Archive for the ‘Energy and Environment’ Category
Obama: Running on Empty
Last week’s energy speech was vintage Obama: repeating the same bad ideas that he has advocated since his pre-2008 election campaign and misrepresenting both his actions and the opposition.
To be sure, he is correct that the Republicans are overstating what can be done immediately to alleviate oil price spikes. However, he falls into the same trap as the Republicans in believing that a sensible policy exists to avoid the inevitable fluctuations in world oil prices. These fluctuations are more tolerable than the possible alternatives.
His selective statement of his policies ignores at a minimum its general anti-fossil fuel thrust with slowdowns in oil and gas leasing on federal land, the temporizing on the Keystone XL pipeline, and the massive anti-coal regulations promulgated by the Environmental Protection Agency. He continues on the paths of dictating fuel-efficiency standards and pursuing dubious alternative energy incentives. Moreover, Republican criticisms of these actions belie the assertion of exclusive concern with drilling. There may be no silver bullet, but there are more sensible policies than Obama’s.
Otherwise the speech differs in no substantial respect from his prior efforts. Every key point from the America-can-do-it pep talk to his misleading argument about tax benefits to the oil industry was critiqued in my Cato Policy Analysis: “The Gulf Oil Spill: Lessons for Public Policy.”
Nancy Pelosi on Gasoline Prices
The congresswomen’s comments are so cartoonish, I don’t even have to comment on them. But I thought Cato readers would like to know what the minority leader of the U.S. House is saying about rising gas prices. From a Nancy Pelosi press release today:
Independent reports confirm that speculators are driving up the cost of oil, hurting consumers and potentially damaging the economic recovery. Wall Street profiteering, not oil shortages, is the cause of the price spike.
We need to take strong action to protect consumers from this speculation. Unfortunately, Republicans have chosen to protect the interests of Wall Street speculators and oil companies instead of the interests of working Americans by obstructing the agencies with the responsibility of enforcing consumer protection laws.
We call on the Republican leadership to act on behalf of American consumers and join our efforts to crack down on speculators who care more about their profits than the price at the pump even if these spikes harm the American consumer and our economy.
For a rational discussion on energy policy, see Downsizing the Department of Energy.
Franken to Chu: Doggone It, Like My State’s Company
The Senate Energy and Natural Resources Committee held a hearing last week on the Department of Energy’s budget request for fiscal 2013. Chris Edwards tipped me off to a particularly galling exchange between Energy secretary Steven Chu and Sen. Al Franken (D-MN). Sen. Franken uses his allotted time to badger Chu about a federal loan that Energy conditionally committed to a Minnesota company in 2010 that apparently has yet to be approved.
The exchange begins around the 61 minute mark here. Our trusty interns, Devon Sanchez and Stephen Wooten, transcribed the exchange, which I’ll share a portion of:
Sen. Franken:
One such project is from a company in Minnesota called SAGE Electrochromics. I know you are aware of that. Sage has developed energy efficient windows that are cutting edge, better than anything in the world and uses photo-voltaic cells to control the window how dark it gets during the summer to block out UV light and lower air conditioning costs and to let it all in, lower heating costs in the summer. And it’s really…I’ve been there and it’s just an amazing tech. In the Spring of 2010, the DoE promised the company it would receive a $72 million loan guarantee under the 1703 Program to build a new manufacturing facility that would create 160 manufacturing jobs and 200 construction jobs in southern Minnesota. It’s now been two years since SAGE has been notified that it will receive a loan guarantee and the deal has not yet been closed. While the Department of Energy prolongs closing the deal, time and money are running out for SAGE. There are high-tech manufacturing construction jobs at stake here. It’s been going forward with the project assuming they get this loan guarantee but they’re running out of time and they may have to sell themselves to a French company. My first question is that the SAGE loan guarantee was going to be submitted to the credit committee on August 23rd, but it was stopped. Why is the Department of Energy continuing to delay closing and executing the SAGE loan guarantee?
Secretary Chu tells Sen. Franken that he can’t discuss the details and advises the senator to speak with SAGE. A frustrated Sen. Franken takes another crack at getting Chu to explain the holdup, but doesn’t get anywhere and his speaking time runs out. Anyhow, the exchange is sad commentary on the state of affairs in Washington. Sen. Franken sitting there singing the virtues of handing out other people’s money to commercial interests in general would have been problem enough. That he instead used his time to grovel for a handout to a company in his state just goes to show that too many policymakers see the federal government as a favor dispenser.
If this company is producing such “amazing tech,” then perhaps Sen. Franken should lend SAGE some of his money? (Maybe he could use the royalties he receives from DVD sales of “Stuart Saves His Family” to help the company.) Wisecracks aside, a quick Google search shows that SAGE has already received private capital. If this company is so great then it should have no trouble finding additional investors to lend it the money it needs. Then again, Franken says that it’s running out of money so perhaps it isn’t so great. But that’s the way Washington works: taxpayers get the losses while private companies get the profits…and arrogant senators get to pat themselves on the back for “creating jobs.”
See here for more on downsizing the Department of Energy.
Fixing the House Transportation Bill
After catching flack from both fiscal conservatives and the transit lobby, House Speaker John Boehner has postponed consideration of a surface transportation bill. Fiscal conservatives (including my fellow Cato scholar Michael Tanner) objected to the bill’s deficit spending; transit interests (including Republicans from New York and Chicago), objected to the bill’s lack of dedicated funds to public transit.
Here are a few things you need to know about the transportation bill before it comes up again in a couple of weeks. First, the legislation now in effect, which passed in 2005, mandated spending at fixed levels even if gasoline taxes (the source of most federal surface transportation funds) failed to cover that spending. Gas taxes first fell short in 2007 and the program has been running a deficit ever since. Although the 2005 bill expired in 2009, Congress routinely extends such legislation until it passes a replacement bill.
Unlike the 2005 law, the controversial House bill only authorized, but did not mandate, deficit spending. Actual deficit spending would be considered on a year-by-year basis by the House and Senate appropriations committees. Should they decide not to deficit spend, passage of the House bill could potentially save taxpayers more than $60 billion over the next five years. Failure to pass a bill will only lead Congress to continue to deficit spend.
Second, transportation is big-time pork. The House Transportation and Infrastructure Committee is the largest committee in Congressional history because everyone wants a share of that pork. Fiscal conservatives’ dreams of devolving federal transportation spending to the states run into the roadblock made up of members of Congress from both parties who don’t want to give up the thrill of passing out dollars to their constituents.
Transportation Agreement Seems Remote
House Republicans and Senate Democrats remain at loggerheads over the future of federal highway and transit funding. Although House Transportation & Infrastructure Committee Chair John Mica introduced a compromise transportation bill this week, few are pleased with his proposal. Secretary of Transportation Ray LaHood, for example, calls it “the worst transportation bill” he has ever seen.
Congress passes legislation defining how federal gasoline taxes and other highway user fees will be spent every six years, and the most recent bill lapsed in 2009. Although the revenues all come from highway users, public transit agencies and other interests have captured increasing shares of the funds in successive bills passed since 1982. To please the wide range of interest groups who benefitted from this spending, the 2005 bill (which itself was two years late) made spending mandatory, meaning annual appropriations bills could not refuse to spend the money even if gas taxes failed to cover the costs—which they did after 2008, forcing Congress to transfer general funds to the Highway Trust Fund. In addition, Congress added more and more earmarks to the bills, increasing from 10 earmarks in 1982 to more than 6,000 in the 2005 bill.
The struggle today is between the Democrats (and others) who want to keep spending like there is no tomorrow and the Tea Party Republicans who want to reduce spending to be no more than actual revenues and eliminate earmarks and other pork.
One major source of pork is so-called competitive grants, which are mainly for transit. Although most highway funds have been distributed to the states using formulas based on such things as population, land area, and road miles, competitive transit grants are handed out on a project-by-project basis. Though the money was supposed to be used for the best projects, in fact most of it was distributed based on political power.
Mica’s compromise would keep spending at current levels—which are as much as $10 billion a year more than revenues—but include no earmarks and replace all competitive grants with formula funds. Instead of pleasing everyone, the compromise has simply ticked everyone off.
‘Professor Cornpone: Ethanol Lobbyist Newt Gingrich—and the Future of the GOP’
The title is from a Wall Street Journal editorial in January of 2011. I commented on Gingrich’s response to that editorial in the following excerpt from a chapter I wrote for a recently published book by Robert E. Looney, ed., Handbook of Oil Politics, Routledge (2012):
Even if draconian belt-tightening by U.S. motorists could significantly reduce the world price of oil (which is highly doubtful), the benefits of cheaper oil would by definition accrue to other countries. If the U.S. allowed its own industries and consumers to benefit from the supposed drop in world oil prices (as a result of breaking the oil cartel), that would undo the effort to cut imports. Most petroleum consumed in the U.S. is not used by passenger cars and demand for petroleum among commercial, industrial and non-auto transportation sectors would rise if any induced reduction in the world oil price was allowed to be matched by a lower domestic oil price (rather than being offset by taxes or rationing).
Consider the protectionists’ old idea that money spent on buying something useful from another country is just lost to the U.S. economy, so we would be much better off buying everything close to home (regardless what it costs, though they never say that).
Attempting to defend ethanol subsidies and mandates, for example, former Speaker of the House Newt Gingrich wrote, ‘It is in this country’s long-term best interest to stop the flow of $1 billion a day overseas. . . . Think of what $1 billion a day kept in the U.S. economy creating jobs, especially energy jobs which cannot be outsourced, could do.’ That is, of course, a totally false choice. Apologists for subsidies and mandates are not proposing to pay the same price for domestic fuel as we could otherwise pay for an energy-equivalent amount of imported oil – replacing $1 billion of imported fuel with $1 billion of domestic fuel. They are talking about paying much more for domestic fuel than we pay for imported oil. Why else would they be asking for subsidies, tariffs and mandates?
Paying much more for something as important as energy, whether directly or through taxes, makes an economy poorer, and being poorer is no way to create ‘green jobs.’ Money wasted on something like ethanol which politicians favor is money that could otherwise have been spent on something else that consumers favor.
Is California High-Speed Rail Dead?
The CEO and board chair of the California High Speed Rail Authority have resigned in disgrace over erroneous cost projections. A peer-review commission created by the California legislature says the authority’s high-speed rail plan is “not financially feasible.” Surveys show a majority of Democrats, Independents, and Republicans in the state all oppose construction.
Yet the authority’s scheme to build a new rail line capable of moving trains from Los Angeles to San Francisco in two hours and 40 minutes won’t die unless the state legislature kills it. Officially, the authority plans to begin construction by September 2012, despite the fact that it has less than 10 percent of the money it needs to complete the project.
The tide definitely turned against the plan when the authority published a new business plan admitting that estimated inflation-adjusted construction costs had more than doubled from $43 billion to $98.5 billion. Moreover, under the new plan the promised 220-mph trains would not roll until 2033, more than a decade later than voters were promised in 2008.
Solyndra: A Political-Energy Company
Good reporting shouldn’t go unnoticed just because it appeared during the week after Christmas, so let me draw your attention to a comprehensive article on the front page of the December 26 Washington Post by Joe Stephens and Carol Leonnig:
Meant to create jobs and cut reliance on foreign oil, Obama’s green-technology program was infused with politics at every level, The Washington Post found in an analysis of thousands of memos, company records and internal e-mails. Political considerations were raised repeatedly by company investors, Energy Department bureaucrats and White House officials….
The documents reviewed by The Post . . . show that as Solyndra tottered, officials discussed the political fallout from its troubles, the “optics” in Washington and the impact that the company’s failure could have on the president’s prospects for a second term. Rarely, if ever, was there discussion of the impact that Solyndra’s collapse would have on laid-off workers or on the development of clean-energy technology.
Did you know that when the president visits a factory, his aides tell the workers what to wear? Keep digging in the documents:
Like most presidential appearances, Obama’s May 2010 stop at Solyndra’s headquarters was closely managed political theater.
Obama’s handlers had lengthy e-mail discussions about how solar panels should be displayed (from a robotic arm, it was decided). They cautioned the company’s chief executive against wearing a suit (he opted for an open-neck shirt and black slacks) and asked another executive to wear a hard hat and white smock. They instructed blue-collar employees to wear everyday work clothes, to preserve what they called “the construction-worker feel.”
This story has all the hallmarks of government decision making: officials spending other people’s money with little incentive to spend it prudently, political pressure to make decisions without proper vetting, the substitution of political judgment for the judgments of millions of investors, the enthusiastic embrace of fads like “green energy,” political officials ignoring warnings from civil servants, crony capitalism, close connections between politicians and the companies that benefit from government allocation of capital, the appearance—at least—of favors for political supporters, and the kind of promiscuous spending that has delivered us $15 trillion in national debt. It may end up being a case study in political economy. And if you want government to guide the economy, to pick winners, to override market investments, then this is what you want.
The Government Must Compensate for Property Damage Even If Its Taking Was Only ‘Temporary’
Cato today filed an amicus brief supporting a request that the Supreme Court review Arkansas Game & Fish Commission v. United States. Here’s the case:
The Arkansas Game & Fish Commission owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve; the preserve’s trees are essential to its use for these purposes. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.
Between 1993 and 2000, the government released more water than authorized under the plan. AGFC repeatedly objected that these excessive releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause.
The district court awarded $5.8 million in lost timber and reforestation costs based on the substantiality of the government’s flooding and the foreseeability of the damage it caused. The Federal Circuit reversed that decision, holding that the flooding of private land can never be a taking unless that flooding is permanent. It further held that, in determining whether the government’s intrusion on AGFC’s land was permanent or temporary, courts must focus on the character of the policy behind the intrusion rather the effects of the intrusion itself. A taking cannot have occurred here because each deviation from the plan constituted a “temporary” policy, the court concluded, so AGFC had no constitutional remedy.
AGFC is asking the Supreme Court to review its case; the Court itself has recognized that something less than a permanent invasion of land can constitute a compensable taking. Cato joined the Pacific Legal Foundation on a brief urging the Court to hear the case and uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government. Our brief highlights the conflict between the Federal Circuit’s decision and both Supreme Court and lower court precedent. First, an invasion of land by flooding is no different from an invasion of land by any other means. Second, the government’s self-professed “intent” that a possible taking be “temporary” should have no bearing on whether a Fifth Amendment remedy exists when that taking has, in fact, occurred. Instead, the relevant inquiry should be whether the government caused permanent damage and, if so, how much.
The Federal Circuit’s new rule — that, so long as it might be “temporary,” no government flooding can be remedied under the Fifth Amendment — runs afoul of the letter and spirit of a constitutional provision meant to compensate property owners for government intrusions on their land. We urge the Court to grant AGFC’s petition and maintain constitutional protections for private property.
The Supreme Court will decide in the new year whether to take the case, and would hear argument in the fall if it does.
Fun with Grammar
Juliet Eilperin at the Washington Post writes:
Less than a week before U.N. negotiators convene in South Africa for a new round of talks aimed at forging a global climate pact, a hacker has released an apparent second round of e-mails from the University of East Anglia in Britain that seek to portray climate scientists in a negative light.
Now let’s break that sentence down. Could it really be the e-mails from the climate catastrophists that “seek to portray [themselves] in a negative light”? Surely not. Rather, it appears that the sentence was intended to read something like this:
…a hacker believes that the apparent second round of e-mails from the University of East Anglia that he released today portray climate scientists in a negative light.
If there’s any embarrassment to the writers of the e-mails, after all, surely it was not intended. In any case, it’s not the release of the e-mails that might “portray [some] climate scientists in a negative light,” it’s the e-mails themselves.
More on the original Climategate here. Ongoing posts at this climate-skeptic website. And as you hear terms like “skeptics,” “deniers,” and so on, remember what Pat Michaels wrote in the 2009 Cato Handbook for Policymakers:
Leading politicians and media figures are insisting that Congress make
global warming a very high priority. Global warming is indeed real, and human activity has been a contributor since 1975.But global warming is also a very complicated and difficult issue that
can provoke very unwise policy in response to political pressure. In 2005, for instance, Congress clearly made a very bad decision about climate change when it mandated accelerated production of ethanol. Critics had argued then that corn-based ethanol would actually result in increased carbon dioxide emissions. An increasing body of science has since verified this position. Further, corn-based ethanol is responsible in part for the skyrocketing price of corn, soybeans, rice, and wheat since the mandates began.Although there are many different legislative proposals for substantial
reductions in carbon dioxide emissions, there is no operational or tested suite of technologies that can accomplish the goals of such legislation. Fortunately, and contrary to much of the rhetoric surrounding climate change, there is ample time to develop such technologies, which will require substantial capital investment by individuals.
He’s a skeptic about the predictions of catastrophic and imminent threats, not about the existence of modest global warming.
Solyndra: Crooked Politics or Just Bad Economics?
Amy Harder has a good take on the Solyndra issue in National Journal Daily (subscription required):
Lesser evil: crony capitalism or bad policy?
Energy Secretary Steven Chu is about to find out when he testifies before a House panel on Thursday about the $535 million loan guarantee his department awarded to Solyndra, the now-bankrupt solar-energy company that was, before its demise, the poster child for America’s renewable-energy industry and President Obama’s 2009 Recovery Act.
The White House and the Energy Department say the influence of political donors such as Oklahoma oil billionaire George Kaiser, whose venture-capital firm was the major investor in Solyndra, did not sway any of the administration’s decisions on Solyndra’s loan guarantee, which was funded from the stimulus package.
By denying politics was involved, the administration is saying that its top officials genuinely and continuously thought Solyndra was a good bet—despite numerous warnings raised both inside and outside of the administration—and that the loan-guarantee program was being carefully managed despite oversight reports and an internal West Wing memo that said otherwise.
“As time went on, there was a growing concern because of the cash-flow,” Chu said in an interview with NPR on Tuesday. “And so we certainly were watching this and looking at this very closely. And eventually we recognized they were in deep trouble.”
Yet, throughout the two years Solyndra was borrowing money from federal coffers, the DOE essentially stayed the path right up until the bitter end when the California-based manufacturer went bankrupt in September. When Solyndra was on the brink of bankruptcy in late 2010, DOE decided to restructure the loan to try to keep the company afloat.
Meanwhile, in today’s congressional hearing, Energy Secretary Steven Chu insisted that “the final decisions on Solyndra were mine, and I made them with the best interest of the taxpayer in mind. . . . I did not make any decision based on political considerations.” This came on a day when the front page of the Washington Post reported:
In the two years preceding its collapse, Solyndra and its biggest investor aggressively asserted themselves in dealings with the Obama administration, pushing Energy Secretary Steven Chu to visit the company’s headquarters to help it raise private money and later suggesting it would file for bankruptcy if the Energy Department rejected its proposed rescue plan. . . .
“The DOE really thinks politically before it thinks economically,” a Solyndra board member wrote in December to George Kaiser, an Obama fundraiser whose family funds owned a third of the company.
Another Shoe Drops: Solyndra Layoff Was Delayed until after Election Day
The Solyndra story just keeps unfolding. Even as Secretary Chu tells NPR that “no decision we made in the loan program had anything to do with who is investing in this company,” today’s papers report that the Energy Department pressured Solyndra not to announce impending layoffs until the day after the crucial 2010 election. From the Washington Post:
The Obama administration, which gave the solar company Solyndra a half-billion-dollar loan to help create jobs, asked the company to delay announcing it would lay off workers until after the hotly contested November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show….
A Solyndra investment adviser wrote in an Oct. 30, 2010, e-mail — without explaining the reason — that Energy Department officials were pushing “very hard” to delay making the layoffs public until the day after the elections.
The announcement ultimately was made on Nov. 3, 2010 — immediately following the Nov. 2 vote.
More than a month ago, I listed some of the earlier shoes in the unfolding story. But as a friend of mine asks about the Penn State scandal, is this the “other shoe,” or is this story a centipede with lots more shoes to come?
Jerry Taylor and Peter Van Doren ignored the politics and looked at the economics of Solyndra and energy subsidies in Forbes.
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