Planetary Ruin

In a previous post here, I noted the major problems with House GOP leadership’s proposal to link revenue from expanded domestic energy production with the Highway Trust Fund in their surface transportation reauthorization legislation. Since then, the three major portions have cleared their respective committees: House Natural Resources approved the drilling proposals, Transportation and Infrastructure passed the primary highway bill, and the revenue link was cleared by Ways and Means. A vote by the full House is expected sometime next week.

Observers expect the bill to fail, not only because there is very little for Democrats to like, but also because principled fiscal conservatives — from our “user-pays” coalition to Heritage Action to Club for Growth to RedState — have all slammed the legislation as a Big Government wolf wrapped in pro-market, pro-growth sheep’s clothing. This proposed bill would continue to federally fund highways at unsustainable levels and fails to address how states are to begin reconstructing their portions of the Interstate system. For instance, it explicitly bans states from tolling existing Interstate segments even for the purpose of reconstruction. Reconstruction to current highway construction guidelines by definition increases capacity, yet the tolling section author(s) apparently didn’t find this additional capacity enhancing enough to justify allowing states to implement an intelligent financing mechanism that can actually pay for the needed investment.

Furthermore, the bill seemed to have been assembled with little care as to how certain provisions might impact the real world. For example, a reasonable proposal to increase maximum truck weights on federal highways was defeated in committee in large part because the legislative author(s) of that provision did not include a way to pay for the increased wear and tear. An example of a clean pay-for in this case would have been to simply remove the cap on the annual Heavy Vehicle Use Tax and perhaps adjust the Tire Tax and Truck and Trailer Sales Tax rates accordingly. Or perhaps allow states to opt-in and take over funding responsibility of the additional wear and tear. But did they include such a pay-for or devolution option? Of course they didn’t, and that underscores the problem.

There are essentially two very different (rational) options for moving forward: (1) greatly increase user taxes (primarily fuel taxes) at the federal level to fund reconstruction; or (2) start devolving highway funding to the states and permit them to toll (and contract with private partners) existing sections of Interstate to finance reconstruction.

In our view, option (2) is far superior. The federal government has no real business funding highways and it has proven through years of ineptitude that it is not capable of effectively doing so. Like every highway bill since ISTEA (1991) — which was the first reauthorization following the completion of the Interstate Highway System — Congress appears willing to punt, rather than address in any meaningful way the serious problems of the status quo.

As I mentioned in my previous blog post here at GlobalWarming.org, CEI held a briefing on Capitol Hill along with the Reason Foundation, Taxpayers for Common Sense, and Natural Resources Defense Council (yes, you read that correctly) explaining why moving away from a “user-pays/user-benefits” highway funding principle would be a grave mistake. See that previous blog post for more detail on “user-pays.” You can watch the video of the briefing below:

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.

The primary way in which OPEC could “harm” America is by colluding to keep prices higher. However, higher oil prices help to make the use of natural gas for transportation more appealing. Because this hasn’t been adopted on a wide scale, its clear that the economic harm from relying on oil imports should be less than switching to natural gas in situations where it doesn’t make sense.

However, as Pickens notes, it does make sense in many situations because natural gas is quite cheap. But rather than praise companies for their patriotism or whatever nonsense he’s referring to, the companies are making this decision because its a profitable one.

Pickens will continue to push his “plan,” and politicians will continue to listen because when you are willing to shower politicians with millions of dollars, their ears instinctively perk up. Here is Pickens on CNBC hoping for higher natural gas prices, so wind power is profitable again.

Mega Star Brad Pitt made a guest appearance on Jon Stewart’s The Daily Show this past Wednesday where he made a point to condemn the traditional gas-guzzler with an analogy of his new Academy Award-nominated Moneyball.

Brad explains:  “It (Moneyball) was the story of this small market team that found the game unfair, they could not compete.  They couldn’t buy the talent and if they developed the talent it was poached by the rich team, so what are they going to do to level the playing field?  And these guys started questioning 150 years of baseball knowledge and they started with the question, ‘Just because we’ve been doing it this way for so long, does that mean it’s right?’ I equate it to the automobile, like if we invented the automobile today, would we invent a car, would we say, ‘I know!  We’ll run it on a finite fossil fuel. We’ll export a half a trillion dollars of our GDP.  We’ll spend hundreds of billions of dollars on our military to protect that interest, and it will pollute the environment!’ You know, it just doesn’t make sense!”

I give Brad two thumbs, way down, for this elitist tripe.  What celebrities seem to miss is that historically, the introduction of the fossil-fueled automobile has been one of the greatest emancipators, leveling the playing field by lifting many out of poverty through the access of affordable mobility.  In The Best-Laid Plans, Randal O’Toole writes:

Not only are we more mobile, this mobility is far more egalitarian than mass transportation was in its heyday.  Well over 90 percent of American families have at least one car, and many of those who don’t could own one but choose not to.  Some new cars cost more than $100,000 while some used cars cost less than $1,000, but they all have more-or-less equal access to nearly all America’s highways, roads, and streets.

The biggest benefit is increased incomes.  The incredible mobility provided by the mass-produced automobile has significantly boosted personal incomes in the past century.  We typically think people buy more cars only when they can afford to do so, but the reality is more complex.  Incomes are increased by auto ownership as much as if not more than ownership is increased by higher incomes.

One hundred years ago, the average American worker earned, after adjusting for inflation to today’s dollars, about $10,600 a year.  By 1929, when half of all Americans owned an auto, this had increased to $17,000 a year.  Today, income per worker (including benefits) exceeds $72,000 per year, more than seven times what it was before the automobile.  Much if not most of this increase is due to the automobile.  (205-6)

Regardless of the automobile’s inability to meet the standards of the Hollywood glitterati, it has freed the average person from geographic and economic isolation.  Brad, who makes millions per film, has had the luxury to be one of the first of the Hollywood royalty to own a $100,000+ electric Tesla Roadster that was released in 2010.  I have no hard feelings towards Brad’s personal automobile predilections, so he should keep his contempt for the car that I drive to himself.

To view Brad’s performance, click here  and fast-forward to the 2 minute mark to get directly to the analogy.

I and several of my CEI colleagues were looking forward to an informal debate late Friday afternoon on energy policy sponsored by McKinsey and Company, the global consulting firm.  As part of their “Drinks and Debate” series, McKinsey’s Washington, DC office invited David Kreutzer of the Heritage Foundation and Joe Romm of the Center for American Progress’s Climate Progress blog to make some remarks and then take questions from an audience of around 40 people representing all shades of the political spectrum.  It sounded like a lot of fun because Romm often seems enraged and slightly deranged in his frequent blog posts, but unfortunately Romm cancelled at the last minute.  Our host explained that Romm had pulled out without giving a reason and that his side of the debate would be represented by a bottle of Corona Light.  It was still fun: David Kreutzer gave an engaging and stimulating presentation, as he always does, and the bottle of Corona Light proved to be more rational and less misleading than Romm.

Today and tomorrow, the House Energy and Commerce Committee will mark up H.R. 3548, the “North American Energy Access Act,” Rep. Lee Terry’s (R-Neb.) bill to nullify President Obama’s rejection of the Keystone XL Pipeline.

Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) will offer an amendment that would bar U.S. refiners from exporting any petroleum products made from Keystone crude.

Waxman and Markey know full well the GOP majority will reject the amendment. But that’s the point. By forcing Republicans to vote no, they hope to “expose” Keystone as an “export pipeline” and a “scam” that won’t provide any consumer or energy security benefit.

Today at Master Resource.Org (here), I explain why the Waxman-Markey amendment deserves raspberries.

• The policy it advocates discriminates against foreign commodities that have entered into domestic commerce and thus is illegal under GATT.
• A significant portion of the oil shipped through the pipeline would likely be turned into products for U.S. consumers.
• Even if that were not so, Keystone crude would still displace OPEC crude that U.S. refiners would otherwise turn into products for export.
• The amendment is a form of reverse protectionism, based on the cockamamie idea that banning exports lowers prices by increasing domestic supply.
• Imagine what a complete ban on petroleum product exports would do. It would drive investment, production, and the associated jobs overseas. Two further consequences would ensue: (1) We would then be more dependent on foreign imports; (2) gasoline prices would increase because we’d have to pay higher shipping costs and because foreign refiners would no longer have to compete with U.S. refiners.
• Such an absurd policy differs from Waxman and Markey’s proposal only in degree, not in kind.

Why are opponents pushing the ludicrous argument that greater access to Canadian oil won’t increase our self-reliance on North American energy? I suspect it’s because the public isn’t buying their even more over-the-top claims that Keystone XL will ruin the Ogallala aquifer and wreck the global climate system.

To be sure, I’m a staunch defender of wealth creators, and I begrudge no one for his or her riches…as long as he or she doesn’t say silly things like “The focus on pro?t has caused signi?cant negative, unintended consequences.”

I have two problems with Sir Richard Branson’s commentary. First, it’s wrong. Profits incent wealth creation, which, in turn, improves the environment, because wealthier societies are friendlier to the environment. More importantly, wealthier societies are healthier societies.

Second, having a billionaire say that profits are secondary—after he earned his money—is akin to Sir Branson raising the drawbridge immediately after gaining entry into the castle, while the peasant throngs stand on the other side of the moat.

Bryan Walsh in Time Magazine broke the big story this week that the Sierra Club received over $25 million from the natural gas industry to serve as a corporate shill for the natural gas industry’s attacks on the coal industry.  Walsh wrote: “TIME has learned that between 2007 and 2010 the Sierra Club accepted over $25 million in donations from the gas industry, mostly from Aubrey McClendon, CEO of Chesapeake Energy—one of the biggest gas drilling companies in the U.S. and a firm heavily involved in fracking—to help fund the Club’s Beyond Coal campaign. Though the group ended its relationship with Chesapeake in 2010—and the Club says it turned its back on an additional $30 million in promised donations—the news raises concerns about influence industry may have had on the Sierra Club’s independence and its support of natural gas in the past.”

McClendon and Chesapeake Energy several years ago funded a multi-million dollar advertising campaign against the coal industry called “Face it, coal is filthy.”  Two months ago, it was revealed that McClendon and Chesapeake had given as much as $100 million to the American Lung Association, one of the most reprehensible of the environmental pressure groups, to fund the ALA’s “Fighting for air” disinformation campaign.

House Natural Resources Committee Votes To Open ANWR and OCS to Oil Production  

The House Natural Resources Committee on Wednesday, 1st February, passed three bills to increase oil production on federal lands and offshore areas.  The House Republican leadership plans to include the three bills as provisions in the five-year, $260-billion highway bill that was passed by the House Transportation and Infrastructure Committee after a grueling seventeen-hour mark-up that ended at 3 AM on Friday, 3rd February.

H. R. 3407, which passed the committee on a 29 to 13 vote, would open the coastal plain of the Arctic National Wildlife Refuge (ANWR) on Alaska’s North Slope to oil exploration.  Three Democrats voted for the bill: Representatives Dan Boren (D-Okla.), Jim Costa (D-Calif.), and Pedro Pierluisi (D-Puerto Rico).  No one knows how much oil there may be below ANWR’s coastal plain, but the U. S. Geological Survey estimates recoverable reserves of 11 billion barrels.  That is probably a very conservative estimate.

The second bill, H. R. 3410, would require the Department of the Interior to hold auctions for exploration leases in the federal Outer Continental Shelf (OCS) areas in the Atlantic and Pacific that are considered to have the largest reserves of oil, including off the coast of southern California.  That bill passed by a 34-19 vote.

The third bill, H. R. 3408, would require new oil shale leases in Colorado, Utah, and Wyoming.  The committee approved it on a 27-16 vote.

A proposal to designate some of the federal revenues from this new oil production to funding highway projects will also be included in the highway bill.  Highway projects have historically been funded by the 18.5 cents per gallon tax on gasoline, but the gas tax is not bringing in enough revenue to fully fund the highway bill.  Diverting oil royalties to fund highway projects has encountered opposition from several groups across the political spectrum.  CEI’s Marc Scribner argues that adding another dedicated source of funding undermines the user-pays principle upon which the Highway Trust Fund is based.

House Insisting on Keystone Pipeline

Rep. Fred Upton, chairman of the House Energy and Commerce Committee, announced on 3rd February that his committee next week will mark up the bill that requires permitting of the Keystone XL pipeline.  H. R. 3548 takes the decision away from the President and orders the Federal Energy Regulatory Commission to permit the 1700-mile pipeline project from Alberta’s oil sands to refineries in Louisiana and Texas.  The House Republican leadership has made it clear that the Keystone bill will be added to the five-year, $260 billion highway bill.  The highway bill was passed out of the Transportation and Infrastructure Committee at 3 AM on Friday, 3rd February, and is expected to be debated on the House floor the week of 13th February.

House Republicans are also planning to attach the Keystone language to the payroll tax cut extension bill that must be enacted before the two-month extension passed in December expires at the end of February.  The two-month extension bill required that President Obama make a decision within sixty days.  President Obama denied the Keystone permit on 18th January, but did not base his decision on the national interest as required by the legislation he signed into law.

This should present Senate Majority Leader Harry Reid (D-Nev.) with a problem because a number of Democratic Senators support the Keystone pipeline.  Reid and the White House will have to do some arm-twisting to keep the Senate from agreeing to the House’s Keystone provision.

Alternate title: “Sierra Club Acknowledges Role as Corporate Front Group, Industry Shill, Hired Gun for Natural Gas Industry.” From Time:

Now the biggest and oldest environmental group in the U.S. finds itself caught on the horns of that dilemma. TIME has learned that between 2007 and 2010 the Sierra Club accepted over $25 million in donations from the gas industry, mostly from Aubrey McClendon, CEO of Chesapeake Energy—one of the biggest gas drilling companies in the U.S. and a firm heavily involved in fracking—to help fund the Club’s Beyond Coal campaign. Though the group ended its relationship with Chesapeake in 2010—and the Club says it turned its back on an additional $30 million in promised donations—the news raises concerns about influence industry may have had on the Sierra Club’s independence and its support of natural gas in the past. It’s also sure to anger ordinary members who’ve been uneasy about the Club’s relationship with corporations. “The chapter groups and volunteers depend on the Club to have their back as they fight pollution from any industry, and we need to be unrestrained in our advocacy,” Michael Brune, the Sierra Club’s executive director since 2010, told me. “The first rule of advocacy of is that you shouldn’t take money from industries and companies you’re trying to change.”

Of course I’m kidding. The Sierra Club holds their respective opinions on energy and environmental policies, and then goes out and seeks funding for donors, some who may have their own corporate interests at heart. In this case Chesapeake Energy gave the Sierra Club millions of dollars to attack the coal industry, and the new head of the Sierra Club decided to end that relationship because the Sierra Club and their members don’t particularly like natural gas either, especially when its hydraulically fractured from the ground.

Many groups on the left seem unwilling to acknowledge this obvious dynamic, preferring to paint those who disagree with them as corporate shills and industry front groups on the basis that they receive money from groups whose interests overlap. Somehow I doubt the Sierra Club’s acknowledgement will do much to improve this dialogue. On this note, the Sierra Club and CEI have had constructive conversations in the past, despite many disagreements, and have worked together on some issues such as putting an end to ethanol subsidies.

Finally, one must question the wisdom of the natural gas industry. In the short run they will have gained market share by helping to induce regulations on the coal industry. In the long run, it is quite clear that much of the environmental movement wants them out of the picture as well.