In a previous post here, I noted the major problems with House GOP leadership’s proposal to link revenue from expanded domestic energy production with the Highway Trust Fund in their surface transportation reauthorization legislation. Since then, the three major portions have cleared their respective committees: House Natural Resources approved the drilling proposals, Transportation and Infrastructure passed the primary highway bill, and the revenue link was cleared by Ways and Means. A vote by the full House is expected sometime next week.

Observers expect the bill to fail, not only because there is very little for Democrats to like, but also because principled fiscal conservatives — from our “user-pays” coalition to Heritage Action to Club for Growth to RedState — have all slammed the legislation as a Big Government wolf wrapped in pro-market, pro-growth sheep’s clothing. This proposed bill would continue to federally fund highways at unsustainable levels and fails to address how states are to begin reconstructing their portions of the Interstate system. For instance, it explicitly bans states from tolling existing Interstate segments even for the purpose of reconstruction. Reconstruction to current highway construction guidelines by definition increases capacity, yet the tolling section author(s) apparently didn’t find this additional capacity enhancing enough to justify allowing states to implement an intelligent financing mechanism that can actually pay for the needed investment.

Furthermore, the bill seemed to have been assembled with little care as to how certain provisions might impact the real world. For example, a reasonable proposal to increase maximum truck weights on federal highways was defeated in committee in large part because the legislative author(s) of that provision did not include a way to pay for the increased wear and tear. An example of a clean pay-for in this case would have been to simply remove the cap on the annual Heavy Vehicle Use Tax and perhaps adjust the Tire Tax and Truck and Trailer Sales Tax rates accordingly. Or perhaps allow states to opt-in and take over funding responsibility of the additional wear and tear. But did they include such a pay-for or devolution option? Of course they didn’t, and that underscores the problem.

There are essentially two very different (rational) options for moving forward: (1) greatly increase user taxes (primarily fuel taxes) at the federal level to fund reconstruction; or (2) start devolving highway funding to the states and permit them to toll (and contract with private partners) existing sections of Interstate to finance reconstruction.

In our view, option (2) is far superior. The federal government has no real business funding highways and it has proven through years of ineptitude that it is not capable of effectively doing so. Like every highway bill since ISTEA (1991) — which was the first reauthorization following the completion of the Interstate Highway System — Congress appears willing to punt, rather than address in any meaningful way the serious problems of the status quo.

As I mentioned in my previous blog post here at GlobalWarming.org, CEI held a briefing on Capitol Hill along with the Reason Foundation, Taxpayers for Common Sense, and Natural Resources Defense Council (yes, you read that correctly) explaining why moving away from a “user-pays/user-benefits” highway funding principle would be a grave mistake. See that previous blog post for more detail on “user-pays.” You can watch the video of the briefing below:

This coming Monday, January 30, CEI will hold a Capitol Hill briefing regarding recent congressional proposals to fund federal surface transportation investments by directing into the Highway Trust Fund revenue raised from expanded energy production. This is widely known as “drilling for roads.” While we certainly support expanding domestic oil and gas drilling, there are major problems with such a proposal. I previously blogged on this topic here and here.

If the federal government is going to continue funding highways at the level that it currently does, it will need additional revenue. The current program faces several major challenges:

• Much of the Interstate system is nearly 50 years old, the intended life of the infrastructure. This means that much of it will need to be completely reconstructed — not just resurfaced — in the near future.
• The federal fuel excise tax rates have not been raised since 1993, and are currently set at 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel. Inflation has reduced the buying power of those taxes by well over one-third, and federal fuel taxes raise the vast majority of Highway Trust Fund revenue. Furthermore, a fifth of Highway Trust Fund revenue is now diverted to mass transit projects.
• It is quite likely that passenger vehicle-miles traveled are plateauing, or at least the rate of increase of passenger VMT will be significantly lower in the future than it has been in the past. Freight VMT, however, will continue to increase, which will put more wear-and-tear on our highways per vehicle-mile traveled.
• Finally, the U.S. vehicle fleet is expected to become significantly more fuel efficient in the coming decades [PDF, see p. 30; or PDF, see p. 13], which will reduce the user taxes collected per vehicle-mile traveled. Due to this reality, there are also major equity concerns, as it is the upper-income drivers who can afford to purchase the most fuel efficient vehicles, such as hybrids. This means that the fuel tax burden will further shift to lower-income drivers.

Something clearly needs to be done in the long-run. Even for the short-run, Congress must act or within months the Highway Trust Fund will be insolvent. But one thing we do not want to see is “drilling for roads.” Primarily, our opposition stems from the proposal’s weakening of the “user-pays/user-benefits principle,” which guides the Highway Trust Fund that has been around since the Interstate Highway System was created in 1956. The trust fund relies primarily on user taxes on gasoline and diesel, which are collected by the Treasury and credited to the Highway Trust Fund.

Congress’s rationale for the taxes and Highway Trust Fund was to link highway use with highway infrastructure investment. General revenue funding of federal-aid highways — going all the way back to 1916 — had proven woefully inadequate.

Weakening user-pays by depositing oil and gas lease royalty revenue into the Highway Trust Fund calls into question the purpose of having a federal trust fund at all. If that were to happen, the chorus for outright abolition of user-pays would only grow louder. And rather than learning from our pre-1956 mistakes, we could begin making them all over again. Moreover, weakening user-pays by creating a taxpayer-pays “drilling for roads” revenue stream sets a terrible precedent for fiscal conservatives, who have long argued that infrastructure and operations for all modes of transportation should rely on user-generated revenue. CEI has long supported variable tolling (which incorporates congestion pricing), as well as public-private partnerships and public road divestitures to private companies that would need to rely on such a mechanism.

We believe this issue is so important that the Monday Hill event is also being sponsored by the Natural Resource Defense Council, an environmental group that often takes positions opposite to CEI. But NRDC, along with fiscal watchdog Taxpayers for Common Sense and the libertarian Reason Foundation, strongly agrees that preserving the user-pays principle is a must for highway bill reauthorization. Doing otherwise would endanger the future health of our transportation infrastructure, as well as undermine fiscally conservative principles.

House Majority Leader John Boehner said in a statement yesterday that he will continue to support a Republican proposal that would tie expanded energy production on federal lands and in offshore areas to highway funding: “In the coming weeks and months, the House will take action on the American Energy and Infrastructure Jobs Act, which will link expanded American energy production to high-priority infrastructure projects like roads and bridges in order to create more jobs.” We previously noted this development here on GlobalWarming.org in November. I had been holding out hope that House GOP leadership would adopt a New Year’s resolution disavowing this flawed proposal… unfortunately, here we are.

In December, National Review Online published a brief op-ed of mine explaining the problems with “drilling for roads” and the danger such a funding mechanism would pose to the Highway Trust Fund:

During the 35 years that it took to build the Interstate system, fuel taxes provided an adequate source of pay-as-you-go funding. As a result, America built its modern superhighways without adding to the national debt. In 1982, Congress authorized that a portion of fuel-tax revenue be dedicated to mass transit. It was at this time that the user-pays/user-benefits bond began to weaken.

Fast forward to 2011, and the Highway Trust Fund is facing insolvency. The last time Congress raised excise taxes on fuel — currently set at 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel — was 1993. Inflation has reduced its buying power by 40 percent, annual vehicle-miles traveled have increased by 30 percent, and mass transit now siphons off one-fifth of highway user-tax revenues.

A quick, temporary fix would be to raise federal fuel-tax rates, but this is a political non-starter in the current political and economic climate. If House Republicans are truly serious about improving our nation’s highway infrastructure without increasing federal tax rates on fuel, they could devolve more transportation funding responsibility to the states and support more tolling. They could also rein in the waste and abuse of highway-user revenues at the hands of pro-mass-transit special interests and their enabling politicians.

Instead, House Republicans appear ready to undermine one of the more fiscally conservative funding mechanisms in existence. A provision of the 1974 Budget Act requires that the Highway Trust Fund receive 90 percent of its revenue from users in order to maintain its exemptions from appropriations meddling. Assuming drilling royalty revenues are great enough to close the near-term funding gap, the House Republicans’ proposal would push the percentage of user-based Trust Fund revenue to well below 80 percent.

Weakening this standard calls into question the purpose of having a federal trust fund in the first place. If that were to happen, the chorus for abolition of user-pays and a reactionary reversion to general-revenue funding of highways would only grow louder. Rather than learning from our previous mistakes, we would be making them all over again.

On January 30, CEI will host a Capitol Hill briefing on the problems with “drilling for roads,” the importance of preserving the user-pays/user-benefits principle in the forthcoming surface transportation reauthorization legislation, and will present serious solutions to highway funding problems. We’ll post details soon.

House Republicans, led by Speaker John Boehner, announced today that they will soon be introducing the American Energy & Infrastructure Jobs Act. A summary is available on Rep. Boehner’s website. The bill would expand domestic American oil and natural gas production offshore and on federal lands, something I believe is very positive. However, I am not enthusiastic about depositing royalty revenues into the Highway Trust Fund, which would spell an end to the mechanism’s ”user-pays/user-benefits” principle that has long enjoyed broad bipartisan support. The other day at CEI’s OpenMarket.org, I briefly explained why this is a shortsighted move that will likely do great harm to long-term surface transportation policy in the United States by opening the door for increased politicization.

A collective cry of outrage could be heard across the D.C. urbanista interwebs upon the announcement that Ward 6 D.C. Councilman Tommy Wells would be losing his chairmanship of the Council’s Transportation and Public Works Committee. Unfortunately given the political dynamics (read: lefty-enviro-urban-fetishists have way too much pull in this town!), less is generally more when it comes to transportation policy in Washington, D.C. Wells, in addition to being an anti-gambling nannystater, is well known for being behind many of the District’s wasteful, anti-auto “livability” programs. His official website’s tagline is even “Building a livable, walkable city.” For a brief explanation of why the New Urbanists’ social-engineering  concept of “livability” is just code for “stupid handouts to yuppies,” see my recent post on OpenMarket.org regarding the federal Department of Transportation’s TIGER 3 grants program.

As the anti-mobility, pro-gentrification-subsidy Greater Greater Washington laments (as I rejoice), this decision is worsening the already low morale among the District Department of Transportation’s most worthless bureaucrats. Chief trolley and bike-share cheerleader Scott Kubly, who announced he will be leaving his post at DDOT, doesn’t appear to have been driven out as a result of Council Chairman Kwame Brown’s committee shakeup. But this latest departure of a Fenty-era apparatchik is making clear that much of the city is sick and tired of local politicians basing transportation and land-use policies around the silly prejudices concerns of wealthy gentrifiers. Ex-Mayor Fenty’s education policy was fingered by many in the clueless media as the culprit for his loss to now-Mayor Gray, as the awful teachers’ union contributed heavily to Gray’s campaign. But ask a resident of Ward 7 or Ward 8 about what annoyed them most about Fenty’s “white-washing”: “bike lanes” are usually at the top of the list.

While I am hardly optimistic about the overall future prospects of the notoriously corrupt D.C. city government, as an advocate for sensible transportation policy that actually enhances residents’ mobility and quality of life, recent steps taken by key city politicians are a breath of fresh air after years of official pandering to well-to-do urbanists.

I’ve previously reported (see here and here) on the environmental industry’s movement’s war on bunker fuel, the heavy fuel used by large ships around the world. The modus operandi of the enviros is to pursue and convince regulators, such as the United Nations’ International Maritime Organization (IMO) or California’s Air Resources Board (CARB), to push for a targeted patchwork of prohibitions and/or mandating low-sulfur fuel-switching, enacting stricter speed limits in near-shore shipping lanes, restricting on-ship power generation when in port, and imposing emissions taxes.

A couple of years ago, the U.S. Environmental Protection Agency (EPA) was toying with the idea of calling for strict and extremely costly regulations or a federal ban on bunker fuel -carrying or -using ships within U.S. waters, only to be shouted down by politicians and citizens from states with large maritime sectors. But California, a state not known to back down from adopting stupid environmental regulations, moved forward in the war on bunker fuel and international trade and set its own regulations on fuel use and petroleum conveyance in the maritime industry operating within the state’s waters.

But the maritime industry, being smarter than California’s eco-regulators, found a second-best way to access the major port complexes in Los Angeles and Long Beach: reroute around the Santa Barbara Channel’s restricted fuel zone. The new route is longer, takes more time, and it requires ships to cross the U.S. Navy’s Point Mugu Sea Range, but it allows them to cut costs by allowing them to use cheaper bunker fuel for a larger portion of the trip.

The Navy is obviously annoyed with this development, and in fact warned CARB in 2008 that adopting the Vessel Fuel Rule would greatly increase shipping traffic through the Point Mugu Sea Range [PDF, page 5]:

The U.S. Navy contends that the avoidance route would be attractive to shippers for a number of reasons. First, shippers will save fuel costs since they will be outside the OGV Fuel Rule 24 nm zone and therefore, not be required to use the more expensive, cleaner fuel. Second, the avoidance route may be outside any potential future vessel speed reduction zones, allowing the ships to travel faster to reduce shipping time. Third, the U.S. Navy has pointed to efforts to reduce marine mammal strikes in the Santa Barbara Channel which may in the future either impose slower vessel speeds in the channel or move the routes outside the Santa Barbara Channel. In addition, the U.S. Navy contends that if shippers use an avoidance route, on-shore air quality will be negatively impacted.

Despite this warning, and despite CARB analysts finding that the avoidance rate among ships would range between 50 and 100 percent, CARB moved forward with the Vessel Fuel Rule. The radical environmentalist litigators at the Natural Resources Defense Council — which was co-founded by career rent-seeker John Bryson, who has been tapped by President Obama to replace outgoing Secretary of Commerce Gary Locke – are predictably floored. But fortunately for consumers and the maritime industry, and unfortunately for Gaia-worshipers, it doesn’t seem likely that CARB will be able to completely prevent the industry’s rational cost-cutting measures.

ADDENDUM: On June 24, CARB elected to increase the current 24-nm restricted fuel zone to beyond the Channel Islands, thereby drastically reducing the savings (if not eliminating them for some ships) of using the avoidance route. But there are still reasons, particularly for ships with older engines, to keep using traditional bunker fuel (rather than marine gas oil or low-sulfur marine diesel). Switching to “cleaner” fuels, for one, can cause propulsion failures due to thermal shock because burning low-sulfur fuels can cause huge temperature spikes and they have a lower lubrication quality, which leads to stuck fuel valves and pump plungers — and an engine shutdown. If this occurs in a channel filled with rock hazards and strong currents, ships — unable to maneuver — can be wrecked, which can result in far more serious environmental problems than slight reductions in ambient air quality.

A few weeks ago, I wrote about the pending ban on ships carrying or using bunker fuel in the antarctic (set to go into effect in July) and radical environmentalists’ attempts to convince the United Nations’ International Maritime Organization (IMO) to extend the ban to the arctic. Now the greens have convinced the bureaucrats at the World Bank to call for large carbon taxes on bunker fuel and aviation fuel, ostensibly to finance a climate-change relief fund for developing nations:

The World Bank is focusing on a levy on shipping and jet fuels in a report to G20 finance minister in October, among other efforts to keep climate action on track.

“We are looking at carbon emissions-based sources … including bunker (shipping) fuels and aviation fuels, that would be internationally coordinated albeit nationally collected,” said Andrew Steer, World Bank special envoy for climate change.

The Bank estimates the extra cost to help the developing world prepare for more droughts, floods and rising seas at $100 billion annually. Various sources put the extra cost of cutting carbon emissions at $200 billion or more annually.

Steer said he was disappointed by the pace of a U.N. climate process which launched talks in 2007 to find a Kyoto successor.

“I’ve got to say the situation is very urgent and sometimes that sense of urgency is not evident in the negotiations.”

Steer, some of you might recall, is the long-time British technocrat who was Staff Director of the World Development Report 1992: Development and the Environment, the main World Bank document at the Rio Summit and arguably the document most responsible for ushering the eco-apocalypse mindset into the mainstream policy world. Steer recently returned to the World Bank after holding domestic policy positions in his home country.

As opposed to the IMO polar ban on vessels loaded with bunker fuel, which focused on toxic sulfur dioxide (SO_x) and nitrogen dioxide (NO_x) particulate pollution, the World Bank is focusing on non-toxic carbon dioxide (CO₂) emissions. The ongoing operations of the maritime industry, the most crucial facilitating sector of the $16 trillion in annual global trade, are responsible for approximately 3.3 percent of global human CO₂ emissions (2.7 percent from international shipping and 0.6 percent from domestic shipping and fishing), while the aviation industry is responsible for about 2 percent. That’s 5.3 percent of human-caused CO₂ emissions for both of these highly important transport industries.

The International Air Transport Association has called a proposed European tax on aviation emissions illegal and China is currently up in arms over developed nations’ assault on their bunker fuel–powered ships (including by the U.S. via California’s Air Resources Board). Pursuing taxes on bunker fuel and aviation fuel at the international level will quite possibly lead to at best a series of sector-specific trade disputes and at worst a protracted trade war between mid-stage developing countries and the wealthy West.

As for the climate change relief fund these taxes are supposed to finance, the United Nations admits that best-case-scenario revenue estimates are $25 billion to $34 billion annually by 2020 (the low estimate is $12 billion combined from taxes on both bunker fuel and aviation fuel; see page 28), when the $100 billion fund is supposed to be up and running. So where will the other $70-billion-plus come from annually? According to the United Nations (page 7):

All analyses of bunker taxes (whether national, regional or international) have found that whatever type of tax is implemented, it is unlikely to raise enough per year to fulfil the $100 billion a year promise, or even the $50 billion per year of this needed for adaptation. Therefore, if such taxes are implemented, they will need to be accompanied by another innovative finance mechanism such as a Financial Transaction Tax.

Oh, the Financial Transaction Tax — better known as the “Robin Hood Tax.” A financial transactions tax would devastate the financial sector, and further restrict access to credit — thereby preventing much-needed investment in the economy. But this should not be surprising. The environmentalists and many of the eco-technocrats at the World Bank, United Nations, and other useless international governmental organizations are attempting to “sustain the environment” by killing economic growth. Their foolish agenda, if they have their way, will foist on the developing world the most destructive and deadly collectivist economic policies since the Great Leap Forward — and the outcomes could very well dwarf Chairman Mao’s three-year Chinese genocide in terms of magnitude.

This issue has yet to really make a splash in the United States outside of California (which I’ll discuss below), but the European Green Police are leading the way with their next war on humanity: prohibiting ships from using bunker fuel.

Bunker fuel, also known as navy special fuel, is the bottom-of-the-barrel (literally), high-viscosity fuel used by large cruise ships, container ships, and tankers that is just slightly less viscous than the bitumen (asphalt) used to pave roads. Environmentalists hate bunker fuel because sulfur dioxide (SOx) and nitrogen oxide (NOx) emissions are considerably more intense than those of the more refined and lighter gasoline and diesel.

While it is true that this makes bunker fuel “dirtier” than the fuel you put in your car, it is used because ships use large enough engines that are designed to handle bunker fuel and it is far cheaper due to limited demand (nearly nonexistent outside of the maritime industry).

For example, the retail price of a metric ton of 380 centistokes bunker fuel in Houston is $611. Converting per-gallon U.S. retail gasoline prices ($3.96/gallon U.S. average) to metric tons would give you a gasoline metric-ton price of $1,480.24 (42 gallons per barrel, 8.9 barrels per metric ton). If they were to pay at the pump, these ships would need to spend 145 percent more on fuel, something that is simply not economical. Requiring them to run solely on marine gas oil, which is currently $945 per metric ton in Houston, would force them to spend 55 percent more on fuel than they otherwise would. (This is an imperfect comparison given differences in density and calorific value, but still an instructive one.)

Just as consumers have seen the price of gas rise at the pump, so has the maritime industry seen huge increases in the price of bunker fuel (by more than 200 percent over the past few years). It has been estimated that as much as 80 percent of that increase has been passed on to consumers in the form of higher prices on goods.

The maritime shipping industry is the most crucial element of global trade. Besides petroleum and chemical tankers and other large cargo vessels, container ships make up a significant percentage of the world’s commercial maritime fleet. A single container ship can carry thousands of twenty-foot equivalent unit (TEU) containers. The Ebba Mærsk, for instance, has a cargo capacity of more than 15,000 TEU. Each of these intermodal containers is the size of a truck trailer. All of this cargo is moved with a crew of only 13.

If that’s not efficient transportation, I don’t know what is. But the greens don’t care. They would rather crush this industry, and global trade and all the benefits that trade entails, than support the world’s most efficient, environmentally friendly form of bulk cargo transport over long distances.

European environmentalists rejoiced recently when they convinced the International Maritime Organization (IMO), the United Nations’ maritime regulatory body, to ban ships using bunker fuel in the antarctic. The ban goes into effect in July. While there is very limited commercial shipping in the antarctic, this will effectively shut out many large cruise ships from these waters.

Not content with the southern pole, they moved next to try to push for an arctic ban on bunker fuel. Earlier this year, the enviros convinced the European Parliament to call on the IMO to impose a similar ban in the arctic, where there is a great deal of commercial shipping. But make no mistake: the radical environmental movement will not stop at the poles. They will not be satisfied until every port bans ships from using bunker fuel.

Leave it to the Californians to import these European “values” to America. The Golden Gold-Plated State’s Air Resources Board (CARB, the same folks responsible for California’s insane tailpipe emissions regulations) is now regulating bunker-fuel-powered vessels in their waters and is handing out fines to foreign ships who dare operate their businesses in a rational manner.

This recent spate of fines follows a terrible Ninth Circuit decision in March that upheld CARB’s authority to issue and enforce Vessel Fuel Rules, which are designed to reduce SOx and NOx particulate pollution, on ships in port or within California’s territorial waters. The California cruise ship industry, which caters to Pacific Northwest and Alaskan sightseeing tourists, will certainly be harmed. Not to mention California’s dominant position with cargo ports-of-entry. Commercial shipping in the Pacific Ocean — the world’s largest ocean, which covers nearly a third of the Earth’s surface — amounts to only about 15 percent of global maritime shipping, so we can expect this figure to further decline.

An EPA proposal to ban bunker fuel use within 200 nautical miles of the United States — which would have purportedly conformed with potential future IMO regulations — has yet to gain significant traction. But it will. The Gaia-worshipers have a lot of money, a lot of time, and a lot of hatred of humanity.

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