Yes, America, There Is a War on Coal

by William Yeatman on September 23, 2012

in Blog

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I can understand why President Obama would deny that his administration is waging a war on coal. In the midst of difficult economic times, it would be politically risky if he told the bald truth, that his administration has launched a pincer attack on both coal production and consumption, for no discernible purpose other than to placate a political constituency.

I do not, however, understand why informed reporters (most recently, at Politico) and esteemed colleagues (Cato) mistakenly posit that the war on coal is an empty rhetorical device. The truth is so obvious; I can’t fathom how they miss it.

Consider: In 2012, the Environmental Protection Agency promulgated two regulations—the Utility MACT (final) and the Carbon Pollution Standard (proposed)—that effectively ban the construction of new coal-fired power plants. This is extraordinary. An Agency within the Presidency, without a Congressional mandate, has closed the future for an industry that provides 40 percent of the nation’s electricity. And for what? Not for any public health benefit, to be sure.

The regulatory justification for the Utility MACT is particularly risible. Its purpose is to protect a supposed population of pregnant, subsistence fisherwomen, who consume at least 225 pounds of self-caught fish from exclusively the 90th percentile most polluted fresh, inland water bodies. You can’t make this stuff up! Notably, EPA never identified a single member of this putative population. Rather, they are modeled to exist.

The EPA’s case for the Carbon Pollution Standard is subtler, but no less pointless. In the proposed rule, EPA never even tried to tether the regulation to a specific benefit accruable to the American people. This makes sense, because there are no such benefits. U.S. policy on new electricity generation (like the Carbon Pollution Standard) is an insignificant driver of global greenhouse gas emissions relative to coal-fueled Asian economic growth. In fact, the Carbon Pollution Standard rested on a discretionary authority; there was no pressing concern. EPA merely exercised an option resulting from the Agency’s endangerment power grab.

Thus, neither the Utility MACT nor the Carbon Pollution Standard engenders a “real” public health benefit. On the other hand, the rules will cause expensive energy, which is a very real cost to be borne by all of society.

For existing coal-fired power plants, EPA’s strategy is to impose three types of expensive retrofits on every existing coal-fired power plant, regardless whether or not they would serve an actual purpose. The three controls are: selective catalytic reduction for nitrogen oxides; scrubbers for sulfur dioxide; and electrostatic filters for fine particulate matter. The aforementioned Utility MACT would require scrubbers and electrostatic filters. EPA is using the Regional Haze rule to compel selective catalytic reduction systems. Regional Haze is the archetype of all-pain, no-gain regulation. It’s an aesthetic regulation, whose benefits are literally invisible.

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San Fran Plan to Go Green Proves that Renewables Can’t Compete

by William Yeatman on September 19, 2012

in Blog

Yesterday, by an 8-3 vote, the San Francisco Board of Supervisors approved CleanPowerSF, a municipal energy plan that would force about half the city’s ratepayers into using electricity that was generated entirely from renewable sources, like wind and solar power.

The cost? According to the San Francisco Chronicle, the measure would increase utility bills about 23 percent*.

And I thought renewable energy was supposed to be competitive! California already has the 13th most expensive electricity rates in the country, so this 23 percent green energy premium is on top of relatively high utility bills. [updated 10:23 AM, 9/20/2012: I completely forgot to mention that this renewable energy is 23 percent more expensive than conventional energy (in a market, California, whereby a state law forbids the consumption of coal, the most conventional electricity source) after accounting for federal, state, and municipal subsidies. Moreover, I don’t know the extent to which this “100 percent” renewable power is “real” rather than an artificial construct. The grid requires a reliable flow of power, but renewable energy is intermittent, and there’s no technology to store utility-scale electricity. Therefore, I presume CleanPowerSF entails a reliance on imported hydropower (the “real” source of power) while the city purchases renewable energy credits (which are basically the environmental attributes of renewable energy produced elsewhere) equal to the amount of hydropower consumed. This is necessary because Californians don’t consider hydropower to be “green” due to the fact that it harms some kinds of fish. Again, this is reasoned speculation on my part–I can’t imagine how CleanPowerSF would work otherwise. I’ll post again when I find out.]

In addition to being expensive, CleanPowerSF is also coercive. On the basis of already-conducted public surveys that purport to have identified those neighborhoods that are willing to pay more for green energy, the city has chosen 375,000 customers who will be automatically enrolled into CleanPowerSF. That’s about half the ratepayer base. It is incumbent upon these unfortunate residents to opt out of the program. By making participation a default option, the city is trying to take advantage of humankind’s innate aversion to dealing with minutiae, and thereby compel (dupe) as many citizens as possible into using 100 percent green, expensive energy. It’s an old sales trick.

Evidently, San Francisco Mayor Ed Lee’s support for CleanPowerSF is tepid. There’s no guarantee he’ll lend his approval, which is necessary for the project to move forward. I appreciate his reservations.

As I’ve argued here, here, and here: San Francisco could have achieved its green dreams, at zero cost, by freeing the city’s electricity market from the shackles of socialism. Instead, municipal leaders have opted to trade one government granted monopoly (PG&E) for another (Shell, the sole provider of electricity for CleanPowerSF).

*The Chronicle reports that the San Francisco Public Utilities Commission estimated that lower income customers, with utility bills of $40 per month, would see an increase of $9.55. For the average monthly utility bill, which the Energy Information Administration pegs at $81 in California, the San Francisco PUC estimated that the increase would be $18.53.

Is the EPA Listening? We Need a Waiver on Ethanol

by Ashlee Smith on September 19, 2012

in Blog

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Although harvesting season for corn is ongoing, there isn’t much hope from the Agriculture Department for a strong season. We know that production levels are already down 13 percent from 2011. Adding to the hurt caused by this year’s devastating drought on corn is the Renewable Fuel Standard (RFS). Under the Clean Air Act the RFS requires that in 2012, refiners sell 13.2 billion gallons of corn ethanol – this number equates to roughly 4.7 billion bushels of U.S. corn.  Corn estimates were down to 10.8 billion bushels last month; right now that means that at least 40 percent of corn production is being forced into the ethanol market.

The decline in corn production is already leading to rising prices in various farming sectors — cattle, swine, poultry — that use corn as feed. These economic effects will be intensified by the diversion of corn supply by ethanol requirements. This has prompted Congress, National Associations, and now individual state Governors to urge the EPA to permit a waiver for ethanol requirements in 2012-2013 under the Renewable Fuel Standard.

In Governor Deal’s August 20th letter to EPA Administrator Lisa Jackson describes the importance and scale of the livestock agriculture to the Georgia economy:

As Georgia’s largest industry, agriculture accounts for over 15.7 percent of the state’s economy in terms of sales and output and represents 11.2 percent of the state’s value added production. Georgia agriculture has an annual impact of $68.9 billion on the state’s economy and provides 380,000 jobs to citizens of the state.  Poultry and livestock are critically important components of the state’s economy, representing over 50 percent of Georgia’s farm gate value, while broilers alone account for over 40 percent of farm gate value. From a national perspective, Georgia ranks first in broiler production and third in value of eggs produced. For Georgia, the poultry industry alone accounts for over $20 billion in annual economic impact, and an estimated 98,000 jobs depend on poultry directly or indirectly.

He also points out the grueling effects the Renewable Fuel Standard will have on not only Georgia, but the whole country coupled with this drought:

According to the University of Georgia, the state’s poultry producers are spending $1.4 million extra per day on corn due to the drought and the upward pressure on corn prices caused by the demand created by the RFS for ethanol. This translates to over $516 million per year if these market conditions continue. These additional input costs are not sustainable, and I urge you to consider all options available to the agency to provide some relief in the coming year.

The ultimate impact on consumers in Georgia and throughout the United States in the form of higher food prices must also be fully considered. A recent analysis confirmed that food inflation, particularly for those food categories most impacted by grain costs, has risen much faster than overall inflation since 2005. The reality of this current crisis is that consumers will have to pay more for protein and other food items, or they will simply not be able to afford certain food items.

As I have outlined, Georgia is experiencing severe economic harm during this crisis, and important economic sectors in the state are in serious economic jeopardy. This harm is precisely of the type, character and extent that Congress envisioned when it granted EPA authority to waive RFS applicable volumes in both the original RFS enacted in 2005 and in the substantial revisions made to the law in 2007 by the Energy Independence and Security Act.

Other states such as; Arkansas, Texas, North Carolina, and others have also filled letter with Administrator Jackson.

On August 20th the EPA opened a 30 day comment period for the public on the waiver requests specifically from the Governors of Arkansas and North Carolina. This week, the comment period was extended another 30 days. After the comment period ends, EPA is afforded time to consider the public’s input. As a result, EPA won’t have to make a decision until after the election. How convenient.

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Should the GOP Champion Climate Change as a National Security Issue?

by Marlo Lewis on September 19, 2012

in Features

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Yes, argues Daveed Gartenstein-Ross in The Atlantic (Sep. 17, 2012). Gartenstein-Ross is the author of Bin Laden’s Legacy: Why We’re Still Losing the War on Terror. I haven’t read the book, but judging from the favorable reviews, Gartenstein-Ross has the ear of defense hawks of both parties. Does he offer sound advice on global warming?

In his Atlantic article, Gartenstein-Ross chides Republicans for taking a “decidely unrealistic tack” on climate change. “The available evidence overwhelmingly suggests that climate change is real; that extreme weather events are increasing; and that this dynamic will have an impact on American national security, if it hasn’t already,” he avers. He goes on to blame this summer’s drought on global warming, citing NASA scientist James Hansen’s claim that the 2003 European heat wave, the 2010 Russian heat wave, and the 2011 Texas-Oklahoma drought have “virtually no explanation other than climate change.” (For an alternative assessment, see these posts.) 

Since 2010, notes Gartenstein-Ross, the Department of Defense has classified climate change as a conflict accelerant — a factor exacerbating tensions within and between nations. Well, sure, what else is Team Obama at DOD going to say in an era of tight budgets when no rival superpower endangers our survival? The concept of an ever-deepening, civilization-imperilling climate crisis is an ideal mission-creep accelerant. 

Gartenstein-Ross concludes by urging Republicans to face “reality” and take action on climate change. However, he offers no advice as to what policies they should adopt. Does he favor cap-and-trade, carbon taxes, the EPA’s greenhouse gas regulatory cascade, ‘all of the above’? Gartenstein-Ross doesn’t say. He ducks the issue of what economic sacrifices he thinks Republicans should demand of the American people. 

Below is a lightly edited version of a comment I posted yesterday at The Atlantic on Gartenstein-Ross’s article: [click to continue…]

EPA Puts a Price on Nothingness in Montana: $82 Million

by William Yeatman on September 18, 2012

in Blog

Today, the Environmental Protection Agency imposed on Montana a Federal Implementation Plan under the Regional Haze Rule that will cost scores of millions of dollars, but achieve no discernible purpose.

Specifically, EPA is requiring $82 million in unnecessary capital expenditures at the Colstrip coal-fired power plant located east of Billings, Montana, in order to engender an ‘improvement’ in visibility that is imperceptible to the eye.

Don’t take my word for it! See the images directly below. They depict the visibility “benefits” wrought by EPA’s regulations. They were generated using WinHaze visibility modeling software, with inputs from EPA data.

Notably, these mandated controls are 500% more expensive than what EPA’s standing rules presume to be “cost-effective.” Given that the benefits are invisible, the severity of these Regional Haze requirements suggests that EPA’s motivations were political.

Remember, environmental special interests are a significant component of the President’s organizational base. And for them, coal is evil, because it is “dirty.” That’s why, way back in 2008, then-Senator Barack Obama told the San Francisco Chronicle editorial board that he would “bankrupt” the coal industry if elected President. Now, EPA is following through on the President’s promise. The powers of the presidency are the means by which he satisfies the environmentalists’ desired ends. To be sure, it’s an American outrage that the fate of an entire industry can thus be subjected to the capricious winds of presidential politics, but that’s a different blog post. For now, it suffices to say that this Administration is imposing billions of dollars of costs, in the midst of difficult economic times, in order to placate a political constituency, and for nothing else.

Another Study Debunks RFA/Vilsack Claim Ethanol Reduced Gas Prices by $1.09/Gal

by Marlo Lewis on September 17, 2012

in Features

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A new study by the Energy Research Policy Foundation, Inc. (EPRINC) further debunks the popular talking point of USDA Secretary Tom Vilsack and the Renewable Fuel Association (RFA) that ethanol reduced gasoline prices by $0.89/gal in 2010 and $1.09/gal in 2011.

As noted previously on this site (here and here), Vilsack and the RFA tout a study by Iowa State University’s Center for Agricultural Research and Development (CARD), which concluded that if ethanol production had remained at year 2000 levels, the U.S. motor fuel supply would have been billions of gallons smaller and, thus, significantly pricier in 2010 and 2011. Subsequent studies by FarmEcon, LLC and MIT/UC Davis spotlighted CARD’s unrealistic assumption that the refining industry would not have increased gasoline production to meet consumer demand in the absence of policies mandating and subsidizing the blending and sale of increasing quantities of ethanol as motor fuel.

The EPRINC study (Ethanol’s Lost Promise: An Assessment of the Economic Consequences of the Renewable Fuel Mandate) shows, in addition, that if ethanol output had remained constant at the year 2000 level, refiners could have made up for the shortfall without importing or even refining “a single additional barrel of crude oil.” The Renewable Fuel Standard (RFS) has increased ethanol production by about 400,000 barrels per day (bbl/d) since 2000. A “remarkably small operational adjustment” in refineries’ product mix — a 1.8% increase in gasoline production — could have covered an ethanol shortfall of 400,000 bbl/d in 2011.

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Another Skewed Poll ‘Finds’ Voters Support Green Agenda

by Marlo Lewis on September 13, 2012

in Features

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An opinion survey commissioned by the Sierra Club supposedly shows that Oklahoma voters overwhelmingly favor the expansion of wind and solar power and the phase out of coal-fired power plants. An obvious implication is that Oklahoma Sen. James Inhofe, the Senate’s leading critic of the Obama administration’s anti-coal policies, is out of step with his constituents.

This is an old trick (see my post on a similar, NRDC-sponsored poll of Michigan voters in House Energy and Commerce Chairman Fred Upton’s district). When a pollster asks leading questions, he can usually elicit the answers his client is paying for.

In the Sierra Club-sponsored survey of 500 registered Oklahoma voters, 78% of those polled said they generally support expanded use of renewable energies like wind and solar power, and 62% said they would support phasing out some of the State’s coal-fired power plants.

The Sierra Club’s polling strategist waxed enthusiastic about the results, Greenwire reports:

“The results of this poll are remarkable,” Sierra Club polling strategist Grace McRae said in a statement.

“Across the nation, support for clean energy is high, but in Oklahoma, nearly 8 out of 10 voters support expanding use of clean energy resources like wind and solar. Oklahoma’s leaders and utilities should take note: Oklahomans want clean energy.”

Okay, let’s look at how the survey reaches those “remarkable” results. [click to continue…]

EU Gropes — in Vain — for Carbon Price Sweet Spot

by Marlo Lewis on September 12, 2012

in Features

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Two stories reprinted in Climatewire today provide a funny reminder that politicians can’t set the ‘right’ price of a commodity even when the fate of the Earth supposedly hangs in the balance. 

On Tuesday, Norway decided to follow European Union (EU) policy and establish a carbon ‘compensation fund.’ The program will bribe pay some 80 energy-intensive firms $90 million not to move their operations overseas. The government contends that without such payments, the EU Emission Trading System (ETS), adopted to implement the Kyoto Protocol, will trigger (or accelerate) the flight of capital, jobs, and emissions abroad. Reuters reports:

“The purpose is to prevent the Norwegian manufacturing industry from moving their enterprises to countries with less strict climate regulations,” Prime Minister Jens Stoltenberg said.

Changes to the EU’s Emissions Trading Scheme (ETS) from next year allow member states to compensate big energy users, like aluminum or steel producers, for costs linked to carbon emissions. The plan is to prevent higher costs driving business out of Europe.

Although ETS carbon prices are high enough to make EU manufacturers uncompetitive, those prices are not high enough (according to critics) to spur technology innovation*:

“This shows some of the fundamental problems with emissions trading,” said Steffen Kalbekken, head of research at the Center for International Climate and Environmental Research in Oslo. “We are getting the worst of two worlds.

“The (carbon) prices are too low to produce the technological shift we need” to force big emitters to clean up, he said. “But they are still high enough to cause some problems for industry and international competition.”

EU carbon permit prices for December have fallen to 7.74 Euros ($9.98) per ton — lower than three of the U.S. Government’s four ‘social cost of carbon‘ estimates. The European Commission is now “pressing ahead with a plan to counter an oversupply of CO2 permits in the EU emissions trading market after a 37 percent drop in prices last year,” Bloomberg reports. The commission “is preparing a proposal to postpone sales of an as-yet unspecified number of allowances in 2013.”

Of course, if that plan goes through, and carbon permit prices rise, European countries may have to pony up even larger subsidies to keep manfacturers from moving to Asia and South America.

So are ETS carbon permit prices too low or too high? They’re high enough to spur innovative ways to get the heck out of Europe asap. [click to continue…]

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.

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