energy

T. Boone Pickens Still Wants Subsidies

by Brian McGraw on February 6, 2012

in Blog

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Fresh off a nod from President Obama’s State of the Union speech, T. Boone Pickens has again began to circle the country touting the alleged benefits of providing subsidies for the transportation sector to convert more vehicles to natural gas power. Today, he writes in The Chicago Tribune:

If you are going to transform American energy to address the national security and economic risks associated with our OPEC oil dependence, there is only one solution: move our natural gas reserves into transportation, with an emphasis on the heavy-duty truck and fleet-vehicle markets.

Free-market advocates argue that’s bad public policy. They fail to understand that OPEC is far from a free market. They’ll tell you we shouldn’t pick winners and losers in the transportation fuel segments. I say it’s time to pick America over OPEC. Let’s go with anything American. I’m fine with the battery, but remember, it won’t move an 18-wheeler.

Imagine the impact natural gas could have in solving our energy problem. Targeting heavy-duty trucks and fleet vehicles — about 8.5 million in all — could cut our OPEC oil dependence in half in 10 years or less.

Fortunately, while we wait for Washington policymakers to lead, the move to replace more expensive, dirtier OPEC oil, diesel or gasoline with cheaper, cleaner domestic natural gas is gaining private-sector support. At an event in Chicago last week, two leaders in the natural gas vehicle industry — Navistar and Clean Energy Fuels — announced a plan to aggressively develop a comprehensive system to build natural-gas truck engines and provide the infrastructure to fuel them.

Over-the-road trucks tend to run the same routes on the same schedule. Drivers stop in the same places to rest, eat and refuel. Putting natural-gas refueling stations along the major travel routes is a relatively minor logistical issue. Building natural-gas engines for those trucks will be a major job creator.

The fact that OPEC isn’t a “free market” does not allow one to conclude that the U.S. should further distort markets without further argumentation, which Pickens does not provide, deciding to go the “national security” route that so many arguments deviate towards when they run out of good points.

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The Consequences of our Biofuel Policy

by Brian McGraw on October 31, 2011

in Blog

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Dave Juday, a commodity analyst writing in The Weekly Standard, has a long essay covering the largely negative consequences of our nation’s ethanol policy. He covers many of the familiar arguments, such as rising food costs and the ongoing nonexistence of cellulosic ethanol, but also many topics less often covered by the media, such as the clever ability of corporations to take advantage of these subsidies in ways that were not intended:

For a time, the $1 tax credit provided a huge incentive to import soy oil from South America, blend it with a small amount of petroleum diesel to claim the U.S. tax credit​—​the blending often occurred while the tanker ship was still in port​—​and then re-export the blended fuel to Europe to further capture EU subsidies. That little scheme was known as “splash and dash,” and it was a $300 million subsidy to promote domestic biofuel use that did not in fact subsidize biodiesel use in the United States.

Consider the absurdity of splash and dash at its height: According to the Department of Energy, in 2008 the United States produced 678 million gallons of biodiesel and exported 677 million gallons. We imported 315 million gallons, and domestic U.S. consumption was 316 million gallons. That particular stratagem ended in 2009, but exports haven’t. Despite not meeting the mandated minimum for domestic biodiesel use last year, more than a third of the biodiesel produced in this country was exported in 2010. [click to continue…]

Support for Ethanol is Still Unfortunately Bipartisan

by Brian McGraw on October 17, 2011

in Blog, Features

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The Washington Times today has an editorial chiding the U.S. Environmental Protection Agency for its decision to proceed with approval and support for higher blends of ethanol (E15) to be sold nationally. There are still a number of complications that seem likely to get in the way of (i.e., the lack of price competitiveness) of widespread use of E15, but recent decisions by the EPA are unfortunately steering the country down that path. However, the editorial makes one comment that doesn’t seem quite right:

This issue highlights the danger of allowing liberal zealots to set public policy. They are so obsessed with micromanaging the lives of others and fulfilling their environmental fantasies that they give no thought whatsoever to the real-world consequences of their schemes.

As a fuel, ethanol is highly corrosive. The E15 gasoline blend reduces gas mileage by 6 percent compared to real gasoline. That adds up to about $150 a year for the average vehicle owner. This expense and the mechanical danger serve absolutely no purpose beyond filling the pockets of wealthy farming giants. Congress needs to repeal the ethanol mandate to protect American pocketbooks – and the car warranties of millions of motorists.

Assuming they are using ‘liberal’ in the liberal versus conservative sense,  ethanol has (both historically and to this day) been supported by both liberals and conservatives alike. Indeed, true market-oriented politicians oppose interventions in our energy markets. However, those politicians are few and far between as politicians from both sides rarely have issue with sacrificing their alleged principles in order to support local constituencies or interest groups. [click to continue…]

Ethanol Advocacy Groups Want More Ethanol

by Brian McGraw on September 26, 2011

in Blog

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In a post titled “An ‘open’ and shut case for an enduring American energy policy: The infallibility of free markets underscores the philosophy for FuelChoiceNow” two authors argue that markets are generally the best method to reward new products and technologies while dismissing those that don’t quite pan out.

So, its odd to see that the the rest of the post goes on to demand that the government intervene in the market to require that automobile producers adjust their industrial processes and begin to build each car as flex-fuel compatible, meaning that it can run on higher blends of ethanol. Let’s address their arguments:

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The Green Jobs Fumble

by Brian McGraw on August 19, 2011

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Coming out of The New York Times of all places, “Number of Green Jobs Fails to Live Up to Promises.” Unsurprisingly, it has the green groups riled up.

A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.

Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.

The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.

(Note that it took seven months, as in 210 days or almost 60% of a year, to figure out wage standards for an industry. Good enough for government work.)

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Where is the Cellulosic Ethanol?

by Brian McGraw on August 17, 2011

in Blog

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Last month the EPA released its proposed 2012 cellulosic ethanol “mandate.” It suggests that there will be somewhere between 3.45-12.9 million gallons of qualifying cellulosic ethanol produced in 2012, though the number will be finalized in November. Note, as discussed previously, the industry has still not produced any qualifying cellulosic ethanol, and the EPA has consistently lowered the ‘mandate’ by over 90% in previous years. (A recently announced cellulosic plant claims it will produce cellulosic ethanol from, wait for it,  corn waste. So much for being a bridge fuel to the future).

In comments on the proposed 2012 production volumes, the ethanol industry begged the EPA to use the higher end of the standard:

In contrast, Brooke Coleman, executive director of the Advanced Ethanol Council, urged the EPA to continue its aggressive goals regarding cellulosic biofuels, stating that the agency’s mandated volume directly affects the industry’s ability to produce fuel. “There is this funny thing going here where you guys have to go out and measure capacity, but the numbers you come out with and the amount of capacity that you put into the Federal Register will have a giant effect on how much capacity we actually create,” he said.

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Ethanol Tax Credit More Likely to Expire

by Brian McGraw on August 9, 2011

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The ethanol compromise did not make it into any debt ceiling negotiations and its future is now looking bleaker than ever before. The Congressional ‘super-committee’ established by the debt ceiling negotiations will have to decide by November 23rd some manner to reduce the deficit by $1.5 trillion or face potentially unpopular automatic spending cuts to defense and discretionary spending (though USA Today writes that these “threats” have failed in the past). None of the rumored super-committee members seem to be from regions that would require their support of the ethanol industry

The ‘ethanol compromise’ had legs because it funneled money into the domestic ethanol industry while still maintaining a facade of deficit reduction. It would have collected $2 billion in revenue from the ending of the domestic tax credit as of July 21 and used a small amount less than that to spend on items near and dear to the ethanol industry (mainly ongoing support for cellulosic ethanol and money for the installation of blender pumps at fueling stations), hence their support.

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NTY Revisits June Frack-Attack

by Brian McGraw on July 18, 2011

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Arthur Brisbane of the NYT this weekend published an op-ed which reads a bit like a ‘mea culpa’ in response to repeated criticisms of reporter Ian Urbina’s jumbling attack on natural gas hydraulic fracturing published late last month:

I also asked why The Times didn’t include input from the energy giants, like Exxon Mobil, that have invested billions in natural gas recently. If shale gas is a Ponzi scheme, I wondered, why would the nation’s energy leader jump in?

Mr. Urbina and Adam Bryant, a deputy national editor, said the focus was not on the major companies but on the “independents” that focus on shale gas, because these firms have been the most vocal boosters of shale gas, have benefited most from federal rules changes regarding reserves and are most vulnerable to sharp financial swings. The independents, in industry parlance, are a diverse group that are smaller than major companies like Exxon Mobil and don’t operate major-brand gas stations.

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WSJ Hits Cellulosic Ethanol Hard

by Brian McGraw on July 15, 2011

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Following up on Marlo’s post yesterday concerning the difficulties of bringing cellulosic ethanol to market, the Wall Street Journal wrote an editorial about the (lack of) fuel, and EPA’s decision to require refiners to buy ‘credits’ — Cellulosic Ethanol and Unicorns:

The EPA set the 2011 standard at six million gallons. Reality hasn’t cooperated. Zero gallons have been produced in the last six months and the corner isn’t visible over the next six months either. The EPA has only approved a single plant to sell the stuff, operated by Range Fuels near Soperton, Georgia. The company used to be a press corps favorite and has been lauded by the last two Presidents, but it shut down its cellulosic operations earlier this year to work through technical snafus.

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When The Wind Blows Too Hard

by Brian McGraw on July 13, 2011

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For some reason, utility contracts in Scotland are written such that companies are paid for energy that the utility cannot use. In this case, The Telegraph estimates that the payments were worth up to 20 times the actual value of the electricity under normal conditions:

The payments, worth up to 20 times the value of the power they would have produced, raises serious concerns about such subsidies, which are paid for by the customer.

The six Scottish wind farms were asked to stop producing electricity on a particularly windy night last month as the National Grid was overloaded.

Their transition cables do not have the capacity to transfer the power to England and so they were switched off and the operators received compensation. One operator received £312,000, while another benefited by £263,000.

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