Ethanol Mandate Waiver: Decks Stacked Against Petitioners

by Marlo Lewis on September 10, 2012

in Blog, Features

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The Governors of Georgia, Texas, Arkansas, Delaware, Maryland, New Mexico, and North Carolina have petitioned EPA Administrator Lisa Jackson to waive the mandatory ethanol blending requirements established by the Renewable Fuel Standard (RFS). The petitioners hope thereby to lower and stabilize corn prices, which recently hit record highs as the worst drought in 50 years destroyed one-sixth of the U.S. corn crop. Corn is the principal feedstock used in ethanol production.

Arkansas Gov. Mike Bebe’s letter to Administrator Jackson concisely makes the case for regulatory relief:

Virtually all of Arkansas is suffering from severe, extreme, or exceptional drought conditions. The declining outlook for this year’s corn crop and accelerating prices for corn and other grains are having a severe economic impact on the State, particularly on our poultry and cattle sectors. While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts corn for fuel. Because of this policy, ethanol production now consumes approximately 40 percent of the U.S. corn crop, and the cost of corn for use in food production has increased by 193 percent since 2005 [the year before the RFS took effect]. Put simply, ethanol policies have created significantly higher corn prices, tighter supplies, and increased volatility.

Agriculture is the backbone of Arkansas’s economy, accounting for nearly one-quarter of our economic activity. Broilers, turkeys, and cattle — sectors particularly vulnerable to this corn crisis — represent nearly half of Arkansas’s farm marketing receipts. Arkansas poultry operators are trying to cope with grain cost increases and cattle familes are struggling to feed their herds.

Section 211(o)(7) of the Clean Air Act (CAA) authorizes the EPA to waive all or part of the RFS blending targets for one year if the Administrator determines, after public notice and an opportunity for public comment, that implementation of those requirements would “severely harm” the economy of a State, a region, or the United States. Only once before has a governor requested an RFS waiver. When corn prices soared in 2008, Gov. Rick Perry of Texas requested that the EPA waive 50% of the mandate for the production of corn ethanol. Perry, writing in April 2008, noted that corn prices were up 138% globally since 2005. He estimated that rising corn prices had imposed a net loss on the State’s economy of $1.17 billion in 2007 and potentially could impose a net loss of $3.59 billion in 2008. At particular risk were the family ranches that made up two-thirds of State’s 149,000 cattle producers. Bush EPA Administrator Stephen Johnson rejected Perry’s petition in August 2008.

In the EPA’s Request for Comment on the 2012 waiver petitions, the agency indicates it will use the same “analytical approach” and “legal interpretation” on the basis of which Johnson denied Perry’s request in 2008. This means the regulatory decks are stacked against the petitioners. As the EPA reads the statute, CAA Section 211(o)(7) establishes a burden of proof that is nearly impossible for petitioners to meet. No matter how high corn prices get, or how serious the associated economic harm, the EPA will have ready-made excuses not to waive the corn-ethanol blending requirements. [click to continue…]

64 Free Market Groups Announce Opposition to Wind PTC

by Myron Ebell on September 7, 2012

in Blog

Sixty-four non-profit groups sent a joint letter to the Hill this week that urges Representatives and Senators “to let the wasteful wind PTC expire as planned at the end of the year.”  The battle lines are now fully drawn between Big Wind and supporters of free markets and affordable energy. The letter was organized by Americans for Prosperity.

On the side of continuing massive tax subsidies to crony capitalist investors in wind farms are President Barack Obama, nearly all Democratic members of Congress, and a sizable number of Republican members from States that have enacted renewable portfolio standards for electric utilities.

The opponents of renewing the wind production tax credit include Republican presidential nominee Mitt Romney, Speaker of the House John Boehner (R-Ohio), and the leadership (but not all the members) of the conservative House Republican Study Committee.

The Senate Finance Committee voted 9 to 15 in early August against an amendment that would reduce by 20% the 2.2 cents per kilowatt hour subsidy that wind farms currently receive for ten years.  The Senate’s business tax extenders bill would renew (and actually expand and make more generous) the current credit for one year until 31st December 2013.  The CBO estimated that the cost of the extension would be approximately $12 billion over ten years.

It is unlikely that the business tax extenders bill or any other bill that includes extending the wind production tax credit will see any floor action in either the House or Senate before the election.  On the other hand, it is almost certain that there will be a big push in a lame duck session in November.

Stern Review Not Fit to Guide U.K. Climate Policy, Report Finds

by Marlo Lewis on September 4, 2012

in Features

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The Global Warming Policy Foundation (GWPF) has just published The Failings of the Stern Review of the Economics of Climate Change. The  2006 Stern Review — named for Sir Nicholas Stern, head of the UK Government’s Economic Service under Prime Minister Tony Blair – is arguably the most pessimistic official assessment ever of the economic damages of global warming. The Stern Review famously argued that the “costs of inaction” on climate change hugely outweigh the costs of greenhouse gas mitigation, claiming that, ”If we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year now and forever.”

Influenced by the Stern Review, the UK Government adopted a set of climate policies that cost £17,000 per household, according to the GWPF report, prepared by the Rt. Hon. Peter Lilley MP. Since the UK’s total annual carbon dioxide (CO2) emissions are less than the increase in China’s CO2 emissions in a single year, the UK Government’s climate program is all pain for no gain. It is time for the UK Government to review the Stern Review, Lilley contends.

The GWPF report is 100 pages long, but there is a helpful executive summary and a hard-hitting foreword by leading climate economist Richard Toll. The following excerpts from Toll’s contribution should be sufficient to entice even the most jaded climate wonk to read the report:

The publication of the Stern Review of the Economics of Climate Change was a PR exercise that was unprecedented in economics. Sir Nicholas, now Lord Stern, was portrayed as an expert even though he had never published before on the economics of energy, environment or climate.

Honest policy analysts show results for a range of alternative discount rates. The Stern Review uses a single discount rate. It corresponds to an extreme position in the literature and it deviates from the official discount rate of HM Treasury. Nick Stern is, of course, free to use whatever discount rate he wants in his private life. Professor Sir Partha Dasgupta of Cambridge University has found that Stern should save 97.5% of his income, were Stern to follow the advice in the Stern Review. Taking such an extreme position in public policy is odd.

Most economic studies conclude that it is best to start with modest emission reduction, and accelerate the stringency of climate policy over time. For that, public policy will need to pull into the same direction over 20 or more electoral cycles. If the case for climate policy is exaggerated, the backlash will come, sooner or later. The Stern Review was a tactical masterstroke, but it will likely prove to be a strategic blunder. Its academic value is zero.

In a related post, Lilley provides a condensed summary of his report. “Stern,” he writes, ”reaches conclusions far removed from those of most environmental economists by combining statistical sophistry and verbal virtuosity. For example:” [click to continue…]

Should We Fear the Methane Time Bomb (Part Deux)?

by Marlo Lewis on August 31, 2012

in Blog, Features

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Climate alarmists have long warned that warming of the Arctic could melt frozen marine and permafrost sediments, releasing methane trapped in peat bogs and ice crystals (clathrate hydrates, see photo above). Methane is a potent greenhouse gas that packs 21 times the global warming punch as CO2 over a 100-year time span and more than 100 times the CO2-warming effect over a 20-year period.

So the fear is that methane emissions from the thawing Arctic will accelerate global warming, which in turn will melt more clathrates and methane-bearing sediments, which will produce still more warming, in a vicious circle of climate destabilization. In a previous post, I offered a skeptical perspective on this doomsday scenario.

This week the journal Nature published a study raising similar concerns about the potential for significant releases of methane from the Antarctic ice sheets. The study’s 14 authors, led by Jemma Wadham of the University of Bristol in the UK, estimate that about 21,000 petagrams (gigatons) of organic carbon (OC) are buried in sedimentary basins under the East and West Antarctic ice sheets – more than 10 times the estimated magnitude of OC stocks in northern permafrost regions. Microbial production of methane from OC (a process known as methanogenesis) is common across many cold subsurface environments, and may have been at work for millions of years beneath the Antarctic Ice Sheets.  [click to continue…]

PolitiFact Repeals the Laws of Supply and Demand

by Hans Bader on August 31, 2012

in Blog, Politics

If you restrict the supply of something, the price will go up.  It’s one of the laws of supply and demand.  Thus, cap-and-trade energy rationing schemes drive the price of energy up, by capping the supply.  President Obama has conceded that in his unguarded moments.  In a January 17, 2008 interview with the San Francisco Chronicle, Obama said that “electricity rates would necessarily skyrocket” under his cap-and-trade plan to fight global warming.  He also said that under his plan, “if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them.”

But journalists are not economists, and often have difficulty understanding the most basic principles of economics.  (Some cannot even do basic math).  What is clear to any economist or any college graduate who has taken Econ 101 seems disputed or unclear to many journalists, who are more familiar with trendy fads in college English Departments, and left-wing critical race theory, than they are with basic economic truths.

So it is that PolitiFact Virginia erroneously rated as “mostly false” the claim that cap-and-trade would naturally lead to “higher” energy bills for Virginia households.  It admitted that “analyses of two measures that have been before in Congress in recent years concluded that cap-and-trade carries a cost for most consumers,” but then claimed that such costs could somehow be offset, even while capping energy use, and result in “an average lower cost for consumers.”  While their effects on the environment may be disputed, it is clear that they raise energy costs for consumers by reducing the supply of energy.  (As a CBS analyst once noted, a Treasury Department analysis pegged the cost of the Obama Administration’s cap-and-trade plan at $1761 per year per American household).

Whatever their theoretical merits, cap-and-trade schemes tend to become vehicles for vast amounts of corporate welfare and special-interest pork by the politicians who craft them, like the Congressional cap-and-trade energy bill backed by the Obama Administration.  That Obama-backed bill contained so many special-interest giveaways that it would have fleeced American consumers without helping the environment, as I explained earlier (it contained environmentally-harmful ethanol subsidies and could have driven industry overseas to countries with less environmental protections).

Pickens Plan – Well and Truly Dead?

by Marlo Lewis on August 29, 2012

in Features

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At a luncheon hosted by Politico at the GOP convention in Tampa today, T. Boone Pickens said truck fleets will switch from diesel to natural gas without Congress approving the NAT GAS Act, legislation offering generous tax credits for the purchase of natural gas trucks (up to $64,000 per vehicle) and installation of natural gas fueling infrastructure. Pickens reportedly spent about $100 million over the past five years promoting his energy agenda, commonly known as the Pickens Plan.

Congress declined to pass either the NAT GAS Act or an earlier iteration of the Pickens Plan that would have required 20% of the nation’s electricity to come from wind, thus supposedly freeing up natural gas to be used to fuel both trucks and passenger cars.

Critics argued that if switching to natural gas vehicles makes commercial sense, private enterprise will bring about the transformation without Washington trying to pick energy market winners and losers. Pickens is now talking the talk. Politico‘s Darren Goode reports:

“You don’t have to have a tax credit; it’s going to happen,” he [Pickens] said. The choices to run 18-wheelers, he said, are between natural gas and diesel — and natural gas is “$2 a gallon cheaper.”

And Pickens strongly suggested that he doesn’t have any plans to try to push his plan anymore in the nation’s Capital.

“I will not go back to Washington again unless it’s for a social event,” he said.

The billionaire and former oil baron also lamented that while his plan initially promoted wind energy, that hasn’t worked out so well.

“I’ve lost my ass” to wind-energy investments, he conceded.

Mitt Romney’s Ethanol Problem

by Brian McGraw on August 23, 2012

in Blog

While I’ll be the first to admit I would prefer Mitt Romney’s energy policies to those of President Obama, especially his appreciation for increased energy production on public lands and the OCS, I found his newly released energy policy white paper slightly humorous in parts.

On the top of page 19:

• Focus government investment on research across the full spectrum of energy-related technologies, not on picking winners in the market;

• Support increased market penetration and competition among energy sources by maintaining the RFS and eliminating regulatory barriers to a diversification of the electrical grid, fuel system, or vehicle fleet;

On the bottom of page 19:

Instead of distorting the playing field, the government should be ensuring that it remains level. The same policies that will open access to land for oil, gas, and coal development can also open access for the construction of wind, solar, and hydropower facilities. Strengthening and streamlining regulations and permitting processes will benefit the development of both traditional and alternative energy sources, and encourage the use of a diverse range of fuels including natural gas in transportation. Instead of defining success as providing enough subsidies for an uncompetitive technology to survive in the market, success should be defined as eliminating any barriers that might prevent the best technologies from succeeding on their own.

I’m not sure what the Renewable Fuel Standard is other than a subsidy for an uncompetitive technology allowing it to survive in the market.

I guess you can’t win them all.

Heat Waves, Droughts, Floods — We Didn’t Listen!

by Marlo Lewis on August 23, 2012

in Features

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The hilarious South Park episode “Two Days Before the Day After Tomorrow” opens with Eric Cartman and Stan Marsh playing in a motor boat that Cartman falsely claims belongs to his uncle. Cartman persuades Stan to drive the boat. Not knowing how, Stan crashes the boat into the world’s largest beaver dam, flooding the town of Beaverton.

Rather than get help, Cartman and Stan decide to tell no one and pretend they were playing at Eric’s house all afternoon. The flood leads to wild speculation not only in South Park but also in the national media and the scientific community. Stan’s father Randy is a geologist. He and his colleagues determine that global warming caused the Beaverton flood. Worse, they calculate that global warming will strike worldwide “two days before the day after tomorrow.” Randy exclaims: “Oh my God — that’s today!” There is panic in the streets.

Echoing the sermon at the end of the 2004 Sci-Fi disaster film, The Day After Tomorrow, Randy laments: “Stan, I’m afraid us adults just let you children down. We didn’t take care of our earth, and now you’ve inherited our problems. We didn’t listen!” To watch Randy’s mea culpa on YouTube, click here.

We’ve been hearing a lot from Randy’s real-world counterparts of late, which is why in recent posts, I presented evidence that climate change was not the principal factor behind the 2003 European heat wave, the 2010 Russian heat wave, the 2011 Texas drought, or the ongong Midwest drought.

What about floods? Google “global warming” and “floods,” and you’ll get 7.2 million results. Given all that ‘evidence,’ you may surprised that a new scientific study finds no correlation between rising global mean carbon dioxide concentrations (GMCO2) and flooding in the U.S.

[click to continue…]

Inside the Sausage Factory: The Obama Administration’s Auto Regulations

by Marlo Lewis on August 22, 2012

in Features

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Earlier this month, the House Oversight and Government Reform Committee issued a staff report on the Obama Administration’s fuel economy/greenhouse gas (GHG) regulatory program. The report, A Dismissal of Safety, Choice, and Cost, is the product of a “multi-year Committee investigation” that includes three hearings, a transcribed interview of EPA Assistant Administrator Gina McCarthy, and a review of more than 15,000 documents obtained by the Committee from the EPA, the National Highway Traffic Safety Administration (NHTSA), the California Air Resources Board (CARB), and 15 automobile manufacturers.

Some key findings:

  • The Administration performed an end-run around the law and ran a White House-based political negotiation, led by “czars” who marginalized NHTSA, the federal agency charged in statute with setting fuel economy standards.
  • Contrary to the statutory scheme Congress created, the EPA became the lead agency in fuel economy regulation and NHTSA was sidelined. Contrary to Congress’s preemption of State laws or regulations “related to” fuel economy, CARB became a “major player” and an “aggressive participant in the process,” allowing unelected state regulators in Sacramento to set national policy outside the federal rulemaking process.
  • The Administration violated the spirit – and possibly the letter – of the Administrative Procedure Act, Presidential Records Act, and Federal Advisory Committee Act by negotiating agreements on both the Model Year (MY) 2012-2016 and MY 2017-2025 standards behind closed doors with only a select group of stakeholders.
  • The new fuel-economy/GHG standards will add thousands of dollars to the cost of new vehicles. Consumers are likely to incur net financial losses unless annual gasoline prices reach $5-$6 per gallon.
  • Compliance with the new standards will require mass reductions that will, in turn, compromise vehicle safety. EPA and CARB officials mocked and belittled safety concerns raised by NHTSA.

In a law journal article and regulatory comment letter, I also make the case that the administration’s fuel-economy agenda trashes the separation of powers and administrative procedures. But the Committee’s report provides the first, detailed behind-the-scenes chronology of Team Obama’s fuel economy machinations, confirming what other critics suspected but could not document.

Some secrets of the sausage factory, though, may never come to light: “Despite multiple requests, the Executive Office of the President refused to provide any information on its involvement in developing the fuel economy and GHG emissions standards.”

[click to continue…]

Reasonable Estimates of Cellulosic Biofuel Production

by Brian McGraw on August 22, 2012

in Blog

Yesterday The Hill‘s Energy Blog reported on a brief filed by the EPA in the U.S. Court of Appeals for the District of Columbia:

The documents filed Monday with the U.S. Court of Appeals for the District of Columbia reveal the reasoning behind EPA’s move to shoot down the American Petroleum Institute’s (API) challenge of the renewable fuel standard (RFS). EPA determined that enough advanced biofuels — generally understood to be made from non-food products — existed to meet that portion of the RFS for 2012.

“EPA reasonably considered the production capacity likely to be developed throughout the year, while API would have EPA rely narrowly and solely on proven past cellulosic biofuel production,” EPA said in its brief. “EPA reasoned that lowering the advanced biofuel volume in these circumstances would be inconsistent with EISA’s [the Energy Independence and Security Act of 2007] energy security and greenhouse gas reduction goals, and decided to leave the statutory advanced biofuel volume unchanged.”

The (main) question here is what the 2012 cellulosic biofuel requirements should be set at. The EPA is arguing that they took a reasonable look at capacity production and put out what they thought could be developed, while the American Petroleum Institute is only looking at historic cellulosic biofuel production. So who is being reasonable? [click to continue…]

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