Energy

March Madness

by Fred Smith on March 28, 2011

in Deregulate to Stimulate, Economy, Energy, Environment, Features, International

Post image for March Madness

In the closing days of March, not only are sports fans a bit crazy, so also are the electorate. Consider the German state of Baden-Wuerttemberg, long secure within the Christian Democratic “right-of-center” view (recall this is Europe, so “right” is at best “moderate” American conservatism), has moved left. More alarming, the Green Party gained most in the election and the Greens, one will recall, are anti-nuclear and anti-coal. The prospects for reversing the earlier German government decision to close down nuclear plants have dropped sharply and the increased clout of the climate change alarmists makes the prospect for new coal plants dim also.

As one unhappy CDU official noted, The election was decided in Japan, referring to the tsunami created nuclear disaster. That tragedy turned a side-issue in the German election into a major concern and led to the CDU defeat.

[click to continue…]

Confessions of a Gasoline Call Girl

by Brian McGraw on November 10, 2010 · 3 comments

in Energy, Ethanol

Marc J. Rauch, Executive Vice President/Co-Publisher of The Auto Channel, posted a lengthy diatribe on the American Petroleum Institute’s recent lawsuit on the EPA’s approval of E15 blends in newer vehicles. Read it here, and note the title: “Gasoline Whores File Frivolous Lawsuit in Attempt to Derail American Energy Independence.” He is mad.

The lawsuit itself is not all that interesting. What is interesting, I think, is how willfully blind the author is to a number of realities that put the successes of the ethanol industry into perspective. He addresses a number of organizations that provided public comments on the EPA decision:

Grocery Manufacturers Association Vice President for Federal Affairs Scott Faber said: “We were disappointed in the Administration’s decision to allow more ethanol in gasoline before truly sustainable advanced biofuels are commercially available.

…

The Auto Channel’s response: Truly sustainable advanced biofuels? Humans have been making alcohol for thousands of years from nearly any plant they could find, what’s more sustainable than that. Advanced biofuels? That’s okay, too, once they’re ready, but why wait for cheaper fuel prices, oil independence and a cleaner environment when we have perfectly good truly sustainable biofuels right now – of which ethanol is only one alternative. By the way Mr. Faber, I challenge you to name what projected biofuels you’re referring to. I think you don’t know. I think you are reading/writing off a prepared script.

TAC is correct when he says that humans have been making biofuels for hundreds of years. Cellulosic ethanol was first developed in 1898. But the ability to create biofuels in a laboratory is different than being able to produce them in an economically and commercially viable manner. Despite 30 years of federal subsidies, corn ethanol has been unable to compete in a serious way with petroleum. The same is true (and even more true) of cellulosic ethanol. There just isn’t a whole lot of energy in plants, and it requires a lot of energy to extract them and make them usable. It’s possible that some technological breakthrough will change this, but it is by no means guaranteed. Congress can’t mandate a cure for cancer, yet when it comes to biofuels they seem to believe they can bend reality.

National Council of Chain Restaurants Vice President Scott Vinson said:“This challenge to the EPA’s decision is necessary to reduce the strain that ethanol production from corn has placed on U.S. agriculture. The EPA’s decision will lead to an ever higher proportion of the nation’s corn crop being diverted to fuel use, raising prices for participants in the food chain and consumers. Already supported by market-distorting mandates, tax credits and import tariffs, ethanol demand for corn has been singled out as the preferred use for U.S agricultural production long enough. Corn is an extremely important commodity used in feeding the world, and it’s about time we reverse the trend of burning more and more of it as fuel.”

TACH’s reply: Mr. Vinson, what script are you reading from? Why don’t you question the government subsidies and allotments that the oil/gasoline industry has been receiving for more than 100 years? Why don’t you question the billions of dollars of our money that is spent to protect enemy regimes and their oil? Oh, by the way, the world isn’t fed by eating corn; wheat is your huckleberry. Wake up and smell the grease, buddy.

Do the oil and gas industries receive subsidies? This is a “yes, but” moment. They receive certain tax breaks – an example is the oil depletion allowance that allow them to pay less tax (relative to other industries) based off of the way in which capital investment is deducted from the net amount of income they generate. This seems to infuriate the average American. But what few realize is that as a percentage of profits, the oil industry still pays significantly more tax than other industries in the United States. As the Tax Foundation explains:
In addition to income taxes, the table below shows that Exxon paid or remitted $20 billion in various sales taxes, excise taxes, severance taxes, and property taxes. This brings the total amount of taxes the company paid or remitted to $29.3 billion, nearly three times the net profits it earned for shareholders.

The oil industry certainly pays its “fair” share of taxes, where fair is defined as a much larger percentage of income than other industries.

National Turkey Federation President Joel Brandenberger said: “In trying so hard to rush out an E15 rule before Election Day, EPA completely disregarded the legitimate scientific concerns surrounding E15 and the potentially disastrous impact of diverting even more corn from food and feed to fuel. We believe the agency ignored the law as well, and we are confident the court will agree.”

TACH’s response: There are no legitimate scientific concerns regarding the use of ethanol. Ethanol is a proven engine fuel used around the world. It has been so used since the earliest automobiles in the mid 1800′s. Until lies such as the ones that you spout about ethanol were created by gasoline interests, ethanol was the preferred fuel of choice by people in the know. Contemporary studies and research continually prove that ethanol hasn’t suddenly become bad: It’s as good and safe as it always was.

Ah yes, it was those evil conniving gasoline interests of the 19th century that ruined ethanol’s chance at becoming the preferred fuel of the “people in the know.” I’m going to assume “people in the know” were people who liked walking everywhere. I’m sure the fact that petroleum was incredibly easy to produce in mass quantities compared to ethanol didn’t have anything to do with petroleum’s adoption. The bolded sentence above alone pretty much shows you how detached from reality Rauch is.

Snack Food Association President and CEO Jim McCarthy said: “In addition to failing to follow the spirit of the Clean Air Act, the EPA has made a decision that will adversely impact our food supply and ultimately cost American consumers greatly.”

TACH’s response: Hey, we love a candy bar and potato chips as much as the next person. But now some guy who represents an industry that might just be the biggest demon in the world is telling us about the environment and product costs! If there’s only 6 cents worth of corn in a $4.00 box of corn flakes, I shudder to think of how much we are getting ripped off on a $4.00 bag of tortilla chips.

But, the number one reason why the lawsuit and entire opposition to e15 is so off base: We don’t need corn to make ethanol, there are plenty of other agricultural products and by-products that can be used, and many of them do not require chemical fertilization or the use of “valuable” farm land. The whole issue of corn’s use for ethanol is irrelevant.

There really aren’t very many products available right now that are (1) scalable and (2) can compete with gasoline at its current prices. Corn ethanol is kind of close, but there are still problems with market penetration – automobile manufacturers aren’t going to produce E85 vehicles unless there is significant long term (non government mandated) demand for it, and with oil prices where they are now there isn’t significant demand for it.

Furthermore, imagine the amount of farmland required to produce 210 billion gallons of ethanol (about 17 times what was produced in 2009), which is the equivalent of the ~140 billion gallons of gasoline the U.S. uses each year. This would have significant negative effects on agricultural markets

You can wave all of these problems away if you don’t care about people taking you seriously, but to produce 210 billion gallons of ethanol from anything will require a lot of “valuable” farmland. Note also how he puts “valuable” in quotations as if the idea that farmland has value (and that value is taken away from it when it’s being put towards less productive use) is some sort of conspiracy concocted by gasoline-interest to keep ethanol down.

Finally, he ends with a good\evil list, where rent-seekers are all placed into the “hero” category and the “evil villain” category ranges from API to Hugo Chavez. He placed himself in the hero category — is Marc Rauch a serious person?

The evil villains:
American Petroleum Institute
National Petrochemical & Refiners Association
OPEC
All gasoline companies
EnergyTribune.com
FollowtheScience.com
Prism Public Affairs
Jerry Taylor and the CATO Institute
David Fridley
The aforementioned coalition members
Hugo Chavez
Mahmoud Ahmadinejad

The heroes
David Blume & Tom Harvey
Ted Chipner & Ohio Biosystems
American Coalition for Ethanol
Growth Energy
Ethanol Today Magazine
Renewable Fuel Association
Anne Korin & the Institute for the Analysis of Global Security
Dave & Steve Vander Griend & ICM, Inc.
POET
Tom Waterman and Ethanol Monitor Magazine
Edwin Black
My business partner Bob Gordon, me and everyone at The Auto Channel

Hillary Clinton Angers Greens

by Brian McGraw on November 5, 2010

in Economy, Energy, Environment, Global Warming

A number of environmental groups asked Secretary of State Hillary Clinton to remove herself from the decision process in whether or not the TransCanada oil-sands pipeline ought to be approved. This request came after remarks made last month when Clinton indicated that the Department of State was inclined to approve the project.  The environmental groups claim that Hillary is too biased in support for the pipeline to objectively evaluate its merits:

This decision will test the administration’s commitments to move America off of oil and combat global warming and should not be made by an official who admits to being inclined to approve it before analysis is completed. Therefore , we respectfully urge you to recuse yourself from this important decision.

I’m *confident* that this same letter would have been sent if Clinton had expressed the sentiment that she was not inclined to approve the pipeline. This seems like nothing more than a Hail Mary media attempt to remind her that a lot of people do not support the pipeline. The State Department has been looking at this issue and accepting comments for almost two years, so it seems pretty reasonable that at this point she would have a good idea one way or the other on whether or not it will be approved.

This reminds me of the groups who asked Alan Simpson to be removed from the deficit commission after his comments on Social Security because after having referred to the program as a sacred cow with many teats, it was clear that he didn’t like it as much as everyone else. Yet bias works both ways, and these groups don’t see any problem with the existence of individuals on the deficit commission who would defend Social Security to their deaths.

Back to the pipeline. Stepping away from the liberal environmentalists, the unions are actively campaigning to support the building of the pipeline. This isn’t surprising as building the pipeline will create jobs or expand opportunities for already unionized businesses. But it does highlight the idea that unions might be a major force against taxing carbon in the future. They supported Waxman-Markley under the guise of saving the planet, but when push comes to shove it seems unlikely that they’d support any taxes that actually significantly limited the ability of U.S. workers to consume cheap energy, which is why they focus on green-job subsidies.

A Surge Toward a New “Scientific-Technological Elite”?

by Fran Smith on October 19, 2010

in Energy, Environment, Global Warming

AEI’s Steve Hayward, in his article “Power Surge,” presents what he says is an innovative solution to foreign oil dependence and global warming: pump huge sums of government money into energy innovation through corporate-university-government partnerships:

While the details may vary, the consensus is clear: America should create a national network of decentralized energy innovation institutes — whether we call them Energy Discovery Innovation Institutes or the National Institutes of Energy or something else — that can bring corporate, university, and government scientists together to tackle big energy problems, while strengthening diverse, regional clean technology clusters. Modeled after sustained federal investments made in the ’40s, ’50s, and ’60s that assisted the rise of Silicon Valley, this effort would cost about $5 billion annually.

As a political historian, Hayward undoubtedly is familiar with Dwight D. Eisenhower’s Farewell Address on January 17, 1961, where he warned against the power of the military-industrial complex: “The potential for the disastrous rise of misplaced power exists and will persist,” he said.

Perhaps Hayward has forgotten that Eisenhower — in that same speech — also warned against the dangers of government research funding in universities and the creation of a new scientific-technological elite:

Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present — and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.

Hayward’s short paper is a synopsis of a report, “Post-Partisan Power,” co-authored by Hayward, Mark Muro of Brookings, and Ted Nordhaus and Michael Shellenberger of the Breakthrough Institute.

Ben Lieberman on Consumer Costs of Regulations

by Marc Scribner on October 18, 2010

in Energy, Video

[youtube:http://www.youtube.com/watch?v=qRb2U8XzIlY 285 234]

Moratorium Lifted, But Drilling Still Blocked

by Ben Lieberman on October 13, 2010

in Economy, Energy, Environment, Global Warming, Natural Resources

With much fanfare, the Obama administration has lifted its moratorium on deepwater drilling in the Gulf of Mexico. But don’t expect much actual drilling any time soon, thanks to all of the administration’s other red tape strangling domestic oil and natural gas production.

Even before the April 20th Deepwater Horizon spill, the Obama administration had clamped down on new leasing on federally controlled offshore and onshore areas. In fact, 2009 saw less oil and gas leasing than in any year under Bush or Clinton, and 2010 was on track to be no better.

Nonetheless, the Obama administration Department of the Interior used the spill as an excuse to crack down further by imposing a six-month moratorium, until November 30th, on issuing any new deepwater drilling permits in the Gulf of Mexico. For all practical purposes, the administration also put an end to nearly all shallow water drilling in the Gulf, as well as exploration activities off Alaska.

Studies estimating thousands of lost jobs as a consequence of the moratorium — not to mention strong bipartisan opposition from Louisiana’s Congressional delegation — made for bad politics as well as bad policy. Whether or not influenced by the upcoming elections, the Department of the Interior announced that the moratorium is being lifted more than a month ahead of time.

The moratorium is gone, but all the pre-spill hurdles are still in force. In addition, Secretary of the Interior Salazar announced several tough new provisions and stated that only those operators who “clear the higher bar can be allowed to resume.” Interior concedes that these new requirements “may delay development of some OCS oil and gas resources.” Additional delays piled onto a policy that had already ground drilling to a near halt is not good news for American energy production.

Notwithstanding the official end to the moratorium, the real test is whether and to what extent drilling activity resumes. The American people need more energy, not to mention the thousands of high paying jobs an expanded domestic oil and gas sector would bring. If 2010 goes into the books as the second year in a row of sharply curtailed domestic energy production, the new Congress should take a close look at reversing this worrisome trend.

Ethanol: Following the E10 to E15 Debate

by Brian McGraw on September 29, 2010 · 1 comment

in Energy, Ethanol

The ethanol industry was patiently waiting for the EPA to approve an increase from 10 percent ethanol blends to 15 percent in gasoline. They are still waiting, but no longer patiently.

Numerous groups have voiced their opinion to keep the blend wall at 10 percent, or at least not to approve the increase until further testing is done. Despite the fact that the opposition comes from organizations such as the National Council of Chain Restaurants (this one is admittedly confusing), the Engine Manufacturers Association, and the Motorcycle Industry Association, the domestic ethanol industry is convinced this is an enormous big-oil conspiracy to keep the ethanol industry from succeeding. Did they just finish watching JFK?

From the reading I’ve done, it looks like 15 percent blends of ethanol aren’t going to have any negative effects on newer car engines — and EPA statements have hinted that the industry will get their 5 percent increase this year. But there is evidence that it can cause harm in non-automobile engines — like outboard engines used in boating, which explains why ESPN ran an article covering the issue.

Why is this confusing the ethanol industry? As the ESPN article says:

The lack of general public understanding of the differences between E10 and E15 increases the risk that boaters may misfuel their engines once E15 becomes readily available at gas stations.

The average citizen has no idea what E10 or E15 or E85 are. They might buy E15 rather than E10 and use it, potentially damaging very expensive equipment.

The underlying issue here is that the Renewable Fuel Standard is mandating huge blends of ethanol into our fuel supply, but the EPA isn’t permitting a high enough blend that will allow the mandate to be met. This highlights the absurdity of government energy policy. One government organization mandates a policy and another government organization sets policy making the original initiative impossible to obtain. This is one of the many reasons why consumers, not governments, should decide what they want going into their fuel.

And yes, the oil companies oppose the increase — as they should. They have absolutely nothing to gain from this, and will lose money as each gallon of gasoline sold now contains less refined oil and more ethanol. To some, it is downright shocking that a company would oppose policies that would have the direct effect of making their industry less profitable.

The Failed Stimulus Package Reveals What Economy Really Needs

by Ben Lieberman on September 29, 2010

in Economy, Energy, Regulation, Stimulus to Nowhere

A failure can make for a valuable learning experience, and the stimulus package is no exception. Clearly the stimulus has not worked, and from its inception many economists doubted the wisdom of the federal government trying to spend our way into prosperity. But putting aside questions about the merits of spending as means of sparking an economic recovery, it appears that the feds were not even able to dole out the money in a timely manner. The culprit — regulatory red tape.

Several studies conducted by the Department of Energy’s Office of the Inspector General (here , here , and here) have concluded that many of the stimulus-funded projects related to energy were very slow to get off the ground. For example, DOE’s investigation of one program dealing with block grants for energy conservation projects concluded that “as of August 2010, more than one year after the Recovery Act was passed, grant recipients had expended only about 8.4 percent of the $3.2 billion authorized for the Program.” Not exactly the “shovel ready” boost to the economy we were promised.

Regulatory delays were the reason. In its most recent report, DOE’s Inspector General concluded that “various regulatory requirements had slowed spending,” including “the Davis-Bacon Act, National Historic Preservation Act, Buy American provisions of the Recovery Act, and National Environmental Policy Act (NEPA).”

Granted, the programs funded by the stimulus are a big waste of taxpayer dollars, and it is a good thing that the feds can’t squander our money more quickly. But the point is that even the big government proponents of the stimulus package are finding out what it is like to get tripped up by — big government. Whilst hoisted on their own petard, one can hope that the legislators who supported the stimulus might figure this out.

Perhaps they will learn the critical lesson that can lead to real economic growth. Just as stimulus spending faces a regulatory gauntlet, so does private investment. Efforts by large and small businesses to expand — the real source of an economic recovery and job growth — are hampered by the regulatory state at least as much as are the government projects highlighted in the DOE reports. Streamlining or eliminating these regulatory hurdles would do far more to help the economy than all the stimulus spending in the world.

Regulation of the Day 151: Water Heaters

by Ryan Young on September 27, 2010 · 4 comments

in Environment, Health and Illness, Nanny State, Regulation, Regulation of the Day

The EPA recommends setting your water heater to no higher than 120 degrees Fahrenheit. But OSHA recommends setting it to 140 degrees Fahrenheit. Why the difference?

“If you turn your water heater down to 120 degrees Fahrenheit; you will cut your water-heating costs by 6-10 percent,” says EPA. Doing so also uses less energy.

But 120 degrees is not hot enough to kill the Legionella pneumophila bacteria. Legionnaire’s disease causes both flu-like and pneumonia-like symptoms. The disease is most often caught by inhaling the spiral-shaped bacteria via water mist, such as in the shower or near a lake or stream. That’s why OSHA recommends setting your water heater hot enough to kill the bacterium – 140 degrees.

Legionnaire’s disease got its name when the Pennsylvania American Legion celebrated America’s 1976 bicentennial at a hotel with contaminated water. More than 200 people were treated for pneumonia. 34 died. The newly discovered Legionella pneumophila bacteria turned out to be the cause. That and other bacteria are why OSHA recommends 140 degrees.

EPA and OSHA are free to publish all the recommendations they want. But hopefully they won’t impose one standard or other on the entire country. One is expensive; the other would kill people.

Fortunately, you are still free to set your water heater how you choose. If you place a high value on saving money and energy, and you have your health, 120 degrees is the way to go. But if you are elderly or infirm, or you have children in your household, 140 degrees is probably better for you. When it comes to your water heater, you know best. Hopefully OSHA and EPA will continue to recognize that.

(via Sam Kazman)

Bob Barr, [un]Principled Supporter of Ethanol

by Brian McGraw on September 24, 2010 · 6 comments

in Economy, Energy, Ethanol, Global Warming, Politics as Usual

Bob Barr, the 2008 Libertarian Party presidential nominee, had a piece in yesterday’s Huffington Post titled Extending Ethanol Tax Credit Makes Sense. It’s depressing to see such a high-profile libertarian completely sell out, and I hope he receives flack over this return to special interest politics, as just over a year ago he said “How about the still-active ethanol subsidy scam?“ Thankfully, the online comments from the left-leaning Huffington Post suggest few are buying into his spiel. If this was some ploy by the ethanol industry to gain support from free-marketers, let me suggest that will not succeed. The entire article is full of misinformation.

Barr attributes a “lack of public awareness,” and the tax credit’s apparent complexity to the trouble ethanol proponents are having in re-securing the tax credits.

I would think a lack of public awareness, if anything, would help the ethanol industry. If the public was even remotely aware of the extent to which government support for ethanol is bad policy, more people would be against it. Right now, all they’re seeing is the occasional advertisement featuring a bright yellow corn-stalk or blabber about how ethanol can’t spill in the gulf (unless we import it from Brazil, then of course the likelihood of a spill approaches 100%). I’d suggest that the ethanol industry get in touch with the sugar lobby for a few pointers on how to maintain horrendous policy.

Barr cites a 2010 CBO report, “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals“ and concludes that evaluating the benefits of ethanol is daunting and un-objective. Confident that no one will actually find the report and read even the summary, Barr is able to completely misconstrue the conclusions of the report (and he talks of ethanol opponents being disingenuous).

At the risk of repeating myself for the 10th time, let’s look at relevant quotes from the CBO report:

From the conclusions section of their summary:

The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol made from corn and $3.00 for cellulosic ethanol.

Taxpayers spend $1.78 to reduce consumption of one gallon of gasoline; approximately 66% of current gas prices. Sounds like a great deal to me.

Similarly, the costs to taxpayers of reducing greenhouse gas emissions through the biofuel tax credits vary by fuel: about $750 per metric ton of CO2e (that is, per metric ton of greenhouse gases measured in terms of an equivalent amount of carbon dioxide) for ethanol, about $275 per metric ton of CO2e for cellulosic ethanol, and about $300 per metric ton of CO2e for biodiesel. Those estimates do not reflect any emissions of carbon dioxide that occur when the production of biofuels causes forests or grasslands to be converted to farmland for growing the fuels’ feedstocks. If those emissions were taken into account, such changes in land use would raise the cost of reducing emissions and change the relative costs of reducing emissions through the use of different biofuels—in some cases, by a substantial amount.

Not cost effective at lowering emissions. The Waxman Markley cap-and-trade bill had permits set to be traded at $32. Equivalent carbon permits in the EU are selling for approximately $20. This means that other industries are capable of reducing their GHG emissions at a cost of 23-27 times less.

“In the future, the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included. To the extent that the mandates determine levels of production in the future, the biofuel tax credits would no longer be increasing production, but they would still be reducing the costs borne by producers and consumers of biofuels and shifting some of those costs to taxpayers.”

Given the Renewable Fuels Standard, the tax credit doesn’t do much other than secure (little) excess profit for the ethanol industry at taxpayer expense.

Continuing on, Barr discusses subsidies for the oil-companies and job losses. The oil company subsidies are mostly in the form of tax write-offs available to a wide sector of U.S. industry (good summary here) rather than just the oil companies. To the extent to which the oil companies do receive subsidies, they are larger on an absolute level but are dwarfed by all sectors of “renewable energy” (let us not forget that the ethanol industry relies on fossil fuels to produce ethanol) on a per unit of energy produced basis.

Job losses of over 100,000 are a complete falsehood perpetuated by the ethanol industry. See a study here; which explains that job losses are likely to be under 1,000 because of the RFS mandating ethanol production.

Finally, Barr requests a fair and comprehensive debate including the “philosophical pros and cons” of federal tax policy. Then sneaks in the fact that despite the VEETC the ethanol industry is a net contributor to tax revenue. This is probably true, though it ignores the numerous state level subsidies and the years and year of subsidies when net tax revenues were likely negative. Furthermore, the net tax revenue of the ethanol industry would likely be higher under a scenario where the U.S. taxpayers didn’t write a $6 billion check each year supporting them.

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. Let’s hope its not hurting Mr. Barr too much this week as he recovers from a disgraceful opinion piece.

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