In D.C., Renewables Fraud Greeted With More Money

Despite the recent hearing on massive fraud connected with the Renewables Fuel Standard, the Senate Finance committee has approved the friendly-sounding “Family and Business Tax Cut Certainty Act of 2012.” Among other provisions, the Act would extend the $1/gallon tax credit for biodiesel producers through 2013, a measure estimated to cost $2.1 billion (in forfeited tax receipts) over 10 years. Thus, the government continues to lavish massive support—both with tax credits and outright mandates for purchase—on a sector without addressing the obvious problems in implementation. Furthermore, even if the programs were administered flawlessly by angels, the government’s encouragement of renewables is an inefficient distortion of energy markets.

In his July 11 testimony to the Subcommittee on Oversight and Investigations, American Fuel & Petrochemical Manufacturers (AFPM) President Charles Drevna explained the massive “RIN” fraud plaguing the EPA’s Renewable Fuel Standard. Here is a summary of the testimony:

[The] Renewable Fuels Stand (RFS) [requires] obligated parties to blend increasing volumes of biofuels into the transportation fuel supply. There are several nested mandates within the RFS, including a requirement for 1 billion gallons of biomass-based biodiesel. In order to demonstrate compliance with the RFS, obligated parties submit a requisite number of renewable identification numbers (RINs) to EPA by the end of February following the compliance year. RINs essentially act as credits that can be bought and sold among biofuel producers, brokers and obligated parties.

In order to facilitate RIN trading, the EPA established the EPA Moderated Transaction System (EMTS), through which all RINs must be generated. Only EPA registered biofuel producers that have submitted third party engineering reports are eligible to generate RINs on the EMTS, although other parties are then able to trade RINs, and in particular biodiesel RINs.

Unfortunately, some bad actors are taking advantage of weakness in the system and have generated and sold more than 140 million fraudulent RINs that we know of. For context, 140 million RINs constitute between 5-12% of the biodiesel RIN market to date. [Bold added.]

Drevna went on to criticize the EPA’s handling of the scandal, taking more than a year to warn buyers when red flags were raised about certain issuers of RINs. Thus, innocent firms unknowingly bought fraudulent RINs from groups that EPA knew were suspect, and yet EPA adopted a “buyer beware” policy, whereby it was the responsibility of refiners to come up with valid RINs. In practice, this meant certain refiners had to pay double, once for the fraudulent RINs and again to obtain valid ones, in order to comply with the RFS mandate.

Drevna pointed out that, in his opinion, EPA thus far had not given much guidance to refiners as to the proper amount of “due diligence” in verifying the authenticity of RINs. Thus the actual compliance cost of the RFS mandate is higher than a naïve textbook analysis would indicate, as many firms are paying twice, not to mention the current uncertainty of dealing with the tradable RINs market at all.

Despite these problems, the Senate Finance committee recently passed a measure extending many tax advantages, including:

Incentives for biodiesel and renewable diesel.  The bill extends for two years, through 2013, the $1.00 per gallon tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon.  The bill also extends through 2013 the $1.00 per gallon tax credit for diesel fuel created from biomass.  Based on preliminary estimates, a two-year extension of this proposal is estimated to cost $2.1 billion over ten years. [Italics in original.

A $1/gallon tax credit represents a massive subsidy, given the margins in the industry. The problem is not with tax cuts per se, but with the government clearly picking winners and losers. By levying a heavy burden of tax, and then exempting special groups, the government establishes a very unlevel playing field.

Both for reasons of minimizing fraud and moving toward an efficient energy sector, the federal government’s continued support for renewable energy should be reconsidered.

In the Pipeline: 8/6/12

We include this not to make fun of Brent Erickson or his band of rent-seekers.  We include it because we love the headline, “Ethanol groups form coalition to save federal support for biofuels.”  We were under the impression that the federal government does not “support” ethanol use (“Go Corn Growers!”).  It mandates ethanol use.  If you need the difference explained, you probably are already a shill for the corn growers. The Hill (8/5/12) reports: “Eight biofuels groups are forming a coalition to coordinate messaging to combat calls to limit a federal mandate for renewable fuels because of the drought.”

 

Only a guy living in an 11,000 square foot house in the suburbs could offer something as ridiculous as it would be tragic if natural gas “undermined” “investments” in wind, solar, and other expensive, unreliable forms of energy.  I have no clue why mainstream media outlets are dying.  I really don’t.  If you any idea, send them to us. NYTimes (8/5/12) reports: “But, as the energy and climate expert Hal Harvey puts it, there is just one big, hugely important question to be asked about this natural gas bounty: “Will it be a transition to a clean energy future, or does it defer a clean energy future?””

 

Remember this next time someone says we can move beyond, phase out, work around, transition away from, create a bridge, replace, switch, end our use of conventional fuels. WSJ (8/5/12) reports: “Slogans like “beyond coal” may appeal to Sierra Clubbers and to New York City Mayor Michael Bloomberg, who gave the environmental group $50 million to help “end the coal era.” But with 1.3 billion people on the planet still lacking access to electricity, the priority for leaders in places like New Delhi isn’t carbon-dioxide emissions or “clean energy.” Their primary aim is to bring their people out of the dark.”

 

So we missed this last week.  But it is odd that the story itself does not mention that Sierra has filed an appeal on this (shocker).  When was the last time the Sierra Club was bashful?  I’ll help:  never.  We think they would rather people not focus on Keystone during the election. Edmond Sun (7/14/12) reports: “Oklahoma environmental activists and an east Texas governmental body have filed a complaint seeking an injunction against the TransCanada Cushing-to-Gulf pipeline.”

 

I’m glad Bill Magwood is the ethically challenged one.  Why does this guy keep getting a free pass? Las Vegas Review Journal (8/3/12) reports: “There’s another factor, however, one more personal to Reid: His son, Rory Reid, is one of the attorneys for the ENN Mojave Energy project. A Reid spokeswoman said the senator did not suggest Reid’s firm – Lionel, Sawyer & Collins – to ENN, nor has the elder Reid spoken to this son about the deal. (Reid imposed a strict ban on family members lobbying his office in 2003 after the Los Angeles Times asked him about lobbying by three of his four sons.)… But success for ENN in finding customers helps Rory Reid, and its failure could cost him a client. It’s an undeniable conflict that Harry Reid should keep in mind as he twists arms at the PUC and NV Energy, lest he earn himself an ethics complaint.””

In the Pipeline: 8/3/12

It is sad that we have to run this.  But the Sierra Club is sort of a collection of nitwits.  So . . . IER (8/2/12) reports: “In response to an error-filled report released today by the Sierra Club, entitled “Clean Energy Under Siege,” the Institute for Energy Research released the following statement and brief fact check that raises serious questions about the quality of scholarship and careful research that went into the report… “Sloppy ‘scholarship,’ half-truths, and outright fabrications fill the Sierra Club’s report. The donors who support the Sierra Club deserve better, and the careless way this report was written, proofed, and published lays bare the nakedly partisan agenda behind the Sierra Club.”

 

Alexa Marrero gets it.  No other way to say it. Energy & Commerce (8/2/12) reports: “Schultz’s and Carney’s surprisingly out of touch responses comes on the heels of Tuesday’s Wall Street Journal report on Solyndra’s chapter 11 plan, that warned, “there’s bad news for U.S. taxpayers: Estimates are $24 million of a $527 million government loan will be repaid, and that’s not a sure thing.”

 

It would be good if people stopped treating the symptoms and started treating the disease. Slate (7/31/12) reports: “Every day that the drought continues garroting the American Midwest, the lunacy of turning corn into motor fuel becomes ever more obvious and ever more outrageous.”

 

Maybe my English is a little rusty, but I think this article is positing the idea that Jacob Lew did something that his staff told him would violate the law.  Which seems pretty bad. Washington Post (8/1/12) reports: “Its report, parts of which were obtained by The Washington Post, suggests that then-OMB Director Jack Lew let the refinancing move forward without intervening, even though some OMB analysts thought a refinancing plan that favored private investors might violate the law. Lew is now White House chief of staff.”

 

You know the bad guys are finished when they start offering up these sort of issues. Energy & Commerce (8/2/12) reports:

Keep in mind, this is the guy that the environmentalists keep trying to tell us is just a mild-mannered professor without any ideological predilections.  When people don’t tell the truth, that makes them liars, right? Texas Tribune (8/2/12) reports: “In his first public interview since stepping down, Armendariz spoke with The Texas Tribune about his decision to resign, his work at the Sierra Club and why climate change is the biggest environmental problem facing Texas.”

 

Please read the summary.  It is a very good summation of relevant points about global warming.  And Matt Dempsey worked hard to post it. Environment & Public Works (8/1/12) reports: “It is popular again to claim that extreme events, such as the current central U.S. drought, are evidence of human-caused climate change.  Actually, the Earth is very large, the weather is very dynamic, and extreme events will continue to occur somewhere, every year, naturally. The recent “extremes” were exceeded in previous decades.”

In the Pipeline: 8/2/12

Charlie Drevna says it pretty well.  While we are dallying with ethanol and other nonsense, the Chinese are investing in petroleum assets all over the planet, including Canada. American Products. American Power. (8/1/12) reports: “In addition to hurting America’s farmers, this year’s record drought has exposed another great flaw with EPA’s renewable fuel standards. Not only do EPA regulations force American consumers to purchase more expensive fuel that generates lower mileage per gallon, these regulations now threaten to consume 40 percent of our nation’s corn crop at a time when the USDA has designated more than half of U.S. counties as ‘disaster areas’ because of the drought,” Pyle said.

 

See, once you accede to small tyrannies, they tend to become larger tyrannies. And, yes, I am talking to those of you who are toying with the idea of an energy tax. Fraser Coast Chronicle (8/1/12) reports: “A FITNESS club that claimed the carbon price would drive up the price of its gym memberships has been fined $6600 by the Australian Competition and Consumer Commission.”

 

Leaving aside for a moment that the sources of their electricity is easily two-thirds coal, natural gas, or nuclear (no one buys wind on the spot market), how much would you like to bet that most of the rest is hydropower?  For those scoring at home, the environmental community does not count that as “renewable” (too affordable and reliable). Facebook (8/1/12) reports: “Today we’re sharing our 2011 carbon footprint, energy mix and energy use for our data centers and global offices. We’re releasing this data because we believe in the power of openness, and because we hope that adding another data point to our collective understanding of our industry’s environmental impact will help us all keep improving.”

 

When brave people speak truth to power, it helps others find their own bravery. Sen. Sessions (8/1/12) reports: “Sessions Debates Boxer At Hearing On Global Warming Regulation”

 

Everyone needs to be super careful now about what they say on the phone (those who don’t get that should google “wiretapping” and “Congressman McDermott”). Politico (8/2/12) reports: “McDermott (D-Wash.) will introduce a bill Thursday to create a carbon tax that he says will create incentives for long-term changes in the American energy market without harming the economy, and in fact providing much-needed revenues.”

 

This is fun.  The Administration has to explain why their friends the Europeans are right to tax carbon (does that sound familiar?) while not annoying their friends who are the rich dudes who fly internationally.  I’ll bet they avoid the easy answer, which is, of course, that the EU has lost its collective mind. Politico (7/31/12) reports: “Pressure on the White House to take action against the EU’s plan to mandate emissions trading for airlines is ratcheting up, with the Senate moving to advance a bill on the issue amid high-level international meetings taking place this week.”

Michael Reagan to Headline 2012 Bus Tour Launch in Dallas, TX

 

WASHINGTON D.C. — On Tuesday, Aug. 7, the American Energy Alliance will launch a six week bus tour to promote affordable and reliable domestic energy sources, free energy markets, and less burdensome regulations on American job creators. Beginning in Dallas, TX, the “American Products and Power” bus tour will travel through New Mexico, Colorado, Wyoming, Montana, North Dakota, South Dakota, Nebraska, Missouri, Oklahoma, Louisiana, Florida, Ohio, West Virginia, Pennsylvania, Virginia, and end in Washington. D.C. on Sept. 13.  A critical component of AEA’s year-long initiative to educate American consumers about the importance of affordable energy for the every day products that make life better, the 2012 “American Products and Power” bus tour will recruit a nation-wide base of informed activists to promote common sense, free market solutions to the nation’s energy needs.  Stopping at state fairs, refineries, manufacturing facilities, state houses and major national events, the American Energy Alliance will add to a multi-million dollar effort this year that involves radio, television, and print advertising, as well as rallies and aggressive social media campaigns.

Conservative columnist and commentator Michael Reagan, the eldest son of former President Ronald Reagan, will officially launch the “American Products and Power” bus tour at an Aug. 7 rally in Dallas’s Flag Pole Hill Park.

“Few others can speak as authoritatively about an American vision for free markets, energy security, and economic growth as Michael Reagan. The American Energy Alliance is pleased to be joined by Michael Reagan as we launch the 2012 “American Products and Power” bus tour,” AEA President Thomas Pyle said.

“At the core of our mission is to tell the truth to the American people about the vast energy potential that lies under American soil and off our coastline. Developing these affordable resources and manufacturing American-made products is critical to the nation’s economy and our future. We cannot compete in the global market as long as Washington has its boot on the neck of hard working men and women who are building our future. We will take the vision for affordable energy, common sense regulation, and safe technology to the American people; then return to Washington D.C. to deliver the message — it’s time to free the American people from costly, unnecessary regulations and bureaucracy. It’s time for Washington to untie the hands of American energy producers and manufacturers, and free these job creators to put our country back to work again.”

A portion of the American Products and Power bus tour will roughly trace the northern path of the proposed Keystone XL pipeline, which the Obama administration and the U.S. Senate have blocked from final approval though it promises to create tens of thousands of jobs and deliver as much as 700,000 barrels of North American oil to U.S. refineries every day upon project completion.

To learn more about AEA’s “American Products. American Power” initiative, click here.
To learn why AEA’s bus tour matters, click here.
To follow the bus tour on Facebook, click here.
To follow the bus tour on Twitter, click here.

In the Pipeline: 8/1/12

Since the President thinks he creates all businesses and jobs, it is a small matter to kill them as well. OhioAmerican (7/31/12) reports: “OhioAmerican Energy, Inc. (“OhioAmerican”), a Subsidiary of Murray Energy Corporation (“Murray Energy”), today announced the closure of its coal mining operations near Brilliant, Jefferson County, Ohio… Regulatory actions by President Barack Obama and his appointees and followers were cited as the entire reason.”

I wonder if Chairman Jon knows that the wind tax credit has been going on for 20 years.  For just as long, people have been talking about phasing it out. The Hill (7/31/12) reports: “Letting the wind production tax credit (PTC) expire at the end of this year “could have a devastating effect” on the wind energy industry, Federal Energy Regulatory Commission Chairman Jon Wellinghoff said Tuesday.”

Boxer.  Mankiw.  Hassett.  Arthur Brooks.  The AFP crew in Arizona.  Jeff Flake.  Probably Boyden Gray.  Probably Jim Connaughton.  That is a pretty impressive list of people who are digging an energy tax.  When do you figure people are going to start to take it seriously? E&ENews (7/31/12) reports: “A carbon tax could be part of a larger deal on tax and budget, two Senate Democrats who support action on climate change said today.”

The problem is the drought is “proof” that global warming is bad, and the “solution” to global warming is putting corn in our cars. NYTimes (7/30/12) reports: “An act of God, right? Well, the drought itself may be, but a human remedy for some of the fallout is at hand — if only the federal authorities would act. By suspending renewable-fuel standards that were unwise from the start, the Environmental Protection Agency could divert vast amounts of corn from inefficient ethanol production back into the food chain, where market forces and common sense dictate it should go.”

You have to think that the RFS is living on borrowed time.  The tricky part is what comes next. National Pork Producers Council (7/30/12) reports: “On behalf of the National Pork Producers Council (“NPPC”) and the other undersigned national and regional livestock, poultry, and feed organizations, we hereby request that you utilize your authority under the federal Renewable Fuels Standard (RFS) to waive the applicable  volume of renewable fuel, in whole or in substantial part, for the period of one year…”
 
This issue is dead because Jim Inhofe, Mike Catanzaro, Andy Wheeler, and George Sugiyama killed it. Environment & Public Works (7/31/12) reports: “The planet may be getting hotter, but Washington’s debate on climate change isn’t heating up.”

Do you think this “man” has ever seen the inside of a paper mill that makes cardboard?  Probably not, but that is not going to keep him from an internship in Henry Waxman’s office.

 Admiral Watkins was a great man, and he did what he could to stop Bob Grady and Bill Reilly from passing the very bad, very damaging Clean Air Act Amendments of 1990. LA Times (7/29/12) reports: “Watkins, 85, who was secretary of Energy under President George H.W. Bush, died Thursday at his home in Alexandria, Va. He had been in declining health in recent years, said his brother, John.”


The War on Affordable Energy Claims More Victims

 

Today, OhioAmerican Energy Inc. announced the closure of a mine near Brilliant, Ohio. According to OhioAmerican, “Regulatory actions by President Barack Obama and his appointees and followers” were “the entire reason” for the closure. This should come as no surprise to anyone. This is exactly what President Obama promised.

Four years ago, President Obama told the San Francisco Chronicle that if people wanted to they could “build a coal-powered plant . . . It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

After the last election, President Obama acknowledged his first plan to regulate carbon dioxide was dead. But unfortunately, he didn’t pull back from his attack on coal. Instead, he doubled down and shifted the attack to EPA. EPA has moved to regulate carbon dioxide, they have introduced the Utility MACT rule, the Cross State Air Pollution Rule, proposed new ozone regulations, stream buffer guidance, conductivity “guidance” and additional regulations designed to increase the cost of using producing and using coal.

The result of the administration’s policies are closures of coal-fired power plants and coal mines. The Energy Information Administration reports that 27 gigawatts of coal-fired capacity is set to close over the next five years, including a record closure of 9 gigawatts this year alone. But even this may be an underestimate. If we look at EPA’s modeling and combine it with actual announcements from electrical generators, nearly 35 gigawatts of generating capacity is set to close because of the Obama administration’s regulations.

The OhioAmerican mine is not the first coal mine to close because of the attack on affordable energy. In June, Arch Coal announced that it was laying off 750 coal miners.

Coal reliably produces inexpensive electricity and the United States has the largest coal reserves in the world but those resources will only benefit the United States if we can access them.

It is no accident that coal mines are closing in the U.S. This is the outcome of policies designed to make it more expensive to produce and use coal. It’s time the Obama adminsitration ends its war on affordable energy before more hard-working Americans lose their jobs.

AEA calls for RFS Enforcement Cease Fire

WASHINGTON D.C. — American Energy Alliance President Thomas Pyle released the following statement upon annoucements that Agriculture Secretary Tom Vilsack had declared more than half of U.S. counties as disaster areas due to the record drought affecting U.S. farmers. A dramatically reduced corn crop has caused prices to rise by about 60 percent since mid-June, and other grain prices are steadily increasing. To meet current renewable fuel standards, American refiners will have to blend 13.2 billion gallons of corn ethanol with gasoline this year, an amount that will consume 40 percent of this year’s reduced crop unless EPA grants an immediate waiver.

“In addition to hurting America’s farmers, this year’s record drought has exposed another great flaw with EPA’s renewable fuel standards. Not only do EPA regulations force American consumers to purchase more expensive fuel that generates lower mileage per gallon, these regulations now threaten to consume 40 percent of our nation’s corn crop at a time when the USDA has designated more than half of U.S. counties as ‘disaster areas’ because of the drought,” Pyle said.

“EPA Administrator Jackson should announce an immediate cease-fire in the administration’s war on affordable energy and suspend the agency’s enforcement of ethanol mandates. Food costs — like fuel costs — are already a heavy burden to American families. Continued EPA enforcement of renewable fuel standards will only add to that burden. To provide greater certainty for American farmers and food producers, Congress should take steps to eliminate the ethanol mandate permanently, so that Americans do not find themselves in a similar crisis during the next dry spell.”

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AEA: USPS TROUBLES TIED TO FAILED ENERGY POLICIES

WASHINGTON, D.C. — American Energy Alliance President Thomas Pyle released a statement today in advance of a default by the United States Postal Service, which is expected to skip more than $11 billion in mandatory contributions for employee retirement benefits between now and Sept. 30 to remain solvent. There are competing measures in the U.S. House and Senate to address the postal service’s long term fiscal crisis. A May 2011 GAO report revealed that USPS compliance with congressionally authorized energy policies substantially increase postal operating costs. Congress has mandated that 75 percent of new light duty vehicle acquisitions run on alternative fuels like biodiesel and ethanol. Moreover, replacement costs for these expensive alternative fuel vehicles complicate USPS’s long term sustainability. 

“If Congress wishes to address long term problems at USPS, it will require long term solutions. The alternative fuel mandates on USPS are another example of bad energy policy crippling efficient government services and opening the door to more taxpayer bailouts,” Pyle said.

“Immediately granting USPS the freedom to continue its constitutionally-authorized responsibility to deliver the mail with an affordable fleet of vehicles that use affordable fuels is a no brainer. A five day delivery — which USPS has considered but Congress resists — is another viable cost-cutting measure that would reduce fuel demand. On the other hand, proposals to meet USPS fleet fuel demands with offshore wind farms like Sen. Carper (D-Del.) recently suggested on the Senate floor are laughable, and green roof reforms at the postal service do nothing to affect the bottom line. USPS knows that it cannot deliver the mail if it is forced to plug into wind mills or burn algae and other biofuels in its fleet. To save USPS, Congress should reverse course and replace failed energy policies with commonsense solutions based on free market principles.”

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Energy: All for All of the Above

While the campaign was launched as prices at the pump were  creeping upward to the highest levels in years, AEA spokesman Benjamin Cole said the group’s theme of energy affordability continues to resonate with voters, even as oil prices have stabilized in the subsequent months. “The fact is, gas is twice what it was in 2009 when President Obama took office,” he said. “The fact is, the sources he’s invested in are the most expensive.”

As a nonprofit issue advocacy group, the AEA is not supposed to  support individual candidates or political parties but exists to spread a message that Cole summarizes as “energy makes your life better, and the cheaper energy is the better.” The spokesman said his group has no interest in taking out-front sides in the partisan fray because “Republicans have stupid ideas on energy, and Democrats have stupid ideas on energy.”

Nonetheless, in the coming days, the AEA will launch a five-week bus tour through 18 states, including some battlegrounds that could well decide who controls Congress and the White House after November. There will be stops in New Mexico, Montana, Missouri, Ohio, Pennsylvania and Florida…The tour, intended to highlight the economic importance of refined petroleum products, will roughly trace the route of the proposed Keystone XL pipeline. The 1,700-mile project, which would carry petroleum produced from the abundant oil sands of Alberta, Canada, to Gulf Coast refineries, has been a headache for Democrats since major environmental groups last year decided to make it a litmus test for their support of Obama’s re-election bid.

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