The White House has finally realized that there is a close correlation between rising gas prices and dropping presidential popularity ratings, and so President Barack Obama has begun flailing around to try to deflect the blame. Normally, I would sympathize with the President’s predicament. Oil prices go up and down as a result of global supply and demand. But in this case, I think the President deserves all the blame he’s going to get from the American people.
President Obama and his Administration have done everything they can to reduce domestic oil and natural gas production. The Department of the Interior has cancelled leases on federal land in the West, delayed and denied permits necessary to start drilling on leases (which, remember, are awarded by competitive bid and have already been paid for), restored an executive moratorium on leasing most federal offshore areas, denied a permit to a lease off the Alaska coast for which Shell paid $2.2 billion and has already invested $4 billion, and placed a moratorium on new drilling in deep and shallow waters in the western Gulf of Mexico (the only major offshore oil field in the U. S.). Since lifting the western Gulf moratorium earlier this year, Interior has been slow-walking the approval of drilling permits. The President also steadfastly opposes opening the coastal plain of the Arctic National Wildlife Refuge to oil and gas exploration.
Although President Obama said in a recent speech that the U. S. was going to have to produce more oil, the Department of Energy’s Energy Information Administration has projected that domestic oil production is going to decline significantly in the next few years as a result of Administration policies. The dropoff would be much steeper were it not for the rapid expansion of production in the Bakken field in North Dakota and Montana. The Obama Administration has not been able to slow production there because all the land is privately owned.
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Via Steven Mufson at The Washington Post.
Black liquor is a by-product of paper production and much of it is burned in house at the paper mills to produce energy. Note that these companies need no incentive to do this as they already have been doing it on their own for quite a long time as its an efficient way for them to produce their own energy. This was an issue in the past, which Congress had theoretically fixed, but as the article notes:
Eager to limit the cost to the Treasury — more than $4 billion by the end of fiscal year 2009 — Congress said that black liquor would not qualify for the alternative fuel tax credits after Dec. 31, 2009. And to help cover the cost of the January 2010 health-care law, Congress also barred black liquor from qualifying for the cellulosic biofuel tax credit.
But the story didn’t end there.
Last year, the IRS said that the provision in the 2010 health-care legislation didn’t prevent black liquor produced in 2009 from qualifying as a cellulosic biofuel, so the paper industry got its calculators out again. The cellulosic biofuel tax credit, part of the 2008 farm bill, is worth $1.01 a gallon.
I can understand how this might happen initially. Laws are written vaguely and companies take advantage of a law not intended to benefit them. This is frustrating in and of itself, but given the complexity of our tax code its bound to happen sometimes. However, the fact that our laws are so complicated that Congress tried, and failed, to fix this loophole is beyond belief.
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I travelled to Denver twice in the last 7 days to testify before the Senate State Affairs Committee on HB 1291, Colorado’s State Implementation Plan to meet the Regional Haze provision of the federal Clean Air Act.
I told the Committee that HB 1291 is illegal. And I rebutted the distortions peddled by its proponents, who also testified. Illegality and disingenuousness are huge accusations, and I made them twice, in testimonies a week apart, so the bill’s proponents had time to conjure a response. But no one disputed my assertions. Because they were true.
Nonetheless, the Plan passed out of Committee, due to the fact that it enjoys the support of two of Colorado’s richest special interests, for which billions of dollars were at stake. Today, HB 1291 was enacted by the full Senate, by a 25-10 vote. Two weeks ago, by a 58-7 vote, it was passed by the House of Representatives. If there’s one thing a bipartisan, bicameral majority can agree on these days, it’s the importance of currying favor with the deepest pockets.
This is a long blog about the who, what, why, and when of Colorado’s Regional Haze State Implementation Plan, the most outrageous rip-off you’ve never heard of.
The Back Story
Colorado’s Regional Haze State Implementation Plan originated not in the Centennial State, but in Oklahoma. It owes its form to Aubrey McClendon, CEO of Chesapeake Energy, a natural gas company headquartered in Oklahoma City.
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I’ve written before about Obama’s tortuous logic when it comes to rising gas prices, and, this week, he again laid out “solutions” that don’t make any sense. Consider,
- Yesterday, the President implored Saudi Arabia to produce more oil. That is, he told the Saudis to “drill, baby, drill.” He did the same thing a month ago in Brazil. Meanwhile, U.S. production remains stunted by the Obama administration’s de facto moratorium on new oil and gas leases and permits. Why is “drill, baby, drill” appropriate for Saudi Arabia and Brazil, but not for the U.S.?
- Last Saturday, the President called for an end to tax breaks for the oil industry. He said, “They’re making record profits and you’re paying near record prices at the pump. It has to stop.” So, the President wants to end oil “subsidies” in order to relieve Americans pain at the pump. This doesn’t make any sense, because the effect of oil industry “subsidies” is to lower the price of oil. It’s a market distortion meant to lower the cost of producing oil. By removing these “subsidies,” the price of oil would better reflect the forces of supply and demand, and it would increase.
[N.B. To an extent, I agree with the President on this one—loopholes in the tax code are a form of corporate welfare that should be stopped. That said, these tax breaks aren’t unique to the oil industry, and singling it out only makes the tax code more complicated. A better way, as articulated by Rep. Paul Ryan, is eliminate ALL corporate welfare.]
- The President wants to take away oil industry “subsidies,” and turn them into green energy giveaways, because, he says, this will “reduce our dependence on foreign oil.” For starters, it’s unclear how investments in unreliable, expensive electricity produced by wind and solar would “reduce our dependence on foreign oil.” Moreover, in the past, Obama’s has dismissed “drill, baby, drill” on the grounds that it would take years to impact the global oil market. The President claims that expanded oil production would take too long to have an effect on the price of gas, but that increased taxpayer handouts to wind and solar would somehow “reduce our dependence on foreign oil” in a more reasonable time frame. This is nonsensical.
Has the EU met its emission reduction targets under the Kyoto Protocol? Not if emissions associated with goods Europe imports from Asia are taken into account. So finds a study published this week in Proceedings of the National Academy of Sciences (PNAS).
The study, Growth in emission transfers via international trade from 1990 to 2008, calculates the net increase in global carbon dioxide (CO2) emissions resulting from developed countries’ imports of goods produced in developing countries. The study provides additional evidence of Kyoto’s futility, although the authors, a team of Norwegian, German, and U.S. researchers, don’t draw this conclusion and would likely deny it.
Some key findings: [click to continue…]
From The Center for Public Integrity:
According to IRS records, the ethanol group Growth Energy paid Gingrich’s consulting firm $312,500 in 2009.The former House Speaker was the organization’s top-paid consultant, according to the records. His pay was one of the group’s largest single expenditures, as it took in and spent about $11 million to promote ethanol and to lobby for federal incentives for its use.
In a Growth Energy publication, Gingrich was listed as a consultant who offered advice on “strategy and communication issues” and who “will speak positively on ethanol related topics to media.”
Chris Thorne, a Growth Energy spokesman, said Gingrich was not hired again in 2010. The group was organized by ethanol producers from the Midwest in late 2008, Thorne said. Its members sought Gingrich’s counsel when it started because “they were people who were never involved in DC politics before, and they were looking for someone who knew how to get things done.” The organization’s IRS report for 2010 is not yet available.
First, the idea that Growth Energy doesn’t have anyone who is familiar with DC politics is laughable. The CEO of Growth Energy is Tom Buis, formerly the President of the American National Farmer’s Union, and named one of D.C.’s top 50 lobbyists. They also employ (or have employed) General Wesley Clark and Jim Nussle.
Do recall Newt Gingrich’s scuffle with the WSJ earlier this year, where in a letter to the editor Gingrich wrote:
Second, I am not a lobbyist for ethanol, not for anyone. My support of increased domestic energy production of all forms, including biofuels and domestic drilling, is born out of our urgent national security and economic needs.
Turns out that wasn’t true. CEI has previously written about Gingrich’s shameless ethanol pandering here and here.
Shell announced today, for now, it must end a project to drill for oil off the coast of Northern Alaska, because of a decision made by an EPA appeals board to deny permits to acknowledge that Shell will meet air quality requirements. This is not part of ANWR.
Companies that drill for oil must go through extensive permitting processes and invest billions of dollars as payments for leasing the land, exploring for possible oil fields, equipment, etc. This is all done with the understanding that assuming they follow the letter of the law, there is a chance that this investment won’t be flushed down the toilet at the end of the tunnel. It appears that in this case Shell has followed procedure and that emissions will be below any standards required by the EPA:
The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project. Environmental groups were thrilled by the ruling.
“What the modeling showed was in communities like Kaktovik, Shell’s drilling would increase air pollution levels close to air quality standards,” said Eric Grafe, Earthjustice’s lead attorney on the case. Earthjustice was joined by Center for Biological Diversity and the Alaska Wilderness League in challenging the air permits.
Talk about moving the goalposts. They must have been really desperate to cancel this project given that this was the best straight-faced excuse they could muster. Not only do you have to be below the legally required emission limits but you must also not even be “close” to the limits, as defined by unelected officials, one of whom is a former attorney for the Environmental Defense Fund.
Events like this are a prime example of why many in Congress want to strip authority from the EPA. Shell had reportedly invested over $4 billion in this project. When companies make investment decisions, consideration is given to whether or not bureaucrats can make arbitrary decisions to shut the project down halfway through a multi-year process. There are many other countries with natural resource reserves who do not subject economic activity to such unpredictable insanity, and in the eye of a corporation, after an event like this these locations begin to look more preferable to dealing with the United States.
In case you haven’t checked recently, gas prices are high again. Fear not, because the DoJ is on the case: “High gasoline prices prompt Justice department to eye energy industry.” From the article:
Attorney General Eric Holder made no secret the move is a direct response to public angst, not to current evidence of any illegal conduct.
…
While promising official vigilance, the attorney general acknowledged regional differences in gasoline prices, and said, “It is also clear that there are lawful reasons for increases in gas prices, given supply and demand.”
At least give them credit for admitting that they’re wasting taxpayer dollars on a bunch of nonsense. If public conern is the only metric for a DoJ bureaucratic task-force, there are a number of other issues American’s are inappropriately worried about. I’d be shocked if the Department of Justice was interested in wasting its time on those issues.
There was a good piece in Forbes explaining the (lack of) evidence that speculators have been driving the price of oil by Jerry Taylor and Peter Van Doren.
I just checked the Web sites of eight leading eco-activist groups, curious as to how prominently the organizations are featuring Earth Day messages and activities.
Surprisingly, seven of the groups — Center for Biological Diversity, EarthJustice, Environmental Defense Fund, Friends of the Earth, Greenpeace, National Wildlife Federation, Natural Resources Defense Council — say nary a word about Earth Day.
Sierra Club is the sole partial exception — they’re offering a $15 gift if you join the organization on Earth Day. It’s almost as if green pressure groups are as sheepish about Earth Day as their congressional allies are about the policy that dare not speak its name — cap-and-trade.
So if they’re not advertising Earth Day, what are they talking about? Six of the eight groups’ Web sites feature strikingly similar photos and messages about the April 2010 BP oil spill:
- Center for Biological Diversity – “Gulf Disaster One Year Later”
- EarthJustice – “One Year After the Gulf Oil Spill”
- Environmental Defense Fund – “One Year After BP Disaster, Congress Lags Its Response”
- Greenpeace – “Deep Water Horizon One Year On”
- National Wildlife Federation – “Status of the Gulf: Wildlife and Wetlands One Year after the Gulf Oil Disaster”
- Natural Resources Defense Council – “Disaster in Gulf Lives On”
Groupthink (“We are Borg . . .”) can afflict partisans of any agenda, but it is endemic to ideologies demanding ever-greater political control over economic decisions.
♫ You don’t have to live like a refugee ♫
You’ve probably heard the dreary narrative many times. By increasing the frequency and severity of floods, storms, droughts, and famines, and by accelerating sea-level rise, anthropogenic global warming will drive millions of people from their homelands. Wave after wave of “environmental refugees” will inundate poor countries barely able to feed their own populations. Fragile governments will tumble. Regional conflicts will intensify. Moral of story: “Global warming is a national security threat — even the generals are worried.”
Google “climate change” and “environmental refugees,” and about 5 million sites pop up. So you might be inclined to think, where there’s so much smoke, there’s bound to be some fire.
Many of these sites — for example, National Geographic News — reference a November 2005 United Nations Environment Program (UNEP) report predicting there would be as many as 50 million climate refugees in 2010. What actually happened?
Today’s (pre-Earth Day) edition of the Wall Street Journal reports that the 50 million climate refugees did not materialize. In fact, many of the places UNEP supposed would be hardest hit by global warming are rapidly gaining population! [click to continue…]
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