered, not wellhead, natural gas should help us gan understandng wth regard to future volatlty n natural gas prces.

13 Sustanablty 2011, Fgure 4. The prce of a thousand cubc feet of natural gas necessary for a frm to make a target return on nvestment s heavly dependent upon the EROI of natural gas producton. Each sold and dashed lne represents the Equaton (10) estmate and assumes a constant value for e nvestment and MROI. The plotted values EROI O&G Gulford (2011) are from [18], EROI O&G Cleveland (2005) from [26], and natural gas prces are n unts of $2005/Mcf from the Energy Informaton Admnstraton [21]. 12 Natural gas prce ($2005/Mcf) Prces were relatvely low before 1970s ol crses and deregulaton Natural gas prces and EROI follow model after deregulaton EROI MROI = 1.1; MJ/$ e nvestment = 33= 33 MJ/$2005 MROI = 1.5; emj/$ nvestment = 33= 33 MJ/$2005 MROI = 1.1; MJ/$ e nvestment = 19= 19 MJ/$2005 MROI = 1.5; emj/$ nvestment = 19= 19 MJ/$2005 EROI O&G Gulford (2011) ( ) EROI O&G Cleveland (2005) ( ) EROI O&G Gulford (2011) ( ) 3.3. Impact of Captal Intensve Energy Technology There s an nterestng and mportant trend to note from our relaton between prce and EROI. Ths trend relates to the energy ntensty of the nvestment, e nvestment, for energy generaton. A captal ntensve nvestment wll have relatvely lttle fuel consumpton but relatvely hgh materal usage, or captal. We nterpret hgh captal ntensty of the nvestment as a low value of e nvestment. For example, steel has drect emboded energy of approxmately 20 GJ/tonne and at $700/tonne represents an energy ntensty of e steel = 28 MJ/$. On the other hand, a fuel ntensve nvestment n the lfe cycle of energy producton s represented by a hgh value of e nvestment. For example, f natural gas were an nput to an energy producton lfe cycle at $7/Mcf, a typcal medum-range prce, the energy ntensty of that nvestment translates to e NG = 155 MJ/$. Thus, f e nvestment s weghted toward fuels, t wll be relatvely large. If e nvestment s weghted toward materals and captal, t wll be relatvely low. As Equatons (10) and (11) ndcate, as the captal ntensty of the energy technology nvestment ncreases, the prce of energy sold must ncrease even at the same EROI (see Fgure 5). In other words, f one technology can produce fuel at EROI = 10 and e nvestment = 10 MJ/$ and another technology can produce fuel at EROI = 10 and e nvestment = 15 MJ/$, then the fuel s cheaper from the latter technology. Phlosophcally ths means that, at an equal EROI, energy producton systems that are more dependent

14 Sustanablty 2011, on ther own product (e.g., fuels) are cheapest. Ths concept has mplcatons for renewable energy technologes that are relatvely captal ntensve n order to extract energy from the sun and wnd yet have lttle to no fuel consumpton durng operatonal part of the lfe cycle. As seen n Fgure 2, captal ntensty also s mportant for understandng prces n the fossl fuel extracton ndustry. The ol and gas ndustry responded to hgh ol prces by ncreasng drllng rates n the early 1980s and late 2000s and ths translated to hgher materal and human captal ntensve nvestment perods (e.g., steel, concrete, overhead for olfeld servce companes, etc.). Because the benefts of these captal nvestments occur for many years after ntal the expendture, t s mportant for future work to properly characterze the tme lags of EROI and E out relatve to captal ntensve energy nvestments. Future work should also explore the energy ntensty, e nvestment, of alternatve fossl and renewable fuels to understand whch prce curve of Fgure 5 s more relevant for each fuel (e.g., ol sands that are heavly relant on natural gas, bofuels usng both free solar energy and fossl fuel nputs, etc.). Fgure 5. When consderng two energy producton lfe cycles wth the same EROI, the one wth the hgher energy ntensty of nvestment e nvestment can be sold at a lower breakeven prce or hgher proft at the same prce. $200 Ol prce ($/BBL) $150 $100 $50 e nvestment 30 MJ/$ 20 MJ/$ 10 MJ/$ $ EROI 4. Conclusons Our equatons derved n ths paper appear to predct rather well the basc relatons among profts, prces, and EROI. Ths formulaton, however, s not meant necessarly to predct short term prces, but rather characterze broad relatons and the ways n whch we beleve that EROI drves large scale fnancal phenomenon and long-term energy nvestments. It s mportant to note that Equatons (9 11) represent equlbrum condtons wth no constrants on any requred nputs. In realty there can be shortages n global ol supply or quckly ncreasng demand of nfrastructure for ol and gas development (e.g., drllng rgs) that rase prces much faster (n tme) than ndcated by the theory of

15 Sustanablty 2011, ths paper. Thus, the theory of ths paper can be vewed as descrbng a lower bound on prce as t relates to EROI. The data used n Gulford et al. (2011) [18] and Cleveland (2005) [26] do represent some dynamcs n supply and demand wth regard to ol producton. Because the underlyng data from the US Census of Mneral Industres s reported only every fve years, there are few conclusons we can make regardng the rate at whch the underlyng EROI changes on annual or monthly tme scales. By the method and demonstratons developed n ths paper we have confrmed our major hypothess that the bophyscal characterstc of EROI s a major factor that can dctate the proft margn and prce necessary for a frm to engage n energy producton. The relatons n Equatons (9) (11) llustrate that lower EROI energy systems have less potental proftablty for ther busnesses. Over the long run, any energy producng entty must produce both a monetary and energetc proft. In the termnology of ths paper, ths statement means that MROI > 1:1 and EROI > 1:1. The queston remans how much greater than 1:1 EROI must be. Consderng that the past calculatons of US EROI of ol and gas estmate t to never have been less than 7 [18,22,26], we can nfer that there s some value of EROI between 10 and 1 that ol becomes prohbtvely expensve. As seen n Equaton (10), as EROI decreases, prce ncreases. By developng theoretcal mnmum EROI values for fuels and electrcty, as n one of the current author s prevous work [1], we can translate those crtcal EROI values nto a prce range. Conversely, we can look to translate crtcal prce thresholds as feedback to nform dervaton of mnmum EROI values. If a busness s characterzed by EROI < 1:1, then by defnton t s an energy consumng busness no matter what the proft of the company. Thus, the monetary nvestments of an energy busness must consume less energy than ts products provde. In terms of our nomenclature, ths means that e nvestment < e product for an energy producton busness or sector. Consderng the example n Secton 3.1, the ol and gas extracton sector nvested at e nvestment = 18.6 MJ/$2005 n 2007 to produce a product wth energy ntensty of e ol = (6,100 MJ/BBL)/(63 $2005/BBL) = 97 MJ/$2005. Thus, based upon pure economc nformaton, we can say that the ol and gas extracton sector multpled the energy avalable to the economy by a factor of 5 (e.g. 97/18.6 = 5) tmes. Equvalently n 2007, for the natural gas case study presented n Secton 3.2 the energy avalable to the economy was ncreased by a factor of 10. Hstorcally, EROI has been many multples hgher than MROI, but our derved relaton tself does not necessarly pont to the lmt of proftablty. Theoretcally, frms can charge hgher prces n an attempt to command ther desred proftablty, but there s a prce at whch consumers are unwllng to pay or that they wll cut back on consumpton. Addtonally, the margnal, or lowest EROI, energy supply often dctates the overall market prce (e.g., ol) such that producers wth hgh EROI supples and resources sell at a large proft. We do show that because EROI s a rato, as t drops lower and lower, the necessary prce (at constant proft) ncreases quckly n a nonlnear manner. That s to say at a constant proft (e.g., MROI = 1.5) and e nvestment = 19 MJ/$2005, an EROI decrease from 5 to 2 (a 60% drop) has a much more dramatc absolute ncrease n prce from $96/BBL to $240/BBL (a 150% ncrease), than a drop from 25 to 10 (a 60% drop) wth an ncrease n prce from $19/BBL to $48/BBL (also a 150% ncrease). Because EROI s a rato, changes around low values are larger n the absolute sense than changes around hgh values. And because most consumers thnk lnearly wth budgets and ncomes that do not quckly adjust to large absolute changes n ol prce, small changes n EROI can quckly translate to budgetary dffcultes for famles, companes, and governments. Ths

16 Sustanablty 2011, phenomenon of decreasng net energy mght explan a lot of our present economc dffcultes [18,22]. Thus, low EROI drectly translates to hgh prce, and because EROI has a physcal bass for ts dervaton, t s an mportant method for double checkng and forecastng future energy prces and proftablty of energy busnesses. In future work, the relatons derved n ths paper set the stage for proper EROI and prce comparsons of ndvdual fossl and renewable energy busnesses as well as the electrcty sector as a whole. For example, by ncludng the EROI of ndvdual energy technologes, ncludng the energy nputs for nvestments n electrcty storage, transmsson, and dstrbuton systems, we can use physcal-based modelng to assst n forecastng a future energy transton to renewables. Addtonally, the presented relatons provde a framework for ncorporatng EROI nto larger economc systems models that can explore the feedbacks between the EROI and prces of dfferent energy supples. Acknowledgements We would lke to thank the Center for Internatonal Energy and Envronmental Polcy for provdng the resources and tme for the frst author to work on ths paper. References and Notes 1. Hall, C.A.S.; Balogh, S.; Murphy, D.J.R. What s the mnmum EROI that a sustanable socety must have? Energes 2009, 2, Whte, L.A. Chapter 2: Energy and tools. In The Evoluton of Culture: The Development of Cvlzaton to the Fall of Rome; Whte, L.A., Ed.; McGraw-Hll: New York, NY, USA, 1959; pp Bouldng, K.E. The economcs of the comng spaceshp earth. In Envronmental Qualty n a Growng Economy; Jarrett, H., Ed.; Johns Hopkns Unversty Press: Baltmore, MD, USA, 1966; pp Tanter, J. The Collapse of Complex Socetes; Cambrdge Unversty Press: Cambrdge, UK, Tanter, J.A.; Allen, T.F.H.; Lttle, A.; Hoekstra, T.W. Resource transtons and energy gan: Contexts of organzaton. Conserv. Ecol. 2003, 7, Artcle Odum, H.T. Envronmental Accountng: Energy and Envronmental Decson Makng; John Wley & Sons, Inc.: New York, NY, USA, Farrell, A.E.; Plevn, R.J.; Turner, B.T.; Jones, A.D.; O Hare, M.; Kammen, D.M. Ethanol can contrbute to energy and envronmental goals. Scence 2006, 311, Pmentel, D.; Patzek, T.; Cecl, G. Ethanol producton: Energy, economc, and envronmental losses. In Revews of Envronmental Contamnaton and Toxcology; Sprnger: New York, NY, USA, 2007; Volume 189, pp Hamlton, J. Causes and consequences of the ol shock of In Brookngs Papers on Economc Actvty: Sprng 2009; Romer, D.H., Wolfers, J., Eds.; Brookngs Insttuton Press: Washngton, DC, USA, Hall, C.A.S.; Groat, A. Energy prce ncreases and the 2008 fnancal crash: A practce run for what s to come? Corporate Exam. 2010, 37,

17 Sustanablty 2011, EIA. Annual Energy Revew 2007; DOE/EIA U.S. Department of Energy: Washngton, DC, USA, EIA. Annual Energy Revew 2008; DOE/EIA U.S. Department of Energy: Washngton, DC, USA, June EIA. Internatonal Petroleum data Annual Producton. pdbproject/iedindex3.cfm?td=5&pd=53&ad=1 (accessed on 9 August 2011). 14. EIA. Internatonal Petroleum Monthly; U.S. Department of Energy: Washngton, DC, USA, NBER. US Busness Cycle Expansons and Contractons. Natonal Bureau of Economc Research, Inc.: Cambrdge, MA, USA. Avalable onlne: (9 August 2011). 16. Murphy, D.J.R.; Hall, C.A.S.; Cleveland, C.J. Order from Chaos: A prelmnary protocol for determnng EROI for fuels. Sustanablty 2011, n press. 17. Gagnon, N.; Hall, C.A.S.; Brnker, L. A prelmnary nvestgaton of energy return on energy nvestment for global ol and gas producton. Energes 2009, 2, Gulford, M.C.; Hall, C.A.S.; Cleveland, C.J. A new long term assessment of EROI for U.S. ol and gas producton. Sustanablty 2011, n press. 19. EROI (MJ/$) $nvested [($/BBL) / (MJ/BBL)] = (2)(20 MJ/$)($1nvested)($61/BBL)/(6,100 MJ/BBL) = $ API Jont Assocaton Survey on Drllng Costs; Amercan Petroleum Insttute: Washngton, DC, USA, EIA. Annual Energy Revew 2009; DOE/EIA U.S. Department of Energy: Washngton, DC, USA, Auguest Kng, C.W. Energy ntensty ratos as net energy measures of Unted States energy producton and expendtures. Envron. Res. Lett. 2010, 5, ; do: / /5/4/ Heun, M.K.; de Wt, M. Energy return on (energy) nvested (EROI), ol prces, and energy transtons. Energy Polcy, n press. 24. Dscountng future E out and E n tends to lower the fnal EROI relatve to a non-dscounted result because E out s generally assumed constant over system lfetme and E n s front-loaded to varyng degrees (e.g. technologes wth no fuel costs such as wnd and solar power are heavly front-loaded ). 25. Mulder, K.; Hagens, N.J. Energy return on nvestment: Toward a consstent framework. AMBIO 2008, 37, Cleveland, C.J. Net energy from the extracton of ol and gas n the Unted States. Energy 2005, 30, Cleveland, C.J.; Costanza, R.; Hall, C.A.S.; Kaufmann, R.K. Energy and the U.S. economy: A bophyscal perspectve. Scence 1984, 225, Hall, C.A.S.; Cleveland, C.J.; Kaufmann, R.K. Energy and Resource Qualty: The Ecology of the Economc Process; Wley: New York, NY, USA, 1986.

18 Sustanablty 2011, Hall, C.A.S.; Cleveland, C.J.; Mthell, B. Yeld per effort as a functon of tme and effort for Unted States petroleum, uranum and coal. In Energy and Ecologcal Modellng, Symposum of the Internatonal Socety for Ecologcal Modelng; Mtsch, W.J., Bosserman, R.W., Klopatek, J.M., Eds.; Elsever Scentfc: Lousvlle, KY, USA, 1981; Volume 1, pp Murphy, D.J.R.; Hall, C.A.S.; Dale, M.; Cleveland, C. Order from chaos: A prelmnary protocol for determnng EROI for fuels. Sustanablty n press. 31. Bullard, C.W.; Penner, P.S.; Plat, D.A. Net energy analyss: Handbook for combnng process and nput-output analyss. Resour. Energy 1978, 1, IEA. Trackng Industral Energy Effcency and CO 2 Emssons; IEA: Pars, France, Bullard, C.W.; Penner, P.S.; Plat, D.A. Net energy analyss: Handbook for combnng process and nput-output analyss. Resour. Energy 1978, 1, Costanza, R. Emboded energy and economc valuaton. Scence 1980, 210, Costanza, R.; Herendeen, R.A. Emboded energy and economc value n the Unted States economy: 1963, 1967, and Resour. Energy 1984, 6, Carnege Mellon Unversty Green Desgn Insttute Economc Input-Output Lfe Cycle Assessment (EIO-LCA) US 2002 (428) model. Avalable onlne: (accessed 28 July 2010). 37. API. Puttng Earnngs nto Perspectve: Facts for Addressng Energy Polcy; Amercan Petroleum Insttute: Washngton, DC, USA, Avalable onlne: (5 August 2010). 38. Carnege Mellon Unversty Green Desgn Insttute Economc Input-Output Lfe Cycle Assessment (EIO-LCA) US 1997 (491) model. Avalable onlne: (accessed 5 August 2010). 39. Gately, M. The EROI of US offshore energy extracton: A net energy analyss of the Gulf of Mexco. Ecol. Econ. 2007, 63, LeGrow, J. ConocoPhllps Company, Houston, TX, USA, Personal communcaton, Cleveland, C.J.; O Connor, P.A. Energy return on nvestment (EROI) of ol shale. Sustanablty, n press.

19 Sustanablty 2011, Appendx Prces are from the Energy Informaton Admnstraton Annual Energy Revew Electrcty prce s taken as the total US average. Fuel ol prce s assumed same as gasolne prce. Both captal expendtures and the value of e nvestment = 14 MJ/$2005 for captal, or ndrect energy, are taken from Gulford et al. (2011) of ths specal ssue of Sustanablty [18]. The value of MJ/$2005 s calculated by summng all drect energy dvded by the sum of all drect energy expendtures per Equaton (9) when consderng multple drect energy nputs. The MJ/$2005 for total nvestment s the bass for plottng the modeled prce versus EROI n Fgures 3 and 4. Table A1. Prces for ol and natural gas [21] and EROI estmates from [26] and [18]. Year US ol prce ($2005/BBL) US NG prce ($2005/Mcf) EROI Ol and Gas (Cleveland, 2005)[26] EROI Ol and Gas (Gulford et al., 2011)[18]

20 Sustanablty 2011, Year Table A2. Input values used to calculate e nvestment n MJ/$2005 (MJ/$ n fnal column) are based on data n [18]. Energy Input Fuel prce Prce unt Mllon $2005 spent for energy nputs MJ/$ Natural Gas 0.61 $2005/Mcf Fuel ol $2005/BBL Gasolne $2005/gal Electrcty 0.09 $2005/kWh Electrcty (qualty corrected) 0.09 $2005/kWh Captal (ndrect energy) energy ntensty for drect energy (MJ/$2005) energy ntensty for total nvestment (MJ/$2005) 74.3 mllon $2005 nvested n drect energy mllon $2005 nvested n ndrect energy (captal) Natural Gas 0.66 $2005/Mcf Fuel ol $2005/BBL Gasolne $2005/gal Electrcty 0.09 $2005/kWh Electrcty (qualty corrected) 0.09 $2005/kWh Captal (ndrect energy) energy ntensty for drect energy (MJ/$2005) energy ntensty for total nvestment (MJ/$2005) 33.8 mllon $2005 nvested n drect energy mllon $2005 nvested n ndrect energy (captal) Natural Gas 0.83 $2005/Mcf Fuel ol $2005/BBL Gasolne $2005/gal Electrcty $2005/kWh Electrcty (qualty corrected) $2005/kWh Captal (ndrect energy) energy ntensty for drect energy (MJ/$2005) energy ntensty for total nvestment (MJ/$2005) 32.5 mllon $2005 nvested n drect energy mllon $2005 nvested n ndrect energy (captal)