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A Bland but Workable Energy Plan

House Energy and Commerce Committee Chairman Fred Upton and Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski have been working jointly on a passable energy bill. The Congressmen have also been coordinating with Energy Secretary Ernest Moniz to ensure the bill will not get vetoed at the President’s desk.

On infrastructure, the Energy Policy Modernization Act (the Senate version) aims to modernize the electricity grid and add cybersecurity safeguards. There are also provisions to streamline the process for natural gas export projects and maintain the Strategic Petroleum Reserve. The bill provides for the “responsible development of American resources”, to include hydropower, geothermal and bioenergy, as well as traditional resources. Surprisingly, the act creates a new National Park Maintenance and Revitalization Fund to fix the maintenance backlog of the nation’s public parks (the park delayed an estimated $11.5 billion worth of maintenance last year alone).

The drafters of the bill chose to avoid big button issues such as the Keystone XL pipeline, allowing the exportation of crude oil and climate change.

The inclusion of maintaining the Strategic Petroleum Reserve is in direct contrast to the transportation bill being presented by the Senate, which offers to sell part of the reserve to fund the Highway Trust Fund.

This week, 11 environmental groups, including the Sierra Club, the League of Conservation Voters and the Natural Resources Defense Council, have come out against the bill stating that several provisions in the bill could cause detrimental effects to public health and the environment. The groups seemed specifically opposed to expediting liquefied natural gas exports and mineral mining permits because they felt “a stronger vision for accelerating the development and deployment of clean energy” was needed. The House bill received less opposition from these groups since it did not include measures on hydropower and liquefied natural gas exportation.

Jul 29, 2015 | Leave a Comment | by

The Transportation Funding Fight

The fight over the future of transportation funding in the United States has once again pitted the House against the Senate and Republicans against Democrats. In June, the House of Representatives narrowly passed a bill to spend $55.3 billion on transportation and housing projects through December 18. 2015, with only three Democrats voting yes to the bill. The intention of the short-term bill was to give representatives more time to craft a longer term bill. The House bill, however, also included amendments restricting travel to Cuba, blocking funds for the transfer of Guantanamo Bay detainees, and attempted to undo recent trucking regulations, which angered House Democrats and the White House.

Senator Dick Durbin (D-IL) gave a grave warning of the current system of transportation and infrastructure funding.

“We cannot patch our way to prosperity with temporary, short-term answers to long-term problems. In just the past six years, there have been more than 30 extensions of surface transportation programs. This is not the way to run the federal highway and transit program.”

Now it’s the Senate’s turn to attempt to pass their own transportation bill. They have a tight deadline to meet since the last measure passed to finance infrastructure programs in the country expires July 31st.

The Senate Bill, which Senator Mitch McConnell (R-KY) brokered with Senator Barbara Boxer (D-CA) is a six-year authorization, although funding appropriations in the bill extend for only the first three years. The bill allocates $47 billion to fund the revenue gap between federal gas tax and other transportation revenue ($35 billion a year) and yearly expenditures ($50 billion a year).

Problems of funding have also divided the two sides but both sides have been firm in their desire to keep the gas tax at current levels, rather than raising it. The House proposed funding the gap between projected costs and expected revenues with a one-time tax on $2 trillion in business income brought back to the United States.

The Senate bill, on the other hand, includes revenue-increasing methods such as:

  • Selling oil from the Strategic Petroleum Reserve to raise $9 billion.
  • Reducing the dividends paid to certain banks by the Federal Reserve to raise $16.3 billion.
  • Indexing various custom fees to inflation to raise $4 billion.
  • Increasing Transportation Security Administration fees to raise $3.5 billion.
  • Extending certain guarantees on mortgage-backed securities to raise $1.9 billion.
  • Adjusting various tax compliance measures to raise an additional $7.7 billion.

While the Senate bill may not directly raise the gas tax, it increases revenues through various raises in fees (fees which are essentially very similar to taxes). This seems quite contrary to Senator McConnell assurances that the Senate bill “does not increase the deficit or raise taxes.”

Jul 22, 2015 | Leave a Comment | by

The Arctic — Our Last Energy Frontier

As the Arctic Ocean ice thaws, countries prepare to tap into the vast energy resources currently trapped beneath the Arctic Ocean. The U.S. Geological Survey (USGS) estimates that the Arctic could hold as much as 12 percent of the world’s undiscovered oil and 30 percent of its undiscovered gas, not including unconventional oil and gas deposits. Of that, the portion of the Arctic belonging to the United States could hold 33 percent of total oil and 18 percent of total natural gas in the Arctic.

The United States, though, is limited in its reach into the Arctic since it has not signed onto the United Nations Convention on the Law of the Seas (UNCLOS) treaty. Without that ratification, the United States, unlike the other four Arctic nations of Russia, Canada, Norway and Denmark, is constrained to an Exclusive Economic Zone (EEZ) of 200 nautical miles off their coasts. The other four Arctic nations, however, have asked to secure international legal titles to sites up to 350 miles off their coasts. Russia and Canada have even submitted claims that reach the North Pole.

Drilling in the Arctic could also be further complicated by harsh storms, drifting sea ice, poor infrastructure and a lack of available crisis response centers. On the other hand, Arctic drilling would take place at shallower depths than drilling in the Gulf of Mexico. In a positive push for Arctic drilling, President Obama signed Executive Order 13580 in 2011 to establish a coordinate efforts among federal agencies to develop energy in the Arctic. The order was intended to expedite future permit issuance and improve information sharing.

Shell Gulf of Mexico has made moves to be at the forefront of oil exploration in the U.S. Arctic region, specifically in the Chukchi Sea and the Beaufort Sea. The company also produced an extensive Oil Spill Response Plan to assure the government of their preparedness in case of an oil spill in the region. Fears regarding oil spill response in the Arctic continue as the Coast Guard admits to having no offshore response capability in Northern and Western Alaska. Due to harsh regional realities, Shell has currently only been granted legal permission for drilling between July and October.

While Arctic drilling may still seem like a dangerous opportunity, future technological innovations and improved Arctic preparedness and infrastructure will make such drilling a reality in the near future. The massive quantities of energy stored in the U.S. Arctic will stay there until we decide to take advantage of this opportunity.

Jul 15, 2015 | 3 comments | by

Strictest Frac Regulations Implemented in California

The first restrictions on hydraulic fracturing are about to be implemented in California. This follows the passage of Senate Bill 4, authored by Fran Pavley (D- Agoura Hills). Approved in 2013, the regulations will force oil companies to expand monitoring and reporting of water use and water quality, conduct rigorous analysis of potential seismic impacts of operations and disclose chemicals used in all operations. Abiding by these new laws will discourage future investments by oil and gas companies in the state.

Recently, the Division of Oil, Gas, and Geothermal Resources (DOGGR) ― California’s agency charged with enforcing such laws — has been coming under attack by lawmakers over its inadequate oversight over oil and gas operations. In the past, DOGGR has admitted to falling behind on monitoring oil field wastewater injections into federally protected aquifers, as well as missing deadlines imposed by legislators for providing data. Many doubt the agency’s ability to correctly implement and abide by these new regulations.

More importantly, the California Monterrey Shale formation could potentially hold the largest “tight oil” shale deposits in the United States. While oil and gas activity in the region could have boosted the California economy, new regulations will hurt potential economic growth in the state. Currently, it has been estimated that oil and gas contribute about $21.55 billion to the public coffers every year. Without such revenue, California will have to make some tough financial decisions and fire many state employees.

 

Jul 08, 2015 | Leave a Comment | by

Oklahoma Fracking Companies Could Face Earthquake Lawsuits

Last week, the Oklahoma Supreme Court ruled that earthquake injury lawsuits against oil and gas companies could now be heard in district courts. Previously, the oil industry had been trying to avoid such court cases and asked for them to be heard only through the Oklahoma Corporation Commission.

The State’s highest court rejected the request, stating:

The Commission, although possessing many of the powers of a court of record, is without the authority to entertain a suit for damages.

The court was in no way ruling that earthquakes are caused by companies using hydraulic fracturing technology to extract oil and natural gas.

Instead, the opinion spoke only of which court was best suited to hear such claims in Oklahoma. This opinion upheld the longstanding tradition of allowing district courts exclusive jurisdiction over private tort actions.

A recent flurry of earthquakes in Oklahoma have placed the state at the center of the fracking debate. A recent study by the University of Oklahoma, Columbia University, and the U.S. Geological Survey reported potential links between wastewater injection, a practice often used for the disposal of water waste in fracking, and earthquakes. The study has been heavily disputed and many conclude the earthquakes are simply a manifestation of natural causes.

 

Jul 06, 2015 | 1 comment | by

Electric Vehicles: More Harm than Good?

A recent study by Stephen P. Holland from the University of North Carolina- Greensboro and other economics and business professors has found the environmental benefits and harms of electric cars vary state by state. The federal government currently awards a subsidy of $7500 for each electric vehicle bought, with some states adding their own subsidies to such purchases. Such subsidies reflect current movements towards green policies.

Electric vehicles, however, are clearly not “zero emission vehicles.” First of all, the components of those vehicles are made in factories most likely powered by fossil fuels. Second, the electricity used for the vehicles themselves comes from power plants across the United States, where around 70 percent of power plants operate on natural gas or coal. In most areas around the country, driving an electric vehicle means choosing to burn coal and natural gas rather than burning oil.

Due to differences in energy production by states, using electric vehicles may be better in some states while continuing to drive gas-powered cars in others may be best. In California, for example, the electric grid is relatively clean while gasoline vehicles produce more environmental damages. In North Dakota, the opposite is true as the electric grid uses more coal.

The report found that on average electric cars are about half-a-cent worse per mile for the environment than gas-powered cars. However, gas-powered cars are worse in congested urban areas while electric cars are worse outside of metropolitan areas. A one-size-fits-all policy regarding electric cars therefore does not make sense. The federal subsidy should be eliminated, leaving only state subsidies for electric vehicles where they already exist.

 

Jul 01, 2015 | 5 comments | by

EPA Regulations Overruled by Supreme Court

In a 5-4 ruling, the Supreme Court ruled that the Environmental Protection Agency (EPA) had not adequately considered the costs of its regulations before enacting them. Limits finalized in 2012 as part of the Clean Air Act on toxic air pollutants proved to be a prohibitive cost on coal utility plants. They were also a main feature in the Obama administration’s environmental policies.

The case, Michigan v. EPA, centered on the first ever limits on mercury, arsenic, and acid gases emitted by coal-fired power plants. While the EPA had estimated the new rules would cost $9.6 billion, placing it among the costliest regulations ever instated.

Prior to the ruling, the head of the EPA Gina McCarthy had said she felt confident the Supreme Court would rule in their favor. However, were that not to be the case, she said:

But even if we don’t [win], it was three years ago, most of them are already in compliance, investments have been made, and we’ll catch up. And we’re still going to get at the toxic pollution from their facilities.

With most coal plants already in compliance, the ruling does little to slow emission curbs in the coal industry. Regulations on interstate air pollution were already upheld last year by the Supreme Court, ensuring that most utilities will need to control future pollution regardless of the new ruling. Furthermore, in the majority opinion, written by Justice Scalia, the Court ruled that the EPA could reconsider the regulations with better cost assessments before reinstating such rules.

 

Jun 29, 2015 | 5 comments | by

The Clean Coal Technology Myth

The potential rise of clean coal technology has been hampered by its costly nature. Originally intended to prevent greenhouse gases from entering the atmosphere, there have been few real applications of this technology. The most promising clean coal development was the potential to make hydrogen from water by using coal and then burying the carbon dioxide by-product and burning the hydrogen, a form of carbon capture and sequestration.

In effect, clean coal technology was supposed to give the coal industry a lifeline into the future of cleaner fuels. In reality, the costs associated with clean coal increase the price of generation by up to 80 percent and cuts efficiency by 30 percent. Initial funding from the federal stimulus bill in 2009 offered $3.4 billion for carbon capture and sequestration. The money, however, soon ran out as costs escalated.

In Mississippi, for example, a clean coal technology project already estimated at $6.2 billion went so over budget that the South Mississippi Electric Power Association withdrew from the project. The coal plant was already the costliest fossil-fuel power plant ever engineered. In February 2015, the Department of Energy similarly pulled its support on a $1.1 billion clean coal project, called FutureGen, in Illinois.

The growth of cheap natural gas has been especially worrisome for the coal industry. In the United States, Arch Coal, one of the largest coal companies, is about to be delisted from the New York Stock Exchange. Even China, a country that traditionally burns half the world’s coal, has been increasingly switching to natural gas and renewable energy. Between January and April of 2015, China’s coal demand fell 8 percent.

Even with so much bad news, coal’s share of primary-energy use in the world is unlikely to fall below 25 percent, from a peak of 30 percent in 2010, by 2035. For many countries, coal still means cheap and reliable energy where such a thing is rare. In such countries, regulations aren’t driving up the price of generation ensuring a continuous supply of affordable energy.

 

Jun 24, 2015 | 1 comment | by

Obama Takes Aim at Big Trucks

On Friday, the Obama administration officially announced plans to further lower carbon emissions in the United States. This new rule, issued by the Environmental Protection Agency (EPA) and the Transportation Department, aims to increase the fuel efficiency of the large trucks crossing the country everyday. New regulations will also affect other trucks, such as delivery vehicles, dump trucks and buses.

Two categories of standards were created, one for the front part of big trucks, called tractors, and one for trailers that trucks haul. The tractor standard will be implemented for those built in 2021 and require efficiency increases of up to 24 percent. This will be the first time, however, that regulations extend to trailers. The first federal standards for big trucks were announced in 2011 for any truck models built between 2014 and 2018.

The rules threaten to impose undue burdens on the trucking industry — an industry responsible for the transportation of food, raw goods, and most freight in the country. Adjusting to these new rules will require improvements in aerodynamics and the use of lighter materials as well as tweaks in current engine and transmission technology. The EPA stated the industry would be able to recoup their costs within two years for trucks with trailers. For smaller trucks and buses, the recoup time may be as long as three to six years.

These new regulations are just the next step in a long line of new rules implemented under the Obama administration. In his first term, President Obama discussed limitations on automobile emissions. These were followed by new rules set by the EPA for power plants and more recently potential regulations on airplane engine emissions.

 

Jun 22, 2015 | 2 comments | by

Draconian California Water Restrictions

California has been plagued by a highly-politicized water crisis for months now, despite crisis warnings for years.

The state has fallen prey to the “tragedy of the (water) commons”, where each person feels their single contribution to the water crisis will not impact the overall situation. With this thought, each Californian uses water like it rained yesterday, with no regard to the desperate calls from Governor Jerry Brown for water conservation.

Until now, Californians have faced few real incentives to lower their water consumption levels. Past water infrastructure subsidies have kept the price of water down as political forces ensured a disastrously low price for California’s many residents. The result was a low water price of less than 0.7 cents per gallon in 2014 for San Diego and Los Angeles. In cities such as Irvine, next to the University of California, the price can be as low as 0.2 cents per gallon.

Economists believe simply raising the water price by 10 percent could cut consumption by 2 to 4 percent.

Not limited to simple price increases, however, new California laws are mandating significant decreases in water consumption. These policies include:

  • New cuts affect 276 rights held by 114 entities to pull water from the Delta, Sacramento, and San Joaquin watersheds. Each of these entities could be supplying water to dozens of additional users.
  • Farmers in the Central Valley have already had their surface water allotment lowered or erased in the last few years.
  • In May, about 200 farmers agreed to lower their water usage by 25 percent in exchange for a promise to face no deeper cuts during the growing season.
  • Other restrictions implemented in May limited yard watering to twice a week and between the hours of 9 a.m. and 6 p.m.
  • Owners of large farms will now have to hand over detailed reports of their water use to state regulators.
  • A recent executive order calls for the replacement of 50 million square feet of ornamental turf, such as municipality-owned lawns or private lawns.
  • For wealthy consumers, districts now reserve the right to install flow restrictors for private use.
  • Top water users are facing cuts up to 36 percent.

While these policies might lower water consumption, they may be a little too much too late. In the end, these draconian measures are sure to enrage those who can afford higher water prices, while also punishing farmers and low-income water consumers.

Jun 17, 2015 | 3 comments | by
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