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New NERA Study Shows Economic Dangers of a Carbon Tax

February 28, 2013 by Leave a Comment


A new study by NERA Economic Consulting, prepared for the National Association of Manufacturers (NAM), documents the economic dangers of a federal carbon tax. The study is very conservative in its assumptions (as I’ll explain below), giving the benefit of the doubt to the proponents of a carbon tax. Even so, there study reaches two conclusions: Either the US government sets a carbon tax low enough so that its economic impacts are simply bad, but not awful, in which case there are few environmental benefits, or the US government sets a carbon tax aggressive enough to meet the emission goals that its proponents want, in which case it is economically devastating.

Either way, the average American household should be alarmed at the prospects of a U.S. carbon tax—and these numbers, to repeat, are very conservative in their estimates of its economic harms. Before implementing a carbon tax, policymakers should be very clear about what its objectives are. Up till now, proponents keep promising the moon: Extra revenues for tax cuts, deficit reduction, and “clean energy” investment, all while saving the earth from climate change! But the new NERA study shows that this is an illusion. By focusing on one or two of these goals, the carbon tax forfeits the others, and in no case does it pass any reasonable cost/benefit test.

The NERA Study’s Two Carbon Tax Scenarios

The NERA study looks at two scenarios for assessing the economic impacts of a carbon tax imposed at the federal level in the United States. In the first scenario, it assumes a $20 initial tax levied on each metric ton of carbon dioxide (CO2) in the year 2013, which then increases in inflation-adjusted terms by 4% each year. This scenario lines up with some recent projections conducted by the Congressional Research Service and the Brookings Institution, so it’s a good ballpark of a “modest” carbon tax proposal. Notice that in this scenario, there is a gentle uptick in the carbon tax over time, with little attention being placed on emissions.

The second scenario looks at the carbon tax trajectory that would be necessary to reduce US emissions by 80% relative to 2005 levels, by the year 2053. In other words, the second NERA scenario asks what the carbon tax rates would need to be over the next forty years, in order to achieve an 80% cut in US emissions by the end of the four-decade phase-in period. They picked this specific goal because it too is a popular discussion point, and is often used in discussions of international agreements on climate change policy. The only constraint on the carbon tax rate is a cap placed at $1,000 per metric ton.

The following diagram from the NERA study shows the trajectory of the carbon tax over time, in the two scenarios:

At this point, we should pause and reflect on Figure 1 above. Proponents of a carbon tax like to argue that it will have a “modest” or “negligible” impact on US households, especially in the early years. If they want to argue this way, then they must have in mind the type of carbon tax schedule depicted in the first scenario (the blue line above).

But although the Scenario One approach will raise a lot of money for the government—and will thereby make American households that much poorer in terms of their personal finances—it is nowhere near what the carbon tax “needs” to be, in order to stave off the alleged environmental problems of unrestricted U.S. carbon emissions. The red line above shows the level necessary (in the NERA model) to achieve what the climate alarmists tell us is the barest minimum in cutbacks, to avoid catastrophe.

Thus we see, even at this stage, the rhetorical corner into which the carbon tax proponents have painted themselves. In order to drum up support from citizens for something that will obviously raise gasoline and electricity prices, as well as just about every other price, the carbon tax proponents stress the scientific research on climate change. But then when trying to pooh pooh the negative economic effects of their proposed “solution,” the proponents will talk about a very modest carbon tax that will barely put a dent in the alleged climate problem.

These observations thus far don’t prove whether a carbon tax is a good or a bad idea, but already we see that Americans have not been getting the full story in the standard discussions.

Economic Effects of the Carbon Tax

After explaining their two cases, the NERA study summarizes its findings in the following table, where the changes are measured relative to a no-carbon-tax baseline:

Let’s walk through the table above to be sure we understand it. The top line shows the baseline (no carbon tax) forecast of US GDP, in billions of inflation-adjusted dollars. For example, in the year 2033 the NERA study assumes baseline GDP would be $24.68 trillion.

As you move down the table, we see the impact of first the $20 Tax Case, and then the 80% Emission Reduction Tax Case. Since the latter is so much more punitive, it has bigger impacts.

Yet in both cases, we see that the annual impact rises drastically as we move forward in time. For example, the $20 tax case shows only a very modest $20 change in average household consumption in the first year, but this annual impact rises to $350 per household by the year 2033 (i.e. 20 years into the policy). Remember that the NERA study assumes—as do other studies and proposals—that the initially modest $20/metric ton CO2 tax rises steadily over time, which is why the damages increase over time.

In contrast, the 80% Reduction case shows a far more devastating impact. By the final year of implementation (2053), when the carbon tax has hit the ceiling of $1,000 per metric ton, the annual impact on the average household will be a reduction of $2,680—in that year alone. Overall US GDP will be a full 3.6% below what it otherwise would have been, in the absence of a carbon tax.

This is an incredible hit to economic growth. Consider that since the official “recovery” began, there have only been two quarters where US real GDP has grown at more than a 3.6% rate. Thus, NERA’s projected impacts in the second scenario eventually have the carbon tax lopping off more than an entire year’s worth of what would otherwise be considered great economic growth.

Because the impacts ramp up over time, the way to summarize in a “snapshot” the full long-term effects is to compute the “present discounted value.” This involves summing up near-term and long-term outcomes, but discounting future values at a 5% annualized rate. (It’s the same procedure used to calculate the current market value of a bond offering a stream of payments over the years, for example.) With this approach, the NERA study summarizes the $20 Tax Scenario as reducing average household consumption by $310 per year, while the 80% Emission Reduction scenario involves a near-tripling of the damages to $920 per household in an “average” year under the tax.

In a similar vein, the NERA study forecasts the carbon tax scenarios on the labor market:

Thus we see, for example, that the more aggressive carbon tax scenario implies a long-run average worker income loss of the equivalent of 1.26 million full-time jobs, while in year 2053 (when the carbon tax reaches its peak) the impact is a staggering hit to worker income of 20.67 million jobs.

It is careful to note that the carbon tax will not permanently “destroy jobs” in the sense that these people will be unable to find work. So long as the government doesn’t tinker with price controls (as President Obama wants to do with low-skill workers with his minimum wage proposals), then after the dust settles from a new carbon tax, workers can find niches in the economy. But the point is, the carbon tax imposes artificial constraints and makes workers less productive. Therefore, even though they can eventually find jobs, they will earn a lower wage or salary than they would have, in the baseline (no carbon tax) case. The “job equivalent” numbers in the table above are quantifying this reduction in total labor income, in terms of how much a full-time worker earns.

Finally, consider the effect of the two carbon tax scenarios on various energy prices:

In particular, the 80% reduction case shows drastic increases in electricity and gasoline prices in the coming decades, should the US government seriously try to meet the emission reduction targets that many groups are proposing as “sensible climate policy.” By 2053, the NERA study anticipates residential electricity prices having risen 42 percent relative to the baseline, and gasoline pries at a whopping $14.57 per gallon (compared with $5.51 in the no-tax baseline, because of rising crude market prices).

And of course, if someone is interested in the coal industry—forget about it. The price of coal in the high-tax scenario eventually ends up being 54 times higher than it would be without the carbon tax. Such a punitive tax rate will obviously destroy the coal industry, which after all is one of the stated objectives for those who want to drastically reduce US emissions.

The NERA Study Is Very Conservative In Its Projections

The NERA study is very precise and clearly lays out its assumptions; its authors are good economists. However, I would argue that its results are too conservative in their projections of the harms of a carbon tax.

The most obvious reason is that the NERA study assumes the carbon tax receipts will be used to either (a) reduce the federal deficit from what it otherwise would have been, holding spending constant and/or (b) reduce other taxes. In terms of supply-side economic analysis, given that there is going to be a new carbon tax, then the very best things one could do with the revenues is use them to cut other tax rates and/or to make the deficit smaller, so that the government doesn’t siphon off as much from the capital markets away from private investment.

In other words, NERA’s projections of economic outcomes under the two carbon tax scenarios has the government behaving very responsibly, doing just what a free-market economist would want, given that it was imposing a carbon tax.

In reality, of course, the government won’t keep its spending trajectory the same, (for reasons I explain here) in the presence of hundreds of billions of new annual revenue in the modest scenario, and even trillions of dollars in new revenue in the aggressive case. Specifically, the NERA projections show that the 80% Emission Reduction scenario has the federal government taking in $1.8 trillion in inflation-adjusted revenues by the year 2053 from its carbon tax.

Does anybody seriously believe this flood of new revenue won’t lead to higher federal spending than would otherwise be the case? Note that such spending would include any “transition payments” to help poorer households or certain industries adjust to the new carbon tax, which will surely be part of any politically feasible deal.

Conclusion

The new NERA study is a precise work of solid economics that carefully spells out its assumptions and offers nuanced conclusions. It outlines two plausible carbon tax scenarios—one involving “modest” tax rates that won’t significantly alter U.S. carbon dioxide emissions, the other involving very large tax rates that will impose crippling impacts on economic growth, worker income, and energy prices. Yet as ominous as the NERA numbers are, they vastly understate the true economic damage from a carbon tax, because they assume the government will use trillions of dollars (over the years) in new revenue in the most efficient manner possible, which is hardly a plausible assumption.

Filed Under: Emissions Standards, Facts, News, Products and Power, Threats Tagged With: , , , , ,

In the Pipeline: 2/27/13

February 27, 2013 by Leave a Comment

If you want to throw down fisticuffs, fine. Pyle’s got Jack Johnson and Tom O’Leary waiting for ya, right here. National Journal (2/26/13) reports: “As passionate as these protests may be, the reality is that the oil in Alberta will go somewhere, and no amount of plastic zip ties — made from refined petroleum products, I might add — will change that. The price of Western Canada Select crude oil was $68.27 last Friday compared to $95.87 for West Texas Intermediate, and more than $110 for Brent crude oil. This price difference is why the Canadian oil will find its way to market regardless of whether the Keystone XL is built. Unfortunately, those markets will be in Asia where governments have little to no concern about pollutants.”

 

It’s so cute when peak-oilers try to explain the shale oil and gas revolution. It has to be frustrating to be so wrong. And I should note that this is Sen. Udall’s brother. Christian Science Monitor (2/22/13) reports: “As we move from a reliance on conventional oil flowing freely from highly porous reservoirs to a dependence on shale plays, whose permeability is a million times less, the future course of America is no longer indicated by a compass needle pointing west, but by a drill bit pointing down… In short, shale plays are a peculiar sort of blessing. For sure, they’ve given us a staggering amount of new energy. Simultaneously, they’ve hijacked our energy future, chained us to a drilling rig, and thrown away the key.”

 

The Red Sox are probably causing more health problems for these folks. But we’re all on the same team in some sense, so we do sympathize with them. Fox News (2/26/13) reports: “Two wind turbines towering above the Cape Cod community of Falmouth, Mass., were intended to produce green energy and savings — but they’ve created angst and division, and may now be removed at a high cost as neighbors complain of noise and illness… ‘It gets to be jet-engine loud,’ said Falmouth resident Neil Andersen. He and his wife Betsy live just a quarter mile from one of the turbines. They say the impact on their health has been devastating. They’re suffering headaches, dizziness and sleep deprivation and often seek to escape the property where they’ve lived for more than 20 years.”

 

It isn’t just the unborn that are threatened by Gov. Cuomo, it is also landowners with dreams of getting in on the energy boom.The Reporter (2/26/13) reports: “‘I have three young girls. My husband left,’ More said. ‘I don’t want to be on social services. I want to take care of my family with my own land.’ But five years later, her natural gas dreams and those of thousands of other New York landowners have faded to frustration as a decision languishes on whether the state should allow fracking, the process of extracting gas by drilling horizontally through the shale and breaking it apart with chemically treated water.”

 

Why is Senator Ben & Jerry shilling for the insurance companies? I thought he disliked corporate profits. Politico (2/26/13) reports: “Sen. Bernie Sanders, who recently introduced legislation to put a fee on carbon emissions, rebuffed a study from the National Association of Manufacturers that criticized a potential carbon tax. Sanders cited insurance industry concerns regarding extreme weather and the $60 billion in government funds directed at Hurricane Sandy recovery aid. Sanders says his legislation, introduced with Senate environment chair Barbara Boxer would invest $75 billion over 10 years in energy efficiency for manufacturers and $10 billion over a decade for job-training in new energy technologies. ‘The price that America cannot afford to pay is the price of doing nothing to reverse global warming,’ said Sanders.”

 

I wonder if the bad guys are going to attend the ceremony for these ‘solar sarcophaguses’. Mourning is a crucial step in the healing process. Heritage (2/26/13) reports: “The Denver Post estimates more than 2,000 total pallets of solar panels remain that are either unsellable or defective. Abound’s manufacturing facility still contains more than 4,000 gallons of cadmium-contaminated liquids, The Post said… At the height of Abound’s production, CDPHE estimated a “waste stream” of 630 pounds of hazardous cadmium-laced materials produced per month, according to a report from Complete Colorado… Following the company’s bankruptcy, an investigation by the Environmental Protection Agency (EPA) revealed that the warehouse in Denver storing the unsold panels did not have a hazardous waste permit. The cleanup, NCBR reports, will require encasement and burial…”

 

Abound Solar Denver Post

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In the Pipeline: 2/26/13

February 26, 2013 by Leave a Comment

All you have to do in the new economy is own a suit! Here’s how it works: All Americans will stop going to school and will pay a visit to the local портной when they turn 18. There, you will be armed with a suit. With this technology – free for all Americans – you will have the opportunity to meet with at least half of the Senate and 150 Congressmen (multiple times each, at that!). These wise old sages, who aren’t nearly as corrupt as everyone says they are, will look at your suit and instantly make you a billionaire entrepreneur. That’s the new economy! Get in line now, though – there are already a lot of people wearing suits in Washington. Bloomberg (2/25/13) reports: “Musk also said in the interview today that Model S demand would be 10 percent to 20 percent less without a $7,500 U.S. tax credit.”

 

 

Wind is unreliable and turbines wear out much faster than expected. Got it. Now you’re telling us if you put lots of turbines together it decreases their effectiveness even more? Phys.org (2/25/13) reports: “Yet the latest research in mesoscale atmospheric modeling, published today in the journal Environmental Research Letters, suggests that the generating capacity of large-scale wind farms has been overestimated. Each wind turbine creates behind it a “wind shadow” in which the air has been slowed down by drag on the turbine’s blades. The ideal wind farm strikes a balance, packing as many turbines onto the land as possible, while also spacing them enough to reduce the impact of these wind shadows. But as wind farms grow larger, they start to interact, and the regional-scale wind patterns matter more.”

 

EPA closes a plant “in a community that has historically been disproportionately impacted by environmental contamination,” failing to mention that the community has also been disproportionately impacted by 33.8% unemployment. EPA (2/25/13) reports: “‘This settlement will eliminate the source of almost 200 tons of air pollutants each year, in a community that has historically been disproportionately impacted by environmental contamination,’ said EPA Regional Administrator Susan Hedman… As part of the consent decree, Geneva will also withdraw all permits and permit applications submitted to Illinois EPA and surrender all sulfur dioxide allowances. Based on an analysis of financial information, the government concluded that Geneva is insolvent and unable to pay a civil penalty.”

 

Somewhere down the road, we’ll be able to lean on Mexico for advice about how to drag the economy out of the dumps. WSJ (2/25/13) reports: “‘It is very hard to explain why Mexico is an expensive energy country while having abundant resources,’ he says, quickly answering his own riddle by reminding me of something his boss campaigned on. ‘He said it is time to get free of our ideological constraints and be a lot more practical.’ Those “constraints” date back to the 1917 constitution, which stipulates that the oil belongs to the state, and to the 1938 nationalization of the oil sector. Mexican politicians have long demagogued foreign investors, insisting that the oil is national patrimony that must not be ‘stolen.’”

 

First they partner with the Sierra Club, now Sinopec. Clearly the era of Aubrey McClendon is not over at Chesapeake. Chesapeake Energy (2/25/13) reports: “Chesapeake Energy Corporation (NYSE:CHK) and Sinopec International Petroleum Exploration and Production Corporation (Sinopec) today announced the execution of an agreement which provides for Sinopec to purchase a 50% undivided interest in 850,000 of Chesapeake’s net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma (425,000 acres net to Sinopec). The total consideration for the transaction will be $1.02 billion in cash, of which approximately 93% will be received upon closing.”

Filed Under: Blog

Deficit Reduction Through Energy Development

February 20, 2013 by Leave a Comment

 

The new report from Joseph Mason, “Beyond the Congressional Budget Office,” explores the various ways that the CBO’s recent estimates vastly understate the economic activity and tax receipts that would be generated if the federal government merely got out of the way of the development of domestic oil and gas resources. In the present post, I’ll summarize some of Mason’s key findings, and then relate them to other proposals for easing the federal budget crunch. As we’ll see, relaxing federal restrictions on domestic energy development should be a no-brainer, if one wants to help the unemployed and reduce the deficit with no pain to taxpayers.

Mason: Why the CBO Got It Wrong

First we should put the Mason study in the context of the ongoing debate over U.S. energy policy. At a time when the federal budget is running up trillion-dollar-plus deficits year after year, oil prices are high, and millions of Americans are out of work, one would think that opening up federal lands to further oil and gas development would be an obvious policy solution that would ease each of these problems.

Yet in August 2012, the Congressional Budget Office (CBO) released an analysis projecting that opening up ANWR and “most” other federal lands to leasing wouldn’t bring in significant amounts of additional federal revenue over the next decade. Among the reasons they cited for the delay in revenues was a lag in bringing new production on-line due to permitting and other delays, things the government has only made worse. Even extending the time horizon, CBO projected gross proceeds from opening up ANWR of only $2 to $4 billion per year during the period 2023-2035. Of course, even these numbers are nothing to sneeze at, but in light of environmental and other concerns, the CBO figures appear relatively modest in the grand scheme.

Enter the Mason study. Mason argues that the CBO analysis vastly understates the potential economic and government revenue impacts of allowing expanded access to federal lands. For one thing, the CBO study only looks at the revenue derived explicitly from leases, royalties, and bonus payments paid by private companies to federal and state governments. Mason instead uses standard economic modeling to estimate the economy-wide impact of increased access. In particular, the federal government will see an increase in tax collections not simply because of explicit lease and royalty payments, but also because of higher incomes in a stronger economy. Furthermore, state and local governments will also see increased tax receipts from new activity and the creation of new wealth

There are other weaknesses of the CBO estimate. Mason points out that it relies on oil and gas price estimates that are lower than those used by other agencies, such as the World Energy Outlook. Further, CBO relies on estimates of oil and gas reserves that were made decades ago. It is well known that with refined exploration techniques and equipment, reserve estimates are usually adjusted upward, as the following chart from the Mason study illustrates:

 

 

The chart above shows how the reserve estimates of oil (green, left side) and natural gas (red, right side) in the Gulf of Mexico Outer Continental Shelf (OCS) increased significantly from 1996 through 2011. We can expect the same pattern to hold in other federal lands, if only private companies were given the green light to start looking.

Having said all this, we should be clear that the Mason study did not tweak the CBO’s assumptions of oil and gas prices, or of reserves on federal lands. Mason retained those assumptions, to get an apples-to-apples comparison to isolate the effects of incorporating all of the economic activity from expanded access. In other words, the only change Mason made, was to go beyond the explicit lease and royalty payments, to include additional tax receipts generated by greater economic activity. His point in mentioning the other drawbacks of the CBO analysis, is to show that even Mason’s estimates remain conservative.

Tax Receipts From Expanded Access: Mason vs. CBO

The CBO analysis estimates only very modest increases in federal receipts from opening up ANWR and select other portions of the OCS to development, working out to a combined total of about $700 million annually during the first decade ($500 million due to ANWR and $200 million to OCS). Further, those gross lease revenues wouldn’t accrue entirely to the federal government, as some would have to be shared with the Alaskan and other state governments.

However, Mason’s analysis indicates a much larger figure, because he includes the increase in revenues due to expanded economic activity. In other words, the federal government (for example) would see increased revenues not merely because of explicit lease payments, but also because of higher incomes.

Using standard economic modeling of such “feedback” effects, Mason estimates that in the “short run” (defined here as 7 years), the federal government could expect an annual boost in tax receipts from expanded economic activity of $24.1 billion.

Comparing the “Mason Plan” With Other Deficit Proposals

To appreciate just how much an extra $24.1 billion per year in federal tax receipts would be, let’s compare this number to other proposals out there. For example, on these pages I’ve already shown that the much-ballyhooed “fiscal cliff” actually would have involved a mere $9 billion cut in the absolute level of federal spending for a single year, before returning to a permanently increasing level of spending.

What about those “tax loopholes for Big Oil” that we often hear about? According to the White House’s FY2013 budget proposal (see pages 221-236), the three biggest suggested changes involve repeal of the manufacturing deduction for oil and gas companies ($11.6 bn over ten years), repeal of the percentage depletion allowance for oil and gas wells ($11.5 bn), and repeal of expensing of “intangible drilling costs” ($13.9 bn). IER President Thomas Pyle has explained why these really aren’t “tax loopholes” and why they aren’t at all about “Big Oil,” but for our purposes here, let’s just look at the total figures: They add up to a total of $37 billion over ten years in extra revenue for the federal government, according to the White House analysts. Of course, that means on average they would only bring in $3.7 billion per year, in the short run.

Recall that the Mason study estimates an immediate boost to federal tax receipts of $24.1 billion per year from expanded economic activity. Thus, giving energy companies more freedom to develop domestic resources, would bring in six and a half times as much extra revenue as jacking up taxes on energy companies.

Conclusion

The new report by Joseph Mason provides estimates of increased job creation and economic activity that would result from increased access to federal lands. In this blog post, I have looked at just one element of the Mason study. Namely, I showed how his estimate of increased federal tax receipts in the short run, is six and a half times higher than what the White House projected it would collect by “closing tax loopholes” on oil and gas companies.

There is no hocus pocus involved here. At a time with millions of people out of work, there are “free lunches” available in the sense that relaxing federal restrictions can instantly render workers employable. The extra revenue that the federal (and other) government would collect on this new economic activity would not come as a cost, because that is economic activity that otherwise would not have existed.  As President Obama said on February 19, “nothing shrinks the deficit faster than a growing economy that creates good, middle-class jobs.  That should be our driving focus — making America a magnet for good jobs.”

In contrast, proposals to explicitly hike tax rates on either individuals or businesses really will depress the economy, and further burden taxpayers. If the goals are to increase employment, reduce energy prices, and reduce the federal budget deficit as painlessly as possible, then reducing federal restrictions on domestic energy development is an obvious policy solution.

Author: Robert Murphy 

Filed Under: News, Products and Power Tagged With: , , , , ,

In the Pipeline: 2/20/13

February 20, 2013 by Leave a Comment

The people at IER sure do good work. They’re pretty good looking, too. Join them and Neil Cavuto in Houston on May 9, 2013. 

 

This should be obvious, but there is a strong correlation between per capita energy use and life expectancy. Roger Pielke Jr. (2/14/13) reports: “The graph above shows energy use (expressed as kilograms of oil equivalent per capita) versus life expectancy at birth (expressed in years) for 151 countries in the World Bank Development indicators database that had data for both variables in 2010… Nonetheless these data carry a powerful message — Energy poverty is not the only factor which contributes to below-average life expectancies, but it is clearly a very important factor.”

 

I wonder what the lag time is before these protests start in America. His Majesty seems pretty bent on following in these morons’ footsteps with expensive and unreliable energy, so we’ll take the under on four years. The Sunday Times (2/17/13) reports: “The payout — equal to £158 for each of the Scottish utility’s 5.6m customers — will inflame the debate over soaring gas and electricity prices. The average annual bill has doubled in the past five years to £1,340, pushing one in five homes into fuel poverty. Scottish Power raised its dual-fuel tariff by 7% in October, adding about £100 to the average annual charge… Fuel poverty protesters brought traffic to a standstill yesterday with a demonstration in front of the Department of Energy & Climate Change building in central London.”

 

Since we’re in a betting mood, we’ll put our coins on the table for the monkey-wrench throwers in this scenario. It’s not that we think they’ll come out on top, though. Sometimes gambling is about principles.Clean Technica (2/14/13) reports: “Wow, talk about taking the wind out of a guy’s sails. Just minutes after President Obama urged the nation to support more wind power in his State of the Union address, Rep. James Lankford (R-OK) sure put a damper on things. He announced that his House subcommittee intends to challenge the new one-year extension for the production tax credit for wind power. That comes on the heels of a similar announcement last month by Rep. Darryl Issa (R-CA), who complained that the new wind tax credit extension is a “dramatic” change from previous versions… The investigation threatens to throw yet another monkey wrench in the path of the wind industry, which is just coming off a banner year for wind production in 2012.”

 

We like to keep things simple, too: “Three Reasons to Build the Keystone XL Pipeline”. Reason (2/17/13) reports: 1. The oil isn’t going to stay buried / 2. The pipeline isn’t a disaster waiting to happen. / 3. It will help the economy.

 

Maybe the Mafia was getting bored. After all, there’s likely going to be a lot more crime, traffic on the black market, and general economic decline as countries like Italy (and America) self-impose energy poverty. Sounds like an excellent market opportunity for coercive-types. BBC News (2/15/13) reports: “Police have arrested five people in eastern Sicily suspected of involvement in Mafia corruption over contracts to build wind farms, Italian media report… The mayor and a councillor in the small town of Fondachelli Fantina, in Messina province, were among those detained… The five face charges including extortion, fraud and Mafia association… The investigation, which began in 2009, is linked to sub-contracts awarded to build energy farms near Agrigento, Palermo and Trapani.”

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In the Pipeline: 2/19/13

February 19, 2013 by Leave a Comment

Yikes… does anybody know a good shrink for this guy? Center for Industrial Progress (2/17/13) reports: “I approve of a blackout, I’m pro population control!”

  

Why we fight. Townhall (2/14/13) reports: “Given our unsustainable national debt — nearly $17 trillion and climbing — America is said to be in decline, although we face no devastating plague, nuclear holocaust, or shortage of oil or food… Yet we don’t talk confidently about capitalizing and expanding on our natural and inherited wealth. Instead, Americans bicker over entitlement spoils as the nation continues to pile up trillion-dollar-plus deficits. Enforced equality rather than liberty is the new national creed. The medicine of cutting back on government goodies seems far worse than the disease of borrowing trillions from the unborn to pay for them.”

 

I wonder what the GHG emissions were for the dope they were smoking. Denver Post (2/18/13) reports: The rally began at the Auraria campus, where demonstrators, many clad in black, gathered and marched to Civic Center… At the park, a band of demonstrators broke off and lay down to create a “human oil spill.”… Gina Hardin, 56, a Denver lawyer who watched the oil spill form, said, “Climate change is the most critical issue. … If we don’t curb climate change, nothing else matters.”

 

How many of these dudes drove to this thing? How many wore clothes that were transported in trucks or trains, and were made with petrochemicals for that matter? The Hill (2/18/13) reports: “Environmental groups gathered on the National Mall in Washington, D.C. Sunday and marched on the White House for a climate change rally largely aimed at pressuring President Obama to reject the Keystone XL oil sands pipeline.”

 

There’s a lot here, but let’s make it easy. Reliance on one fuel source is a bad idea, no matter where you are. It is especially bad when you don’t build pipelines and shut down powerplants both coal (thank you EPA) and nuclear (thank you electricity “markets”). NYTimes (2/15/13) reports: “Electricity prices in New England have been four to eight times higher than normal in the last few weeks, as the region’s extreme reliance on natural gas for power supplies has collided with a surge in demand for heating.”

 

How can the meaning between value-creation and redistribution be so easily confused? Removing green subsidies wipes out subsidies, not “profit”. Reuters (2/14/13) reports: “The Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technologies, backtracking on its push for green power…That measure, along with other recent laws including a tax on power generation that hit green energy investments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say.”

 

This is why folks in Congress who care about things like accountability and affordable energy should start constructing votes on energy taxes. Because folks like Senator Begich want no part of such things. The Hill (2/17/13) reports: “Congressional Democrats will not commit to forcing votes on major climate change bills, even as they try to build political momentum behind President Obama’s promise to make global warming a second-term priority… Obama’s State of the Union address called on Congress to create a “market-based solution” such as cap-and-trade to limit greenhouse gases, but vowed new executive action if lawmakers do not act.”

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In the Pipeline: 2/15/13

February 15, 2013 by Leave a Comment

Congratulations to the caption contest winner… you know who you are. Your box of Whitman’s Sampler is currently melting at the Postal Service, but should be delivered no later than March. 

 

 

John Broder is a good reporter who was rude enough to point out that this particular king didn’t have any clothes. NYTimes (2/14/13) reports: “Elon Musk , the chief executive of Tesla Motors, has now responded in detail to the account of my test drive of his Model S electric car, using the company’s new East Coast Superchargers, that was published in The Times on Feb. 10. His broadest charge is that I consciously set out to sabotage the test. That is not so. I was delighted to receive the assignment to try out the company’s new East Coast Supercharger network and as I previously noted in no way anticipated – or deliberately caused – the troubles I encountered.”

 

It appears there’s only one kind of drilling allowed on public lands. U.S. Interior Department (2/15/13) reports: “As stewards of America’s National Parks, Wildlife Refuges and other public lands, we get to see many wonderful events on a daily basis. None of which are more exciting than when we see visitors using our Nation’s public lands for their most memorable moments.”

A market-based mechanism from Ma’am Boxer and Senator Ben&Jerry? That’s like saying there’s no horsemeat in a British cheeseburger. Energy Guardian (2/14/13) reports: “Senate Environment and Public Works Chairman Barbara Boxer on Thursday put a new carbon emissions fee bill on track for committee action by this summer, even as the chances for the proposal to be enacted appeared slim… The fee is part of a package of two climate bills by Boxer, D-Calif., and Sen. Bernie Sanders, I-Vt., that sidesteps President Barack Obama’s call for a market-based mechanism to cut greenhouse gas emissions.”

 

The following think tank chiefs are opposed to a carbon tax. The list to date follows. If your guy is not on the list, it is because he either favors a carbon tax, wants to retain the option of favoring a carbon tax at some point in the future, or has yet to contact us.

Tom Pyle, American Energy Alliance / Institute for Energy Research
Myron Ebell, Freedom Action
Phil Kerpen, American Commitment
William O’Keefe, George C. Marshall Institute
Lawson Bader, Competitive Enterprise Institute
Andrew Quinlan, Center for Freedom and Prosperity
Tim Phillips, Americans for Prosperity
Joe Bast, Heartland Institute
David Ridenour, National Center for Public Policy Research
Michael Needham, Heritage Action for America
Tom Schatz, Citizens Against Government Waste
Grover Norquist, Americans for Tax Reform
Sabrina Schaeffer, Independent Women’s Forum
Barrett E. Kidner, Caesar Rodney Institute
George Landrith, Frontiers of Freedom
Thomas A. Schatz, Citizens Against Government Waste
Bill Wilson, Americans for Limited Government

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Fracking and Federalism

February 13, 2013 by Leave a Comment

 

A funny thing has happened in the fracking wars: All of a sudden, the interventionist groups who are usually fans of centralized power—such as having the federal government issue edicts on carbon emissions—all of a sudden have discovered the virtues of federalism. Specifically, they don’t want state governments limiting the ability of local governments to regulate or even put a moratorium on hydraulic fracturing.

For example, from this news story about a legal battle in upstate New York, we read:

Lenape Resources’ high profile lawsuit versus the Town of Avon was heard by New York State Supreme Court Judge Robert Wiggins in Geneseo on Monday.

Lenape, a local producer of natural gas, has challenged the legal right of the Town of Avon to regulate drilling and recovery of natural gas within the township. On June 28, 2012, in a split 3-to-2 vote, the Avon Town Board enacted a one-year moratorium which temporarily banned the production of natural gas by methods utilizing high volume hydraulic fracturing, or hydrofracking, of rock sediment.

…

At the hearing, [counsel] McClaren made a motion for dismissal of the suit on the grounds that, “New York has traditionally given authority to local municipalities to control the land use within their borders through zoning.”

“We don’t believe there is any legal basis for any of the Lenape claims,” he added.

McClaren further noted, “The Court of Appeals has already held that towns and villages can continue to zone in respect to open mines — such as gravel mines. Our position is that the same holds true with respect to oil and gas wells. It’s an issue for the local municipalities to decide if they want them — and, if they do want them, where they want them.”

“It’s not an issue which should be forced upon these municipalities by the state or by the oil and gas industry,” McClaren asserted. [Bold added.]

Well imagine that! McClaren—who is echoing the sentiments expressed by many opponents of fracking across the country—doesn’t like the state government coming in, and telling smaller jurisdictions how they should run their affairs.

Let’s push this to the logical conclusion, shall we? Suppose a local landowner is informed of the potential risks, and still decides that he wants to take a handsome payment in exchange for granting a company permission to develop the natural resources on his property. What business does the local government have, in telling him what he can and can’t do on his own property? Why should this important decision be “forced upon him” by the local municipality?

If the anti-fracking groups were consistent advocates of decentralization of political power, we could take their arguments seriously. In general, they have no problem whatsoever with a higher level of government laying down a one-size-fits-all rule. The next time a carbon tax or cap-and-trade comes up, let’s see if these environmental groups agitate for the right of local municipalities to make their own rules, and not have decisions rammed down their throat from DC.

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In the Pipeline: 2/13/13

February 13, 2013 by Leave a Comment

It can’t be worse than what most University of Colorado students consume on a regular basis. Washington Times (2/12/13) reports: “Colorado Gov. John Hickenlooper went to unusually great lengths to learn firsthand the strides the oil and gas industry has made to minimize environmental harm from fracking… The first-term Democrat and former Denver mayor told a Senate committee on Tuesday that he actually drank a glass of fracking fluid produced by oilfield services giant Halliburton… The fluid is made entirely ‘of ingredients sourced from the food industry,’ the company says, making it safe for Mr. Hickenlooper and others to imbibe.”

 

If past is prologue, we’re looking at four more years of this bait and switch. IER (2/13/12) reports: “WASHINGTON D.C. — IER President Thomas Pyle released the following statement in response to President Obama’s State of the Union address, given tonight before a joint session of the United States Congress: ‘Tonight, the president affirmed the renaissance in American manufacturing and recognized the promise of American energy. Yet he seems to misunderstand the reason that manufacturing jobs are coming back to America and why domestic oil and natural gas production are on the rise. These bright spots in an otherwise dark economic time have happened despite the president’s policies, and not because of them… The proof of his administration’s failure is that, despite federal lands and waters much larger than the combined private and state lands in the U.S., the CRS says 96% of this increase in oil production occurred on non federal lands. Something is very, very wrong with the president’s energy programs.’”

 

Great.  Now maybe the reelected brain trust can introduce a bill streamlining the development of actual energy on public lands. U.S. Senate introduces: A BILL…To promote the development of renewable energy on public land, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) SHORT TITLE. —This Act may be cited as the ‘‘Public Land Renewable Energy Development Act of 2013’’.

 

Even the WaPo understands that Obama shouldn’t have wasted billions on electric cars. Washington Post (2/11/13) reports: “President Obama repeatedly declared that, with enough federal aid, we can put a million electric vehicles on the road by 2015. His administration has invested about $5 billion in grants, guaranteed loans — including $465 million for Tesla — and tax incentives to buyers… Yet Americans bought just 71,000 plug-in hybrids or all-electric vehicles in the past two years, according to GreenCarReports.com. That’s about a third as many as the Energy Department forecast in a 2011 report that attempted to explain why Obama’s goal was not preposterous.”

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In the Pipeline: 2/12/13

February 12, 2013 by Leave a Comment

Thank you for your service, Mr. Romesha. Washington Free Beacon(2/11/13) reports: “Former Staff Sgt. Clinton Romesha (ROE-muh-shay), 31, will receive the Medal of Honor today for heroic actions during the day-long attack on Combat Outpost Keating in Afghanistan… More than 300 Taliban attacked Keating early in the morning of Oct. 3, 2009, from all four sides and from higher ground. Armed with recoilless rifles, rocket-propelled grenades, mortars, machine guns, and rifles, the Taliban swarmed the site, occupied by only 53 Americans and two Latvians. A score of Afghans stationed there had abandoned the site. Mortars hit Keating every 15 seconds during the first three hours of the attack. Taliban breached the site and destroyed 70 percent of Keating with a fire… He left the Army in 2011 as a staff sergeant and now works in North Dakota where he oversees safety and security procedures for KS Industries, an oil company.”

 

Let’s recap: It’s cool to transport toxic solar panel sludge from California to Rhode Island, but it’s not cool to transport oil through a pipeline like Keystone XL.  Excuse our French, but we’d like to point out that some people are a little two-faced. ABC News (2/10/13) reports: “Homeowners on the hunt for sparkling solar panels are lured by ads filled with images of pristine landscapes and bright sunshine, and words about the technology’s benefits for the environment — and the wallet… What customers may not know is that there’s a dirtier side… While solar is a far less polluting energy source than coal or natural gas, many panel makers are nevertheless grappling with a hazardous waste problem. Fueled partly by billions in government incentives, the industry is creating millions of solar panels each year and, in the process, millions of pounds of polluted sludge and contaminated water.”

 

The Tesla is a technological marvel that rivals some of the greatest transportation innovations like horse-drawn carriages and dog sleighs. NYTimes (2/8/13) reports: “I drove a state-of-the-art electric vehicle past a lot of gas stations. I wasn’t smiling… Instead, I spent nearly an hour at the Milford service plaza as the Tesla sucked electrons from the hitching post. When I continued my drive, the display read 185 miles, well beyond the distance I intended to cover before returning to the station the next morning for a recharge and returning to Manhattan… I drove, slowly, to Stonington, Conn., for dinner and spent the night in Groton, a total distance of 79 miles. When I parked the car, its computer said I had 90 miles of range, twice the 46 miles back to Milford. It was a different story at 8:30 the next morning. The thermometer read 10 degrees and the display showed 25 miles of remaining range — the electrical equivalent of someone having siphoned off more than two-thirds of the fuel that was in the tank when I parked.”

 

Ethanol kills ducks.  Along with engines, gaskets, seals, the environment, and probably humans.  Other than that, it is golden.The Times-Picayune (2/5/13) reports: “Larry Reynolds is a reasoned, respected scientist who isn’t prone to hyperbole, but the state’s waterfowl study leader is also a passionate duck hunter. That’s why he can’t really understand the apathy he’s seen from his fellow waterfowlers as the continent moves headlong into a very preventable duck disaster… The problem stems from the fact that the federal government is mandating ethanol usage in the country, a move begun in the Bush administration that has accelerated under President Obama. As every grocery shopper knows, the use of corn in the production of ethanol has caused a severe spike in grain prices.”

 

Why do the greens hate hydraulic fracturing so much?  Because it opens up vast new energy resources and would give Britain a possible 5.3 trillion cubic feet of shale gas. The Times (2/9/13) reports: “Britain could have enough shale gas to heat every home for 1,500 years, according to new estimates that suggest reserves are 200 times greater than experts previously believed. The British Geological Survey is understood to have increased dramatically its official estimate of the amount of shale gas to between 1,300 trillion and 1,700 trillion cubic feet, dwarfing its previous estimate of 5.3 trillion cubic feet.”

 

We do recognize the consequences of carbon use Ms. Jewell.  One such consequence is the ability to camp out in the wilderness for fun rather than out of necessity. CNSnews.com (2/9/13) reports: “At the University of Denver’s ‘Voice of Experience’ speaker series on October 17th, 2011, Sally Jewell, who Pres. Obama recently nominated for Interior Dept. secretary, said that ‘none of us are paying for the consequences of our carbon use… Government does play a role’ in ensuring that we do pay, and she’d like to see ‘some mechanism is put in place’ to make us recognize carbon consequences, Jewell said.”

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