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Farmers Hit Hard by the Estate “Death” Tax

On April 16, 2015, the House of Representatives voted to repeal the estate tax. The Internal Revenue Service defines the estate tax as, “a tax on your right to transfer property at your death.”

Advocates for the estate tax decry the perpetuation of inequality due to inherited wealth. The estate tax, often called the “death tax” by opponents, is ineffective in reducing inequality; it does, however, excel at destroying family business, especially agricultural operations. Unlike investments and cash, real estate cannot be as easily placed into trust. Thus, American farmers and small business owners are hardest hit by the tax, while cash-rich Americans avoid it.

The shale gas revolution has created economic booms from Pennsylvania to Texas to North Dakota, but it is a mixed blessing for American farmers. The sudden influx of money to rural areas is increasing the wealth of farms in America and complicating estate tax calculations for farms.

  • Many farm estates have increased in value due to the mineral rights to the land. Farmers saw land values appreciate immediately upon signing leases with natural gas producers and land values have continued to rise. In both Texas and Pennsylvania, land values increased from 1997 to 2012, even after several years of drilling.
  • The increase in land value due to the demand for mineral leases was followed by increases in farm estate values, as many farmers invested their royalties from gas extraction back into their farms. The Federal Reserve Bank of Kansas estimates that three-fourths of farms’ wealth accumulation from energy payments are through increases in land values.

As the U.S. Senate begins debate over the estate tax, it is obvious the stakes are higher than ever. With farms in Pennsylvania and Texas experiencing 10 percent or greater increases in household wealth, the estate tax is a continuing threat to farm families’ ability to pass their farms to their children.

Mike Gajewsky is a research associate at the National Center for Policy Analysis

Jun 15, 2015 | 1 comment | by

More Tax Money for Obama’s Green Dreams

From Merrill Matthews at the Institute for Policy Innovation:

President Obama reportedly will announce on Friday that he will waste another $100 million taxpayer dollars in his never-ending quest to push consumers to embrace his green dreams.

Though he won’t actually put it quite like that, that’s the upshot of his message.

The $100 million is to expand special fuel pumps, called “blender pumps,” that allow drivers to choose how much ethanol they want in their gas tanks. If consumers could choose zero, at least it would represent a real choice, but don’t bet on that.

Consumer Reports says that about 70 percent of gasoline has a 10/90 blend, that is, 90 percent gasoline and 10 percent ethanol, known as E10.

Ethanol advocates — primarily the farmers who grow the corn and the processers that turn it into ethanol, both of whom profit greatly from the product — claim that newer cars can take a blend ratio of E15. And some flex-fuel cars can go significantly higher.

But why would most people do that, since the higher blends of ethanol appear to reduce miles per gallon?

When Consumer Reports compared the gas mileage of E10 to what the ethanol industry is really pushing, E85 (85 percent ethanol), it found a significant reduction in miles per gallon. “When running on E85 there was no significant change in acceleration. Fuel economy, however, dropped across the board. In highway driving, gas mileage decreased from 21 to 15 mpg; in city driving, it dropped from 9 to 7 mpg.”

In addition, many environmentalists who once encouraged ethanol expansion have begun to back off that support.

Obama’s predictions about the adoption and benefits of his environmental policies have been every bit as bad, if not worse, than his predictions about his health care law. He predicted there would be a million electric vehicles on the road by 2015; there’s actually about 286,000. His efforts to push high-blend ethanol are likely to be no better.

There is nothing wrong with a transition to higher-blend vehicles — if that’s what consumers want. But that is not this administration’s approach. What matters is what the president thinks is good for you, whether he would ever use it or not, and to back his vision with your taxes.

 

Jun 08, 2015 | 2 comments | by

Access to Electricity for 1.2 Billion by 2030

Power For All is a company that plans to bring about universal energy where governments have failed, before the year 2030. Power For All believes that bottom-up distributed energy solutions assuring universal access to electricity because are faster, cleaner and cheaper than extending power grids to rural areas.

Figures released this week by the joint UN-World Bank energy access program Sustainable Energy for All add to this argument:

  • From 2010 to 2012 some 222 million people — more than the population of Brazil — gained grid access for the first time. The growth outpaced global population growth almost 2 to 1, thus trimming the number not yet connected from 1.2 billion to 1.1 billion.
  • Those figures make electrification a bright spot. Little progress was detected in access to cleaner cooking fuels. Some 2.9 billion people were still cooking with biomass fuels such as wood and dung in 2012.
  • Grid access expanded mainly in urban areas, and fully one-quarter of the growth was in India. In Sub-Saharan Africa — the region with the highest energy access deficits — electrification just barely outpaced population growth; electrification trailed demographic growth in half of the world’s 20 least electrified countries.

To bring energy to 1.2 billion people that are energy impoverished by 2030, the International Energy Agency estimates it will cost $700 billion.

Jun 03, 2015 | Leave a Comment | by

A Bumpy Ride for Germany’s Green Energy

The aim of the German Energiewende (also known as Germany’s Energy Transition) is to decarbonize the energy supply by increasing access to renewable energy and improving energy efficiency. A key part of the Energiewende is the outright rejection of nuclear power as an alternative to fossil fuels and the complete shutdown of nuclear facilities by 2022. The German government has also taken a stand against carbon capture and storage, calling it expensive and unsafe. The strategy focuses instead on wind, biomass (using landfill gas and agricultural waste products), hydropower, solar power, geothermal and ocean power.

So, how does Germany expect to transition to renewable energy so quickly?

  • Germany has been focusing on increasing wind power generation since the early 1990s. In 2014, onshore wind power provided 8.6 percent of the country’s power supply.
  • By 2020, Germany plans to triple the amount of energy produced by wind (both onshore and offshore).
  • Germany is aiming to have 6.5 gigawatts of installed offshore wind power by 2020.
  • Germany expects to increase citizen ownership of renewable sources, limiting the influence of large corporations, through the use of feed-in tariffs.
  • Increase “energy cooperatives” ― community-owned renewable projects, which have already garnered more than 1.2 billion euros in investment from more than 130,000 private citizens.

One of the most key impacts of Germany’s energy transition has been the democratization of energy resources. Turning traditional consumers into additional producers of energy has meant enacting generous support subsidies for renewables. This method seemed effective and by 2012 citizens and co-ops owned 47 percent of renewables, while energy suppliers controlled 12 percent and institutional and strategic investors owned 41 percent. In Freiburg, Germany, for example, citizens of the town of about 220,000 people funded a third of the investment cost for four turbines, with the rest coming from banks loans.

In 2014, the plan seemed to be on the right track and electricity from fossil fuels (including natural gas) hit a 35-year low. However, the German energy transition has hit a few bumpy spots along the way. Offshore wind has not taken off as it was supposed to and most Germans see it as a big business scheme. At the end of 2014, only 1 gigawatt of the total 6.5 gigawatts desired had been installed, with only 923 additional megawatts under construction.

The rush into renewables was also poorly timed and coincided with increased investments into traditional energy production by utility companies. The increased generation from both renewables and fossil-fuel power plants has overwhelmed demand causing prices to fall and hurt profits. Additionally, Germany had guaranteed above-market prices for newly installed renewable energy, to incentivize investment. The surge of renewables on the market are subsidized directly by a surcharge on customers, which increases in parallel with the addition of more renewable kilowatt hours. In the end, utilities have been forced to return to coal-powered plants due to the squeeze on profits.

Lauren Aragon is a research associate at the National Center for Policy Analysis

Jun 03, 2015 | Leave a Comment | by

The Real Cost of Clean Power Plan

The Environmental Protection Agency’s Clean Power Plan Proposed Rule to cut carbon emissions from power plants, specifically targets coal power plants. Not only would this hurt United States energy supplies, but also greatly increase energy costs that would hit consumers by raising their electricity bill.

The following shows the difference between the analysis of the costs of the National Economic Research Associates and the Environmental Protection Agency (EPA).

The EPA estimates:

Annual cost estimates for complying with the Clean Power Plan range from $5.4 billion to $7.4 billion in 2020, to $7.3 billion to $8.8 billion in 2030. These annual cost estimates factor in both the costs of investments in transitioning to lower-carbon electricity options and the savings that result from investments in energy efficiency.

NERA estimates:

EPA’s Clean Power Plan could cost consumers and businesses a staggering $41 billion or more per year, far outpacing the costs of compliance for all EPA rules for power plants in 2010 ($7 billion) and the annual cost of the Mercury and Air Toxics Standards rule ($10 billion). The analysis also finds that additional coal retirements would total 45,000 megawatts or more of coal-based electricity, posing a major threat to electric reliability in many parts of the country.

Jun 01, 2015 | Leave a Comment | by

The Demise of Traditional Hydro-Power

Traditional hydroelectric power, generated by the storage and release of water in reservoirs, has faced regulatory and environmental restraints on growth for decades. The current generation capacity of hydroelectric power, in the form of conventional and pumped storage, in the United States is around 101,000 megawatts. According to the Electric Power Supply Association, this is enough energy to power 75 to 100 million homes.

In 2013, hydroelectric power accounted for 7 percent of energy production, about 50 percent of total renewable energy produced that year. This represents a sharp decrease from ­­­­about 25 percent of electric generation in 1920.

While the federal government owns only 8 percent of the total number of hydroelectric facilities, it accounts for 52 percent of total hydro generation due to the large size of its facilities. The private sector, public utilities, and state or local governments own the other 92 percent of the facilities, 89 percent of which have a generation capacity of less than 30 megawatts. The non-federal market for hydroelectric power is therefore significant, operating over 1,600 hydropower facilities in states across the country.

While initial investment costs for hydropower projects is high, overall costs in dollars per kilowatt hour are comparatively low. According to the U.S. Department of Energy, hydro power plants cost $0.08/kW-hr, while coal plants and nuclear plants average costs around $0.10/kW-hr. Natural gas power plants are more competitive with costs between $0.07/kW-hr and $0.13/kW-hr. The increase in natural gas plants, which provided 27 percent of U.S. energy in 2014, stems from the cheap supply of gas from hydraulic fracking and the relatively quick construction process of plants. As traditional hydro investment slumps, natural gas is there to pick up the slack and provide cheap electricity for American homes.

Other key reasons for the lack of growth in hydroelectric development stem from considerations outside of average cost, including:

  • Intentional removal of existing dams to restore wildlife habitats.
  • Locations for new reservoirs are lacking as most were constructed on in the twentieth century.
  • Many key rivers in the United States are drying up as a result of changing weather patterns and outdated water sharing laws.
  • Regulations implemented in 1992 drastically increased the waiting time for project development, discouraging future investors who already faced large initial investment costs. Licensing, through Federal Energy Regulatory Commission, for traditional hydro projects can take anywhere from 16 months to 10 years, depending on the environmental concerns on the project.
  • Intentional removal of nearly 900 dams in the last 25 years to restore wildlife habitats.

While one of the easiest methods for boosting generation capacity is installing hydroelectric generators on existing dams, the destruction of current dams is hindering this prospect. Future increases in hydroelectric capacity will stem mostly from new technologies focused on closed-loop pumped storage systems, tidal, and hydrokinetic power (using river water flow). These technologies offer an alternative to outdated methods of controlling and releasing water gradually, which effectively decrease the environmental concerns about hydroelectric power and provide a strong alternative to traditional hydro projects. While the costs for these projects are still too high to be commercially viable, investments in research and development have been increasing throughout the world.

Lauren Aragon is a research associate at the National Center for Policy Analysis.

May 27, 2015 | Leave a Comment | by

Economics of Recycling in Houston

Waste Management, a company started in Houston, Texas and now serves more than 20 million customers around the United States and Canada, started its business with commodity prices at an all-time-high and made contracts with municipal governments based on a deal that required a commodity price floor of $65 a ton. However, when the revenue falls below $65 a ton, the city of Houston does not make any money and Waste Management takes a loss.

  • The sorting process at a recycling facility costs between $75 to $150 on average, depending on how contaminated the recycling load, while Waste Management sells the recycled material for just $80 on average.
  • Contracts were made when average recycled commodity prices rose 20 percent in 2011 and received as much revenue as $140 per ton.
  • The city of Houston gets 70 percent of any revenue over $65 per ton.
  • Last March, Houston’s recycling process contamination rate was 17.4 percent.

The Waste Management contracts with municipal governments have been profitable for both over the past few years. However, with recycled commodity prices as low as they now are, Waste Management’s contracts might have to expire. Cities like Houston could lose their popular recycling programs due to hasty decisions that were made a few years ago.

What can you recycle curbside in Houston?

Paper: Newspapers, magazines

Cardboard: Broken down to no more than 3-feet-by-3-feet and clean. No soiled pizza boxes, for example.

Plastics: Nos. 1-5 and No. 7 only

Metals: Tin, aluminum, empty aerosol cans

Glass: Only on routes with 96-gallon bins

Laminated cartons: Milk cartons, for example.

May 20, 2015 | 2 comments | by

States vs Local Hydraulic Fracturing Bans

In the past few years, hydraulic fracturing/frac bans have become increasingly common in communities opposed to the drilling practice that extracts oil and natural gas from shale rock by injecting sand, water and chemicals into the ground. Such bans focus on either the actual drilling methods or the transportation of waste from the hydraulic fracturing process.

State legislatures are now finding themselves in a fight against local authorities for control of hydraulic fracturing regulations in their own states. While Vermont and New York have already implemented state wide bans on hydraulic fracturing, Texas has banned local bans and Oklahoma is considering banning local bans on the practice as well.

Current hydraulic fracturing ban legislation:

  • Over 470 local measures have passed in towns, cities, and counties.
  • 24 states and Washington D.C. have seen at least one such local measure passed.
  • Oklahoma introduced legislation imposing a ban on local frac bans.

The debate has sparked questions over who has the right to regulate oil and gas activity in the state, state agencies or individual communities. For New York, the state-wide ban followed a court decision that town zoning laws allowed the banning of hydraulic fracturing. In an attempt to achieve a compromise between state and local control, state legislation banning cities and counties from outlawing hydraulic fracturing opens the door for local oil and gas regulations, specifically where it concerns health and safety. Texas House Bill 40, signed into law this week by Governor Greg Abbott, includes a four-part test for determining city drilling regulations while prohibiting hydraulic fracturing bans throughout the state.

Lauren Aragon is a research associate at the National Center for Policy Analysis.

May 20, 2015 | 1 comment | by

Hydrogen-fueled Cars?

Toyota is developing the first hydrogen fueled car to hit the market. Competing with other alternative fueled vehicles, the Toyota Mirai will be the first of its kind that will be mass marketed to the public. A direct rival/competitor to the electric cars, the hydrogen car compares to electric cars by price, range before refueling, refueling time and fueling stations around the United States.

2015 Toyota Mirai’s hydrogen fuel cell car, without the subsidies:

  • $57,500 a car.
  • 300 mile range.
  • Refuels in 5 minutes.
  • 12 hydrogen fuel stations around the U.S.

Electric cars, without the subsidies:

  • A $29,000 car would take 16 hours to recharge/refuel with a range of 84 miles.
  • The Tesla car costs $75,000 and take 5 hours to recharge/refuel and a range of 240 miles.
  • 9,533 electric recharge/refuel stations in the U.S.

Who will win, the hydrogen or the electric car, as the top choice of alternative fueled cars?

May 18, 2015 | 3 comments | by

Offshore Access Critical to U.S. Energy Security

The Department of the Interior granted conditional approval to a plan by Shell Gulf of Mexico to begin exploratory drilling in the Chukchi Sea in the Arctic Ocean. Federally owned offshore oil and natural gas reserves of the United States are estimated to hold over 50 billion barrels of crude oil 200 trillion cubic feet of natural gas. However, close to 87 percent of federal offshore acreage is off limits to energy exploration and development. Without energy exploration to give a more accurate estimation of energy reserves, the closed off area could hold far more oil and natural gas reserves.

The Bureau of Ocean Energy Management’s offshore oil and natural gas leasing plan for 2017-2022 excludes promising areas in the Atlantic, Pacific, and Arctic and in the Gulf of Mexico.

Expanding offshore access would:

  • Create nearly 840,000 new American jobs.
  • Increase oil production by 3.5 million barrels per day.
  • Generate $200 billion cumulative revenue for the U.S. government.
  • Add $450 billion in private sector spending.
  • Add $70 billion per year to the U.S. economy.

The United States is now producing the most oil in the world and can continue to do so if more pro-energy policies, such as opening all federally owned offshore areas, are adopted by the federal government.

May 13, 2015 | Leave a Comment | by
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