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Post image for A Modest Proposal on Exports: Give Dow Chemical a Dose of its own Medicine

Dow Chemical CEO Andrew Liveris has been making waves of late with congressional testimony and a Wall Street Journal oped advocating restrictions on U.S. exports of liquefied natural gas (LNG).

To oppose “unfettered,” ”unlimited,” or “unchecked” LNG exports — in other words, to fetter, limit, and check the freedom of gas producers to sell their own products — Dow formed a business group called America’s Energy Advantage (AEA). Other members include Alcoa, Eastman, Huntsman, and Nucor.

AEA’s rationale for restricting gas exports (to quote Liveris’s oral testimony) is that when gas is not exported but instead is used to manufacture products, it creates “eight times the value” across the entire economy. That claim derives from a Charles River Associates (CRA) study sponsored by – drum roll, please – Dow. According to CRA, using gas as a manufacturing input trounces gas exports in terms of job creation, GDP growth, and trade-deficit reduction. Therefore, AEA argues, Congress and/or the Department of Energy (DOE) should constrain LNG exports in the “public interest.” AEA also warns that higher gas prices from increased overseas demand could destroy tens of thousands of manufacturing jobs and kill the U.S. manufacturing renaissance. AEA claims it is not opposed to all LNG exports, it just wants a “balanced” approach.

Economist Craig Pirrong (a.k.a. the “Streetwise Professor“) deftly pops this rhetorical balloon:

I am adding a new entry to my list of phrases that put me on guard that someone is trying to con me: “balanced approach.”. . . . In Obamaland, “balanced approaches” mean large tax increases now, and hazy promises of spending cuts in some distant future. In Liveris’s oped, “balanced” means imposing restrictions on exports of natural gas to lower the cost of his most important input. Funny, ain’t it, that things seem to tip the way of those advocating “balanced approaches”? In other words, if it helps me, it’s fair and balanced!

The whole thing is galling. Even if Liveris were correct and gas turned into chemicals generates “eight times” the economic value of gas sold abroad, such third-party assessments should have no bearing on how companies dispose of their own property. As American Enterprise Institute scholar Mark Perry points out, AEA companies did not invest a dime to develop fracking and horizontal drilling technology, construct the wells, or hire the rig workers, yet they presume to decide what happens to the gas after it’s extracted from miles under the Earth. Not unlike the Supreme Court’s Kelo decision, AEA’s implicit premise is that central planners have the right, nay the duty, to commandeer private property whenever the resource would add more value in someone else’s hands.

But do Liveris and AEA really believe the rationale they’re pushing, or only when it cuts in their favor? Here’s an easy way to tell. Dow, Alcoa, Eastman, Huntsman, and Nucor primarily manufacture intermediate goods, not final goods. As natural gas is an input to them, so their products are inputs to still other companies. AEA-produced chemicals, plastics, electronic components, aluminum, and steel reach the consumer only after other manufacturers “add value” by turning those “feed stocks” into paints, cosmetics, fertilizers, pharmaceuticals, computers, cell phones, automobiles, and so on.

So by AEA’s logic, the government should restrict exports of chemicals, aluminum, and steel to hold down domestic prices and make U.S. manufacturers of final goods more competitive. The “public interest” demands it! I’ll bet my salary against Liveris’s that he will never, ever agree that sauce for the goose should also be sauce for the gander. [click to continue…]

Maryland’s Off-Shore Wind Farm Would Be More Dangerous Than You Think

by Adam Sandberg on March 13, 2013

Post image for Maryland’s Off-Shore Wind Farm Would Be More Dangerous Than You Think

With the Maryland’s Senate passing the Maryland Offshore Wind Energy Act of 2013, it looks as if the U.S. is likely to build its first off-shore wind farm east of the Ocean City. The initiative has been widely endorsed by environmentalist groups, such as the Coalition for Wind Works for Maryland. As the coalition states on its website:

“Bringing offshore wind power to Maryland will effectively stabilize electricity rates, create jobs, reduce pollution, and provide us with a local source of clean, renewable energy.”

According to current plans, any offshore windfarm built pursuant to the legislation would be approximately 10 nautical miles (11.5 miles) from the Atlantic coast and produce 200 megawatts – supposedly providing about 1 percent of the state’s electric needs.

As we’ve frequently pointed out, wind power plants are inefficient, costly and in need of heavy subsidization. But the cost may not only be measured in dollars–reports show that the turbines are in fact quite dangerous as well. For instance, two windmill accidents have been reported in Sweden in the few weeks alone. In February, a blade fell down while a turbine was being repaired, crushing a parked car. This past Sunday, a windmill spun out of control after a safety mechanism failed, forcing the nearby residents to evacuate for 24 hours until two blades finally came off in the strong winds.

And not every accident leaves people unscathed. Last December, a German crane operator was killed when a blade fell on his cab during the installation of a windmill. A survey performed by RenewableUK, a wind power trade association, estimated that 1,500 accidents had occurred between 2006 and 2011 in the UK alone, including 300 injuries and 4 deaths. Focusing on wind farms, the Health and Safety Executive’s figures showed three fatal accidents between 2007 and 2010 and a total of 53 major or dangerous incidents during the same time frame.

A Later Peak Cherry Blossom Date – Is DC’s Global Warming Indicator Broken?

by Adam Sandberg on March 8, 2013

Post image for A Later Peak Cherry Blossom Date – Is DC’s Global Warming Indicator Broken?

There’s an ongoing quest to find signs of global warming in every aspect of everyday life. Over the last few years a rather unique kind of local indicator for GW has emerged, namely the predicted peak cherry blossom bloom of Washington DC’s Tidal Basin.

The peak cherry blossom bloom period has been used frequently as a GW indicator for the last three years. In line with GW claims, the predictions for peak blooms were moved ahead in both 2010 and 2011; in 2010, the revised predicted peak dates were April 1 to April 4; in 2011, they were even earlier– March 29 to April 3. In 2012, the predictions of a peak between March 20 and March 23 were regarded as a first-class sign of GW, with DC’s cherry blossoms being called a “Global Warming Canary” by the Huffington Post. It seemed that the hugely popular cherry blossom festival was in danger of becoming a winter, rather than a spring, event. As stated in a 2012 Washington Post article “Could cherry blossoms one day be blooming in winter?” there is a future possibility of “a blooming period in February instead of March, and a peak bloom in early March, instead of early April”.

So what are the predictions for this year’s cherry blossom? The National Park Service has announced that the peak bloom for Washington’s Global Warming Canary will be March 26 to March 30 — about one week later than last year. Although the actual bloom dates will be determined by the weather in the coming weeks, this year’s prediction of a later peak period does not fit into the alarming predictions of earlier years, or the notion that the shift towards earlier dates will continue.

Given the decades-long nature of climate trends, later peak blooms in a single year don’t prove anything either way about GW. But that was just as true of the 2010 to 2012 cherry blossom seasons, and yet those dates triggered quite a bit of GW alarmist commentary. This year’s prediction hasn’t. Press coverage of GW “evidence” apparently omits incidents that run counter to alarmism. Perhaps that’s not a surprise, but it’s not a healthy sign for public understanding.

And no matter when the blossoms appear this year, let’s all enjoy them—even the GW alarmists among us.

Exxon Mobil’s Carbon Tax Follies

by Myron Ebell on March 1, 2013

Post image for Exxon Mobil’s Carbon Tax Follies

It was a busy week for promoting and opposing a carbon tax. Two studies on the economic effects of a carbon tax that draw opposite conclusions were released by the National Association of Manufacturers and the Brookings Institution. Kevin Hassett, Ph.D., director of economic policy studies at the “pro-business” American Enterprise Institute, continued his advocacy of a carbon tax at a Resources for the Future forum. And most interestingly, former EPA Administrator William K. Reilly, said at a conference that, “The strongest advocate on our task force for a carbon tax was ExxonMobil. I had previously thought that was a public relations thing — I didn’t think they were quite interested in it.”

The National Association of Manufacturers released a study by NERA Consulting on the Economic Outcomes of a Carbon Tax. The NAM study concludes that a tax starting at $20 per ton of carbon dioxide emitted and increasing by 4 percent per year would have a range of negative effects that would ripple through the economy. In particular: “The negative impact of a carbon tax on total manufacturing output would be significant, with output from energy-intensive manufacturing sectors dropping as much as 15 percent and output from non-energy-intensive manufacturing sectors dropping as much as 7.7 percent.”

The NAM study also argues that: “A carbon tax would have a net negative effect on consumption, investment and jobs, resulting in lower federal revenues from taxes on capital and labor. Factoring in lost revenue from reduced economic activity, the net revenue from a carbon tax available for deficit/debt reduction and lower tax rates is relatively small.”

EPA Cuts 2012 Cellulosic Blending Target to Zero

by Marlo Lewis on February 28, 2013

Post image for EPA Cuts 2012 Cellulosic Blending Target to Zero

“U.S. EPA has altered its cellulosic biofuel requirements for 2012 — from 8.65 million gallons to zero,” today’s Climatewire reports. In January, the D.C. Circuit Court of Appeals vacated EPA’s 2012 cellulosic biofuels standard. “As a result,” Climatewire explains, ”obligated parties — oil companies required to show EPA that they blend biofuels in their fuel supply — won’t need to provide information on their compliance. The agency will submit refunds to companies that have submitted payments for 2012 cellulosic waiver credits.”

Who says there’s no justice in this world! For several years the EPA has fined refiners for not purchasing and blending ethanol made from switchgrass, wood chips, and other fibrous, non-edible plants. Refiners protested that there was no commercial cellulosic fuel to buy. The EPA argued that didn’t matter because the Renewable Fuel Standard (RFS) is meant to be “technology forcing.” The agency thus based each year’s cellulosic target on aspirational (rather than realistic) projections of how much cellulosic fuel would be produced. It then cheerfully collected fines for all the gallons of phantom fuel refiners did not blend.

The Court held that punishing refiners for what the ethanol industry failed to do is not “technology forcing”:

EPA applies the pressure to one industry (the refiners) [citation omitted], yet it is another (the producers of cellulosic biofuel) that enjoys the requisite expertise, plant, capital and ultimate opportunity for profit. Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry. “Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.” Given this asymmetry in incentives, EPA’s projection is not “technology-forcing” in the same sense as other innovation-minded regulations that we have upheld.

Zeroing out the RFS cellulosic blending targets established by the Energy Independence and Security Act (EISA) is long overdue. [click to continue…]

Is Presumed EPA Nominee Trustworthy?

by Anthony Ward on February 26, 2013

Post image for Is Presumed EPA Nominee Trustworthy?

The Washington Post reports that the President is poised to nominate Gina McCarthy to succeed Lisa Jackson (a.k.a. “Richard Windsor”) as EPA administrator. If/when the Senate takes up her confirmation, lawmakers should know that McCarthy, the current chief of Air Regulation at the EPA, has a history of misleading Congress and the public on two of EPA’s most expensive regulations.

As CEI Senior Fellow Marlo Lewis points out in a 2011 editorial:

[McCarthy and other EPA officials] denied under oath that motor vehicle greenhouse gas emission standards are “related to” fuel economy standards. In so doing, they denied plain facts they must know to be true. They lied to Congress.

He elaborates:

That greenhouse gas emission standards implicitly regulate fuel economy is evident from the agencies’ own documents. As EPA and NHTSA acknowledge in their joint May 2010 Greenhouse Gas/Fuel Economy Tailpipe Rule (pp. 25424, 25327), no commercially available technologies exist to capture or filter out carbon dioxide (CO2) emissions from motor vehicles. Consequently, the only way to decrease grams of CO2 per mile is to reduce fuel consumption per mile — that is, increase fuel economy. Carbon dioxide constitutes 94.9% of vehicular greenhouse gas emissions, and “there is a single pool of technologies… that reduce fuel consumption and thereby CO2 emissions as well.”

That’s not the only time she’s willfully confused the public on a major regulation.

Study Links Ethanol Policy to Food Price Increases, Mideast Turmoil

by Marlo Lewis on February 8, 2013

Post image for Study Links Ethanol Policy to Food Price Increases, Mideast Turmoil

A report published in October 2012 by the New England Complex Systems Institute (NECSI) links soaring corn and agricultural commodity prices to food riots and turmoil in North Africa and the Middle East.

Although several factors may contribute to political unrest, acknowledge Dr. Yaneer Bar-Yam and two co-authors, “the timing of violent protests in North Africa and the Middle East in 2011 as well as earlier riots in 2008 coincides with large peaks in global food prices.” In poor countries with little or no local agriculture to “buffer” swings in global supply conditions, the central government “may be perceived to have a critical role in food security. Failure to provide security undermines the very reason for existence of the political system.”

In short:

When the ability of the political system to provide security for the population breaks down, popular support disappears. Conditions of widespread threat to security are particularly present when food is inaccessible to the population at large.

Soaring food prices triggered food riots in both 2008 and 2011.

Figure explanation (references omitted): Time dependence of FAO Food Price Index from January 2004 to May 2011. Red dashed vertical lines correspond to beginning dates of “food riots” and protests associated with the major recent unrest in North Africa and the Middle East. The overall death toll is reported in parentheses. Blue vertical line indicates the date, December 13, 2010, on which Dr. Bar-Yam and colleagues submitted a report to the U.S. government, warning of the link between food prices, social unrest and political instability. Inset shows FAO Food Price Index from 1990 to 2011. [click to continue…]

Ethanol: Bad Deal for Consumers Gets Worse

by Marlo Lewis on February 6, 2013

Post image for Ethanol: Bad Deal for Consumers Gets Worse

Responding to the anti-Renewable Fuel Standard Hill briefing discussed on this blog yesterday, Tom Buis, CEO of ethanol trade group Growth Energy, asserted that “homegrown American renewable energy provides consumers with a choice and savings” (Greenwire, subscription required). Rubbish. Under the Renewable Fuel Standard (RFS), ethanol consumption is a mandate, not a choice.

Buis’s claim that ethanol relieves pain at the pump sounds plausible because a gallon of ethanol is cheaper than a gallon of gasoline. However, ethanol has about one-third less energy than gasoline and does not make up the difference in price. Consequently, the higher the ethanol blend, the worse mileage your car gets, and the more money you spend to drive a given distance.

FuelEconomy.Gov, a Web site jointly administered by the U.S. Environmental Protection Agency (EPA) and the Department of Energy (DOE) calculates how much a typical motorist would spend in a year to fill up a flex-fuel vehicle with either E85 (motor fuel made with 85% ethanol) or regular gasoline. The exact bottom line changes as gasoline and ethanol prices change. The big picture, though, is always the same: Ethanol is a net money loser for the consumer.

For example, at prices prevailing in late November 2012, it cost $500 more per year to drive on E85. When I checked FuelEconomy.Gov last week, E85 cost the average motorist an additional $600 per year.

A bad deal just got worse. At today’s prices, it would cost an extra $700-$900 a year to switch from regular gasoline to E85. Some savings! Small wonder that our ‘choice’ to buy ethanol must be mandated.

Ex-Colorado Gov. Ritter on Energy Secretary Shortlist, Despite Record

by William Yeatman on February 6, 2013

Post image for Ex-Colorado Gov. Ritter on Energy Secretary Shortlist, Despite Record

Over at the Daily Caller News Foundation, reporter Greg Campbell takes a long look at ex-Colorado Governor’s qualifications to become the next Energy Secretary, a cabinet position for which he is rumored to be in the running. The President’s due diligence team should take note. Campbell writes:

One of Ritter’s main legacies as governor is a package of legislation called “the new energy economy” that was meant to kickstart renewable energy initiatives.

But his administration has come under scathing criticism recently for its handling of new energy projects. A state audit of the Colorado Energy Office — which began focusing on renewable energy initiatives during Ritter’s tenure — showed that it could not account for how it spent $252 million in state and federal money since 2007.

The agency could not say how much its programs cost or how much money was spent on them. The audit concluded that because of poor accounting, the energy office could not show that any of its programs were cost effective.

Much of the mismanaged money alluded to above came from the stimulus. In this respect, an Energy Secretary Ritter would provide a seamless transition from outgoing Secretary Steven Chu, whose tenure was characterized by pound-foolish stimulus spending.

According to Ritter, however, the state auditor has it all wrong:

He [Ritter] said that documents showing “in great detail” what was spent on various projects, as well as their outcomes, exist on the Internet and that there were “other avenues” for auditors to locate information.

Sooooo…….the missing exculpatory evidence is “on the internet”…..I’ve heard worse excuses, but not many.

In addition to the mismanagement of taxpayer money, Ritter also has a deep well of experience making energy more expensive. While in office, Ritter championed an agenda he labeled the “New Energy Economy.” In practice, it meant forcing Colorado ratepayers to use more green energy, and also fuel switching from coal to natural gas. Because green electricity costs more than natural gas electricity, which in turn costs twice as much as coal electricity in Colorado, Ritter’s New Energy Economy necessarily inflated electricity costs. As Campbell reports,

Indeed, a new report examining the financial impact of New Energy Economy legislation shows that Xcel Energy customers paid $484 million last year complying with the state’s tough new renewable energy standards and other clean energy measures, an amount that comprised 18 percent of Xcel’s total electricity sales in 2012.

Hill Briefing Shreds Renewable Fuel Standard

by Marlo Lewis on February 5, 2013