In the Pipeline: 6/4/13

Let’s talk about energy subsidies (on Friday). Join us with the National Review for lunch and a “High Noon Debate” to talk about the energy subsidy experiment. 
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Greenpeace has given you permission to not feel guilty about climate change. You see, oil companies are using your honorable sense of personal responsibility as a weapon against your consciousness. (Heads up: this is a spoiler alert for the sequel to Inception, starring guilt-free-carbon-guzzler Leo DiCaprio). LA Times (6/2/13) reports: “Maybe it’s time for us to remove the guilt. Yes, I drive a car that runs on gasoline. I fly for work when necessary and occasionally for vacation. But doing these things is not the same as admitting they are inevitable. Five years ago I flew more; now I use Skype. Bike lanes have been newly painted in my neighborhood, so I cycle to the store. In a couple of years, electric cars might come into my price range. In the meantime, I refuse to feel guilty… In the battle against climate change, we should not be waging guilt trips on one another. Rather, we should take the fight to those who use our sense of personal responsibility against us. Climate change is a problem, and we must fix it. But it’s certainly not our fault.”

If you can’t show them the light, make ’em feel the heat. Red State (5/31/13) reports: “At a critical Friday meeting in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) will set production policy. For the first time, they will be grappling with the challenges of shale oil, even none of the member states are major shale oil producers… The shale boom began in the U.S. as a ripple in North Dakota and Texas. Some thought its impact would be limited and regional, not global. Now that uptick on our domestic production curve has triggered a tsunami with geopolitical implications.”

Listen up – our man in Houston has an ear to the ground on these things… Forbes (6/3/13) reports: “But if Obama was really attuned to job creation, he should have been shaking hands and pumping his fist at the annual Offshore Technology Conference (OTC) in Houston where hundreds of oil and natural gas firms from around the world were sharing their latest technology—and looking for workers. Attendance of 105,000 was a 30-year high… The buzz at OPC was about ‘subsea factories,’ ‘a global bonanza,’ and ‘thousands of new technologies.’ ‘We have to innovate at a faster pace,’ said technologist Gregory Powers of Halliburton, which has been rushing to keep up with consumer demand since 2010.”

I thought the only thing you needed on your resume to drill for oil was “evil”? Rig Zone (6/3/13) reports: “Everybody’s recruiting,” said James Bradley, permanent hire recruitment manager with NES Global Talent, at the sidelines of AAPG’s annual meeting… Demand is particularly keen for drilling and well completions engineers, subsurface geologists, geophysicists and geochemists, Bradley said, adding that there are not enough specialists with direct experience developing a shale gas play. As a result, operators are wooing candidates with conventional onshore oil and gas experience ‘who can jump right into shale work,’ he noted. He acknowledged this is often easier said than done.”

Despite all the headache and red tape here at home, be thankful that we avoid these in the Federal Register: Rind(Cow) fleisch(meat) etikettierungs(carbon emission label) überwachungs(monitoring) aufgaben(duties) übertragungs(transmission) gesetz(law). The Telegraph (6/3/13) reports: “Germany’s longest word – Rindfleischetikettierungsüberwachungsaufgabenübertragungsgesetz –  a 63-letter long title of a law regulating the testing of beef, has officially ceased to exist.”

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In the Pipeline: 6/3/13

This is fun. It’s like an 8th grade math question: “If Bob Inglis is running for elected office, is it wise for him to support a carbon tax?”. R Street (5/31/13) reports: “The R Street Institute and the Heartland Institute cordially invite you to a debate among friends on the question: Are there any circumstances under which conservatives should support a tax on carbon emissions?”

Gee, now they admit it. The Hill (6/1/13) reports: “Environmental lobbyists are pressing President Obama to turn more western lands into national monuments to prevent oil-and-gas companies from drilling there… The Sierra Club is leading the charge and is sweetening its message with political sugar, saying Obama could thereby help Democrats win House and Senate seats in midterm elections year.”

Stewart Udall was right. The environmental movement is fundamentally anti-people and mostly racist. But the Sierra Club and the rest of the leadership are now just adjuncts of the Democratic Party. Politico (6/1/13) reports: Environmentalists are getting off the sidelines and backing immigration reform — but it wasn’t easy… During the Senate’s last go round on the issue in 2007, greens stayed silent to avoid airing their dirty laundry — an internal dispute that some in the movement feared would be seen as racist… Their family feud was so rough that it twice nearly ruptured the Sierra Club when a vocal faction — including some of the movement’s leading luminaries — argued too many new immigrants living the American dream could spell doom for the planet.”

While your flight was in a holding pattern due to FAA furloughs, which oh by the way means the plane was burning fuel unnecessarily, the federal government was busy patting itself on the back with “green energy scorecards”. Maybe His Majesty’s jesters wouldn’t have to make embarrassing stunts to justify their bloated budgets if they spent less time handing out participation trophies at frivolous conferences and conventions.PoliticoPro (5/31/13) reports: “As part of the Obama Administration’s initiative to reduce energy use, pollution and waste and save money in Federal operations, Federal agencies today released annual updates that show significant progress toward energy and sustainability goals. Under Executive Order 13514, President Obama directed Federal agencies to reduce their carbon pollution, increase renewable energy use, and meet energy and water efficiency goals. These annual performance scorecards benchmark agencies’ progress and help them to target the best opportunities to improve their energy efficiency and reduce costs and waste in their operations moving forward.”

We took a shot at the ski industry last week, but our friends kick it up a notch and really stomp the point home. POWERLINE (5/31/13) reports: “Skiers use energy to haul mass uphill, only to slide back down hill, over and over again. They fly or drive long distances to get to places that are cold (requiring heated facilities). While there, they consume goods that are hauled long-distances and up hill. The perishable goods have to be refrigerated (think about that for a minute). Virtually everything they wear (and their gear) is made from petroleum. From a thermodynamic perspective, you would have a hard time designing a more greenhouse-gas-intensive activity than skiing. Vanity space flight, perhaps… But the companies involved would like some green-washing courtesy of the government: they want legislation that would let them claim they’re doing good (“We’re paying our carbon tax!”) when in reality, they’ll pass their direct costs onto the skiers (who can afford it), while the majority of the costs of carbon control imposed on the general public

In the Pipeline: 5/31/13

For some of us, this hits close to home. So I have a few suggestions: Quit bragging about the non-stop flights that are offered from Newark to Jackson. Shut down the tram (it runs on coal). Stop selling skis, boots, jackets and goggles because they are made with carbon-based petrochemicals. And those of us who are still (physically) able can hike to the top of Rendezvous and ski on wooden boards like the good ol’ days. Unless that sounds like a good plan, quit begging for the heavy hand of the EPA and Congress to strangle your own industry. Wyoming Business Report(5/29/13) reports: “The past ski season was a banner year for our guests and for our resort, but we can’t gamble on the weather in an uncertain climate. We have to take action,” said Jerry Blann, president of Jackson Hole Mountain Resort in Wyoming. “Resorts have made tremendous efforts to raise awareness on the issue of climate change and to adjust our operations to reduce carbon emissions and manage resources efficiently. We need Washington to take those strategies seriously through stronger policies.”

Like we’ve always said, the science is settled. Phys.org (5/30/13) reports: “Chlorofluorocarbons (CFCs) are to blame for global warming since the 1970s and not carbon dioxide, according to new research from the University of Waterloo published in the International Journal of Modern Physics B this week…  ‘Conventional thinking says that the emission of human-made non-CFC gases such as carbon dioxide has mainly contributed to global warming. But we have observed data going back to the Industrial Revolution that convincingly shows that conventional understanding is wrong,’ said Qing-Bin Lu, a professor of physics and astronomy, biology and chemistry in Waterloo’s Faculty of Science. ‘In fact, the data shows that CFCs conspiring with cosmic rays caused both the polar ozone hole and global warming.’”

Next up in California, a lifeguard is required to hold your hand as you walk out into the waves. It’s a great program that will create hundreds of thousands of jobs for new lifeguards while ensuring the safety of the population; it’s not at all creepy and overbearing; and it certainly won’t erode your sense of personal responsibility and good citizenship. NYTimes (5/30/13) reports: “But these days, a blizzard of restrictions — on everything from dogs to playing horseshoes — is being imposed on beach activities up and down the coast, turning beaches into sanitized zones that longtime beachgoers say barely resemble the freewheeling places they once knew… Smoking is banned at many beaches across the state. On San Diego beaches, playing ball or tossing a Frisbee has been outlawed. Alcohol is no longer allowed on the sand in Huntington Beach. Even surfing is restricted to designated areas here, though this is ‘Surf City.’… And the next thing to go could be the fire pits — concrete rings designed to contain bonfires — which for many people are enduring features of a free, outdoor California lifestyle.”

In a nutshell, the EPA is a very dangerous agency. Washington Post(5/30/13) reports: “A Wednesday shootout on the streets of Washington Highlands left a cop injured and a carjacking suspect dead. But before the suspect expired, he went on an unusual ambulance ride that involved moving him from one vehicle to another on the shoulder of Interstate 295. While this might appear to be another story of Fire and Emergency Medical Services dysfunction, the story is rather more complicated. As WUSA-TV explains, newer-model diesel engines are required by federal regulations to have emission-control features that, in some circumstances, require the motor to shut down for “regeneration” — a process in which the exhaust system burns off trapped soot.”

Big talk for a guy with the largest “carbon footprint” on the planet. Maybe he should lead by example (cough cough) and do more of his celebrity fundraisers via Skype or Google hangout. Weekly Standard(5/30/13) reports: “Obama: ‘I Don’t Have Much Patience for People Who Deny Climate Change’… ‘My only interest is making sure that when I look back 20 years from now, I say I accomplished everything that I could while I had this incredible privilege to advance the interests of the broadest number of Americans and to make sure that this country was stronger and more prosperous than it was when I came into office.  That’s my only interest,’ the president said.”

Join us next Friday for a luncheon and panel discussion hosted by National Review and the American Energy Alliance! Get a spot while they’re hot…

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In the Pipeline: 5/30/13

“First they came for the manufacturers, and I did not speak because I was not a manufacturer. Then they came for the coal miners, and I didn’t speak out because I wasn’t a coal miner. Then they came for the drillers, and I didn’t speak out because I wasn’t a driller. Then they came for me, and there was no one left to speak for me.” CBS Pittsburgh (5/29/13) reports: “Janice Gibbs is a grandmother and was born and raised in Washington County. Although she has no drilling lease on her land, she believes that shale gas drilling is great for the local economy… ‘I just think it’s a good thing for our community,’ Gibbs said… When she started posting her pro-gas views on local websites under the name “Proud American,” she was soon shocked at how nasty things got… First, State Rep. Jesse White allegedly posted Gibbs’ real identity. Then, someone posting under the name “Prouder American” called her an ‘industry troll.’… The internet protocol — or IP — address of those people came up as the same computer as Rep. White’s state e-mail address.”

So when is Congress going to start reining in an Executive branch that is drunk with power? WSJ (5/29/13) reports: “The Environmental Protection Agency isn’t known for restraint, and now it has a new reason to let it all hang out. A federal court says it can be judge and jury for every development project in the U.S… That’s the impact of a unanimous late April decision by the D.C. Circuit Court of Appeals upholding the EPA’s veto of the Arch Coal ACI -2.63% Spruce Mine in West Virginia. The sweeping but little-publicized decision remakes regulation under the Clean Water Act, turning the Army Corps of Engineers into a bystander and elevating EPA to the nation’s water regulator of consequence.”

We are all about self-determination, but can’t help pointing out the irony here. LATimes (5/28/13) reports: “In acting to protect their water supply, the 5,000 residents of poor, conservative Mora County make it the first in the U.S. to ban fracking — hydraulic fracturing for oil… ‘We are one of the poorest counties in the nation, yes, but we are money-poor, we are not asset-poor,’ Olivas said.”

Recall that Van Jones, former Special Assistant to the President for Bankrupting the Coal Industry, had the hubris to rally with the workers against these necessary reductions in benefits. These hundreds of families are the real victims of this senseless ideological war against affordable energy and the blame is squarely on the Van Jones’ of the world. Washington Post (5//13) reports: “Surratt-States ultimately concluded the cost-cutting proposals were legal, perhaps unavoidable, for Patriot, which sought Chapter 11 bankruptcy protection last summer to address labor obligations it insisted have grown unsustainable… ‘Unions generally try to bargain for the best deal for their members,” the judge wrote. “However, there is likely some responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity, particularly given the availability of sophisticated actuarial analysts and cost trend experts.’”

Maybe a sophisticated guy like Kerry realized it’d be easier to bribe the Iranian government than the Obama administration to issue oil and gas permits. Free Beacon (5/29/13) reports: “Secretary of State John Kerry disclosed hundreds of thousands of dollars in investments last year in a company that allegedly bribed Iranian government officials to obtain oil and gas contracts in the country… The Securities and Exchange Commission on Wednesday charged French oil and gas company Total S.A. with violations of U.S. law for allegedly paying $60 million in bribes to “intermediaries” who helped the company win lucrative state contracts in Iran.”

In the Pipeline: 5/29/13

The first rule of Fair-Share Club is you do not talk about Fair-Share club. The second rule of Fair-Share Club is you do NOT talk about Fair-Share Club… NYTimes (5/25/13) reports: “Last week, in a Congressional hearing, Apple got grilled for its low-tax strategy. But not every business can copy that approach. Here is a look at what S.&P. 500 companies paid in corporate income taxes — federal, state, local and foreign — from 2007 to 2012, according to S&P Capital IQ.”

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Guys like Josh Nelson, not Fox, are a reminder that there is still hope for America. This kid packs a lot of punch. Coal Valley News (5/28/13) reports: “After coming out of Allegiance Mine, a mine that Joshua Nelson worked at last year and filing for candidacy for the West Virginia House of Delegates, Delegate Nelson made a decision that he wanted to stand up for West Virginia and its coal miners… During his campaign he stated that he believed that the state of West Virginia could do more to stand up to the federal government’s overregulation… He actually went on the Fox News Channel’s “The Huckabee Show” as well as spoke to the United States Congress on a piece of legislation called the “Stop the War on Coal” act.”

Linguists? Poets? How crazy do you have to be to stand out in California? Sacramento Bee (5/25/13) reports: “The core talent of a successful environmental activist is not science and law,” Suckling said in a 2009 interview with the High Country News. “It’s campaigning instinct.” In the same interview, Suckling even bragged about his staff’s lack of scientific qualifications… “It was a key to our success,” Suckling said. “I’m more interested in hiring philosophers, linguists and poets.”

Solution to save the environment? Do less. Work less. Create less. Improve less. Prosper less. Live, well, less! Carbonated.TV (5//13) reports: “Think about it: there is nothing sacred about the pattern of five days on, two days off. It’s an absolute miracle that we have the entire world on the same seven day week, and we probably shouldn’t mess with that, but what if we made the standard national work week 32 hours instead of 40? Here’s what: 1. The environment would heave a giant sigh of relief. The reduction in commuting time alone is reason enough to consider a four day work week. It would be all the better if not everyone took the same three days off: spreading out the traffic would reduce the overall burden.”

If we had a penny for every problem with this industry, we’d probably be able to afford one of the darn things ourselves. NYTimes (5/28/13) reports: “It was not an isolated incident. Worldwide, testing labs, developers, financiers and insurers are reporting similar problems and say the $77 billion solar industry is facing a quality crisis just as solar panels are on the verge of widespread adoption… No one is sure how pervasive the problem is. There are no industrywide figures about defective solar panels. And when defects are discovered, confidentiality agreements often keep the manufacturer’s identity secret, making accountability in the industry all the more difficult… But at stake are billions of dollars that have financed solar installations, from desert power plants to suburban rooftops, on the premise that solar panels will more than pay for themselves over a quarter century.”

Apparently you can win a boatload of money for fear mongering. Huffington Post (5/28/13) reports: “OSLO, Norway (AP) — American environmentalist Bill McKibben has won the $100,000 Sophie Prize for being a mobilizing force in the fight against global warming… The award committee commended McKibben for ‘building a global, social movement, fighting to preserve a sustainable planet.’”

Tesla Repays Feds, Should Thank Competitors for Success


Tesla Motors repayed a $465 million dollar loan from the federal government yesterday, nine years ahead of schedule. While being touted as a major success for the future of renewable energy and Zero Emissions Vehicles in particular, the truth behind Tesla’s façade of success is worrisome. The company’s first profitable quarter demonstrates the difficulty of finding real success in an unproven market.

Critics have raved about Tesla and its offerings. By any standard, their cars would be considered top notch. When added to the fact that their fleet is 100 percent electric, the level of hype is virtually unmatched by media, consumers, and environmentalists alike. Though such innovation comes at a premium (a stock Tesla Model S is priced at $69,900 before a $7500 federal tax break and various state incentives), the real money maker for Tesla and its billionaire CEO Elon Musk comes not from its cars, but capitalizing on government regulations aimed to reward automakers like Tesla whose cars emit zero emissions.

Tesla’s Q1 of 2013 exceeded investor expectations by producing its first ever quarterly profit earning $11.2 million. The stock exploded from $55 per share to $92 over the next few days. Less prominent in the financial discussion is the fact that during the quarter $68 million, or 12% of all revenue, was generated by the sale of carbon credits that Tesla sold to its competition.[1] These credits, which some analysts think can generate $250 million for Tesla this year, are purchased by companies as an insurance policy to help meet the restrictive emissions standards of states like California who require that 15% of all cars sold by 2025 will produce no emissions.[2] Critics are quick to point out that although these cars are emission free on the road, it takes conventional power plant and mining operations to develop and charge their lithium-ion batteries. Regardless, companies buy these Zero Emissions Vehicle (ZEV) credits from companies like Tesla who already exceed the 15% standard and hold onto them until they face fines and penalties for non-compliance.

This jump in stock price, based on industry subsidies and regulatory fees over actual market success, prompted Tesla sell 2.7 million new shares at its inflated price to raise the $450 million needed to repay Uncle Sam. Prominent skeptic of the still-fledgling EV market, Chrysler CEO Sergio Marchionne, has said, “Regulators are rushing precipitously toward embracing (electric vehicles) as the only solution. Doing that on a large scale will be masochism in the extreme.” Marchionne says that governments should stay technology neutral and let the free markets work.

While it’s great to see taxpayers not lose money on a loan to an electric car company, Tesla should be wary to claim success based on the exploitation of beneficial government regulation, lucrative taxpayer subsidies, and the continued funding of their competition.

In the Pipeline: 5/28/13

Here’s the thing. Even if Congress passed us a law that gave us cash to become tall and good-looking, we would still remain balding, overfed, leaping gnomes. So it is with physics. The federal government can’t just incentivize things into existence. The Atlantic (5/26/13) reports: “Electric car infrastructure company Better Place’s move to file bankruptcy today marks the end of the road for a billion-dollar bet that Silicon Valley-style technological disruption could wean the world from fossil fuels… Founded in 2007 in Palo Alto, California, by a charismatic former SAP executive named Shai Agassi, Better Place sought in one stroke to solve a conundrum: most electric cars were too expensive and too limited in their range to become a mass market alternative to the internal combustion engine.”

Why is it that OPEC has the same concerns as the Greenies? WSJ (5/27/13) reports: “The American energy boom is deepening splits within the Organization of the Petroleum Exporting Countries, threatening to drive a wedge between African and Arab members as OPEC grapples with a revolution in the global oil trade… OPEC members gathering on Friday in Vienna will confront a disagreement over the impact of rising U.S. shale-oil production, with the most vulnerable countries arguing that the group should prepare for production cuts to prop up prices if they fall any lower… ‘We are heading toward some problems,’ said a Persian Gulf OPEC delegate.”

It’s easy to triple a really small number. What’s really difficult is undoing the damage done to taxpayers. IER (5/24/13) reports: “According to the newly confirmed Secretary of Energy, Ernie Moniz, “While the market has taken longer than predicted to get going, sales of electric vehicles in the U.S. tripled last year and are continuing to increase rapidly in 2013. Tesla and other U.S. manufacturers are in a strong position to compete for this growing global market.” But, electric vehicles still have a long way to go to catch up to sales of traditional gasoline and diesel powered vehicles. During the first four months of 2013, plug-in cars accounted for less than 1 percent of total vehicle sales.[vii] And one thing is abundantly clear from Tesla’s financial experience with electric cars: thus far, this is a market created by the government, and without the government’s powers, it would not exist.”

The cure is worse than the disease. Most doctors would stop treatment. The Times London (5/20/13) reports: “There is little doubt that the damage being done by climate-change policies currently exceeds the damage being done by climate change, and will for several decades yet. Hunger, rainforest destruction, excess cold-weather deaths and reduced economic growth are all exacerbated by the rush to biomass and wind. These dwarf any possible effects of worse weather, for which there is still no actual evidence anyway: recent droughts, floods and storms are within historic variability.”

To kick the week off with a surprise, Jay Leno shares some insightful wisdom about government-funded solar companies. NewsBusters (5/25/13) reports: “You know, if he really wants to close it, turn it into a government-funded solar power company. The doors will be shut in a month. The whole thing will collapse and shut in a month.”Jay_Leno_

In the Pipeline: 5/24/13

Did Tesla pay back their loan, or did other people. Wanna guess? WSJ(5/23/13) reports: “Tesla’s biggest windfall has been the cash payments it extracts from rival car makers (and their customers), via its sale of zero-emission credits. A number of states including California require that traditional car makers reach certain production quotas of zero-emission vehicles—or to purchase credits if they cannot. Tesla is a main supplier… A Morgan Stanley MS -1.82%report in April said Tesla made $40.5 million on credits in 2012, and that it could collect $250 million in 2013. Tesla acknowledged in a recent SEC filing that emissions credit sales hit $85 million in 2013’s first quarter alone—15% of its revenue, and the only reason it made a profit… Take away the credits and Tesla lost $53 million in the first quarter, or $10,000 per car sold. California’s zero-emission credits provided $67.9 million to the company in the first quarter, and the combination of that state’s credits and federal and local incentives can add up to $45,000 per Tesla sold, according to an analysis by the Los Angeles Times.”

Believe it or not, there are plenty of things to remain optimistic about in this world. Among others, you’ve got puppies, bacon, and The Hangover III hitting theaters. IER (5/23/13) reports: “Air quality in the United States is getting cleaner, but sadly many Americans believe the opposite. In order to explain the reality of America’s improving environmental quality, Steven Hayward has spent years compiling environmental data with his Almanac of Environmental Trends. Recently he released an update using data from the Environmental Protection Agency to chronicle the astonishing reductions in air pollution in the last few years alone.”

Sun, sun, sun, here it comes. MPR News (5/14/13) reports: “The Minnesota House and Senate have agreed to an energy bill that includes a 1.5 percent solar energy standard for investor-owned utilities… The House version of the bill had required investor-owned utilities to provide at least 4 percent of their power through solar generation by late 2025. The Senate had approved a bill that included a 1 percent solar standard.”

Are these bozos so close to the issue that they can’t see how simple it really is? We could hire a senior in high school to do this study and save the government and American people a lot of time and money. Here’s a hint – free trade is good for everyone. The Daily Caller (5/23/13) reports: “The newly confirmed Energy Secretary Ernest Moniz has announced he will delay the final approval of 20 applications to export liquefied natural gas until he reviews studies on the impact exports would have on domestic natural gas prices… ‘I want to do, as I promised to Chairman Wyden, to make sure that we are using up-to-date data and then we want to go forward on a case-by-case basis … in terms of evaluating licenses in as expeditious a way [possible], consistent with that review process,’ said Moniz, according to The Hill.”

Apologies in advance Dan and Dan, but here’s the winner of the caption contest… Thanks for all the submissions! 

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The following think tank chiefs are opposed to a carbon tax. Please contact us at nocarbontax@energydc.org if you wish to join our growing ranks.

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
Wayne Brough, FreedomWorks
Rich Collins, Positive Growth Alliance
Craig Richardson, American Tradition Institute

Drawing the Wrong Line in the Sand

 

The New Yorker’s Elizabeth Kolbert recently published a comment entitled “Lines in the Sand,” arguing that President Obama should not approve the Keystone XL pipeline because of the climate impacts of using oil. Kolbert’s argument is flawed for multiple reasons including the fact that she fails to consider the actual climate impact and the reality that even if the oil is not shipped to the U.S., it will be used anyway—obviating any climate impact of not building the pipeline. The reality is that the oil sands oil will be used regardless of Kolbert’s purported desire to use less oil. The question is whether the United States will reap the benefits and jobs of refining the oil. 

The crux of Kolbert’s argument centers on the fact that refining oil from oil sands is requires more energy, and attendant carbon dioxide emissions, than conventional oil. But instead of actually looking at the projected impact on climate from carbon dioxide emissions related to oil sands, she makes this maximalist argument:

Were we to burn through all known fossil-fuel reserves, the results would be unimaginably bleak: major cities would be flooded out, a large portion of the world’s arable land would be transformed into deserts, and the oceans would be turned into liquid dead zones.

She later acknowledges rejecting the Keystone XL pipeline “would not solve the underlying problem” but that it “would put a brake on the process.”  To this point, the State Department’s most recent environmental impact assessment found that the United States’ decision on Keystone would not affect changes in climate either way. 

An even better question, and one that Kolbert failed to consider, is how much of a climate impact would not building the Keystone XL pipeline have? Recently climate researcher Paul C. Knappenberger testified before Congress on Keystone’s climate impact. Using a climate simulation technique developed by the EPA called MAGICC (the Model for the Assessment of Greenhouse-gas Induced Climate Change), he concludes that, if Keystone were to operate for a century, it would in the worst-case result in a rise of 1/100th of a degree Celsius[1]. Kolbert is arguing that the President should reject the Keystone XL pipeline because it would reduce global temperature by 0.01 degrees C. Furthermore, Kolbert’s estimates about oil sands’s carbon emissions are inaccurate. She asserts that tar sands emit 12-23% more carbon dioxide than conventional crude. An IHS CERA study, however, suggests that her numbers are inaccurate. It cites Department of Energy data that reveal the range to be between 5-15%[2].

The pipeline is inevitable – it is only a question of whether it runs through the United States or not. That fact alone mitigates much of the opposition to Keystone. Whether the U.S. approves the pipeline or not, worldwide demand for oil will ensure that it will be brought to market somewhere. Furthermore, oil sands already travel by rail. Should the administration reject Keystone, the oil sands will simply continue to travel by rail[3]. Therefore, rejecting Keystone and Canada’s oil sands has no positive effect on climate change; there is only the question of whether the United States will share in the economic benefits that will come from it.

Kolbert even alludes to this argument in her piece, but then does a poor job of answering it. Even she admits that Canadian Prime Minister Stephen Harper has suggested on numerous occasions that, should Washington fail to approve Keystone, Ottawa will instead route the pipeline through British Columbia and ship the oil to China. Kinder Morgan is already working on tripling the size of its Trans Mountain Pipeline to take oil sands oil from Alberta to the coast near Vancouver. Kolbert’s answer to this argument is that “if getting tar-sands oil to China were easy, the Canadians wouldn’t be applying so much pressure on the White House.”

The problem with her analysis is that it ignores the distinction between “easy” and “easier.” The Canadians obviously want to do what is easiest for them (ship the oil sands to their largest trading partner, the U.S.), but that doesn’t suggest that, if they fail to ship it to the U.S., they will wave the white flag and give up producing the billions of dollars worth of crude oil they possess. Canada will instead settle for the next best option, which would be transporting the through Western Canada and shipping it overseas to energy-hungry countries like China.  For environmental advocates like Ms. Kolbert, this is arguably a worse outcome for the environment, because many of these countries lack the pollution controls that the United States imposes on its refineries and associated industries. Additionally, the pipeline would avoid the need to transport the oil to the U.S. via truck or rail, both of which are expensive alternatives that have a much greater likelihood of the kind of accidents that pipeline opponents warn against.

Even if Kolbert’s environmental warnings are correct—and the U.S. Department of State’s assessments and EPA climate models suggest they are not—her opposition to the Keystone XL pipeline has no grounding in reason or logic.  In rejecting Keystone, the United States only stands to lose to the benefit of our economic competitors.

Renewable Fuel Standard: A Misguided Policy

Ethanol advocates delight in touting the Renewable Fuel Standard (RFS) as an “American Success Story.” Yet several years after its passage, some in Congress are finally realizing that the RFS stands not as a central-planning success story but as a symbol of misguided government mandates.

The RFS requires refiners to blend ever-growing amounts of ethanol into gasoline every year with the goal of blending 36 billion gallons by 2022. To comply with the law, refiners must either blend the minimum levels of ethanol or purchase credits called Renewable Identification Numbers (RINs). However, RIN prices spiked from 7 cents in early 2013 to over $1 in March and have remained high since. This volatility increases compliance costs on refiners, which puts upward pressure on prices at the pump.

Ethanol supporters argue that the spike in RIN credits wouldn’t matter if refiners just bought more ethanol, but this ignores simple economics. If it made economic sense to purchase more ethanol, refiners would just purchase more ethanol. The fact of the matter, as reflected in the volatile RIN market, is that refiners don’t think buying more ethanol is a good deal. Yet instead of letting people decide for themselves how much ethanol to use, the federal government insists on mandating the use of billions of gallons of ethanol a year.

RIN prices are likely so high because refiners recognize that the U.S. is approaching the maximum amount of ethanol that can be blended into gasoline. This limit is called the “blend wall.” The problem is that federal law requires ever-increasing amounts of ethanol to be blended into gasoline, but current law, regulations, and warranties only permit most cars to run on gasoline that is at most 10 percent ethanol (automakers also produce some vehicles that are “Flex-Fuel” vehicles that can use fuel that is 85 percent ethanol). Automakers do not certify the vast majority of their vehicles to run on gasoline that more than 10 percent ethanol.

Even though automakers have warned against introducing higher levels of ethanol into gasoline, the Environmental Protection Agency (EPA) wants to approve E15 (gasoline that is 15 percent ethanol) for production. However, E15 could accelerate engine failure in the 95 percent of cars that aren’t certified to use it. Maybe worse, the small engines of boats, lawn mowers, weed eaters break down much more quickly with ethanol, even gasoline with just 10 percent ethanol, according to AAA. In turn, several car manufacturers have said their warranties won’t cover claims related to E15 use.

Another issue with the RFS is that as ethanol production remains essentially stagnant, the federal mandate continues to rise. A new report from the Energy Information Administration (EIA) finds that U.S. fuel ethanol production capacity was 13.9 billion gallons per year as of January 1, 2013, compared to 13.7 billion gallons per year at the same time in 2012. Even though the ethanol industry was capable of producing less than 14 billion gallons in 2012, the RFS required refiners to blend 15.2 billion gallons that year. And despite only slight production increases since last year, the RFS requires 16.5 billion gallons to be blended in 2013.

On top of harming engines that aren’t designed to use high amounts of ethanol, ethanol reduces the fuel efficiency of motor fuel. Ethanol contains 33 percent less energy per gallon than gasoline, which means as ethanol content in gasoline increases, fuel economy decreases. This trade-off might not be an issue if ethanol was cheaper than gasoline, but it is not. For example, AAA’s Daily Fuel Gauge report shows that E85 gasoline costs about 50 cents more than a regular gallon of gasoline when adjusted for the energy difference. On top of paying more per gallon, Americans will need more gallons to get where they’re going – spending more to get less.

As expected, mandating inefficient motor fuel that can harm engines comes at a price. A recent study found that by 2015 implementing the RFS will increase diesel costs by 300 percent, gasoline costs by 30 percent, and reduce take-home pay for American workers by $580 billion. The study warns of a “death spiral” in which increasing blending mandates depress gasoline sales, which leads to supply disruptions and makes compliance unattainable.

Some of the most vocal opponents of the RFS are livestock groups that depend on affordable corn and humanitarians who oppose using food for fuel while the Third World struggles to find sufficient food. Broad-based opposition to the RFS reflects a misguided policy that enriches ethanol producers at the expense of everyone else. Ultimately, Congress should eliminate all mandates and subsidies that distort the energy market. Repealing the RFS is a good place to start.