Federal Govt. is Using the Military to Provide Subsidies for Biofuel Producers
May 19, 2014 by Leave a Comment
The Government Accountability Office (GAO) recently released a report which found that the military had spent up to $150 per gallon for alternative jet-fuel. This is one more example of how the administration is providing subsidies for renewable producers.
The latest GAO report found:
The federal government supports the development and use of alternative jet fuels through both broad and targeted initiatives. Broad national strategies promote the development of a variety of alternative fuels—including alternative jet fuel—to help achieve national goals, such as securing energy independence, fostering economic development, and reducing greenhouse gas emissions.
Of the three justifications the GAO gives for the federal government spending up to $150 a gallon subsidizing alternative fuels, the only one that is possibly true is a potential reduction in greenhouse gas emissions. The administration is not serious about securing energy independence nor are they serious about fostering economic development. Furthermore, the latest evidence shows that the alternative fuel actually increased greenhouse gas emissions.
If the administration were serious about energy security, then why are they subsidizing experimental products that may, potentially, increase energy security rather than taking concrete steps to actually increase energy security today? This is why the energy security argument does not makes sense.
The administration only leases 3 percent of federal lands for energy development. If the administration were serious about energy security, they would lease more lands and it would learn from the states how to increase oil production and protect the environment at the same time. On private and state lands, oil production has increased 61 percent over the last five years, but oil production has decreased by six percent on federal lands. This drop in oil production on federal land would not happen if the administration were serious about energy security.
The administration could also allow the Keystone XL pipeline to be built. Oil from Canada is just as secure as oil from the United States. If the administration were serious about energy security, they wouldn’t restrict oil from Canada. Instead, they would allow the Keystone XL pipeline to be built.
As for fostering economic development, again there is no evidence that the administration interested in fostering overall economic development. Buying fuel at above market rate is a waste of money. Wasting money does not foster economic development, instead it retards it. As Phillip Cross the former Chief Economic Analyst at Statistics Canada wrote:
Public sector investment never “kick-starts” more business investment, creating the virtuous circle governments always hope for when launching the latest wave of government capital spending. Instead, more public sector spending creates a vicious circle, where a “failure” of business investment to respond to higher public sector spending justifies the perceived need to further boost public sector investment “to fill the gap.
This is what has happed with energy subsidies. With biofuel, not only have there been subsidies for years, but the Renewable Fuel Standard mandates that Americans use billions of gallons of biofuel a year. If subsidies for mandates “kick-started” more business investment there would be no need at this point for the military to pay $150 per gallon for some exotic jet fuel.
Lastly, there is the potential for alternative fuel to reduce greenhouse gas emissions. But the evidence is not strong and is decreasing. The latest study from the University of Nebraska-Lincoln found that:
Using corn crop residue to make ethanol and other biofuels reduces soil carbon and can generate more greenhouse gases than gasoline, according to a study published today in the journal Nature Climate Change.
The findings by a University of Nebraska-Lincoln team of researchers cast doubt on whether corn residue can be used to meet federal mandates to ramp up ethanol production and reduce greenhouse gas emissions.
The justification the administration and the military give for spending massive amounts of money on alternative fuels do not hold water. It appears, therefore, that this spending is just one more example of unnecessary and economically harmful subsidies for alternative fuels.
IER Director of Regulatory and State Affairs Daniel Simmons authored this post
RFS is Unsustainable and Harmful to the Economy
May 15, 2014 by Leave a Comment
Late last year, the Obama administration exercised some common sense and issued a proposed rule to reduce the amount of renewable fuel required under the Renewable Fuel Standard (RFS) from 18.15 billion gallons to 15.21 billion gallons. EPA realized that Americans weren’t using enough fuel to blend 18.15 billion gallons of biofuel without the mandated biofuel exceeding 10 percent of the content to fuels. The 10 percent barrier matters because higher amounts of ethanol can damage engines, especially small engines. EPA’s proposed rule still has problems, but at least it was a nod toward reality.
The RFS is a biofuel mandate. It requires the use of more biofuel than the market would support. As a result, it is economically harmful and results in higher fuel prices and higher food prices (after all nearly half of the U.S. corn crop now goes to making ethanol for fuel instead of being used as food).
The biofuel industry has been built on the promise from the government that the American consumer will be forced to buy ever-increasing amounts of ethanol and biofuel. With Americans not using as much gasoline and diesel as planned, the biofuel producers are being forced to cut back:
A new study from the National Biodiesel Board, shows that the lack of certainty of federal policies is already hurting farmers and producers that help our country become more energy independent. According to the findings, nearly 80 percent of U.S. biodiesel producers have scaled back production this year and almost 6 in 10 have idled production altogether. Additionally, two-thirds of producers said they have already reduced or anticipate reducing their workforce as a result of the downturn.
The biofuel industry is reaping what they have sown. This is the foreseeable result of an industry built on forcing people to use their products. If the government policies change (of even if there is threat to change them), the industry built on the government promises will be harmed.
If the biofuel industry and their supporters were truly concerned about jobs and the economy as a whole, they would reject the RFS. The RFS artificially drives up costs in the rest of the economy, harming the economy as a whole. This comment from Tom Stacy explains why:
“Jobs within in any energy sector are “good” to the extent they support families and individuals, but the number of jobs inside any energy industry sector pale in comparison to the job creation and retention potential of least-cost plentiful, reliable energy availability to the economy at large. While the job and standard of living increases across the economy are hard to trace discretely to low energy costs, the effect is impressive and should not be ignored. May 14th, 2014 House committee testimonies supporting Amended Substitute Senate Bill 312 from Alcoa’s David Ciarlone and Timken’s Peggy Claytor are excellent examples of the leverage energy cost has on jobs across the state’s economy. Low energy costs are a competitive tool for manufacturers. The more energy intensive the manufacturing, the greater the effect. From there, warehousing, shipping and retailing all have significant energy costs borne by consumers. Keeping energy costs as low as possible fights inflation – in ways far beyond household utility bills and pain at the pump.
Energy technologies which are highly subsidized are almost always low value “economic losers” which end up raising the cost of energy despite the handouts they receive at taxpayer expense. When an energy technology group, such as the American Wind Energy Association, touts the jobs they create in their tiny piece of the economy, we must recognize that their industry is actually costing far more jobs across the entire economy. Yet such “trade associations” persist in their relentless public relations and lobbying efforts, largely funded by our tax dollars – and to perpetuate access to our tax dollars. Isn’t that the way a Ponzi scheme works?
Governments are coming to recognize that taxpayers are waking up, and do not wish their hard earned tax dollars to fund special interest industries when the end result is higher energy cost for everyone.”
This is exactly right. Even EPA is waking up that the RFS is unsustainable and harmful to America. Hopefully the proponents of the RFS will see that as well.
IER Director of Regulatory and State Affairs Daniel Simmons authored this post
Where Does Senator Udall Stand?
May 14, 2014 by 1 Comment
WASHINGTON – The American Energy Alliance continued its energy policy accountability efforts today with a television ad urging Senator Mark Udall to reverse his stance against the Keystone XL pipeline. Sen. Udall has now voted against the construction of the pipeline multiple times. The ad buy is for $405,450 and will run until May 23rd in Denver and Colorado Springs. AEA President Thomas Pyle released the following statement:
“Senator Udall’s refusal to support Keystone XL is far outside the mainstream. The approval of this commonsense infrastructure project is five years overdue, delaying thousands of jobs and straining our relationship with Canada, America’s strongest energy ally. Coloradans recognize this, which is why two-thirds of them support the pipeline. Despite this overwhelming support from his constituents, Senator Udall remains beholden to a narrow band of special interests in opposition to this commonsense, job-creating, shovel ready project.
“Will Senator Udall continue to stand with special interests that promote an anti-energy agenda, or will he support policies that better the lives of Coloradans and the American people by supporting the Keystone pipeline?”
To watch the ad, click here.
To read the fact sheet for the ad, click here.
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Pyle Urges Senate to Cut Red Tape on Energy Development
May 2, 2014 by Leave a Comment
WASHINGTON — American Energy Alliance President Thomas Pyle sent a letter today to Sens. Harry Reid and Mitch McConnell urging them to use the debate over the Shaheen-Portman bill to discuss policies that would cut red tape on American energy development. The letter reads:
The Shaheen-Portman bill will not grow the economy nor will it reduce energy prices for American families. At best, it will increase the government’s micromanagement of our daily lives, something Americans are growing increasingly concerned about. If the Senate intends to debate the Shaheen-Portman bill, it is imperative that there be a thorough discussion of policies to end the red tape that is shackling energy development in America. Here are some important issues that should be part of any discussion of an energy bill:
- Electricity Security and Affordability Act. EPA’s GHG regulations will drive up electricity prices and according to EPA itself will not affect climate change in any meaningful way. Congress must step in to stop these regulations that provide no gain, but will further imperil our struggling economy.
- American Energy Renaissance Act. Oil production increased by an impressive 61 percent on private lands between 2009 and 2013, but oil production fell on federal lands over the same time period. Federal lands contain the largest known energy reserves in the world, but the federal government keeps these resources off limits. The AERA will allow for the development of some of these resources and rein in the red tape that is strangling our economy.
- Encourage the exports of LNG to ensure that production of natural gas in the United States will remain strong, which will, in turn, keep prices low for American consumers.
- Allow the Keystone XL pipeline to be built. Getting more oil from Canada is in the national interest. It is that simple. It should not take five years to figure out if transporting oil from Canada in the most environmentally sensitive and economic way possible is a good thing. We cannot sit by and let the Obama administration continue to play politics when we could be getting people back to work.
To read the full letter, click here.
If Solar Is So Great, It Doesn’t Need Mandates
April 30, 2014 by Leave a Comment
The environmentalist Outrage Police are at it again, this time over solar power. Specifically, a new LA Times article explains that utilities and America’s most feared brothers (since the identical twins from GI Joe) are trying to get rid of arbitrary government mandates on how much electricity must come from renewable sources, so that consumers and producers can determine how much power various sources should contribute. In their outrage over this development, progressive commentators neglect to mention this awkward fact of compulsion in their pet policy.
For example, here’s how Paul Krugman reacts to the LA Times story, in a blog post titled, “There Goes the Sun”:
Like just about everyone who has looked at the numbers on renewable energy, solar power in particular, I was wowed by the progress. Something really good is in reach.
And so, inevitably, the usual suspects are trying to kill it.
What makes it even worse is that one (not the only) reason to like the solar revolution is that it helps fight climate change. So if you’re a card-carrying conservative, who believes that climate change is the biggest, most intricate, and most incredibly successful conspiracy in history — thousands of scientists around the world, and not one of them squealing! — you want to block solar even if it saves money.
But wait a second. If “[s]omething really good is in reach,” and solar “saves money,” then why does the government have to force utilities to use it so heavily? Remember, this is what the dispute is over. Contrary to Krugman’s claim, nobody is trying to “kill” solar, rather the effort is to lift mandates requiring a minimum percentage of renewable power, and in addition to get rid of the “net metering” schemes that privilege customers with solar panels on their homes at the expense of everyone else.
You really have to marvel at Krugman’s worldview. He thinks that greedy power companies hate the planet so much that they actually will spend their own money on campaigns to make their businesses less profitable. That’s actually what Krugman must believe (or at least, what he must believe if you take his writings at face value).
For his part, Kevin Drum at Mother Jones concludes his analysis of the LA Times story in this way:
If there’s anything that liberals and conservatives ought to be able to agree on, it’s the benefit of renewable power. It’s as close to a no-brainer as you can get. But President Obama made green programs part of his stimulus package, and that was that. When tea-party hysteria took over the conservative movement, renewable energy became one of its pariahs. Griping about Solyndra is ancient history. Today’s conservatives oppose renewable energy for the same reason they’ve gone nuts over Benghazi and the IRS and Syrian rebels: to show solidarity to the cause. Welcome to modern American politics.
No, actually Mr. Drum, conservatives (and libertarians) don’t oppose renewable energy. We oppose renewable energy mandates.
It is truly shocking that Krugman and Drum can write entire blog posts without once bringing up the distinction between a certain technology (like solar power) and the government forcing people to use it.
Welcome to modern American politics—at least from the New York Times and Mother Jones.
IER Senior Economist Robert Murphy authored this post.
Cellulosic Ethanol Continues to Fail
April 28, 2014 by Leave a Comment
In 2007, President Bush signed the Energy Independence and Security Act. The bill amended the Renewable Fuel Standard and mandated that increasing amounts of cellulosic ethanol be blended with gasoline and diesel every year, with the provision that the Environmental Protection Agency (EPA) may reduce the mandated amounts. But year after year, the technological advances that President Bush and the Congress assumed would happen have not occurred and cellulosic ethanol production remains stuck in neutral.
Normal ethanol is made from the sugary or starchy plants of plants. For example, corn ethanol is made with corn kernels. But cellulosic ethanol is made from the rest of the corn plant—the corn stalks for example. While cellulosic ethanol sounds interesting in theory, in practice it is expensive and the ethanol industry cannot make very much of it, let alone the amounts mandated by the Renewable Fuel Standard.
For 2013, the Renewable Fuel Standard mandated that 1 billion gallons of ethanol be blended with fuel and in 2014, the law mandates that 1.75 billion gallons are blended with fuel. But actual production has met just a fraction of the mandate. In 2013, a total of 818,517 gallons of cellulosic ethanol were produced—a mere 0.082 percent of the Congressionally-mandated volumes.
Because the cellulosic ethanol producers have fallen so far short of producing the mandated amounts of ethanol, the EPA has been forced to reduce the mandate for every year so far including for 2013. EPA originally forecast that 6 million gallons of cellulosic ethanol would be produced in 2013—far more than the 800,000 gallons that were actually produced. This is just one example of how EPA’s forecast of cellulosic production have been notoriously inept with EPA year-after-year overestimating actual production.
For 2014, EPA forecast that a whopping 17 million gallons of cellulosic ethanol would be produced. Once again, EPA’s estimate is proving grossly incompetent. So far in 2014, the cellulosic ethanol producers are on track to produce a mere 307,292 gallons of cellulosic ethanol for the year, or only 2 percent the amount EPA forecast a few months ago.
It is now seven years since Congress passed the cellulosic ethanol mandate and cellulosic ethanol producers are producing far, far less than is required by the law. EPA can reduce the amount required every year, but EPA does a terrible job of estimating actual cellulosic production. It’s about time EPA comes back to reality an only require as much cellulosic ethanol as was produced in the previous year instead of trying to forecast increased production.
This is just one more example of how Congress and bureaucrats do a poor job predicting the future. Hopefully, this Congress and future Congresses will look at the failure of cellulosic ethanol, despite massive mandates, and be much more circumspect about mandates in the future.
IER Director of Regulatory and State Affairs Daniel Simmons authored this post.
No More Wind Welfare
April 25, 2014 by Leave a Comment
WASHINGTON — The American Energy Alliance joined today with 30 other organizations in a letter to the House Ways and Means Committee urging them to oppose an extension of the wind Production Tax Credit. The letter comes as the committee prepares to examine a tax extenders bill. The letter reads:
“Choosing to extend the wind PTC further will only serve to place more burden on taxpayers. The projected cost of another one-year extension is $6.1 billion dollars and a five-year concession would cost $18.5 billion. The American people deserve a full airing of the cumulative economic impacts of wind subsidies.
“What is so dangerous about the wind PTC is not only that we are choosing to throw away money on a technology completely incapable of keeping the lights on, but the PTC is designed to harm reliable sources of energy like nuclear and coal through predatory negative prices that the PTC enables. The PTC is so large that it allows wind producers to pay the electricity grid to take their electricity and still make money.
“The PTC has been a failure for taxpayers and ratepayers. In exchange for tens of billions of dollars in handouts to wind producers, the states with the highest wind production have seen their electricity rates increase nearly five times faster than the national average. In fact, states with at least 7 percent wind power have seen their electricity rates increase at an average of 17.4 percent over the last 5 years compared to an increase of only 3.5 percent for the U.S. as a whole”
To read the full letter, click here.
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