January 2014

Post image for Senate Holds First Congressional Hearing in 25 Years on Crude Oil Export Ban

Yesterday the Senate Energy and Natural Resources Committee held the first hearing in 25 years to “explore opportunities and challenges associated with lifting the ban on U.S. crude oil exports.”

Sen. Lisa Murkowski (R-Alaska) reiterated her call for President Obama to end the prohibition against exporting crude oil produced in the United States. “The prohibition on crude oil and condensate exports threatens record-breaking U.S. oil production and American jobs by creating inefficiencies, gluts, and other dislocations,” Murkowski said in her opening statement.

Lifting the ban would “send a powerful signal to the world that the United States is ready to reassert its role as a leader on energy,” Murkowski stated. In addition, she argued, opening up global markets to U.S. producers would spur production, contributing to an overall expansion in global petroleum supply, which in turn would lower the price of petroleum products.

All things equal, the American consumer will benefit from this interaction, as will those Americans employed directly and indirectly as a result.

Chairman Ron Wyden (D-Oregon), who once opposed U.S. exports of petroleum products made from imported Canadian crude oil, took no position for or against lifting the crude oil export ban, stating he wanted to hear the arguments pro and con and would “not be making any judgments today.”

Sen. Murkowski agreed that no decisions would be reached in the Senate or the administration in the next few weeks. But, noting that congressional debate on the ban would have been unthinkable only two years ago, she said the hearing should advance the conversation on how to renovate America’s “antiquated energy trade architecture.”

In a comedic moment indicating just how far the conversation has come, Sen. Al Franken (D-Minn.) made a plea to Sen. John Hoeven, Republican of North Dakota, home of the Bakken shale boom, to “please discover some oil in Minnesota.”

As discussed previously, Sen. Murkowski recently released a white paper, A Signal to the World: Renovating the Architecture of U.S. Energy Exports. On visiting her Committee Web page today, I found that she has commissioned 11 studies from the Congressional Research Service (CRS) on various energy export issues. In short, she is providing intellectual leadership and serious legislative deliberation on these important issues. Brava!

I may review other testimonies in a later post. Here I’ll provide highlights from the testimony of Harold Hamm, Chairman and CEO of Continental Resources, Inc., “the company that co-developed the first field ever drilled exclusively with horizontal drilling and the company that is the largest leaseholder and most active driller in the Bakken Play.” [click to continue…]

Post image for Europe’s Wind Rush: A Mid-Term Assessment

Rupert Darwall, author of The Age of Global Warming: A History, writes today in the Wall Street Journal about Europe’s infatuation with renewable energy mandates.

In 2007, the European Union adopted a package of legally binding targets known as “20-20-20.” The EU committed to achieve the following objectives by 2020:

  • Reduce EU greenhouse gas emissions 20% below 1990 levels.
  • Increase the share of EU energy consumption produced from renewable resources to 20%.
  • Improve the EU’s energy efficiency by 20%.

Darwall comments on a recent European Commission analysis, which finds that the U.S. is reducing greenhouse gas emissions almost as fast as Europe but much less expensively, placing EU manufacturers at a competitive disadvantage:

In a clear-eyed analysis last week, the European Commission published its proposals for the follow-up period from 2020. The Commission notes that since 2005, the U.S. cut its CO2 emissions by more than 12% (a little less than the EU, which cut emissions by just under 14%), thanks largely to shale gas. EU firms and households, the commission says, are increasingly concerned by rising energy prices and widening cost differentials with the U.S. Between 2008 and 2012, the average electricity price paid by European industrial firms rose by 16.7% while American firms are paying 2.3% less, so prices paid by American firms are 45% lower than EU firms.

As the U.S. powers into an era of cheap, abundant energy, across the Atlantic the European Commission reckons electricity prices will rise 31% before inflation by 2030 from 2011, and will consume an increasing share of European GDP. Widening energy-price disparities may reduce production and investment and shift global trade patterns, the commission concedes. However, it adds, if other countries outside Europe agreed to cap their greenhouse-gas emissions, they would help Europe’s energy-intensive industries—hardly an inducement for them to do so. [click to continue…]

Post image for President Obama’s SOTU Energy/Environment Message Made No Sense

When it comes to energy/environment policy, the big question heading into last night‘s State of the Union Address was: Which President Obama will show up?

Would it be 2012 Presidential candidate Obama, the one who tried to outflank Republican nominee Mitch Romney to the right on energy, by claiming to be a staunch supporter of all fossil fuels? Or would it be 2013 SOTU Obama, the one who stressed his alarm about climate change, the cause of which is greenhouse gas emissions emitted from the combustion of fossil fuels?

The incongruent answer is that BOTH of these Obama incarnations spoke last night. As I told the Daily Caller’s Michael Bastasch,

In one breath, he incorrectly takes credit for growing U.S. oil and gas production, which, in fact, took place despite his administration, rather than because of it. In the next, he vows to do all he can to fight global warming. Of course, his boast of booming oil and gas drilling is antithetical to his promise to mitigate climate change.

It’s impossible to discern any policy prognosis from his speech, because it makes no sense. It like trying to interpret a stop light that reads both green and red contemporaneously.

Notably, this confusion extends to the President’s signature climate policy, the Carbon Pollution Standard. As I explain here, the regulation would require coal-fired power plants to reduce greenhouse gas emissions by installing carbon capture and sequestration. In order to make compliance costs manageable (and legally permissible), EPA projects that power plants will sell their captured CO2 to oil drillers, who can inject it underground to enhance oil recovery. But the administration never took into account the greenhouse gas emissions caused by enhanced oil recovery, which would be effectively subsidized by the Carbon Pollution Standard. According to my calculation, every 1 kg of CO2 “captured” at a coal plant leads to 1.6 kg of CO2 from the combustion of oil engendered by the process.

Post image for Cooler Heads Digest 24 January 2014

In the News

Global Warmists Aim to Disempower America
Ron Arnold, Washington Examiner, 24 January 2014

Keystone Copout
Charles Krauthammer, National Review Online, 23 January 2014

EPA Bamboozles Science Advisory Board on Carbon Pollution Standard
William Yeatman, GlobalWarming.org, 22 January 2014

CEI Energy Analysis Warns of Regulatory Capture, Urges Adaption to Climate Change
Taylor Kuykendall, SNL Energy, 22 January 2014

Fuel-Efficiency Rules Are Already Raising Costs in Detroit
Henry Payne, Wall Street Journal, 22 January 2014

DOE’s Manufacturing “Innovation” Is $70 Million Corporate Welfare Giveaway
Nicolas Loris, The Foundry, 21 January 2014

Why Investor’s Should Worry about Cleantech’s Clueless Response to 60 Minutes
William Pentland, Forbes, 21 January 2014

[click to continue…]

Post image for More on the Social Costs of Carbon Mitigation

As discussed yesterday on this site, a new report by economist Roger Bezdek demonstrates that carbon energy has immense social benefits, and, consequently, carbon pricing schemes can have devastating social costs.

Today’s post takes a closer look at Bezdek’s discussion of the health risks of policies, such as carbon taxes, cap-and-trade, renewable energy quota, and carbon capture and storage (CCS) mandates, that raise household energy costs.

Although fuel poverty is typically discussed as a European problem, millions of Americans also face harsh tradeoffs between paying their utility bills and purchasing other necessities. The relevant concept here is energy burden, defined as the “percentage of gross annual household income that is used to pay annual residential energy bills” for electricity, heating, motor fuel, and cooking fuel. More simply, energy burden is the “ratio of energy expenditures to household income.”

For low-income households, small increases in energy bills translate into large increases in energy burden:

For example, consider the case where one household has an energy bill of $1,000 and an income of $10,000 and a second household has an energy bill of $1,200 and an income of $24,000. While the first household has a lower energy bill ($1,000 for the first household compared to $1,200 for the second), the first household has a much higher energy burden (10 percent of income for the first household compared to five percent of income for the second).

In other words, carbon taxes or their regulatory equivalent are regressive, because energy expenditures consume a larger portion of the budgets of low-income households than high-income households. The regressivity of high energy costs is greater than you might suspect. According to Bezdek:

  • Families earning more than $50,000 per year spent only 4% of their income to pay energy-related expenses.
  • Families earning between $10,000 and $25,000 per year (29% of the U.S. population) spent 13% of income on energy.
  • Those earning less than $10,000 per year (13% of population) spent 29% of income on energy costs.

These percentages are higher still when energy expenditures are compared to after-tax income. For the 8.7 million Americans earning $10,000 a year and less, energy costs consume more than 69% of after tax income:

Estimated U.S. Household Expenditures as a Percentage of Income, 2010 Bedzek Jan. 2014

Even without carbon taxes, cap-and-trade, or national renewable energy quota, the energy burden of all U.S. households has increased significantly over the last decade, especially for low-income households: [click to continue…]

Over the weekend, I conducted an email interview with SNL Energy’s Taylor Kuykendall on energy/environment/climate policy. Below, I pasted our first two exchanges; read the whole thing here.

SNL Energy: Your organization champions free markets and limited government. From that perspective, what is the biggest threat to the energy industry today, particularly for fossil fuels like natural gas and coal?

William Yeatman: The biggest threat to the energy industry today is regulatory capture by environmental special interests. Most environmental statutes were enacted during the 1970s, at a time when intellectuals and policymakers alike believed that New Deal-era regulatory agencies had been “captured” by the industries that they regulated. In order to mitigate this regulatory capture, these environmental laws accorded then-nascent green litigation groups legal privileges to influence both implementation and enforcement of regulatory regimes.

Fast-forward 40 years, and circumstances have reversed course. Environmental organizations like the Sierra Club and the Natural Resources Defense Council now operate with near-hundred-million-dollar annual budgets. It is from their ranks that political positions are filled in federal agencies. Most importantly, they now run sophisticated and expensive political campaigns, including heavy media buys and get-out-the-vote efforts. Thus, they are now big-time political players. In short, green groups are exhibiting virtually the same behaviors as industry in the 1970s, which, at that time, were pejoratively labeled as regulatory capture.

To be sure, if these groups’ purposes were purely in the public interest, then regulatory capture wouldn’t necessarily be a concern. But that’s not the case. Instead, they’ve made a political cause of demonizing fossil fuels.

SNL Energy: What do you think is right about the current climate debate, and what is wrong? And what is our best bet for addressing the issue of climate change?

[click to continue…]

Post image for Bill Ritter’s Recommendations for Executive Action on Climate Actually Undercut Obama’s Signature Executive Action on Climate (Thanks, Bill!)

On Tuesday, former Colorado Governor Bill Ritter was in Washington, D.C. to unveil a report, titled Powering Forward, that offers more than 200 suggestions for how President Obama can circumvent Congress to “move America toward a clean energy future that curbs climate change.”

I don’t quite understand why, but authoritarianism is all the rage in climate policy circles these days. Last week, the top UN climate diplomat endorsed Communism as a global warming solution. This week, a former U.S. governor is trumpeting policies that can be imposed by a second term President unaccountable to the electorate, in the face of inaction by Members of Congress, the government branch most responsive to voters.

Whatever the case, Ritter’s report, an effort which grew out of energy meetings at the White House and which, moreover, included input from former White House climate and energy advisor Heather Zichal, actually undercuts the President’s signature regulatory agenda to fight climate change.

Talk about your all time backfires!

In early January, EPA proposed the Carbon Pollution Standard, a regulation that would effectively ban the construction of new coal-fired power plants by requiring them to install a technology, known as carbon capture and sequestration, that isn’t yet market ready. As I’ve explained here, the Clean Air Act stipulates that EPA cannot require a technology that is not “adequately demonstrated.” This is key distinction; courts will strike down the rule if carbon capture and sequestration is not commercially viable.

EPA, of course, insists that CCS is ready for prime time; others, myself included, dispute EPA’s claim. Evidently included among our ranks are Bill Ritter and Heather Zichal. On page 134 of the report (which I’ve reposted below), in a section titled “Recommendations for Presidential Action,” it is explained that CCS is “commercially unavailable.” [click to continue…]

Post image for At Last: A Report on the Social Benefits of Carbon

Although invented by academics curious about the economic implications of climate models, social cost of carbon analysis quickly became a form of computer-aided sophistry. Its political function is to hoodwink the gullible into believing that fossil fuels are unaffordable no matter how cheap and that so-called renewable energy technologies (chiefly wind and solar power) are a bargain at any price.

The social cost of carbon (SCC) is an estimate of the damage supposedly inflicted on society by the emission of a ton of carbon dioxide (CO2) in a given year. SCC estimates derive from a host of assumptions about highly speculative issues including: climate sensitivity (how much warming results from a given increase in CO2 concentrations); the impacts of warming on weather patterns, ice-sheet dynamics, and eco-system services; the economic impacts of the latter on agriculture and other climate-sensitive industries; and how human adaptive capabilities will evolve (how technology will develop) as the world warms. In addition, because the SCC is a guesstimate of cumulative damage over time, modelers can get big, scary-sounding numbers just by selecting low discount rates to calculate the present value of future projected damages.

But, as noted repeatedly on this blog, even if SCC analysis were an exact science, it would still tell only one side of the story. It would still tell us nothing about the social benefits of carbon energy, hence nothing about the social costs of carbon mitigation. Divorced from analysis of carbon’s social benefits, SCC estimation even at its theoretical best is partisan advocacy posing as objective research.

The Office of Management and Budget (OMB) requires federal agencies to estimate both the costs and benefits of proposed regulations and, to the extent permitted by law, ensure that the benefits of regulation justify the costs. In 2009, the Obama administration convened an interagency working group (IWG) on the social cost of carbon, which has so far produced two reports (2010 and 2013). Unsurprisingly the 2013 SCC estimates were about 50% higher than the 2010 estimates. The next report’s estimates will no doubt be higher still because warmism demands that its votaries always conclude that climate change is “worse than we thought.” That the administration would ever convene an IWG on the social benefits of carbon is unthinkable.

So where can citizens turn to for balance? I have good news. In The Historic, Present and Future Societal Benefits of Fossil Fuels, a report prepared for the American Council for Clean Coal Energy (ACCE), Dr. Roger Bezdek of Management Information Systems, Inc. (MISI) not only documents the manifold economic and health benefits of carbon energy, he also makes a powerful case that the evident societal benefits of carbon outweigh the conjectural costs by orders of magnitude — a range of 40-1 to 400-1. [click to continue…]

Post image for EPA Bamboozles Science Advisory Board on Carbon Pollution Standard [Updated 1.23.2014]

Yesterday, I listened in on an EPA Science Advisory Board (SAB) teleconference call regarding a possible SAB review of the science underlying the agency’s proposed Carbon Pollution Standard, and what I heard was shocking.

Simply put, EPA misled the SAB, in order to avoid a potentially embarrassing review. By my count, EPA told the SAB three whoppers about the Carbon Pollution Standard. On the basis of this duplicity, the SAB declined to conduct a review of the regulation’s technical feasibility, one that surely would have exposed the rule’s untenable assumptions.

Here’s the back story: SAB was created by the 1978 Environmental Research, Development, and Demonstration Authorization Act. Under the act, EPA is required to make available to the SAB its proposed regulations for review. SAB may then advise the administrator on the adequacy of the scientific and technical basis of the proposed action.

In September 2013, EPA issued a pre-publication version of the Carbon Pollution Standard. The regulation requires that all new coal-fired power plants install carbon capture and sequestration technology to control greenhouse gas emissions. Pursuant to its legal mandate, the SAB delegated to a Work Group the task of performing a preliminary review, on which basis the group would make a recommendation to the full SAB whether or not to conduct a more comprehensive review. On November 12, 2013, the Work Group recommended that the full SAB review “the science supporting” the Carbon Pollution Standard. Directly below, I’ve pasted the Work Group’s conclusion (formatting added):

The Work Group finds that the scientific and technical basis for carbon storage provisions is new science and the rulemaking would benefit from additional review. The specific technical and scientific matters that can be examined as part of the discussion include the scientific basis to develop separate standards for new gas-fired and coal-fired units, carbon capture and storage as a Best System of Emission Reductions for coal-fired plants and underlying scientific assumptions around carbon pollution emissions technological controls.

During yesterday’s teleconference, the full SAB considered whether to further review the Carbon Pollution Standard. And a key determinant of the SAB’s decision was the Work Group’s recommendation. Yet between November 12th and yesterday, the Work Group changed its recommendation 180 degrees. Before, the group had recommended a review; now, it advised that the SAB decline to review the Carbon Pollution Standard.

What happened? According to the Work Group, it was persuaded to change its mind by EPA during a December 17 “fact finding teleconference.” To be precise, here’s what EPA claimed, as interpreted by the Work Group in its recommendation:

  1. “EPA has made a policy decision that this action only applies to carbon emissions and the capture of carbon emissions, and thus does not directly address carbon sequestration.”
  2. “EPA staff explained that the agency’s consideration of feasibility and commercially availability of CCS provisions would be binding only on coal-fired EGUs and were based on three examples of implementing partial CCS.”
  3. “They [EPA staff] state that the agency’s considerations meet the statutory requirements to determine if technologies will be available for the regulated community at the time of construction”

In fact, the SAB was duped. On the truthiness spectrum, EPA’s claims (on which basis the SAB Work Group rendered its advice) range from lies of omission to bald face untruths. Below, I address each one in turn.

[click to continue…]

In a welcome sign of the times, Gore’s act is wearing thin with the tastemakers.
alOn a related note, Gore last week took to his blog to decry the possibility of geoengineering as a solution to global warming climate change. My colleague Marlo Lewis had this to say about Gore’s post (from last week’s Cooler Heads Digest):

Al Gore this week warned that use of geo-engineering to counter global warming would be “utterly mad.”

Geo-engineering refers to a set of techniques designed to cool the planet by limiting the amount of solar energy reaching the surface. Potential techniques include injecting small particles into the stratosphere to scatter sunlight, and spraying sea-water mist into clouds to make them brighter and reflect more sunlight back to space.

[click to continue…]