October 2010

Adding ethanol to the gasoline supply raises the cost of driving, boosts food prices, gobbles up subsidies, and has failed to live up to its environmental promise. But there’s good news – the Environmental Protection Agency may let us use more of it.
EPA recently announced that E15 – gasoline with up to 15 percent ethanol blended in – has been approved for use in cars and trucks built since 2007. Until this decision, no more than 10 percent ethanol was allowed. The federal government is still conducting testing to determine whether older vehicles can use E15 without problems, and until that decision is made gas stations will be reluctant to carry it. Beyond cars and trucks, a coalition of producers and owners of watercraft, motorcycles and off-road vehicles, and gasoline-using equipment continue to express concerns that E15 will compromise performance and possibly damage engines.
Given the increasing ethanol mandate – 13 billion gallons of corn based ethanol and other renewable fuels must be added to the fuel supply in 2010, increasing to 36 billion by 2022 – raising the limit to E15 was necessary in order to incorporate the mandated amounts into the fuel supply. But the risk to millions of vehicle and equipment owners only adds to the problems created by the mandate. Ethanol has not lowered and in fact has increased the cost of driving. And the diversion of nearly a third of the nation’s corn supply from food to fuel use has raised the costs not only of corn itself but related items like corn-fed meat and dairy.
In addition to the mandate, ethanol benefits from billions in tax breaks as well as protectionist tariffs that limit competition against sugar ethanol from Brazil.
While the costs of ethanol have been higher than anticipated, the claimed air quality benefits and reductions in greenhouse gas emissions are failing to materialize. Indeed, several major environmental groups have joined in the fight against E15.
At least on the tax and tariff front, there may be a chance to stem the tide. The tax credit of 45 cents per gallon of ethanol (currently costing about $6 billion a year) as well as the tariffs are set to expire by the end of the year. Allowing them to end would be the first step to rein in the ethanol mistake.

Global Warming / Environment / Energy:

Is climate change activism dead?:
“In a wood panelled room in East London more than 100 people, including Britain’s only Green MP Caroline Lucas, gathered earlier this week for the ‘Climate Rendezvous’. The meeting was organised by activists Climate Rush to discuss strategies for raising the profile of climate change before international talks in Cancun, Mexico next month.”

‘Dual flush’ toilets among conservation proposals OK’d by Council:
“Under a law passed by the City Council today, new toilets will have to be high water efficient or “dual-flush,” which allow users to choose between a high pressure flush for solid waste, and a low-pressure flush for liquid.”

Russia agrees to build nuclear plant in Venezuela:
“Venezuelan President Hugo Chavez reached a deal with Russia on Friday to build a nuclear power plant in the South American country and negotiated several other agreements in energy and other areas.”

Reform of Toxic Chemicals Law Collapses as Industry Flexes Its Muscles:
“Fire retardants in baby blankets, nano-particles in cosmetics, plastics in water bottles and anti-bacterial agents in soaps.”

The Carbon Cycle and Royal Society Math:
“The recent “rebellion” by senior members of the Royal Society (RS) forced it to revise their guide “Climate change: a summary of the science”. The new guide, published on 30 September 2010, has a single paragraph under the heading The Carbon Cycle and Climate. In that, it says:”

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.