Post image for State Department Assessment Blows Away Keystone Pipeline Foes’ Objections

If you want to reduce greenhouse gas emissions and oil spill risk, you should support the Keystone XL Pipeline.

Last week the State Department issued its Final Supplemental Environmental Impact Statement (FSEIS) for the Keystone XL Pipeline. Environmental activists are outraged.

Before construction can begin, State must determine that the proposed 875-mile pipeline serves the “national interest” and grant a “Presidential Permit” to builder-owner-operator TransCanada Corporation. Green pressure groups have pushed President Obama to base the national interest determination on a single issue — whether Keystone XL would increase incremental greenhouse gas emissions above the no-project baseline.

Keystone foes assumed this single-factor test would give them a slam dunk. How could expanding petroleum infrastructure not increase oil production, consumption, and the associated greenhouse gas emissions?

The FSEIS, however, concludes that Keystone XL is “unlikely to significantly affect” the rate of Canadian oil sands development. Most U.S. refineries are “optimized” to process heavy crudes such as those imported from Latin America, the Mideast, and Canada. If the Presidential Permit is denied, delivery via rail lines, tankers, barges, and other pipelines will increase, and roughly the same amount of Canadian crude will reach U.S. refineries.

Rail transport of Canadian oil, for example, has increased from practically zero barrels per day in January 2011 to 180,000 bpd in November 2013. Rail loading facilities in the Western Canadian Sedimentary Basin currently have a capacity of 700,000 bpd, and by year’s end capacity is expected to exceed 1.1 million bpd.

Rail Transport Canadian Crude

Here’s the kicker. Those other modes of delivery also produce greenhouse gas (GHG) emissions. Total annual GHG emissions associated with alternative delivery scenarios are 28% to 42% greater than those for the proposed project.

Keystone GHG compared to alternative scenarios

What about oil spill risk, another common complaint of Keystone opponents? [click to continue…]

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 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…]

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…]

Yesterday a flock of green special interests sent a letter to President Obama, asking the Commander-in-Chief to stop using the stupid shibboleth “all of the above,” and instead view all energy policy through a “climate impact lens.”

As you can probably tell by my choice of modifiers, I disdain “all of the above,” even more so than environmentalists. The reason I hate this phrase is that it fails to account for the inane. If an energy source is intermittent and expensive, then it makes no sense to require people to use it…unless you buy into dumb ideas like “all of the above.” Alas, such is our plight.

As much as I dislike “all of the above,” I think “climate impact lens” is an even stupider grouping of words. As I noted earlier this week, when you start seeing things through a “climate impact lens,” Communism looks like a global warming solution. Above, for the sake of reader clarity, I’ve depicted an artist’s rendition of the world as it appears through a climate impact lens.

[update, January 18, 2014, 12:49 PMIn the above post, I absentmindedly forget to heap scorn on that other oft-used energy policy phrase: “energy independence.” In the name of “energy independence,” motorists endure a Soviet-style production quota for ethanol (a fuel whose use increases the price of both food and energy), the Congress perpetuates a counterproductive ban on energy exports, and the EPA constricts consumer choice on the auto market. In general, I advise voters to be wary of all lazy phrases, but if I had to rank the three described above, from highest to lowest in terms of harmfulness, I’d go: (1) ‘climate impact lens’ ; (2) ‘energy independence’; and (3) ‘all of the above.’

Post image for Oil Export Ban and Capitalists against Capitalism: When Will They Ever Learn?

Capitalists against capitalism are a bane of modern society. Although sometimes clever, anti-market business lobbying is neither honorable nor genuinely prudent. Government would be smaller and our economy more prosperous if business leaders eschewed all forms of rent-seeking and corporate welfare.

What makes this evergreen reflection timely and even urgent is the debate over energy exports.

National Journal’s Amy Harder reports that, on Wednesday, independent refiner New Jersey-based PBF Energy hosted a phone call with six competitors to consider joint lobbying against repeal of the decades-old ban on U.S. crude oil exports. Other participants on the call included Valero, Marathon Petroleum, Philadelphia Energy Solutions (PES), and Delta Airlines’ Monroe Energy. According to one account, Valero and Marathon indicated they would not join the lobbying effort. Harder notes the similarity between PBF Energy’s agenda and that of Dow Chemical, which last year organized a coalition of chemical companies to restrict natural gas exports.

Freedom to export is an essential component of free enterprise. Economic liberty primarily means the right to offer one’s goods and services for sale. Exporting is just competing for customers on the other side of lines drawn on maps. In reality, every sale to anyone living outside the walls of your domicile is an export. What we today call capitalism Adam Smith more accurately called the “system of natural liberty” — the spontaneous order that flourishes when government protects rather than suppresses people’s freedom to “truck, barter, and trade.”

Somebody should remind PBF and Dow that private property is the bedrock institution of capitalism, and that export bans and restrictions violate property rights. Such policies are inherently confiscatory. [click to continue…]

Post image for Sen. Murkowski Calls for Lifting Crude Oil Export Ban

In a keynote speech at the Brookings Institution today, Sen. Lisa Murkowski (R-Alaska) called for an end to the decades-old ban on U.S. crude oil exports.

Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, also released a white paper on U.S. energy export policy, A Signal to the World: Renovating the Architecture of U.S. Energy Exports.

Total U.S. energy production reached its highest level ever in July 2013, Murkowski noted in her speech. As a consequence, U.S. exports of coal, dry natural gas, and finished petroleum products are at their highest levels on record.

However, those welcome developments came about “in spite of the federal government, not because of it, as the president frequently seems to imply,” she said.

More importantly, U.S. energy trade rules “were written long ago for a now bygone world in which scarcity, not abundance, was the prevailing mindset,” Murkowski noted. Outmoded regulations hamper exports of liquefied natural gas and virtually prohibit exports of crude oil and condensates. This antiquated policy architecture holds back the leading source of new investment, job creation, and competitive advantage in the U.S. economy.

Worse, the current regime creates significant economic risk. U.S. refineries were not built to handle the light sweet crude produced in the Bakken and Eagleford shale plays. The export ban could soon create a glut, forcing producers to choose between losing money on sales or leaving the oil in the ground. The oil boom could become a bust, warns International Energy Agency executive director Maria van der Hoeven, whom Murkowski cites.

Status-quo defenders claim lifting the ban would increase gasoline prices by reducing the discount at which crude oil trades in U.S. markets. That reasoning is flawed. As Blake Clayton of the Council on Foreign Relations points out, the discount currently benefits a handful of refiners, not consumers, because gasoline prices reflect global crude and finished petroleum product prices, not domestic refiners’ production costs:

As it stands, the primary beneficiaries of the export ban are a few fortunate oil refineries in the central United States—not U.S. consumers—that are able to buy crude oil at depressed prices before selling it at prevailing market rates. Current law arbitrarily works to the benefit of these companies.

Crude oil exports would likely benefit consumers not only by fueling GDP growth but also by moderating gasoline prices. By spurring investment in production, freedom to export would accelerate the increase in global petroleum supply. That, in turn, would put downward pressure on global petroleum prices — the chief factor determining gasoline prices. As Murkowski’s white paper explains:

First, gasoline is a petroleum product and petroleum products are subject to global pricing, just like crude oil. To the extent that greater U.S. production of crude oil puts downward pressure on inter-national oil prices (e.g., the Brent benchmark), then production increases have benefited U.S. consumers by marginally lowering gasoline and crude oil prices.

By the same token, retaining the ban puts consumers at risk. A shale oil glut would depress production and slow the growth in global supply, putting upward pressure on gasoline prices:

To the extent that the crude oil export ban contributes to supply disruptions and decelerating oil production (which affects employment), then the American consumer will suffer the consequences. If the refining mismatch causes production to become shut-in, as some analysts suggest, then prices could actually rise and increase U.S. dependence on imports.

Murkowski believes the Obama administration already has the authority to lift the ban: [click to continue…]

Post image for UK Fuel Poverty: Green Energy Policies Partly to Blame

Today’s Climatewire (subscription required) reports that in the UK last year, “more than 30,000 winter deaths were thought to be caused by fuel poverty, up by a third from the previous year, according to the Office for National Statistics.”

What makes fuel poverty deadly? “Poor heating and a lack of insulation are known to increase the likelihood of strokes in the elderly and to exacerbate asthma and rheumatic disease in all age groups,” explains Climatewire correspondent Erica Rex.

Until last month, UK law defined fuel poverty as a household that spends more than 10% of its income “to maintain an adequate level of warmth.” The law now defines it as “above average fuel costs” that leave households with “a residual income below the official poverty line.” That seems obfuscatory. Implicitly excluded from the revised definition are households that can’t afford to heat their homes because of high average fuel costs.

As Rex notes, the redefinition instantly reduced the official tally of fuel poor in the UK from 3.2 million to 2.4 million, or from 15% to 11%. The reclassification does not mitigate the hardship of people like “Gemma,” a single mother of three interviewed for the article, who skips meals “just to keep the heating on.”

Regardless of how fuel poverty is defined, the issue is heating up, partly because Britain is facing the worst winter in 60 years, but also because government policies mandate increasing reliance on renewable energy.

According to Department of Energy and Climate Change figures, so-called green policies account for “only” 10% of the UK heating bill. On the other hand, DECC projects those policies to increase electricity prices 33% by 2020 and 41% by 2030.

Although commonly associated with the UK and Ireland, fuel poverty is more pervasive. The map below shows the percentage of European households that cannot afford to keep their homes adequately warm.


Source: EU Statistics on Income and Living Conditions (EU SILC) [click to continue…]