December 2010

The Environmental Protection Agency sprang two surprises last week. First, EPA asked a federal judge to allow them to delay issuing the boiler MACT (Maximum Available Control Technology) rule until April 2012, which would give EPA time to reconsider and rewrite the proposed regulation.  The rule is designed to cut air pollution from approximately 200,000 industrial boilers, process heaters, solid waste incinerators, etc.  Industrial users of boilers have made a good case that the proposed standards were going to be impossible to meet in many cases.

Next, EPA announced that the ozone or smog rule would be delayed until July 2011, while it reconsidered the scientific and health studies on smog’s effects.  The announcement suggests that EPA has bowed to intense opposition from Congress, state and local governments, and industry and is now going to re-write the smog rule so that it is less economically catastrophic.  EPA nonetheless is going ahead with regulating greenhouse gas emissions from major stationary sources on January 1, 2011.  There is little reason to think that those regulations are any less damaging than the smog rule.

The EPA also announced last week that it was holding its second National Bed Bug Summit meeting in early February. You may laugh, but at least with bed bugs EPA is addressing a real environmental health problem.

Los Angeles Mayor Antonio Villaraigosa’s green energy plan will increase utility bills 3%-8% annually for twenty years, according to the LA Department of Water and Power. Currently, Los Angeles gets almost 50% of its electricity from out-of-state coal power plants, which is the primary reason that its ratepayers avoided the price spikes that plagued California during the 2000 electricity crisis, but the Mayor’s energy plan would have the Department of Water and Power disinvest from its Nevada coal generating facility and replace this power with expensive renewable energy.

Ethanol Payoffs Survive Again

by Myron Ebell on December 12, 2010

in Blog

Senate Majority Leader Harry Reid’s (D-Nev.) version of the tax deal agreed between President Barack Obama and senior House and Senate negotiators reportedly includes a one year renewal of the 45 cents per gallon ethanol tax credit and the 54 cents per gallon ethanol tariff.  Several other giveaways to renewable energy special interests are included in the Senate version of the package.  They include the multi-billion-dollar Section 1603 grant program for renewable energy projects (such as wind turbines), an extension of the bio-diesel tax credit, and a bunch of credits for energy-efficient appliances, energy-efficient new homes, and the 30% credit for installing E-85 pumps at gas stations.  All these boondoggles add up to many billions of dollars of wasted taxpayer dollars lavished on big business special interests.  The result is higher energy prices for consumers.

However, it is not clear that the tax deal is going to be enacted.  House Democrats led by Speaker Nancy Pelosi (D-Calif.) have voted to oppose it. Unless Pelosi schedules a House vote, it won’t come up this year.  It appears the White House was taken by surprise by this House Democratic revolt against their own President, but I expect the White House is twisting a lot of arms to get them to change their minds.  If the tax hikes take effect on January 1st and it’s up to the 112th Congress to repeal them, then I expect the new Republican majority in the House will want a significantly different package.  My advice is not to bet against ethanol subsidies.

Sen. James Inhofe (R-Okla.), Ranking Member of the Senate Committee on Environment and Public Works, last week released a new minority report, titled, “The Real Story Behind China’s Energy Policy-And What American Can Learn From It.” The report shows that, regardless of its wind and solar production, China is predominantly relying on coal, oil, and natural gas, along with hydro and nuclear power, to fuel its economy.

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In Washington, D.C., Corn is King. Corn farmers receive all manner of farm subsidies: deficiency payments, direct payments, crop insurance premium subsidies, price support payments, counter-cyclical program support, and market loss assistance. Total price tag? More than $75.8 billion from 1995 to 2009, according to the Environmental Working Group.


But that’s not all. Corn is the main feedstock for the production of ethanol, and Congress props up the market for ethanol in three main ways. First, the so-called Renewable Fuel Standard (RFS), which is actually a Soviet-style production quota, compels refiners to blend increasing amounts of corn-ethanol into the nation’s motor fuel supply. Almost 12 billion gallons of corn ethanol will have to be sold as motor fuel in 2011. Under current law, 15 billion gallons of corn ethanol will have to be sold by 2015.

Lest anyone suppose this is a good deal for consumers, the government’s own data reveal that if you own a flexible-fueled vehicle, you spend hundreds of dollars a year more to fill up the tank with E-85 (motor fuel blended with 85% ethanol) than if you fill it with regular gasoline. The reason is that ethanol has about one-third less energy than an equal volume of gasoline. I document all this in my Pajamas Media column, Ethanol’s Policy Privileges: Heading into History”s Dustbin?

One difference between a Soviet-era production quota and the ethanol mandate is that Soviet planners only tried to dictate production levels for five years at a time — the infamous “five year plans.” Our Corn Commisars have an even worse case of the fatal conceit, because the RFS is a 14-year plan, spanning 2008-2022 (or a 16-year plan if we include the ethanol mandate Congress enacted in 2005).

So this component of King Corn’s empire may be with us for some time.

However, two other policy privileges — a 45¢ per gallon blender’s tax credit and a 54¢ per gallon protective tariff on Brazilian sugarcane ethanol — are scheduled to expire at the stroke of midnight on December 31, 2010. A battle is now raging on Capitol Hill between defenders of the Statist Quo and a broad-based coalition of ethanol, food industry, humanitarian, taxpayer, and free market groups. The blender’s credit is refundable, meaning that it is paid by your tax dollars, to the tune of $6 billion a year. The Tariff prevents you from buying lower-priced cane ethanol, increasing your pain at the pump. The entire ethanol program inflates food prices, contributing to the hunger crisis of 2008, and has environmental impacts that rival or exceed any associated with petroleum consumption (see here, here, here, and here). For these and other reasons, the reform coalition says it’s time for the tariff and tax credit to face the grim reaper.

In the past, King Corn held sway almost without opposition. But the number and diversity of groups, policymakers, and opinion leaders calling for an end to the two special-interest giveaways is truly impressive. Some 60 organizations from across the political spectrum signed this letter urging Senate leaders to let the tax credit expire. And a bi-partisan group of 17 Senators signed this letter calling for an end to both special-interest giveaways.

On the House side, Rep. Joseph Crowley (D-N.Y.) has written a “dear colleague” letter that is now making the rounds:

Dear Colleague,
I hope you will join me in the sending the below letter urging an end to U.S. subsidies for corn ethanol and the tariff on imported ethanol.   Subsidizing the diversion of our nation’s food supply from food to fuel puts serious upward pressure on food prices – costs that create an unfair burden on working families.  I also wanted to draw your attention to today’s editorials on this issue:

New York Times
December 9, 2010
Good Energy Subsidies, and Bad
Washington Post
December 9, 2010
Wasting tax dollars on ethanol

Chicago Tribune
December 9, 2010
End the binge: Aid to ethanol has gone on too long.”

To join this letter, please have your staff contact Jeremy Woodrum in my office at or (202) 225-3965.
Joseph Crowley
Member of Congress
Nancy Pelosi
U.S. House of Representatives
John Boehner
Minority Leader
U.S. House of Representatives
Dear Speaker Pelosi and Leader Boehner,

We want to express our strong opposition to extending the Volumetric Ethanol Excise Tax Credit (VEETC) and the tariff on imported ethanol. 

This year, the U.S. will divert nearly 40 percent of the domestic corn crop from food and feed to fuel, which will contribute to already increasingly volatile and high commodity prices.  According to the Congressional Budget Office (CBO), corn ethanol production accounted for 10-15 percent of the increase in food prices between April 2007-April 2008 and $600-900 million in additional costs to the Supplemental Nutrition Assistance Program and other child nutrition programs in 2009 alone.

Higher food prices hurt Americans, particularly those who can least afford it, such as those on public assistance and working families. 

In addition to escalating food and commodity prices, corn ethanol is not a cost-efficient way of achieving environmental benefits.  A July 2010 study by the CBO found that every gallon of ethanol used to replace gasoline costs the Federal government $1.78 – adding up to billions for American taxpayers.  Ethanol also does little to combat climate change, causing more global warming pollution than the gasoline it replaced. 

We believe it is time to end or significantly reduce the subsidy for corn ethanol and the tariff on imported ethanol.  We look forward to working with you to promote the development of truly sustainable advanced bio-fuels that meet both our food and environmental needs.


Crowley’s letter concisely makes the key points. It also spotlights the fact that even the New York Times, the Washington Post, and the Chicago Tribune, all proponents of big-government liberalism, think it’s time to end the ethanol spending binge.

Earlier this week, the Supreme Court agreed to hear an appeal from five electric utilities in State of Connecticut v. American Electric Power.  The utilities are challenging an appellate court decision that the “political questions” doctrine does not bar states and other plaintiffs from suing emitters of carbon dioxide (CO2) for injuries alleged to result from CO2-induced global warming.

Troutman Sanders, a law firm with an extensive environmental practice, concisely summarize the history and basic issues of the case:

Supreme Court Grants Certiorari in Second Circuit Global Warming Nuisance Case

December 6, 2010

In a victory for industry, the Supreme Court today granted a petition from a group of electric utilities for a writ of certiorari seeking review of the decision of the United States Court of Appeals for the Second Circuit in Connecticut v. AEP.  The case concerns whether greenhouse gas emitters may be sued in tort on a theory that their emissions, by assertedly causing climate change, constitute a public nuisance. 

The lawsuit was originally brought in the United States District Court for the Southern District of New York by eight states, the City of New York and several environmental parties against five electric utilities.  The suit alleged that the companies’ coal-fired plant emissions were a significant cause of global warming and constituted a public nuisance actionable in tort.  The District Court dismissed the case in 2005, holding that the lawsuit presented a “political question” that was not appropriate for judicial resolution.  However, in September 2009, the Second Circuit overturned the District Court, found that the plaintiffs properly stated a cause of action for “public nuisance,” and rejected Defendants’ argument that Clean Air Act regulation of greenhouse gases displaced Plaintiffs’ federal common law nuisance claims.

Granting the petition for certiorari does not mean that the Court will overturn the Second Circuit decision, only that the Court will now consider the issues on the merits.  One development of note is that Justice Sonia Sotomayor recused herself from considering the petition and will undoubtedly also recuse herself from the merits decision.  Justice Sotomayor was on the Second Circuit panel that heard oral argument on Connecticut v. AEP, but recused herself from taking part in the Second Circuit’s decision after learning of her nomination to the Supreme Court. 

For more information, please visit our previous discussion of the Connecticut v. AEP case.

The case pits the States of Connecticut, New York, California, Iowa, New Jersey, Rhode Island, Vermont, and three conservation groups against American Electric Power, Southern Company, Tennessee Valley Authority, Xcel Energy, Inc., and Cinergy Corporation.

 A victory for plaintiffs would be a boon to ambulance chasers throughout the land and, indeed, across the globe but a bane to the U.S. economy. It would also further erode what remains of our constitutional system of democratic accountability.

CO2 is the inescapable byproduct of the carbon-based fuels that power modern manufacturing, agriculture, and commerce. This means that classifying CO2 as a “public nuisance” has an enormous potential to endanger public health and welfare. The American Farm Bureau Federation put the point very well in an amicus brief on a related case (Comer et al. v. Murphy Oil et al.):

[B]ecause the production and use of fossil fuels and the attendant GHG emissions are so closely tied with all facets of modern life, a finding that using fossil fuels and emitting GHGs constitute a nuisance is akin to saying that modern life constitutes a nuisance. That may be true in some sense, but the necessary rejoinder is: compared to what? Certainly not as compared with pre-industrial society with preindustrial levels of atmospheric GHG concentrations. As Justice Breyer stated in his concurring opinion in Whitman v. Am. Trucking Ass’ns, in the context of air pollution regulations designed to protect the public health, “[p]reindustrial society was not a very healthy society; hence a standard demanding the return of the Stone Age would not prove ‘requisite to protect the public health.’”

Like the politicians who assured an earlier generation of Americans that the income tax would apply only to the super rich, plaintiffs in AEP v. Connecticut say they just want to compel the nation’s biggest coal-burning utilities to cut their emissions. But once the precedent is established, there can be no principled basis for shielding any class of emitters from tort claims. As I explain in a column posted at PajamasMedia.Com:

If litigators can sue large utilities for emitting CO2, they can also sue smaller utilities and manufacturers. Indeed, they can in principle sue anyone and everyone. Utilities, after all, only emit CO2 in the process of serving customers who use electricity. People lighting their homes, powering their factories, and running their laptops are ultimately to blame for destroying the planet, according to the “science” invoked by plaintiffs. In their worldview, everybody is injuring everybody else — which implies that everybody has standing to sue everybody else. Plaintiffs may preach “green peace,” but they sow the seeds of a war of all against all.

Since global warming is, by definition, global, and since anyone anywhere on the planet who uses carbon-based energy, or consumes goods and services made or transported with carbon-based energy, contributes to CO2 emissions, both the pool of potential victims and the pool of alleged injurers number in the billions! This despite the fact that without carbon-based energy, billions of people on the planet would starve and/or freeze in the dark, and billions more would not even exist. Massachusetts v. EPA’s legacy of absurd results is small change compared to the Hobbesian nightmare the Court will bring into being if it decides Connecticut v. AEP in favor of plaintiffs.

If Connecticut et al. win, firms large and small will face the threat of interminable litigation, from a potentially limitless pool of plaintiffs, in which multiple courts, acting without benefit of statutory guidance, improvise remedies — both injunctive relief and damage awards — as they see fit. A victory for plaintiffs would, in short, destroy for many firms the legal predictability essential to business planning.  

In addition, climate policy would be made by decision-makers even less accountable than the non-elected bureaucrats at EPA, who at least depend on congressional appropriations for their budgets and salaries. We would have to live under Kyoto-like restrictions on energy use imposed neither by Congress nor by EPA but by trial lawyers and activist judges appointed for life.

In their lawsuit against the utilities, plaintiffs asked the lower court to fashion a remedy whereby the utilities would be required to reduce their CO2 emissions by a “specified percentage each year for at least a decade.” Such a “remedy” is legislative in nature and therefore beyond the competence of courts and juries, as the Justice Department argued in its amicus brief, submitted to the Supreme Court on half of the Tennessee Valley Authority:  

Establishing appropriate levels for the reduction of carbon-dioxide emissions from power plants by a “specified percentage each year for at least a decade” (as Plaintiffs request), would inevitably entail multifarious policy judgments, which should be made by decision-makers who are politically accountable, have expertise, and are able to pursue a coherent national or international strategy — either at a single stroke or incrementally.

No doubt plaintiffs once hoped the specter of CO2 litigation chaos would spook industry into supporting cap-and-trade as the lesser evil, just as they hoped the prospect of EPA regulation of greenhouse gases via the Clean Air Act would tip the political scales in favor of Waxman-Markey. However, this greenhouse protection racket strategy of regulatory extortion has not worked and arguably even backfired, exposing greenhouse crusaders as self-righteous bullies. 

In November, angry voters punished supporters of the stealth energy tax formerly known as cap-and-trade. They’ll be even angrier if the Court empowers ambulance chasers to “enact” the job-killing, anti-energy policies they just rejected at the polls.

Two weeks ago, my colleague Chris Horner and I coauthored an oped about the renewable energy industry’s dependence on taxpayer subsidies. To make our point, we listed a number of examples of renewable energy executives warning that massive layoffs were imminent, unless the Congress passed or renewed green energy giveaways.

-Biomass Power Association President Robert Cleaves (February 2010): “Thousands of jobs in the biomass power industry could be lost if Congress fails to extend the production tax credit.”

-American Wind Energy Association CEO Denise Bode (July 2010): “Manufacturing facilities will go idle and lay off workers if Congress doesn’t act now” to impose a federal mandate for electricity produced by AWEA members.

-Solar Energy Industry Association President Rhone Resch (September 2008): “Unless Congress promptly returns to complete their unfinished business, the solar industry will suffer with the loss of 39,000 jobs.”

-Renewable Fuels Association CEO Bob Dinneen (November 2010): “Allowing the tax incentive to expire would risk jobs in a very important domestic energy sector and across rural America.”

Currently, the Congress is deliberating whether or not to extend a particularly generous subsidy that was established by the American Recovery and Reinvestment Act, a.k.a. the stimulus. It’s called the Treasury Department section 1603 tax credit, and it allows renewable energy projects to receive up to 30% of their capital costs up front. The Congress created this subsidy because the 2008/2009 financial crisis rendered ineffective the production tax credit, which had been the renewable energy industry’s primary means of remaining economically viable. The production tax credit was based on corporations having profits and therefore a tax liability. The financial crisis, of course, wiped out corporate profits. So the Congress included the section 1603 program in the stimulus. Now, the renewable energy industry wants to keep both subsidies alive. When it comes to government goodies, the more the merrier.

In this context, the American Wind Energy Association yesterday issued a press release that lends further credence to the point made by Chris and me in our oped. Consider,


In the process of preparing year-end numbers on the industry, the American Wind Energy Association reports that tens of thousands of Americans could lose their jobs or not get called back from layoffs without the 1603 investment tax credit for renewable energy that hangs in the balance as Congress and the White House work to settle a tax package.

“We have people being laid off right now, and we expect to see more without fast action on the tax extenders now being negotiated,” said Denise Bode, CEO of AWEA. “The 1603 tax credit extension would help bring them back as soon as possible.” According to the trade group’s research, there are over 15,000 jobs in the manufacturing pipeline alone. “We are risking those jobs by not sending a clear signal that America remains open for business in wind energy,” Bode said.

The 1603 tax investment credit saved 55,000 jobs in wind energy, as estimated by Lawrence Berkeley National Laboratory. Overall employment has reached 85,000 in the American wind industry, as installed capacity has grown 40 percent in each of the past two years. Wind now generates 20 percent of the electricity in Iowa; and on Oct. 28, high winds pushed wind power to 25 percent of the electrical generation in Texas.

As Chris and I conclude,

Of course, it is only natural for aid-dependent industries to warn that they would suffer without the continuation of aid. Employing this circular logic, taxpayer funded renewable power has remained the “energy of the future” for decades. But American taxpayers simply cannot afford to subsidize industries that are forever-nascent.


For all the administration’s talk about job creation being priority one, the President has targeted a number of occupations for elimination because environmentalists don’t like them. As my New York Post article sets out, oil industry workers, factory workers, miners, and fisherman are all being subjected to environmental regulations that are putting these people out of work. (I could have added loggers, ranchers, and others as well). The worst is yet to come, especially with EPA’s global warming agenda to take effect in January of 2011, not to mention the President’s recent announcement that he is shutting down nearly all offshore oil and gas leasing. When the wishes of environmental activists clash with the need to save and create jobs, the Obama administration has sided with the environmentalists nearly every time.

In 2000, Dr. David Viner, a senior research scientist at the Climatic Research Unit of the University of East Anglia, told the UK Independent that snowfall will become “a very rare and exciting event” within a few years due to global warming.

This week, as an unseasonal snow blanketed Northern Europe and caused more than 60 fatalities, University of College London Professor Mark Maslin told the UK Telegraph that the snow was likely due to global warming.