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It’s Time for the Wind Industry to Grow Up

August 6, 2020 by 1 Comment

There comes a point in every person’s life when they have to face the realities of the adult world. In 21st century America the age at which that point comes seems to be extending further past the age of legal adulthood each year, leaving a generation in a state of perpetual adolescence—with their parents footing the bill.

Something similar has taken place concurrently in American energy policy. Birthed in 1992, the Production Tax Credit (PTC) for wind that was intended only to get a young industry up on its feet has now been extended a dozen times. 

The production tax credit provides wind energy facilities with a tax break for the first 10 years of operation. In 2013, the production tax credit for wind generation was 2.3 cents per kilowatt-hour for the first 10 years of production, with adjustments for inflation. Under the phase-out of the credit approved by Congress, the tax credit decreased by 20 percent per year from 2017 through 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended the production tax credit for facilities beginning construction during 2020 at a rate of 60 percent—higher than the 40 percent rate for 2019. Currently, wind energy facilities that begin construction after the end of 2020 cannot claim the credit, although they will still be required to be built by state mandates referred to as “renewable portfolio standards.”

No Expansion, No Extension

  • The U.S. Treasury estimates that the Production Tax Credit will cost taxpayers $40.12 billion from 2018 to 2027, making it the most expensive energy subsidy under current tax law.
  • The tax credit fundamentally distorts markets and strains the grid in ways that are economically unsustainable.
  • Backup costs (i.e., the costs of maintaining backup electricity 24/7 to compensate for wind’s intermittency) are not included in estimations of the cost of wind power, leading to gross underestimation of the costs of the energy wind produces.
  • Countries like Germany and Great Britain have bet big on wind power and have foisted higher residential electricity prices on their citizens as a result.
  • If wind power makes sense, the free market will support it without the need for subsidies like the PTC and state renewable energy mandates. 

The Wind Industry Can No Longer Have It Both Ways

The PTC gives wind power producers a path to profitability, even when a fair market would not. It effectively pays wind power producers for energy regardless of that energy’s value to the grid and to energy users. Now nearly 30 years since it was introduced, the PTC continues to coddle an industry that has promised time and again that’s it’s almost ready to move out of the house. Much like America’s perpetual adolescents who pound their chests to assert manhood while awaiting mom-and-dad’s direct deposit, the wind industry assures us it is out-competing other forms of electricity while still lobbying for another round of handouts. 

As described by Kenny Stein for the Institute for Energy Research:

We’ve been hearing a lot lately about the economics of wind energy. In a recent earnings call, James Robo, CEO of NextEra Energy, predicted that within a decade the cost of wind generation would be more competitive “without incentives” than conventional sources like coal and natural gas. NextEra is one of the largest generators of wind and solar electricity.

Tom Kiernan, CEO of the American Wind Energy Association (AWEA), the $18 million lobbying arm of the wind industry, stated in 2016 that “wind is now the cheapest source of new electric generating capacity” in many parts of the United States. Kiernan is also fond of saying that the wind industry is getting out of the federal subsidy business altogether because of a provision in the PATH Act of 2015 that gradually phases down the industry’s main federal subsidy, known as the Production Tax Credit (PTC). In an interview defending the PTC from being modified in the recent tax reform law, Kiernan implied that the industry will no longer be receiving the federal subsidy because “we made a deal to drop our tax credit to zero over five years.” Tom is right, the subsidy phases down, but a closer look at the mechanics of the PTC shows that the wind industry will still be receiving billions in federal subsidies well beyond 2020.

It’s time to close the book on the PTC and nudge the wind industry out into the real world.

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Abusing the Process for Politics

August 4, 2020 by Leave a Comment

At the end of June, the Pennsylvania Attorney General announced with great fanfare the result of a statewide grand jury report on the oil and gas industry in the state.  Attorney General Josh Shapiro presented the report as some sort of courageous truth-seeking endeavor.  But in reality, the report is the culmination of a two-year, taxpayer-funded fishing expedition designed to libel the Pennsylvania oil and gas industry, an abuse of the state grand jury process for the transparent purpose of boosting the Attorney General’s green political credentials.  Rather than praised, Shapiro should be condemned.  His abuse of process clearly highlights the way that unscrupulous or self-interested officials can hijack the Pennsylvania statewide grand jury system.  

The statewide grand jury process in Pennsylvania has long been criticized for its serious due process failures.  In most states, grand juries simply have the power to investigate criminal allegations.  In Pennsylvania, however, grand juries have the additional ability to pursue a wide-ranging investigation into any issue deemed vaguely in the public interest.  In such a case the grand jury issues a report that summarizes the findings and recommendations of the grand jury.  Such a report is compiled in secret, directed by prosecutors on their own recognizance, and the report is made public as if it is an official government document, even if the claims contained within it are distorted or completely unfounded.  The targets of such an investigation have no opportunity to respond, as they would in court. The potential for abuse here should be obvious.  Indeed just last year a task force convened by the Pennsylvania Supreme Court recommended ended the practice of grand jury reports.

Even beyond the well-known due process concerns, this report on the state oil and gas industry exposes further deficiencies in the statewide grand jury process.  A grand jury is simply a collection of random individuals.  They are not issue-area experts, not scientists or specialists with the knowledge that helps them understand the issues they are investigating.  The grand jury only knows what the prosecutor chooses to tell them and only hears testimony from those the prosecutor chooses to call.  In the hands of a biased prosecutor, this limitation is easily exploited, as it was in the case of this report.  The grand jurors heard from a parade of individuals claiming various illnesses or land contamination from oil and gas operations, but all purely anecdotal and often unsubstantiated.  A panel with oil and gas expertise would have been aware that claims of health and water issues from hydraulic fracturing have been made for decades and no investigation has substantiated a systematic connection.  For example, even the Obama administration EPA, no friend to the oil and gas industry, found no widespread adverse water impacts from fracturing.  The report is filled with many such factual errors or omissions.

The further deficiency of the grand jury report process is clear from the preposterous nature of the report’s eight recommendations, which again highlight how a group of random citizens are entirely unprepared to conduct specialized investigations.  The first recommendation is requiring drilling setbacks of 2,500 feet or more from occupied buildings.  But an even slightly informed grand jury would know that this “recommendation” is effectively a ban on drilling in the state of Pennsylvania, given that the vast majority of this fairly densely populated state would become off-limits.  Another recommendation calls for the reporting of chemicals used in hydraulic fracturing, but an informed grand jury would have known that this is already required.  The report is so transparently biased that even the state Department of Environmental Protection was moved to draft an extensive criticism of the report’s errors of fact and law.  And this is a DEP that is run by the state’s Democratic governor.

While the random citizens of the grand jury can be excused for their lack of knowledge of law and fact, the Attorney General should not be.  It is clear from the report that AG Shapiro convened this grand jury specifically for the purposes of libeling the oil and gas industry.  The information presented to the grand jurors was one-sided and full of questionable allegations designed to paint the oil and gas industry as evil.  The recommendations included in the grand jury report also just happen to match many of the demands that extreme environmentalist groups promote across the country (for example the setback recommendation mirrored a ballot proposal defeated in Colorado in 2018).  What a coincidence that this “impartial” grand jury reached exactly the conclusions that extreme left-wing activists share.

But of course, it is not a coincidence.  This was a political exercise.  AG Shapiro seeks to use this grand jury report to burnish his green credentials to curry favor with powerful environmentalist groups and billionaires in the hopes of getting their money and support in his pursuit of the governor’s mansion.  Shapiro hijacked this grand jury to boost his career and help with political fundraising.  The state meanwhile is left footing the bill for this fishing expedition and the oil and gas industry has to try to defend itself from the report’s baseless claims in the court of public opinion.

Whatever the theoretical value of a statewide grand jury investigation, this sordid incident exposes the danger of the process in unscrupulous hands.  That the process can so easily be manipulated and used to attack political enemies of the Attorney General should be a blaring alarm demanding reform or outright abolition of this sort of non-criminal report.  In the meantime, this “report” should be seen for what it really is: Attorney General Shapiro’s campaign platform for the governor’s race, and its veracity and factual value discounted accordingly.

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On American Energy Dominance, the Numbers Speak for Themselves

July 31, 2020 by Leave a Comment

From the Permian Basin on July 29, President Trump proudly recounted his best energy decisions and the achievements of industry that have followed. His highlights included:

  • Withdrawal from the Paris Agreement
  • Cancellation of the Clean Power Plan
  • Approval of Keystone XL and Dakota Access pipelines
  • Opening up of ANWR
  • Ending the moratorium on coal leasing on federal lands
  • Doubling of Permian oil and gas production
  • Increase of oil production by 3 million barrels per day
  • Achieved net energy export status
  • Topped global oil and gas production rankings

The list is so spectacular that some will wonder if the claims stand up to scrutiny.

Rest assured, they do. 

Over the course of his first term, Trump has presided over the maturation of an industry that has always brimmed with potential, yet has been held back by government red tape. It is held back no longer. Trump’s energy dominance platform has given American businesses the confidence to harvest our bountiful resources and to produce the fuels that power our economy. The achievements meet the hype. 

The extraordinary rise of the Permian can be seen in this Energy Information Administration data visualization. Despite the effects of the pandemic on demand, the Permian is pumping out about 4 million barrels of oil per day this summer compared to around 2 million barrels per day in 2016. Permian gas numbers are just as stellar, showing an increase from 6 billion cubic feet per day in 2016 to over 15 billion cubic feet today. National oil production numbers can be seen here, showing U.S. field production of crude oil climbing from 8.8 million barrels per day in 2016 to over 12 million in 2019. Global rankings on oil can be found here and for gas here, attesting to American energy dominance.

Notably, the Trump administration has exercised discipline when needed, resisting the calls early in the coronavirus pandemic to raise new import tariffs. The Trump energy dominance platform has struck the proper balance between government table-setting and private enterprise. Examples like Double Eagle—who hosted President Trump in Midland—abound in the Trump era. The approach is fundamentally about markets, rather than mandates. This stands in contrast to the energy policies of Trump’s predecessor in the Oval Office and to his 2020 challenger from the Democratic Party, Joe Biden, who would take the wheel from industry and steer America in his politically-preferred direction.

Key aspects of the Trump energy renaissance have been the continued expansion of fracking and access to federal lands and waters—both of which Biden would end.

A federal ban on new fracking—which Biden has endorsed—would shut the door on Trump-era energy dominance and its economic and geopolitical benefits. A new fracking ban would seriously harm the production of natural gas—the single largest source of generation in the power sector and a newfound foreign policy tool.

Biden also supports a ban on all new oil and gas permitting on federal lands and waters. According to a study by the Chamber of Commerce, a ban on new drilling leases would reduce revenues by $6 billion nationally over the next 15 years and eliminate 270,000 U.S. jobs. The United States owns 2.46 billion acres of mineral estate between the onshore and offshore areas. This total area is larger than the entire U.S. landmass and would alone make the U.S. the world’s third largest country by area. It’s an asset the Trump administration has aimed to elevate.

According to another study by the National Ocean Industries Association, banning all new oil and gas permitting in federal waters would cost almost 200,000 jobs, deny the U.S. government billions of revenue dollars, and push offshore production to other countries. While this harm would be concentrated most intensely in energy powerhouses like Texas and Louisiana, no state in the Union would go unscathed. All 50 states have benefited from the Trump energy dominance platform and would be hurt by a Biden power grab.

The U.S. energy production boom has not only boosted the welfare of Americans, but has provided citizens of countries across the globe with affordable, reliable energy. For the first time since the 1950s the United States is a net energy exporter. By pipeline and rail here in North America and now through the transoceanic shipment of liquefied natural gas, U.S. exports are thriving and provide a needed counterweight to the export capacity and geopolitical pull of adversarial regimes.

To that end, Trump announced in Midland that export authorization for liquefied natural gas will be extended to 2050. Other announcements included permits for NuStar Logistics and for The Kansas City Southern Railroad Company to construct and operate facilities at the southern border, as well as for TransCanada Keystone Pipeline at the northern border. (The Keystone permit raises the cross-border shipping limit for the TC Energy Corp. line to 760,000 barrels a day, from 590,000 under a previous presidential permit.)

In the first Trump term, America has truly blossomed as an energy superpower, but there is still more room for growth. The United States has been blessed with a cornucopia of energy resources, it has a legal framework that facilitates entrepreneurship and innovation, and has the potential to serve as world leader in energy long into the future. America’s energy resources are one of our best assets and the Trump energy dominance platform has allowed that promise to be realized.

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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“Party of Science” Ignores the Facts

July 31, 2020 by Leave a Comment

Along with other topics in his bunker reports, Joe Biden weighed in on President Trump’s prophylactic use of hydroxychloroquine.  “It’s like saying maybe if you inject Clorox into your blood it may cure you.”

“Hydroxychloroquine” does contain all the letters in “Clorox,” but no serious medical person would equate the two.  And though there are studies that fail to find hydroxychloroquine to be effective in combating COVID19, there are others that do.  For example, the Henry Ford Health System recently published a peer-reviewed study of over 2,500 patients.  Dr. Steven Kalkanis, Chief Academic Officer of the Henry Ford Health System, said, “Our analysis shows that using hydroxychloroquine helped saves lives…the data here is clear that there was benefit to using the drug as a treatment for sick, hospitalized patients.”  Of course, one study does not end the debate and we may find that, indeed, hydroxychloroquine is an ineffective therapy for COVID19.  On the other hand, hydroxychloroquine may become a standard (and cheap) part of the COVID19-fighting toolbox.

What is strange is how views on the effectiveness of hydroxychloroquine have become a litmus test of support or opposition to the president.  This creates roadblocks to scientific analysis of COVID19 therapies.  By ridiculing the president’s use of the drug, Senator Biden helped politicize what should be a scientific debate.  Unfortunately, politicizing science is evident in candidate Biden’s approach to climate change as well.

The co-chairs of Biden’s Climate Advisory Panel, John Kerry and Alexandria Ocasio-Cortez, are Washington political operatives of the highest order.  However, they are deeply unserious when it comes to climate science and climate policy.

Though John Kerry is a well-known political actor on the climate-change stage, few people have made it clearer they know so little about climate science.  Perhaps his most famous climate sound bite equated climate change to a weapon of mass destruction.  It was a well-reported part of a talk in Jakarta.  What was not well-reported at all from that speech, was his totally fantastic description of climate science.  His phenomenally condescending science lecture was total nonsense.  His description of greenhouse gasses in the atmosphere was, “Try and picture a very thin layer of gases – a quarter-inch, half an inch, somewhere in that vicinity – that’s how thick it is.  It’s in our atmosphere.  It’s way up there at the edge of the atmosphere.”  Ignoring all evidence of ice ages, he also asserted, “And for millions of years – literally millions of years – we know that layer has acted like a thermal blanket for the planet – trapping the sun’s heat and warming the surface of the Earth to the ideal, life-sustaining temperature.  Average temperature of the Earth has been about 57 degrees Fahrenheit.”

Like so many who claim to believe in science, he appears to know very little of it, especially with regard to climate.  When politics is the overarching concern, it seems science does not really matter.

Co-chair Alexandria Ocasio-Cortez famously said the world would end in 12 years if we did not take dramatic action to stop climate change.  (She also said the quote was taken out of context.  The audience did not seem to think it was out of context.  You be the judge. See it here.)  In any event, her solution was the Green New Deal.

Whether the 12-year statement was idiocy, a scare tactic or just AOC hyperbole, the Green New Deal was not primarily about climate anyway.  Her then chief of staff, Saikat Chakrabarti, said “it wasn’t originally a climate thing at all … we really think of it as a how-do-you-change-the-entire-economy thing.”

This is the standard DC practice.  Hitch your special-interest policy wish-list to a perceived crisis.  Work to hype the severity of the crisis requiring the changes in policy you seek. The change-the-entire-economy-thing comes through loud and clear.

Here are some provisions of the Green New Deal that have sketchy (at best) connections to global warming, but long-running connections to the progressive agenda:

  • “strengthening and protecting the right of all workers to organize, unionize, and collectively bargain free of coercion, intimidation, and harassment”
  • “guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States”
  • “strengthening and enforcing labor, workplace health and safety, anti-discrimination, and wage and hour standards across all employers, industries, and sectors”
  • “directing investments to spur economic development, deepen and diversify industry and business in local and regional economies, and build wealth and community ownership” (emphasis added)

Plus, provisions for healthcare and antitrust.

A debate on the best way to free workers from coercion (from both sides) during labor organizing battles is certainly worth having, but it is not a climate issue.  Similarly, growing the income, wealth, and economic security for all Americans is a great goal, one on which record-making progress was being made immediately before the COVID pandemic.  However, it is not a climate topic either.

The fourth bullet might be the most worrisome.  The innocuous-sounding imperative to “direct investments” is a clear call for industrial policy where government does what it does worst—picks winners and losers.  For example, the Green New Deal explicitly calls for government financing for high-speed rail, just as the last government-financed high-speed rail project, the California bullet train, is drowning in cost overruns and is being drastically reduced in scope.  True to form, the loudest voices for continuing the high speed train are the firms and companies and politicians who are all in on the gravy train. Widely regarded as a fiasco, it has become a poster child for waste.  Do not worry rail fans, the Green New Deal is ready to double down on picking losers.  Biden is ready to shovel the money into the high-speed rail abyss, too.  This excites some politicians, most of whom know little about winning in the marketplace, but who are all-in when it comes to doling out political favors from which they accrue political points, the coin of the political realm.

Abusing a crisis (real or perceived) for political advantage is an old and sorry story.  So much so that Rahm Emanuel’s adage, “Never let a serious crisis go to waste,” has become a sort of DC mantra.  Good politics, maybe, but it leads to crummy policy.  That Biden’s Climate Task Force has taken it to heart is a bad omen for what we might see in a Biden administration.

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

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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Biden Would Gift China American Energy Insecurity

July 29, 2020 by Leave a Comment

While pipelines in the United States face increasingly hostile legal challenges, China is seeing the importance of a national oil and natural gas pipeline network and is buying pipelines and storage facilities valued at 391.4 billion yuan ($55.9 billion). PipeChina was created in December 2019 to consolidate pipeline assets from the country’s state-owned oil and gas companies, as part of China’s reforms to incentivize domestic exploration and production. 

Newly created PipeChina, known formally as China Oil and Gas Pipeline Network, is taking over oil and gas pipelines and storage facilities from state-owned companies, PetroChina and Sinopec, in return for cash and equity in the pipeline company worth almost $56 billion. PipeChina was created to provide neutral access to China’s pipeline infrastructure to help small and non-state-owned companies, encourage investment, improve efficiency, and help China meet its energy needs. The deals are expected to be completed and PipeChina to be operating by the end of September.

Bakken Oil Pipeline Projects

Pipeline projects in the United States that were slated for startup in 2021 are facing huge challenges from uncertain demand, lengthy court battles, and regulatory review. While some projects already under construction are moving forward, it is estimated by ESAI Energy’s North America Watch that 2.7 million barrels per day of new takeaway will be postponed.  

First, there is the potential loss of the 570,000 barrel per day Dakota Access Pipeline and its planned expansion due to an issue with environmental permitting. Early in July a DC-based judge ruled that the pipeline needed to be shut down and emptied while a new environmental analysis be performed despite the pipeline operating without mishap for three years. The closure, if appeals fail, will cause bottlenecks as other pipelines fill up, resulting in more dependency on rail and weaker prices for Bakken crude, which had already been adversely impacted due to the lockdown from COVID-19.

Other pipelines affecting Bakken output are the 350,000 barrel per day Liberty pipeline that was deferred in March due to deteriorating economic conditions resulting from COVID-19 and the Tesoro High Plains pipeline that was ordered to shut down for the first time in its 67 years of operation. The Dakota Access pipeline and the Tesoro High Plains pipeline together ship more than one-third of crude from the Bakken shale formation to market. The Tesoro High Plains pipeline delivers oil to Marathon Petroleum Corp.’s 74,000 barrel-a-day Mandan refinery. The Bureau of Indian Affairs determined the pipeline was trespassing on Native American land and found the company responsible for $187 million in damages. The lack of pipeline takeaway from North Dakota is expected to result in an increase in crude-by-rail of 300,000 to 350,000 barrels per day. 

Due to these pipeline problems, some curtailed Bakken production may not be brought back, with expected production declining by about 270,000 barrels per day in 2020 and by a further 65,000 barrels per day in 2021. As a result, capital is likely to be diverted to other basins that have better access to markets. 

Other U.S. Pipeline Issues and Fatalities

Recently, Dominion Energy and its partner Duke Energy announced they were no longer moving forward with their $8 billion Atlantic Coast natural gas pipeline after years of delays and escalating costs. The Atlantic Coast pipeline would have transported natural gas 600 miles through West Virginia, Virginia, and North Carolina. The two companies had invested a combined $3.4 billion in the pipeline to date. Just five months before, Williams Co. canceled its Constitution natural gas pipeline after failing several times to obtain a water permit from New York State.

The Keystone XL pipeline also has a permitting issue, which is related to a U.S. Army Corps of Engineers’ permitting program, known as Nationwide 12, which allowed gas and oil pipelines to traverse wetlands and bodies of water. A May 15 ruling from a federal judge in Montana cancelled the use of the permit for Keystone XL, ruling that the U.S. Army Corps of Engineers failed to adequately consider effects on endangered species.

On top of these existing challenges, presumptive Democratic Party presidential nominee Joe Biden’s energy and environment advisor Alexandria Ocasio Cortez has introduced an amendment to block the U.S. Army Corps from using federal funding to issue permits under Section 404 of the Clean Water Act for “the discharge of dredged or fill material resulting from an activity to construct a pipeline for the transportation of oil or gas.” That would prevent the Army Corps from constructing, repairing or working on about 8,000 projects each year involving oil and gas pipelines that cross waterways.

Conclusion

China has recognized the necessity for an efficient and accessible pipeline network to further its expansion of oil and natural gas and provide its economy with abundant energy. In the United States meanwhile, environmental activists and their political allies—including an advisor to presidential candidate Joe Biden—want to keep fossil fuels in the ground and are using pipeline obstruction as the means to do so, filing legal suits that prompt the halting of pipeline operation and construction and even introducing legislation to block pipeline permits altogether.  

Abundant and low-cost oil and gas are important to our nation’s recovery from the coronavirus economic lockdowns, but a Biden administration would turn away from those energy sources. Biden has vowed to steer the economy toward intermittent sources of energy and to revoke the permit for the Keystone XL pipeline that President Trump granted in 2017. As a result, more companies could follow Dominion and Duke and shy away from building new oil and gas infrastructure.

Right now, it appears that China is taking energy very seriously and investing in pipeline infrastructure for the future. In the United States, antipathy toward oil and gas has drowned out the science that shows pipelines to be safe and environmentally sound.

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

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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Biden Unveils Job Destroying Climate Plan

July 27, 2020 by 1 Comment

According to presidential candidate Joe Biden’s website:

“We need millions of construction, skilled trades, and engineering workers to build a new American infrastructure and clean energy economy. These jobs will create pathways for young people and for older workers shifting to new professions, and for people from all backgrounds and all communities. Their work will improve air quality for our children, increase the comfort of our homes, and make our businesses more competitive. The investments will make sure the communities who have suffered the most from pollution are first to benefit — including low-income rural and urban communities, communities of color, and Native communities. And, Biden’s plan will empower workers to organize unions and bargain collectively with their employers as they rebuild the middle class and a more sustainable future.”

Biden’s $2 trillion plan promises to massively raise taxes; eliminate jobs in the coal, oil. and natural gas and construction industries; and raise energy prices. Biden is pushing extreme policies that would severely hurt the economy when it is recovering from the coronavirus pandemic. Biden’s plan to mandate a transition from gas-fired power to renewable energy will hasten the decline of union jobs and add to the strife the industry is already feeling due to the pandemic.

The Energy Job Market

Biden’s proposed transition from oil and gas to renewable energy would result in lower pay for blue-collar workers and possibly lower benefits as well. According to data from the Bureau of Labor Statistics for May 2019, the average annual pay for gas and oil extraction workers was $96,600—twice that for solar panel installers ($46,850) and almost 60 percent higher than the average salary for a wind turbine technician ($61,270). Further, workers who have completed an apprentice program or otherwise dedicated years of their lives in a profession do not want to see their skill sets devalued or be thrown into junior positions in a new occupation. Laid-off workers will not be able to immediately find a new job at the same wage, but will likely spend a significant amount of time searching for work, and will most likely need to accept a lower wage in the new job market.

Further, new jobs may not be available where workers currently live, requiring them to relocate. Workers, who may own a home and have raised a family near a current job, may not want to upend their careers. And, those who are near the end of their careers would probably have difficulty transitioning to something so different than their current occupations. For those facing major industry upheavals, the path to a new career is often unclear and the outcome uncertain. While this applies for all job-changers, it becomes especially acute for those presented with a government embargo on their chosen field of work deliberately. This is precisely what Joe Biden’s plans to phase out the U.S.’s predominant fuels.

Biden’s promise of union jobs is also unrealistic since the renewable energy sector largely lacks union representation. According to a January 2017 report by the U.S. Department of Energy, only 3.4 percent of solar photovoltaic workers were unionized and only 4 percent of workers in wind power generation were unionized, compared to a national workplace average of 11 percent.

Along with losing high-paying jobs, keeping conventional fuels in the ground in the United States would amount to giving up billions of dollars in annual oil and gas exports along with related jobs and tax revenue, as well as that economic and national security leverage such exports have only recently given us. Dozens of states from Appalachia to the Gulf Coast to the Rocky Mountain region are critically dependent on fossil energy for jobs and for state and local tax revenues.

Even if the United States were to remake its society, industry, and economy and even if the nation achieved 100-percent decarbonization, it would not accomplish the goal of limiting global warming to targets of 1.5 or 2 degrees Centigrade proposed by the Paris climate accord. Estimates using EPA-approved climate models suggest reductions of at most 0.14 degrees Centigrade by 2100 if U.S. greenhouse gas emissions are reduced immediately.

Further, nothing the United States does alone will slow the increase in greenhouse gas emissions. New coal-fired and natural gas-fired capacity by other countries would likely offset any carbon emission reductions achieved. Shutting down carbon emissions in the United States merely invites a proportional increase in emissions abroad.

Biden does not describe exactly how he would pay for the $2 trillion in new spending that he needs to kick-start his plan. Some of it, according to advisers, would be through stimulus funding, which would add to the growing federal deficit, and/or Biden may rescind the tax cuts pushed by President Trump and approved by Congress in 2017, and/or he may “ask the wealthiest Americans to pay their fair share.” Even if Biden wins the presidency, much of his climate plan would require legislation from Congress—a tall order even if Democrats take back the Senate and win the White House.

Conclusion

Retraining programs have been tried before and have not worked well due to lower salaries, less benefits, relocation complexities, and age issues. The retraining that Biden’s plan would entail would be enormous and difficult to implement especially when the economy is suffering from the devastation caused by the coronavirus pandemic. His promises of well-paying union jobs are just that—promises. Americans, especially those working in the energy industry, should carefully examine Biden’s plan, its costs, and its ramifications before endorsing it.

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

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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Joe Biden Would Cripple Energy Producing Swing States

July 24, 2020 by Leave a Comment

Presumptive Democratic Party presidential nominee Joe Biden’s oil and gas policies will kill jobs in energy-producing states and voters need to be aware—especially those reliant on those jobs and revenues. Biden has been outspoken in his opposition to the country’s role as the world’s top producer of oil and gas, endorsing a ban on new hydraulic fracturing and new oil and gas drilling on federal lands. Further, Biden referred to the need to address climate change as a “war-like situation” that requires the same kind of global response as the coronavirus pandemic. Biden supports action by Congress that would put a tax on oil, natural gas, and coal. “We have to act dramatically, boldly if we’re going to save lives in this country and around the world. I look at climate change in exactly the same way,” Biden said regarding the coronavirus pandemic.

Banning Hydraulic Fracking

Hydraulic fracturing is the practice of using water pressure to open tight shale rock formations allowing oil and natural gas to flow. The technology has brought considerable economic prosperity and jobs in energy-producing states and made the U.S. the largest oil and gas producer in the world. Fracking, combined with horizontal drilling, is used in 95 percent of the oil and gas wells drilled in the United States, so a ban would have immediate economic consequences in Pennsylvania, Ohio, Texas, New Mexico and North Dakota—to name just a few states. The result would be increasing energy costs, falling GDP, and increased oil imports that would be harmful to our national security. These would be dire consequences for the oil and gas industry and the country.

A federal ban on new fracking would bring an end to Trump-era energy dominance and its economic and geopolitical benefits. Domestic energy prices would increase and the environmental gains in the generating sector from natural gas use for electric generation—the single largest source of generation in the power sector—would be in jeopardy, relegating the sector to reliance on intermittent wind and solar power that cannot perform 24/7. To concretize this threat, consider the sophisticated, energy-dependent medical equipment needed by patients inflicted with COVID-19. This equipment and general operation of hospitals require reliable electricity, which is put at risk by the intermittent nature of wind and solar energy.

Biden also supports a ban on all new oil and gas permitting on federal lands and waters, which will affect many of these same states, hurting jobs, local and state revenues used to support schools, and other critical budget areas. According to a study by the Chamber of Commerce, a ban on new drilling leases would reduce revenues by $6 billion nationally over the next 15 years and eliminate 270,000 U.S. jobs.  The United States owns 2.46 billion acres of mineral estate between the onshore and offshore areas of the nation.  If this were all surface area, it would be the third-largest nation in the world, after Russia and Canada, and it is larger than the entire U.S. landmass.

According to another study by the National Ocean Industries Association, banning all new oil and gas permitting in federal waters would cost almost 200,000 jobs, deny the U.S. government billions of revenue dollars, and push offshore production to other countries. Despite almost all U.S. offshore drilling occurring in the western and central portions of the Gulf of Mexico, jobs that support the offshore oil and gas industry—which is capital-intensive and reliant on the manufacturing of associated equipment such as pipes, valves, and motors—are in nearly all 50 states.

The Oil and Gas Sector Is Already Hurting

The oil and gas sector is already reeling from the double whammy of lost demand caused by the worldwide spread of SARS-CoV-2 and the price war between Saudi Arabia and Russia. U.S. oil prices have fallen precipitously, even into negative territory for the first time in history. While they are now teetering around $40 a barrel, the price is still below the breakeven point for many shale wells. Despite the resiliency of many large U.S. oil and gas companies, smaller independents and the oilfield service companies that work for them are hurting financially with many filing for bankruptcy protection. Thousands of oil and gas workers have been laid off and are hoping to be rehired as the demand for oil returns during the economic recovery.

Conclusion

Biden’s energy and environmental policies will be detrimental to the U.S. economy and its energy security. He will essentially put the U.S. oil, natural gas, and coal industries out of business and tax the American public on any energy they use that is generated by oil, natural gas, or coal. That means Americans will be taxed on their electric bills since almost two-thirds of the nation’s electricity is generated by fossil fuels, when they drive their cars since most vehicles run on gasoline or diesel fuel, or when they fly to family functions or business meetings since jet fuel is produced from oil. These taxes will devastate the U.S. economy, while Biden’s re-commitment of the U.S. to the Paris Agreement will endorse China’s continued economic investment in fossil fuel energy.

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

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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Key Vote NO on H.R. 1957

July 22, 2020 by Leave a Comment

The American Energy Alliance urges all members to vote NO on H.R. 1957 as amended by the Senate with the text of the Great American Outdoors Act.  The federal government already owns far more land than it can adequately manage, which is part of the reason for the large maintenance backlog this bill tries to address.  However, the Land and Water Conservation Fund is simply a vehicle for buying up even more land for the federal government to mismanage.

By buying up land, the federal government hems in and impoverishes local rural communities by removing taxable land and limiting space for economic activity.  Land procured through the LWCF that is later placed off limits to development further harms the local communities as well as harming the larger economy.  While the LWCF itself is questionable policy, at least the current structure of the fund allows for congressional input into the land acquisition process through appropriations.  Making LWCF funding permanent removes this last Congressional check on federal land acquisition.  Permanent funding of the LWCF should be opposed.

The AEA urges all members to support free markets and affordable energy by voting NO on H.R. 1957 as amended with the Great American Outdoors Act.  AEA will include this vote in its American Energy Scorecard.

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China Would Be Sole Beneficiary of Biden’s $2 Trillion Climate Plan

July 20, 2020 by 2 Comments

In a speech in Wilmington, Delaware, Democratic Party presidential candidate Joe Biden built on his plans for reviving the economy in the wake of the coronavirus pandemic with a focus on significantly cutting fossil fuel emissions. The proposal attempts to eliminate carbon dioxide emissions from the power grid by 2035. Such an attempt might be a renewables-only approach or a net-zero carbon dioxide emissions goal that would include nuclear energy and carbon-capture technology. But Biden’s $2 trillion proposal is not a policy to recover from the devastation of the COVID-19 recession because the time goals are not consistent and changing the energy portfolio of the nation is an extremely costly endeavor that requires reallocating labor, capital, and innovation. Those reallocation costs, especially retraining people for new jobs, will slow the recovery. With a debt of $26 trillion, the country cannot afford a “clean energy standard.”  

Instead, Biden should watch closely what China is doing, which will probably make China the only G20 country whose economy will grow in 2020. China’s imports and exports are indicative of this. Demand for China’s medical products has surged during the pandemic. China’s textile exports including masks increased by 32 percent during the first six months of this year, with medical devices jumping by almost 50 percent. 

China’s Coal Plant Construction

China is constructing coal-fired power plants to stimulate its economy, as it did after the global recession in 2009. China currently has 249.6 gigawatts of coal-fired capacity under development (97.8 gigawatts under construction and 151.8 gigawatts in planning)—a 21 percent increase over yearend-2019 (205.9 gigawatts). The amount of coal-fired generation under construction exceeds that of the U.S. entire coal fleet. Once built, China’s total coal-fired capacity will equal or be larger than the total generating capacity of all sources—natural gas, coal, nuclear and renewables including hydro—in the United States. Clearly, China is not worried about reducing its carbon dioxide emissions, which the Paris Agreement allows China to grow until 2030, when carbon dioxide emissions are supposed to peak in that country.  China already consumes over half the world’s coal annually. 

China’s plans for new coal plants have steadily increased since 2019, after the central government began relaxing restrictions on new coal plant development. Between January 1 and June 15, China permitted more coal plants (17.0 gigawatts) for construction than it permitted in all of 2018 and 2019 combined (12.0 gigawatts). Almost half (7.9 gigawatts) of the 17.0 gigawatts permitted in 2020 are to power long-distance transmission lines from coal plants in the West to demand centers on the coast. Three-fourths (12.7 gigawatts) of the 17.0 gigawatts are sponsored by local companies, and many are being fast-tracked: units 3–4 of the Hohhot Jinshan coal plant in Inner Mongolia went from announced to construction in just three months. 

Despite overcapacity of generation in China, coal remains a significant part of the country’s planning mix, led by local leaders eager to capitalize on the readily available credit and central government support for stimulus spending. Investment in utilities from January to May 2020 was 14 percent above the same period in 2019. State-owned banks lend to state-owned utilities with little review and increased local lending quotas and calls to boost spending to offset the economic impact from COVID-19 encourage even greater lending.

China’s Imports

China’s demand for iron ore and coal has also surged. China is importing commodities critical to its infrastructure: iron ore imports into China grew by 10 percent over the first half of the year, coal by 13 percent and liquefied natural gas (LNG) by 3 percent. Australia accounts for up to 60 percent of China’s annual iron ore imports and more than 30 percent of its coal imports. 

China’s crude oil imports surged 34.4 percent year on year to an all-time high of 12.99 million barrels per day in June as Chinese buyers who secured low-cost oil in late March received their deliveries in June. It was the first time China’s monthly crude imports surpassed 12 million barrels per day, and was 14.6 percent higher than the previous record high of 11.34 million barrels per day in May. The record June volume brought imports for the first half of 2020 to 10.82 million barrels per day—up 9.3 percent on the year, despite an eight-month low of 9.72 million barrels per day in March due to the coronavirus pandemic. China is fueling its economy with oil and filling its strategic stockpiles with low-cost crude.

Conclusion

While China is burning more coal, more oil, and more natural gas to fire its manufacturing and development, Biden’s approach is to unilaterally disarm the United States, which became self-sufficient in energy in 2019 for the first time in over 60 years. Expensive, complicated, pie-in-the-sky programs will only push the United States into more debt, and make us more dependent on others for our energy after successfully achieving energy independence after six decades of foreign energy dependence.  Biden should watch more closely what China is doing, and recognize that America’s hard-won energy dominance is an asset in the U.S. economy’s coronavirus recovery and future growth potential.

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

For more information on these issues check out AEA’s Vote Energy 2020 election hub.

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AEA Applauds NEPA Modernization Announcement

July 15, 2020 by Leave a Comment

Long overdue overhaul will get American infrastructure projects out of the courtroom and onto the construction site.

WASHINGTON DC (July 15, 2020) – Today, the American Energy Alliance voiced its support for the White House’s Council on Environmental Quality (CEQ) final rule updating regulations implementing the procedural provisions of the National Environmental Policy Act (NEPA).

When it was first signed into law in 1970, NEPA served as a way for federal agencies to consider the impacts of their actions, helping them to balance a range of interests. Today, NEPA is a massively expensive and time-consuming liability that threatens to derail crucial infrastructure and energy development projects. NEPA, as it currently operates, is the model of an outdated regulation that has been exploited beyond recognition from its original purpose.

After forty years, an overhaul was clearly overdue, and today’s announcement paves the way forward to de-politicize America’s permitting and infrastructure improvement process.

Thomas Pyle, President of the American Energy Alliance, issued the following statement in support of the announcement:

“The American Energy Alliance applauds the administration’s modernization of the National Environmental Policy Act (NEPA). NEPA is one of the most inefficient, growth-slowing, infrastructure-stopping laws we have in the U.S., desperately in need of this modernization. Americans need, and deserve, updated infrastructure to get them safely where they need to go and ensure affordable, reliable energy arrives to their cities, communities, businesses, and homes. Radical environmental groups have twisted the intent behind NEPA and leveraged the legal system to their advantage in a coordinated effort to slow and stop progress. This long overdue modernization will get American infrastructure projects out of the courtroom and onto the construction site.”

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