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House Democrats Plan to Pay Wind Industry Nearly 10 Times Value of their Electricity

September 15, 2021 by 3 Comments

Nine years ago, the wind industry agreed to a six-year phase out of the wind production tax credit. At the time, the wind industry told reporters that they needed 4-6 years to achieve subsidy-free competitiveness. But now the wind industry, other renewable electricity generators, and their financial backers on Wall Street, are back supporting the House Democrats plan to transfer billions of dollars from hard-working taxpayers to Wall Street bankers by laundering it through renewable energy companies.

This is an aggressive interpretation of what is going on, but it fits the facts available. When you run the numbers, the House Democrats plan provides wind and other renewable producers with $210 of value for a megawatt hour (MWh) of wind worth $25 per MWh. The bulk of this is through massive grants to renewable producers and their financial backers in the House Democrats’ reconciliation bill. Here’s how the calculation works:

In PJM (the regional transmission organization that serves Virginia, Maryland, Washington, DC, West Virginia, New Jersey, Delaware, Ohio, and parts of Kentucky, Indiana, and Illinois), the market price for energy has been $22-27 per MWh over the last few couple years. Let’s round that to $25. [We are ignoring capacity for now, but we expect some wind resources clear the capacity market in PJM.]

To the value of the electricity, we add a payment for the wind production tax credit. To keep it simple, and not get into complicated calculations of pre-tax revenue, etc., we will use the face value of the Production Tax Credit (PTC)—$25 per MWh. 

As if doubling the average value of the electricity isn’t enough through the PTC, the House Democrats are proposing to add a grant of $150 per MWh if you’re in the sweet spot of that 2.5% of new generation that gets the subsidy. (See Sec. 224 of the Democrats’ Clean Energy Performance Program)  

To this amount, we add the value of renewable electricity credits (RECs). The price can be volatile and can vary by market, but according to researchers at Lawrence Berkeley National Laboratory in PJM, the price of RECs rose slowly in 2020 “reaching ~$10/MWh by end of the year.” So we will use $10 for the value of the RECs. 

Adding this up, under this bill, a PJM wind provider who provides 1 MWh of wind gets paid: 

  • Value of energy: $25
  • Wind Production Tax Credit: $25
  • House Democrats Grant Provision: $150
  • Renewable Electricity Credit Payment: $10

Value to Provider of 1 MWh of Wind: $210

The electricity provided from wind might be worth only $25 to the market, but under the House Democrat’s bill, the PJM wind producers and their financial backers get $210 of value. This is obscene and it encapsulates everything that’s wrong with Washington, DC. We have an inflation problem and this kind of reckless spending will only pour gasoline on those inflationary fires. Wall Street renewable energy financiers might do well posing as Greens under this plan, but as demonstrated, their real interest is in the green of the money taken from hard-working taxpayers who will be crushed under the inflationary pressure of these policies. And while it is understandable for Wall Street Bankers to want to cash in on free money by the truckload from taxpayers, it is remarkable that elected officials would go along. 

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Senate Democrats’ New Plan to Tax Our Leading Energy Resources

September 9, 2021 by Leave a Comment

Senate Democrats are proposing to institute a new tax on the use of our leading energy resources—oil, natural gas, and coal—according a leaked list of reconciliation bill pay-for options.

Before getting into the specifics of what the leaked list calls “carbon pricing,” let’s reiterate how central these fuels are to our productivity and well-being.

In terms of primary energy consumption, oil, natural gas, and coal contribute 35, 34, and 10 percent of U.S. energy on a Btu basis respectively. At a combined 79 percent of our mix, fossil energy is indispensable to our prosperity, as it is throughout the world. As it so happens, the U.S. uses fossil fuels at a slightly lower clip than the world as a whole, for which the fuels make up 85 percent of the mix. 

This reconciliation bill proposal would put a carbon tax on the use of these key energy resources to raise money for our seemingly endless array of new expenditures.

According to the Democrats’ Senate Finance Committee document floating around Washington, the “major options” for doing so are as follows:

1) a per-ton tax on carbon dioxide content of leading fossil fuels (e.g., coal, oil, natural gas) upon extraction, starting at $15 per ton and escalating over time, 

2) a tax per ton of carbon dioxide emissions assessed on major industrial emitters (e.g., steel, cement, chemicals), and 

3) a per-barrel tax on crude oil. 

Each option would be paired with rebates or other direct relief for low-income taxpayers, as well as a border adjustment to ensure foreign companies also pay the tax.

At this stage the outline is sparce, but as is inherent to carbon tax implementation, every option above would result in higher energy costs for American families and businesses. A carbon tax will drive up costs for transportation, electricity, industry, commercial activity, and everything else that relies upon oil, natural gas, or coal to deliver goods or services. Again, those fuels contribute 79 percent of our energy.

To put this into everyday terms, a 15-dollar tax on oil translates loosely to a 15-cent increase in the price of gasoline per gallon.  

This would come at a time when Americans are already reeling from this summer’s price sting and, ironically, just after President Biden’s national security adviser pleaded with OPEC and Russia to put more oil onto the market. Of course, there’s nothing new about the Democratic Party bemoaning increases in the most visible consumer price in our economy while simultaneously seeking to drive it higher with coercive policies.

It should also be stressed that while some carbon tax plans are framed as revenue-neutral—for example, by pairing a carbon tax with a reduction in corporate taxes—each of these options is an explicit revenue-raiser that would contribute to new spending.

The document also contains an admission of the carbon tax’s biggest weakness from the perspective of progressive politics. Carbon taxes are what we in the policy world call regressive. They hurt those at the bottom of the household income charts the most as a percentage of their budgets, because certain energy expenses are simply unavoidable no matter how tight you pull the belt.

In an effort to counterbalance the carbon tax’s regressive nature, the document mentions “rebates.” This is a euphemism for checks sent from the government in order to offset the inevitable increase in energy expenditures. We do not know who would be included in the rebate plan or how much would be redistributed.

What we do know is that this approach to carbon tax revenue recycling is among the least efficient.

IER has published extensively on this matter, most notably with the 2018 paper The Carbon Tax: An Analysis of Six Potential Scenarios.

The paper found:

A tax swap that recycles 75% of gross revenue by returning it to taxpayers as a lump-sum rebate results in persistent economic underperformance over the entire 22-year forecast period. GDP is reduced by between as much as 1.07% and 1.67% relative to the reference case at the beginning of the forecast period, depending on the amount of tax, and gradual.

In January I covered this topic in an IER blog post, where I cited studies from both the Tax Foundation and EY.

Here’s what I wrote in January:

The Tax Foundation study finds that the rebate strategy reduces regressivity but is harmful to overall economic output and harmful to employment. A payroll tax cut strategy, meanwhile, yields output and employment boosts, while also making the tax code slightly less regressive.

The EY study, similarly, reports that both a permanent extension of select Tax Cuts and Jobs Act provisions and investment in public infrastructure would outperform household rebates as carbon tax revenue uses. In the rebate scenario the entirety of the long-run positive change in annual per-household GDP would be attributable to the removal of the existing regulatory approach. In the EY analysis (figure ES-1) the rebate itself would cause losses of 0.4 percent, but be offset by gains of 1.1 percent as a result of ditching regulations.

While it may be the case that some carbon tax revenue strategies could mitigate the tax’s regressivity, the literature does not support a lump-sum rebate strategy.

The rebate approach would put drag on our economic performance.

The document’s other admission is that we’d need to erect new trade barriers to prevent businesses from fleeing to lower-cost environments. The document calls this a border adjustment.

In July I analyzed carbon border taxes at the American Spectator, where I wrote:

Democrats will try to sell this new tax as a way to save American jobs, but as has long been understood, tariffs deliver concentrated economic benefits to the powerful incumbents who lobby for them while spreading new costs across the wider population. Far from being an economically just approach, the carbon border tax would further enrich existing companies while taxing American households.

IER economist David Kreutzer spoke on this topic recently as well. His interview with Forbes is worth listening to in full, but here’s what he had to say about carbon border taxes:

Yeah, that maybe is the most compelling sounding part of this thing. But it is, I think, the most dangerous.

It is a constant battle to keep people that want tariffs and other trade restrictions at bay. There are always special interests that want to protect whatever their industry is or whatever their product is. It’s an almost impossible task for economists to keep that as low as possible.

This carbon border adjustment would be very, very difficult to set up. I mean, you’d have to know, for instance, if you’re bringing in a car from Japan, how much of a carbon tax did they have in Japan? Did they import something from Korea where they had a different carbon tax? Did they use steel from some other country? What’s the carbon content that hasn’t been taxed and all of these products that are coming in?

There are going to be lobbyists who are going to go out and say, “Our competitors’ imports actually have more carbon than they claim.” There are going to be lawsuits. There’s going to be all sorts of rent-seeking and lobbying going on.

Once you get that in place, I think that would be the most difficult thing to unwind. It’s very, very difficult to get rid of tariffs because of what we call the special interests effect. The benefits are narrowly focused and the costs are spread out so there’s not much organized opposition to them. 

I think that the carbon border adjustment tax — that tariff — is the scariest of the proposals that they’ve put out.

The Senate Democrats’ leaked carbon tax plan bodes poorly for American energy affordability and economic productivity.

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The Unregulated Podcast #49: Tom and Mike Discuss Gavin Newsom’s Recall Election

September 7, 2021 by Leave a Comment

On the final episode for summer 2021 Tom and Mike discuss Gavin Newsom’s looming recall election in California.

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War On Coal Comes Back To Haunt Biden’s “Green” Agenda

September 3, 2021 by Leave a Comment

As the “war against coal” continues with Biden’s Paris climate commitment to decrease greenhouse gas emissions by 50 to 52 percent by 2030, skilled miners for his clean energy plan have become scarce. Biden’s clean energy program needs critical minerals, which are essential for technologies such as batteries and wind turbines. Mining and geological engineering employment is estimated to grow 4 percent between 2019 and 2029, according to the Bureau of Labor Statistics. But, as demand increases for these minerals, there are fewer skilled workers to fill job openings in the industry. Both the decline in coal mining jobs and the coronavirus pandemic have made mine workers reassess their careers—some moving to new professions, others retiring, and others being lured to places promising higher wages (e.g., Australia, Canada).

Critical minerals have become increasingly important in recent years because they are key components in high-tech personal devices, green technologies like solar panels and defense systems like jet fighter engines. The U.S. imports the majority of its critical minerals, and the United States has sought to boost domestic mining of these minerals. As in other jobs with labor shortages, employers are raising pay. But, it appears that the American public holds a negative perception of mining, thinking of old pictures of dirty coal miners working in dangerous conditions, making it difficult to attract skilled labor and students to be trained at universities. In fact, many of these jobs are highly skilled and require advanced technological capabilities.

There has been a steady decline in the number of mining and mineral engineering programs at U.S. colleges and universities from a high of 25 in 1982 to 14 in 2014 as well as a corresponding decline in U.S. faculty (~120 in 1984 to ~70 in 2014) and a shortage of qualified candidates to fill faculty vacancies. Federal funding of studies and research in mining has been drastically reduced. The former federal Bureau of Mines has been dissolved, removing all funding for mining schools under the Mining and Mineral Resource Institutes Act of 1984.

Jobs Needed for Mining Critical Minerals

Many of the most common jobs in the mining, quarrying, and oil and gas extraction sectors are physically demanding. Mineworkers must be able to operate heavy machinery and deal with explosives in both surface and underground mines. Engineers, metallurgists, and mine managers design and coordinate mine operations. The average salary of an underground mining machine operator and extraction worker is $56,000, and mining and geological engineers make around $90,000, according to May 2020 figures from the Bureau of Labor Statistics (BLS).

According to the BLS, about 20 percent of workers in the mining, oil, and gas sector are over 55. In 2015, 43 percent of surveyed professionals in oil, gas, and mining firms said the loss of talent due to an aging workforce would become a problem in the next six to 10 years—a percentage that would be much higher now, 6 years later.

Conclusion

Critical minerals are essential to the transition to renewable energy technology and Biden’s goal with respect to his net-zero carbon economy. Despite the relatively high wages of mineworkers, the industry is having a hard time attracting workers due to the labor intensity of the jobs, the reduction in employment that occurred in the “war on coal” followed by additional retirements and job changes when the COVID pandemic hit, the difficulty of attracting students to the profession, and the lack of university programs in the field and faculty to teach them. Quite simply, the U.S. government has given mining and miners an undeserved bad name, at the very time when the demand for minerals mining required for “green energy” is expected to skyrocket. President Biden is going to have a difficult time attracting workers and obtaining the needed critical minerals in his attempt to reach his net-zero economy and to meet his commitment to the Paris climate accord.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #48: Tom and Mike Discuss the Withdrawal From Afghanistan

August 23, 2021 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna go over everything that’s gone wrong with America’s withdraw from Afghanistan and what it means for the future of Joe Biden’s administration.

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The Unregulated Podcast #47: Tom and Mike Unpack Infrastructure Votes

August 12, 2021 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the recent votes to advance Biden’s “infrastructure” package out of the Senate.

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Biden Begs America’s Enemies For Oil While Attacking Domestic Producers

August 12, 2021 by 1 Comment

At every turn, President Biden has instituted policies to hurt the North American oil and gas industry, resulting in decreasing U.S. energy independence earned during the Trump Administration and benefiting oil-producing countries. Russia, for example, has become the number two oil importer to the United States, second only to Canada. Biden has also canceled the Keystone XL pipeline while removing sanctions that the Trump Administration implemented so that Russia’s Nord Stream 2 pipeline could supply Germany with natural gas later this year without going through Ukraine. Through Biden’s actions, Russia will be able to increase its energy revenues and improve its economy.

Russian Heavy Oil Imports to U.S. Markets

U.S. imports of oil and refined petroleum products from Russia increased 23 percent in May to 844,000 barrels a day from the prior month, according to the Energy Information Administration. Mexico lost its number 2 ranking because its shipments to the United States increased by less than 3 percent. Russia has become a favored source for U.S. refiners largely because it produces semi-refined oils such as Mazut 100, which is a feedstock for American refineries that are accustomed to processing heavy crude from Venezuela and the Middle East—sources that have dried up due to sanctions on Venezuela and OPEC output limits.

Source: Bloomberg News

Federal Customs Service records show that the United States is the single largest buyer of Russia’s heavy-oil products. U.S. refiners bought almost one-fifth of Russian heavy-oil exports during the first five months of this year. Most of the U.S.-bound Russian crude has docked along the West Coast to feed refineries like Phillips 66’s plant 100 miles north of Seattle and California refineries owned by Chevron Corp. and Valero Energy Corp. Refiners in Texas and Louisiana also have been buying Russian oil products. Recently, 1.5 million barrels from the Black and Baltic seas landed in the Gulf region. The quantity was substantial enough to cut prices at the Houston Ship Channel by 3 percent.

Canada remains the largest foreign oil supplier to the United States, accounting for about half of U.S. imports.

Keystone XL vs. Nord Stream 2

On his first day in office, President Joe Biden canceled a presidential permit for the construction of the Keystone XL pipeline from Canada to the United States. Mineral fuels are Canada’s largest export to the United States totaling over $89 billion in 2019 — two-thirds more important than auto vehicles and parts. Almost 3,000 direct jobs and another 14,000 indirect jobs were lost to Canada, as well as thousands of direct and indirect jobs in the United States, due to the cancellation of Keystone XL. Because of reduced pipeline capacity, Canadian heavy oil will sell at a discount, resulting in billions of dollars in lost GDP and federal and provincial tax revenues for Canada.

It is well-known that pipelines are the safest form of shipment for oil, which will still be produced in Canada and travel by rail—a less safe method, producing more emissions than pipelines. The cancelation of the Keystone XL also means that the United States will need to import more heavy oil from other countries, such as Russia. Instead of benefiting Russia, Keystone XL would have benefited the United States and our closest ally. Keystone XL would have not only supplied Gulf refineries with 830,000 barrels per day (730,000 Canada, 100,000 North Dakota Bakken) but also would have lifted prices paid to Canadian producers, encouraging new investments (and further pipelines) to tap Canada’s second-largest in the world proven reserves.

President Biden is treating a European pipeline, the Nord Stream 2, very differently than the Keystone XL. Nord Stream 2 is a natural gas pipeline from Russia to Germany, on whose construction the United States had placed sanctions. Despite bipartisan support for the sanctions on Russia against Nord Stream 2, President Biden weakened those sanctions, which will secure the pipeline’s completion. The Biden administration waived sanctions on the corporate entity (Nord Stream 2 AG) and its CEO (Putin friend and former East German intelligence officer Matthias Warnig) overseeing the construction of Russia’s Nord Stream 2 pipeline into Germany.

Germans want the less expensive natural gas coming from the Nord Stream 2 rather than the more expensive LNG. Countries like Poland are willing to pay a premium for LNG to avoid Russian gas, even if they are significantly less wealthy than Germany. While Nord Stream 2 will provide cheaper energy, it will deepen European dependence on Russian gas, forcing buying countries to be beholden to Putin for gas that is currently piped via Ukraine. In the past, Russia has cut off natural gas supplies to Ukraine as retribution in disputes. Bypassing Ukraine with a direct pipeline to Germany helps Russia advance its goal of isolating its former client state, now a struggling democracy, from Western Europe. It also equates to enormous sums of revenue for Russia.

Biden’s Other Anti-U.S. Oil and Gas Actions

President Biden released an executive order in January to halt drilling on non-tribal federal lands pending a review of the federal oil and gas leasing program. Biden also set a goal of protecting 30 percent of federal land and water from future drilling by 2030, which equates to 738 million acres of the total 2.46 billion acres owned by the public. He ordered federal agencies to eliminate fossil fuel subsidies “and identify new opportunities to spur innovation.” Removing the tax deductions that fossil fuel companies receive, which are not subsidies, will purportedly help pay for Mr. Biden’s climate change agenda.

Biden also put a moratorium on oil and gas leasing in Alaska’s Arctic National Wildlife Refuge, reversing Congressional action taken in 2017 to begin leasing in the area. Biden signed an executive order placing a temporary moratorium on oil and gas activity in the refuge on January 20, 2021, one day after the Trump administration issued nine oil and gas leases in its coastal plain. ANWR is estimated to contain 10.4 billion barrels of oil, according to U.S. Geological Survey, and could help the state’s revenues as oil production is the largest contributor to the state’s economy. Alaska’s oil production is now at its lowest level in 40 years, which threatens the operation of the Trans-Alaskan Pipeline System (TAPS) that transports crude oil from the North Slope of Alaska to Valdez on Alaska’s southern coast. TAPS at one time delivered 2 million barrels per day to the West Coast and is now transporting about 20 percent of its capacity.

Conclusion

President Biden appears to have a more positive view of OPEC and Russian energy enterprises than of North American energy enterprises. On August 11, Biden’s National Security Advisor Jake Sullivan wrote in an open statement, “Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery.”

Biden’s treatment of Nord Stream 2 and his endorsement of OPEC+ production increases are very different from his treatment of the Keystone XL pipeline and of U.S. producers. Biden is treating a pipeline that increases Russian influence and revenues better than one that would enhance America’s energy security, jobs and revenues and that of its northern neighbor.

Russia is also benefiting from supplying U.S. refiners with heavy oil, becoming the second-largest supplier of oil and petroleum products to the United States, behind Canada. Russian feedstock is functioning as a substitute for the heavy oil that was once supplied by Venezuela or the Middle East and could be supplied by Canada. The United States should promote North American energy sources rather than depend on less reliable foreign imports, and particularly those from Russia.

*This article was adapted from content originally published by the Institute for Energy Research.

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Key Vote YES on Amendments 3104 and 3105

August 10, 2021 by Leave a Comment

The American Energy Alliance urges all Senators to support amendments 3104 and 3105 to S.Con.Res. 14.

The Biden administration’s oil and gas leasing ban on federal lands has already been ruled illegal. Leasing must be reinstated immediately according to existing law and long-standing practice.

The EPA, state regulators and independent researchers have repeatedly over the years studied the environmental effect of hydraulic fracturing. The clear conclusion from all these studies is that the process is not dangerous. It should be made clear that EPA has no jurisdiction to attempt a ban or limitation on this process.

The AEA urges all members to support free markets and affordable energy by voting YES on Amendments 3104 and 3105.  AEA will include these votes in its American Energy Scorecard.

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Key Vote NO on Cloture on the Substitute Amendment

August 7, 2021 by Leave a Comment

The American Energy Alliance urges all Senators to oppose cloture on the substitute amendment to H.R. 3684.

The substance of the amendment is poor policy and a bad use of taxpayer resources. The subsidies for electric vehicles and charging are not the responsibility of the federal government. The tens of billions of dollars for unneeded and impractical passenger rail will only fuel more wasteful white elephants to accompany California’s ongoing high-speed rail fiasco. The tens of billions of dollars more to mass transit systems whose ridership have collapsed is yet more waste. The tens of billions in subsidies for electricity transmission is simply not needed. The amendment also layers on billions in questionable spending in pursuit of central planning of energy.

But beyond the bad policy in the infrastructure proposal itself, the legislation is inextricably linked to the multi-trillion dollar inflationary budget that the administration hopes to see passed through reconciliation. While the contents of the reconciliation bill are still vague, the energy taxes and tariffs reported to be included would be a disaster for the American economy. Its provisions will drive up the cost of energy and goods throughout the country, turbo-charging already persistently high inflation and exacerbating the challenges posed by federal deficits. Because of the linkage of the two pieces of legislation, a vote for the bipartisan infrastructure bill makes passage of the inflation bill more likely. AEA therefore urges the Senate not to collude in raising energy prices for Americans.

The AEA urges all members to support free markets and affordable energy by voting NO on cloture substitute to H.R. 3684.  AEA will include this vote in its American Energy Scorecard.

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Biden’s “Infrastructure” Bill Advances Green New Deal Provisions

August 6, 2021 by 1 Comment

Climate change central planning is found throughout the 2,700-plus page infrastructure bill that President Biden is touting as bipartisan. The Senate bill uses central planning to re-engineer the electric grid and to eliminate carbon from the U.S. economy by offering large subsidies. There is $21.5 billion to create the Energy Department’s new Office of Clean Energy Demonstrations, which will provide for Secretary Granholm’s green-energy venture-capital fund. This funding should bring to mind the Obama Administration programs that funded with tax dollars companies that failed including Solyndra, A123 Systems, Fisker Automotive and other solar manufacturers. Granholm’s fund includes $2.4 billion for advanced nuclear reactor projects, $3.5 billion for carbon capture, $8 billion for “clean hydrogen” and $5 billion for projects that “demonstrate innovative approaches to transmission, storage, and distribution infrastructure to harden and enhance resilience and reliability.”

Ms. Granholm is also charged with creating a “smart” and “clean” grid that provides reliable electricity despite heavily federally subsidized, inherently intermittent renewable energy. The grid is the job of regional authorities, which coordinate wholesale markets with states and utilities—not the Feds. In addition to providing $9 billion for grid-balancing technologies, the bill “loans” the Department of Energy (DOE) $2.5 billion to enter “capacity contracts” with transmission developers that will backstop their projects if there is insufficient demand for renewable energy. The bill also allows DOE to designate “national interest electric transmission corridors” where there are constraints in delivering excess renewable energy to markets, which will allow the Federal Energy Regulatory Commission to overrule states on power lines and their placement.

Transportation Secretary Buttigieg would receive $7.5 billion to rollout a national electric-vehicle charging network. The bill instructs Buttigieg’s Department of Transportation to finance chargers that “meet current or anticipated market demands” and “would be unlikely to be completed without Federal assistance.” Some politicians believe that building more chargers in low-income areas will encourage additional electric vehicle sales, despite no data documenting their belief. Faster chargers in denser population areas may also require grid capacity to be upgraded and could strain power supply, as was demonstrated in California, where electric vehicle owners were asked during heat waves to not charge their vehicles in the evenings when the sun goes down.

The infrastructure bill is also riddled with corporate welfare. United Airlines is investing in flying electric taxis, which will be eligible for federal loan guarantees. Kenworth and Toyota are rolling out hydrogen-powered trucks to transport freight. Exxon Mobil may receive funds for its experimental green technology program.

Funding for Disasters

The bill contains tens of billions of tax dollars that would be allocated against natural occurrences such as floods, wildfires, and drought, under the premise that they are climate-related. The bill covers the development of new sources of drinking water in areas where there is drought and it even funds the relocation of entire communities away from places that may be deemed vulnerable.

The Army Corps of Engineers would get an additional $11.6 billion in construction funds for projects such as flood control and river dredging, which is more than four times the amount the Corps received last year for construction. The Federal Emergency Management Agency (FEMA)’s annual budget for a program that buys or elevates homes at risk from floods would more than triple to $700 million. Some of that money is designated for homeowners in areas considered especially vulnerable because of socioeconomic factors, including areas that house racial minorities. FEMA would also get an extra $1 billion for a grant program that is supposed to protect communities against all types of disasters, and another $733 million to make dams safer.

The National Oceanic and Atmospheric Administration would get almost $100 million a year to help restore coastal habitats and protect coastal communities—five times what the program currently spends. The Bureau of Reclamation, which manages water supplies in the West, now gets $20 million a year for desalination projects, which remove minerals and salts from seawater to create freshwater, which would increase to $250 million over five years. It currently receives $65 million for water recycling that would increase to $1 billion for treating wastewater to make it available for new uses such as irrigation.

Other funding in the legislation would be directed toward new programs. The bill would give the Department of Agriculture $500 million for “wildfire defense grants to at-risk communities”—money that is supposed to help people make changes to their homes or landscape to make them less vulnerable to fire or other disasters. Other programs would not just fortify homes and facilities against disasters, but move them elsewhere.

The Department of Transportation would get almost $9 billion for a program to help states prepare highways for the effects of “climate change”—including relocating roads out of flood-prone areas. The Environmental Protection Agency would pay for communities to move drinking water pipelines and treatment facilities at risk from flooding or other extreme weather. Funding in the legislation would be available to move entire communities. The bill would provide $216 million to the Bureau of Indian Affairs for climate resilience and adaptation for tribal nations. More than half of that money, $130 million, would go toward “community relocation.”

Where is the Money Coming From?

Supporters of the bill indicate that the bill is “fully paid for.” But the bill’s text and analyses of it dispute that point. One source of funding for a multi-billion-dollar offset is to come from the improved recovery of fraudulent pandemic unemployment benefit payments, which some have estimated could total $400 billion or more. News accounts suggest as much as $50 billion in savings might be found by better recovery of those misspent funds, but there is no policy in the bill for obtaining it.

Another source is supposed to be $53 billion from “savings” from states ending federal pandemic unemployment benefits sooner than expected. That provision is linked to “findings” language buried in the massive bill, which are typically statements of opinion without legislative or legal effect. The supposed savings, however, have “already occurred”, according to the nonpartisan Committee for a Responsible Federal Budget (CRFB).

Congress passed three major laws creating and subsequently extending pandemic unemployment benefits: the March 2020 CARES Act, which the Congressional Budget Office projected would provide $268 billion in benefits; the December 2020 Consolidated Appropriations Act, which was expected to add another $119 billion; and the March 2021 American Rescue Plan, which was estimated to add another $205 billion. Taking $53 billion off the total results in $539 billion. The latest Department of Labor tally of actual spending on those federal benefits through July 31, 2021 shows almost $630 billion spent on these temporary federal programs with over a month to go on the program. That is almost $90 billion more in deficit spending than the Congressional Budget Office projected in its three estimates.

The missing policies indicate that less than half of the bill’s overall costs are offset, according to CRFB. Offsets are running around $250 billion, which compares to $540 billion in new spending in the legislation. In fact, the Congressional Budget Office reported on August 5, 2021, that the bipartisan infrastructure bill would add more than $250 billion to the federal deficit over the next decade, confirming the above analyses that the massive legislation would not fully pay for itself.

Conclusion

Supposedly the Senate already has the votes to pass the bill and may even have 10 more than the 60 votes needed. From funding new endeavors like the ones that have failed under the Obama Administration—to funding relocations from areas that have for centuries had the risk of wildfires, drought and floods—the bill is using tax dollars to fund corporate welfare and, in some cases, the rich under the guise of benefitting racial minorities. The money for the bill is supposed to be offset from other programs, but the analyses above show that not to be true.

The expansive nature of the bill can be seen from a provision that would require auto manufacturers to equip “advanced alcohol monitoring systems” in all new cars. The section titled, “ADVANCED IMPAIRED DRIVING TECHNOLOGY,” mandates new vehicles include “a system that … passively and accurately detect[s] whether the blood alcohol concentration of a driver of a motor vehicle is equal to or greater than the blood alcohol concentration” of .08, in which case the system would “prevent or limit motor vehicle operation.” Automobile manufacturers would have a three-year grace period to comply with the regulation.

Instead of an infrastructure bill, the product represents the old Washington, D.C., approach of distributing pork sufficient to buy votes of enough Senators to enable its passage. With a Budget Reconciliation Package estimated at more than $3.5 trillion waiting in the wings and expected to follow the trail blazed by this bill, Americans are paying for a very expensive fundamental transformation of the country, including the reliability and availability of our basic energy necessary for life.

*This article was adapted from content originally published by the Institute for Energy Research.

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