January 2011

Three events last week demonstrated that the EPA’s new regulation to reduce greenhouse gas emissions from large stationary emitters such as power plants is not the only tool being employed to strangle the economy.  There’s also the Clean Water Act, the Endangered Species Act, and Corporate Average Fuel Economy or CAFÉ standards.

First, the Clean Water Act

The EPA last Thursday announced that they were going to force the Corps of Engineers to revoke an already granted Section 404 permit to Arch Coal’s Spruce Fork Mine, which is an operating surface coal mine in West Virginia.  The New York Times and the Wall Street Journal articles repeated the EPA’s ludicrous claim that new scientific research since the permit was granted in 2007 shows that surface mining will have much more detrimental environmental and health effects than previously thought.  My CEI colleague William Yeatman has written about this issue here, and CEI sent out a press release criticizing the decision.  EPA’s revocation of a permit that has already been granted for a mine that is already in operation is outrageous.  The consequences could be catastrophic if this precedent scares away investors in future energy projects because of the risk that their investment could be lost by the retroactive revocation of an operating permit.

Second, the Endangered Species Act

The polar bear was listed as a threatened species by President George W. Bush’s Secretary of the Interior Dirk Kempthorne in 2008.  Last month, President Obama’s Interior Department designated 187,000 square miles in the Chukchi and Beaufort Seas off Alaska’s north coast as critical habitat. Interior also explained that the designation of critical habitat would require more environmental scrutiny of offshore oil and gas exploration and production, but that it would not be used to ban drilling.  The Center for Biological Diversity last Thursday announced that they would file suit in federal court to force Interior to ban all oil and gas drilling within the critical habitat designation.  This is a game that has often been played by environmental pressure groups working with their allies in the executive branch (and often those allies were formerly employed by environmental pressure groups).  Interior Secretary Ken Salazar can claim that he is trying to be reasonable and to balance environmental and economic interests, but will then probably reach a settlement with the Center for Biological Diversity to ban some or all drilling in the designated critical habitat.  Once the court approves, the settlement will have the force of law and will be nearly impossible to overturn.

Third, CAFÉ standards

In 2009, the Obama Administration did a deal with the State of California and the auto industry.  The auto industry thought they were getting some mythical beast called “regulatory certainty” in return for agreeing to a CAFÉ standard of 35.5 miles per gallon for cars and light trucks by 2016.  First, EPA said last fall that they were considering raising that to up to 62 miles per gallon by 2025.  Now, the California Air Resources Board is making sounds that it wants to control the process by setting its own higher standards beginning in 2017, which would precipitate the same mess that the auto industry assumed they had alleviated with their 2009 deal over the California Waiver.  So this week the Alliance of Automobile Manufacturers sent a letter to Rep. Darrell Issa (R-Calif.), the new Chairman of the House Oversight and Government Reform Committee, and Rep. Fred Upton (R-Mich.), the new Chairman of the House Energy and Commerce Committee, asking for help.

I don’t have much sympathy for the automakers because they were warned that this is what would happen (I know because I and my colleagues at CEI were among those warning them publicly), but it needs to be kept in mind that the ultimate victims will be consumers who want to buy cars.

The BP oil spill may well be the worst environmental disaster in history. Yet it was not the planetary catastrophe some predicted it would be.

In May 2010, experts warned that the Deep Water Horizon rig blowout would cause “irreversible damage to the marine eco-systems of the Gulf of Mexico, north Atlantic Ocean, and beyond.”

 But a surprising thing happened on the way to the apocalypse. Bacteria gobbled up the oil so fast that by August, the underwater oil plume became “undetectable.”

A study published last week in ScienceExpress reports that bacteria also made short work of the massive volumes of methane (natural gas) released when the BP well exploded. This is good news not only for Gulf Coast eco-systems. It also further undercuts the credibility of a popular global warming doomsday scenario.

Some warmists warn that rising ocean temperatures will melt frozon methane crystals (known as “clathrates”) on the deep ocean floor.

Methane is a potent greenhouse gas. So the fear is that warming will cause even more warming, leading to a runaway greenhouse effect. However, if this scenario were realistic, we would expect ice core data to indicate higher-than-present atmosopheric methane concentrations during the Last Interglacial Period, when the Arctic region, for centuries to thousands of years, was substantially warmer than it is today. Instead, the data indicate that current methane concentrations are 130% higher (due to man-made emissions, not clathrate melting) than at any time during the past 650,000 years.

Apparently, then, clathrates were not much affected by the greater warmth of the Last Interglacial. Or maybe they were but, as in the case of the BP blowout, the sea bugs digested the methane before it reached the surface.

Our resilient Earth — is this a great planet, or what?

The end of the month (Jan. 31) is the deadline for submitting comments on EPA and the National Highway Traffic Safety Administration’s (NHTSA’s) joint proposed rule to establish first-ever greenhouse gas/fuel economy standards for diesel trucks and other heavy-duty (HD) vehicles. When finalized, the rule will substantially increase both agencies’ power over the freight goods industry.

The agencies’ chief rationale for the proposal is that the fuel economy of HD vehicles, especially “combination tractors,” the semi-trucks used in long-haul freight, has not improved in recent years or even declined. This is paradoxical, because nobody has a greater incentive to demand cost-effective improvements in fuel economy than people who haul freight for a living.

EPA and NHSTA offer five “potential hypotheses” to explain the “paradox” of “under-investment” in HD vehicle fuel economy. As I explain here, none of the hypotheses demonstrates a market failure and two suggest that truckers are just behaving like prudent buyers. In two other posts (here and here), I develop an alternate hypothesis: EPA’s diesel-engine emission standards, via their impacts on engine performance and the HD vehicle market, caused the very problem the agencies now propose to solve with more regulation.

I am now pleased to share additional evidence supporting my hypothesis.

In March 2010, Kevin Jones, a reporter for The Trucker magazine, interviewed Daimler Trucks North America President and CEO Martin Daum at the Louisville, Ky. Mid-America Trucking Show.  Daum told Jones that EPA’s emission standards added $20,000 to the cost of an 18-wheeler over the previous six years. That’s a substantial chunk of change truckers don’t have to spend on vehicles with better fuel economy.

Daum draws a distinction between “push innovations” (changes compelled by regulation) and “pull innovations” (changes driven by market demand). This too speaks to a point made in the earlier posts. To comply with EPA rules, engine manufacturers had to spend hundreds of millions of dollars and deploy hundreds of engineers to develop emission-control technologies rather than fuel-saving technologies. “Push innovations” crowded out “pull innovations.”

ECON 101 also tells us that as price increases, demand falls (other things being equal). Consequently, even if newer trucks were more fuel efficient, the $20k cost increase imposed by EPA’s emission standards would discourage truckers from buying those vehicles.

In fact, however, as earlier posts discuss, newer vehicles typically get fewer miles per gallon, because emission-control technologies decrease the fuel efficiency of diesel engines. A Wall Street Journal article from April 2007,  by Robert Guy Matthews, sheds light on this point:

A requirement that newly manufactured diesel trucks spew out less soot starting this year is posing a paradox for truck fleets: These new-generation trucks are cleaner than older-generation vehicles, but they get worse mileage.

With emission standards to get even tougher in 2010, truck-fleet owners are seeking changes to other rules, to help improve efficiency. Some are lobbying for the go-ahead to hitch up longer trailers, while others are pushing requirements for manufacturers to make engines offering a certain minimum mileage.

Previous-generation trucks average about nine or 10 miles to each gallon of diesel fuel. New engines designed to meet the more-stringent federal mandate on truck exhaust get about one mile less to the gallon. That may not seem like much, but it all adds up for large fleet owners that operate trucks crisscrossing the country.

“For every additional mile-per-gallon lost, it costs us about $10 million in [total annual] fuel costs” said YRC Worldwide Chief Executive Bill Zollars. YRC is one of the largest transportation providers in the country, operating a fleet of 20,000 trucks. . . .

Freightliner LLC, the largest heavy-duty truck maker in North America, confirmed that some loss of fuel economy was inevitable for engines to comply with the new standards. Certain parts of the engine must run at a higher temperature to burn off pollutants, and that requires more fuel.

A few pieces of this puzzle still elude me. How much did engine manufacturers actually spend since 2000 to comply with EPA’s emission standards? A March 2004 Government Accountability Office report (p. 12 ) indicates that the total could easily exceed $1 billion. What was the actual cost? More importantly perhaps, what was the actual expenditure as a percentage of total diesel-engine manufacturer R&D? Any information, tips, or leads regarding these matters would be greatly appreciated.

            Undefeated Auburn beat Oregon to win the BCS championship last night, yet Sports Illustrated magazine failed to include Auburn in its Preseason top 25.  Believe it or not, this was far from SI’s silliest error in recent years.  The magazine was even further off the mark with its March 12, 2007 cover story on global warming.

Yes, SI devoted an entire story to global warming, and in particular its impact on sports.  The tone was set by the cover itself, which depicted then-Florida Marlins pitcher Dontrelle Willis in Dolphins Stadium.  Presumably he’s on the mound, but it’s hard to tell since he is above his knees in water – the text explains that “the seas will rise and coastal areas, including parts of South Florida, will eventually be underwater.”   In fairness, SI’s prediction of sea level rise stretches to 2100, so it cannot yet be disproven.  But the cover certainly suggests more immediate impacts, and elsewhere the story stresses that “global warming is not coming; it is here.”  Much of the rest of the piece is an anecdotal litany of spectator and participant sports purportedly being ruined by global warming – ski seasons getting shorter, summer heat waves causing cancelled high school football practices, and even the bats used by the hitters Willis faces jeopardized by warming-induced insect infestations of ash forests.      

             Nearly four years later, few of the article’s scary scenarios are standing the test of time.   Since 2007, we have seen bad ski seasons have followed by good ones, unusually hot summers followed by mild ones – in other words, fluctuations in weather that are completely normal and nothing for the sports fans – or the rest of us – to be particularly worried about. 

            The good news is that the public is wisely tuning out global warming alarmism, though Willis may have been convinced by rising sea levels to move inland – he is on the Cincinnati Reds roster for 2011.  Either it was global warming or the $12 million a year he is getting from the Reds.

In his 2006 State of the Union Address, President George W. Bush joined the chorus of environmental scolds in disparaging America’s spaciously mobile civilization as being “addicted to oil” and called for various R&D programs to move us beyond petroleum. A key objective was to commercialize so-called cellulosic ethanol made from prairie grasses, wood waste, and other fibrous plant materials. Bush proclaimed:

We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips and stalks or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.

Responding to this presidential initiative, Congress, in 2007, enacted a Soviet-style production quota for renewable fuels, commonly known as the ethanol mandate. It required refiners to blend and sell 100 million gallons of cellulosic ethanol in 2010 and 250 million gallons in 2011.

Commercial output was so anemic, however, that last year EPA watered down the 2010 cellulosic target to 5 million gallons and the 2011 target to 6.6 million gallons. And even those essentially symbolic targets are too ambitious.

Today’s Climatewire (subscription required) reports that commercial blending of cellulosic biofuel likely did not exceed 1 million gallons in 2010. And what about 2011 — six years after President Bush announced his goal to make cellulosic fuel “practical and competitive within six years”? The Energy Information Administration’s most optimistic scenario projects the sale of less than 4 million gallons this year.

Although a world beyond petroleum may emerge some day, it is today still a pipedream.

Here is the lineup so far for House committees with jurisdiction over energy, energy-rationing, and global warming policy.  Rep. Fred Upton (R-Mich.) is the new Chairman of the House Energy and Commerce Committee.  Rep. Henry Waxman (D-Beverly Hills), who was the Chairman in the 111th Congress, is now the Ranking Democrat.  The Energy and Environment Subcommittee will be chaired by Rep. Ed Whitfield (R-Ky.).  The Democrats have not yet picked their ranking member for the subcommittee.

The new Chairman of the House Natural Resources Committee is Rep. Doc Hastings (R-Wash.), and the ranking Democrat is Rep. Ed Markey (D-Mass.), of Waxman-Markey fame.  Rep. Doug Lamborn will chair the Energy and Mineral Resources Subcommittee.  Again, the Democrats have not yet picked their subcommittee ranking members.

Rep. Ralph Hall (R-Tex.) will chair the Science, Space, and Technology Committee.  The ranking Democrat will be Rep. Eddie Bernice Johnson (D-Tex.).  Chairman Hall has not yet announced his pick to chair the Energy and Environment Subcommittee.  On the Appropriations Committee, Rep. Hal Rogers (R-Ky.) is the new the Chairman and Rep. Norm Dicks (D-Wash.) is the new Ranking Democrat.  Rep. Darrell Issa will chair the Oversight and Government Reform Committee, while Rep. Elijah Cummings (D-Md.) is the new ranking Democrat.

The Senate, as is usually the case, is taking longer to organize itself.

After being sworn a week ago, New Mexico Governor Susana Martinez’s (R) first order of business was to overturn outgoing Governor Bill Richardson’s (D) attempt to impose a cap-and-trade program. As the Cooler Heads Digest reported, then-Governor Richardson pushed an energy rationing scheme through the Environmental Improvement Board, without approval from the State Legislature, on the same day that voters elected Martinez, who had campaigned against cap-and-trade. On Saturday, Governor Martinez fired the entire EIB, and moved to block the cap-and-trade regulation. Last Friday, she chose former astronaut and climate change skeptic Harrison Schmitt to run the Energy, Minerals and Natural Resources Department. What a great start!