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Fracking Bans Continue to Proliferate

The city government of Denton, TX has recently voted to impose a temporary moratorium on any new fracking wells until September of this year, and it is looking to make it permanent. They would not be the first community to do so.

Food and Water Watch, a non-profit NGO, tracks the number of communities across the nation that ban fracking operations. Three states (New Jersey, New York and Vermont) and the District of Columbia have all banned fracking. Indeed, over 400 counties and municipalities across 21 states have also passed anti-fracking measures.

Such bans arise from safety concerns, including groundwater contamination. Yet, an Institute of Energy Resource report reveals that even though over 1 million fracking wells having been drilled in the U.S., the EPA has not found any confirmed incidents of groundwater contamination from fracking. Even Lisa Jackson, then head of the EPA, has stated, “In no case have we made a definitive determination that the fracking process has caused chemicals to enter groundwater.”

While the risks from fracking operations are often overblown, the benefits of fracking to the American economy and the environment are not:

  • A Penn State University study found that between 2007 to 2010, Pennsylvania state sales tax revenues declined by 3.8%. While state sales taxes increased by 11.4% on average among those counties with high numbers of fracking wells, it decreased by 6.6% on average in those counties without any fracking wells.
  • The Institute for Energy Research estimates that in the near-term, over half a million jobs and $32 billion in wages will be added to the nation’s payrolls annually, which is an average income level of nearly $60,000. State and local tax revenues would increase by more than $10 billion annually. Further, the federal government stands to add $24 billion dollars in tax revenues annually, which would help offset our persistent federal deficit spending problem.
  • A U.S. Energy Information Administration report reveals that oil and gas industry employment grew by 40% between 2007 and 2012, which far outpaced the 1% rate of employment growth in the U.S. economy during that same period.
  • An EPA report estimates that greenhouse gas production from power generation has fallen by 11%, due largely to energy companies switching to burning natural gas for power generation instead of burning coal and oil. Aggregate U.S. carbon dioxide emissions have fallen from a peak of 7.3 billion metric tons emitted in 2007 to 6.5 billion metric tons emitted in 2012. This is a market response to lower natural gas prices caused by increased gas production from fracking.

One can only hope that the remaining communities located over oil shale areas will weigh the benefits and costs more carefully before considering a local fracking ban.

May 19, 2014 | Leave a Comment | by

The Limited Attention Span of our Federal Government

If you will indulge me, I feel like waxing philosophic about the impact that the many redistributive economic policies being promoted by the Obama Administration will likely have on our nation’s environment and natural resource management. Consider the many ways our federal government is redistributing incomes to help the “poor” in American society:

The list goes on, but I won’t test your patience here. The bottom line is that the federal government is trying its very best to increase the cost of hiring unskilled labor while making the returns to becoming a skilled laborer much slimmer.

Further, the Fed has undertaken the largest Open Market Operations program in history, just to keep market interest rates at abnormally low levels. This action boosts business investment in physical capital, which is often justified as an attempt to increase GDP and employment (in the short run at least). However, this action also makes buying physical capital cheaper while unskilled labor is becoming ever more expensive to hire.

Even Bill Gates can do the economic math. Businesses will use more capital and hire less labor to produce our nation’s goods and services. They will invest more on technological innovation and less on developing industry-specific human capital. Nobel Laureate Gary Becker (who, sadly, passed away just recently) recognized that about 80% of the income differentials observed between skilled and unskilled labor in our economy are related to the economic returns to technological innovations. In other words, investing in capital and technology favors the skilled worker, not the unskilled worker.

In the past, middle class workers largely rose from the ranks of low-paying but skills-enhancing starter jobs to acquire the meaningful, industry-specific skills and valuable work experience that landed them their current, middle-income job. As these starter jobs disappear and the middle class slowly dwindles in number over time, there will be increasing calls for ever more income redistribution to rectify the gap between rich and poor — all in the name promoting equity.

Which brings us back to the quality of our environment and managing our nation’s natural resources. How will Congress respond to calls for redirecting funding to preserve our national parks and forests when entitlement programs for the growing ranks of low-income people are competing for the same federal dollars? How will scientific and economic criticism of federal lands use policy compete for scarce media time when ever more Congressional hearings will be held to consider ways to help the plight of America’s disappearing middle class? How will stories of federal bureaucratic bungling of natural resource management, or stories about innovative, market-based proposals for efficient and equitable natural resource uses, be able to compete for media attention that is stretched thin with stories of capitalism’s “failure” to maintain the middle class?

It seems clear to me that we are mindlessly following the voice of the “wizard” who can be seen busily pulling all the bureaucratic strings and pushing all the media buttons behind the grand curtain of government. Do we not see that he is feverishly trying to fix problems that he does not even realize are the result of his very own machinations?

Sigh… Excuse me, but I think I need an adult beverage…

May 07, 2014 | 1 comment | by

Does a State Renewable Portfolio Standard (RPS) Help Promote “Ethical” Energy Production?

Most state governments have instituted renewable portfolio standards (RPS), which require energy producers in the state to use ever higher levels of renewable fuels as sources of energy over time. These standards are usually expressed as a minimum percent of all energy produced in the state. Who knew that RPS might create an ethical challenge for state governments? I will explain.

Currently, 30 states use either mandatory or voluntary RPS to encourage energy producers to invest in technology for using cleaner, renewable fuel sources for generating electricity, rather than investing in new technologies for clean burning of coal and oil. Furthermore, environmentalists are increasingly touting energy generated from fossil fuels as wholly unethical, going so far as to formally ask the Pope to condemn investing in fossil fuel burning energy companies as being sinful. Oh my!

Which makes me wonder: If public policy is designed by a democratic process, does that ensure a more efficient and ethical outcome, relative to the decentralized activity of individuals interacting in a free enterprise system? For example, is the state more efficient when picking the “winners” from among competing energy sources and technologies? Are our elected officials any better than individual consumers and investors at ultimately promoting “ethical” energy production in society?

An article by Gerome Corsi and another by Wayne Root each question whether the recent federal stand-off at Bundy Ranch, a fourth generation family cattle operation in Clark County, Nevada, was really about protecting a newly discovered, sensitive tortoise habitat on this section of federal grazing land, as the federal government has claimed. Regardless of whether one agrees or not with the federal government’s decision to rescind this rancher’s grazing rights, both authors strongly suspect that the BLM’s decision was truly about a certain powerful U.S. Senator from Nevada fighting to gain control ever these federal lands in Nevada for a number of newly proposed solar power plants.

Why? There were strict RPS to satisfy, and Mr. Harry Reid was just making sure that they would be. Indeed, in another article, Corsi notes that 15% of all energy produced in the state of Nevada must be produced by renewable fuels. This number is required to rise to 25% by 2025. These minimums are among the highest across all fifty states for any RPS.

Both authors wonder whether Mr. Reid’s pursuit of ever more renewable energy production trumps any ostensible concerns for habitat preservation. After all, if the tortoise habitat of this particular section of federal grazing land was far too sensitive to allow cattle to continue to grazing and stomping upon it (as they had been doing for 140 years), then why did the federal government suddenly send in loud helicopters and 200 armed officers speeding around in four wheel vehicles to crisscross and tear up the land — just to corral the rancher’s posse of supporters and his meandering cattle? Or maybe they just wanted the land cleared for new Chinese solar panels?

To add to my doubts about governmental ethics in this sad situation, both authors point out that not only does Mr. Reid have a strong political interests in developing these multiple projects to satisfy Nevada’s strict RPS, but his former senior advisor, Neil Kronze, was recently confirmed by the Senate as the new Director of the BLM… which manages the grazing leases on all federal lands.

Corsi further piles on more doubts when he reveals that a BLM document specifically points out how the Bundy Ranch cattle are grazing on lands that are ear-marked for the state’s regional energy mitigation strategy to develop solar energy. Corsi notes this report states that mitigation activities are “not durable with the presence of trespass cattle.” I guess that implies cattle herds and solar panels simply do not mix well. Further, Corsi thinks it is highly interesting that this report no longer appears on the BLM website, despite its being available on internet archive files.

So, I wonder: If the government lies about why it is refusing to renew a cattleman’s grazing rights to federal land, whose eviction was a direct response to artificially created scarcity of renewable energy resulting from strict Nevada RPS regulations, that are specially designed to favor one type of clean energy technology (and its jobs) in one industry over another, is this all ethical?

Perhaps we should consult the Pope…

Apr 28, 2014 | 1 comment | by

The “Inequality” of Federal Wind Energy Subsides Distribution

President Obama has been famously outspoken about “a dangerous and growing inequality” in our economy that has “jeopardized middle-class.” He was so adamant about our private sector’s misallocation of income away from a majority of Americans and towards a fortunate few that he proclaimed, “I believe this is the defining challenge of our time: making sure our economy works for every working American. It’s why I ran for President… It drives everything I do in this office.”

Apparently, the President’s concern for fairness in the distribution of public sector benefits across society does not seem to drive his support for federal renewable energy policies, many of which tend to favor some U.S. states at the expense of others.

For example, the Institute for Energy Research (IER) released a study at the end of last year that examines the federal allocation of wind energy subsidies across the country. Their analysis estimates the net value of Wind Production Tax Credits (PTCs) distributed across the states by comparing the federal wind-subsidy tax burdens paid by the citizens of each state to the percent of PTCs received by that state. The IER then examines the allocation of those net PTCs across our fifty states.   

The IER estimates that in 2012, ten states received over 72% of the total PTCs during that time frame, with many states receiving nothing. The table below notes some net winners and some net losers:

Net Losers   Net Gainers  
California

$195,849,979

   Texas

$394,451,907
New York

$162,554,909

   Iowa

$265,448,788
Florida

$138,141,406

   Oklahoma

$150,598,298
New Jersey

$125,585,386

   North Dakota

$110,663,105
Ohio

$103,847,354

   Oregon

$99,483,222
               

These numbers do not correlate with population, per capita incomes or any other characteristic commonly used to justify redistribution efforts. Yet, if one were to ask the President or his Cabinet members to justify this policy of inequitable allocation of federal wind energy subsidies, their response would surely be: in America’s diverse geographic environment, those states that are capable of producing more wind energy for the country will naturally receive a greater share of federal wind subsidies.

The irony is that one might say the exact same thing about the American private sector: in our nation’s diverse business environment, those individuals who are capable of bringing more value to the economy will naturally receive a greater share of our nation’s income. Perhaps meritocracy can justify only public sector benefits allocations, rather than the private sector benefits allocations.

Apr 21, 2014 | 1 comment | by

Global “Clean” Energy Expenditures are Down (and Respect for Economic Realities are Up) in 2013

It is refreshing to see that environmentalists and liberal governments are beginning to recognize the economic realities they face when manipulating energy markets to promote clean, renewable energy sources. For example, a recent Time Magazine article investigates why total public and private funding of “clean power” from the global renewable energy industry fell 14% in 2013. This amounts to a decline of 23% since the peak of such spending occurred in 2011. The data cited came from a study from the Frankfurt School-UNEP and Bloomberg New Energy Finance.

This study points out that Europe decreased its spending on clean, renewable energy sources by 44% while the U.S. decreased it is spending by 10%. These reductions were found to largely arise from three economic realities:

  • The declining costs of producing “clean” energy.
  • The significant reduction in public subsidies.
  • Increased competition from renewable but “unclean” biofuels power sources.

Economic Reality #1: Subsidizing an activity can drive down the unit cost of production by creating economies of scale. For example, the average cost for installing a voltaic solar cell in the U.S. declined 60% in the last few years. Indeed, despite the reductions in total spending in 2013, global clean energy capacity in 2013 (from renewable energy sources other than existing hydroelectric power sources) had remained the same as it was in 2012. However…

Economic Reality #2: Public sector funding sources are scarce. As Europe is slowly recovering from the recent global recession, the central governments of these countries are finding it very difficult to justify costly public investments in clean energy subsidies when other popular social programs compete for survival in an environment of shrinking public sector budgets. In fact, Spain and Bulgaria made their subsidy cuts retroactive, shuttering their clean energy industries, despite the falling unit costs of providing clean energy. Further…

Economic Reality #3: Every choice has an opportunity cost that cannot be avoided.  Clean power is defined as coming from renewable, sustainable fuel sources that create very low or no pollution or greenhouse gas emissions. Environmental scientists are beginning to realize that subsidized biofuel production:

  • Pushes up global food prices, because the fuel is grown with water sources and lands that could be used for growing food, which increases food prices and makes biofuels less “sustainable”.
  • Increases water pollution levels from pesticides and insecticides, making biofuels “unclean.” Indeed, an article in the magazine Scientific American notes that, “U.N. Intergovernmental Panel on Climate Change has for the first time acknowledged the risks of uncontrolled biofuels development.”

We seem to be living in a world where national governments are intent on accelerating our adoption of clean energy sources along a time line not supported by private energy markets. At least it is refreshing to see that both governments and environmentalists are slowly (if only involuntarily) admitting to economic reality: the true scarcity of valuable resources in our world creates real and unavoidable influences on the efficacy of government policies designed to accelerate clean energy industry development. We cannot simply wave the magic wand of “hope” to force the hand of the market in a manner that ignores such economic realities.

Apr 14, 2014 | Leave a Comment | by

The Under-Reported Costs of the Endangered Species Act

When I read articles from the apologists for the Endangered Species Act (ESA), I often read silly statements like,

The U.S. federal and state governments spent just more than $1.7 billion to conserve endangered and threatened species under the Endangered Species Act (ESA) in fiscal year (FY) 2012… (W)ith a pretty high success rate of preventing species from going extinct, the ESA works out a decent bang for your buck.

Well, I beg to differ — $1.7 billion is just a small part of the total economic costs of implementing the ESA. Let me count the ways:

1)    The economic costs of implementing the ESA include its total impact on economic efficiency. This includes all of the lost economic opportunity that arises from the restrictions that are imposed by the ESA. When a federal agency declares private property as a “critical habitat” for an endangered species on private land, that agency can force the land owner to discontinue her economic use of that land. This impacts not only the landowner, but all of the businesses that directly engage in trade with that landowner. How bad can this cost be? One economic study in 1994* looked at the ESA recovery plan for the spotted owl species in the northwest. It estimated that this plan decreased economic welfare in the region by $33 billion (and that was in 1990 dollars). That was just one recovery plan… for one endangered species… for specific period of time.

2)    The economic costs of implementing the ESA include its total impact on social equity. What is almost never considered by such apologists is the unequal distribution of who ultimately bears the cost. The cost of any regulation is not just the taxes raised for implementing the Act. These taxes are spread across the federal government tax base, and (conceptually) everyone bears some federal tax exposure. However, the economic costs that arise from regulations are borne only by the landowner and those that directly relied on the land owner for trade. This creates a disproportionate share of the total economic costs to be borne by the land owners and the people who do business with them, rather than by the nation’s taxpayers. That same spotted owl study estimated that the regional producers of intermediate wood products bore the brunt of that $33 billion economic loss, which was a very small segment of the regional population. Ouch…

3)    The economic costs of implementing the ESA include its total impact on individual rights. Yet another aspect of the cost of implementing the ESA is that when private property owners are told that their land is “critical habitat” and can no longer be used for its historical economic activity, this amounts to a “taking”  that is supposedly protected under the Fifth Amendment to the U.S. Constitution. However, the land owner must undertake very expensive legal action to sue the federal government for her rightful “just compensation” for this taking. Research by the Congressional Research Service has shown that the odds of winning such suits are relatively low. Their 2013 study identified 18 such ESA cases filed against the federal government, with only one being successful at the time of printing and two still outstanding. That means there is between a 83% to 94% chance of losing a very expensive law suit to defend your Constitutional rights. A track record like that will be sure to send a message to those who believe the U.S. Constitution will protect their individual rights.

Apr 07, 2014 | Leave a Comment | by

The Want to Regulate is Human, Let Prosper is Devine

The World Health Organization (WHO) recently released a study of the impact that air pollution has on human health around the world. It estimates that approximately 8.0 million people died in 2012 from air pollution related health issues: 3.7 million from outdoor air pollution exposure and 4.3 million from indoor air pollution exposure.

Critics have used this study to implore all nations to curtail air pollution levels. As usual, there is no consideration among the media responses that calls for using the economic approach to generate the greatest “bang for the buck.” Let me explain:

The WHO estimates that outdoor pollution caused 1.7 million deaths among the low-income nations of the Western Pacific, which amounts to 102 deaths per 100,000 people. It also estimates that outdoor pollution caused 0.9 million deaths in Southeast Asia, or 51 deaths per 100,000 people. The WHO states that these two regions alone accounted for 70% of all deaths attributable to outdoor air pollution.

Indeed, the WHO report states that, “88% of these deaths occur in low- and middle-income countries, which represent 82% of the world population.” It appears that people living in high income nations have largely avoided air pollution related deaths, either through lack of exposure or having better access to effective medical care.

Is the proper response to curtail economic prosperity and growth in the low to middle income countries in an attempt to decrease the levels of air pollution that economic activity creates, and thereby lower exposure levels? Or might the answer be to raise everyone’s living standards in these countries as much as possible, so that they, too, have the same options available that their more prosperous neighbors have? Perhaps these populations could afford lower-polluting but more costly production technologies, or could afford to provide better medical care options to those exposed. Which is best?

The WHO report indirectly yields evidence that would support the latter possibility, for it also reports on indoor pollution death rates. It estimates that in 2012, indoor pollution caused 1.7 million deaths in Southeast Asia, or 92 deaths per 100,000 people. Indoor pollution also caused 1.6 million deaths in the low-income Western Pacific nations, or 99 deaths per 100,000 people. These two regions alone accounted for over 75% of all deaths attributable to indoor air pollution. Adding the African nations raises the total to 90% of all deaths in 2012. Rich nation’s populations simply are not exposed to the indoor pollution from open-hearth cooking pits or dung-burning heat sources during cold weather.

Contrast these figures to only 1,300 deaths that the WHO states as arising in the high-income nations of the Americas, or only 0.3 deaths per 100,000 people. There were fewer than 100 deaths in high income European nations, or a number of deaths per 100,000 that was indistinguishable from zero. In fact, a recent WHO press release notes that, “deaths from household air pollution are over 5 times greater in low- and middle-income countries than wealthier ones.” I say let the nations prosper, and these death rates will fall.

Apr 02, 2014 | 1 comment | by

Endangered Species Act: The Semantics of Being “Endangered”

If you are a land owner, pour yourself a cup of coffee, tea, or favorite adult beverage and have a seat. I want you to imagine yourself in a difficult personal scenario and then ask you a seemingly simple but important question that may take some time and focus to comprehend and answer… Now then, take a sip. Ready?

Assume you are about to face a serious loss of economic prosperity due to a federal or state “cease and desist” order on the economic activity you were performing whilst using your privately held land or other natural resource. Assume further that you weren’t causing any harm to anyone else’s health, welfare or private property. Instead, you were found to be causing harm to a protected and endangered wildlife species that is listed under section 4 of the Endangered Species Act (ESA) of 1973.

OK… This would be a very undesirable financial situation for you and your family to be in, to be sure. But it also would be a very understandable public concern over your causing the possible elimination of an entire species. Pondering a heavy moral dilemma such as this may just require another sip from your cup.

Yet, as you begin to contemplate rearranging your whole life just to save a species of small, furtive bird, or seldom seen fish, wouldn’t you want to at least be assured that the government has made certain that your economic actions were indeed harming a distinguishable “species” that was rare enough, and had a projected future fragile enough, to warrant all the economic harm that will surely descend upon you?  

Certainly, all human activity has some impact on the world’s flora and fauna. The least the government could do is assure you that their taxonomy of “species” to determine the relative scarcity that they claim is being aggravated by your economic activity was adequately defined and broadly accepted within the scientific world. Right?

OK… Take another sip — you’ll need it. The federal legal process for listing or delisting a species as endangered is clearly written, assuming the definition of what constitutes a separate species is well defined. However, it happens that any definition of “species” that the government might choose to use for assessing which ones are scarce enough to warrant listing as “endangered” will garner little consensus from across the biological sciences. Why? Because there is no real agreement among scientists as to what constitutes the proper definition of a distinct “species.”

Oh, my. I’ll give you a moment to clean up that sudden burst of drink sprayed all over your video screen…

Yes, this is true. The “species problem” is an ongoing argument amongst scientists for the past century. It seems the problem of speciation, or finding a universally accepted taxonomy of what actually differentiates the various species, has been roiling in the biological sciences for over one hundred years. That certainly isn’t what we were taught in high school biology with the rusty scalpels and dead, smelly frogs.

Which begs the question: If scientists cannot agree as to what defines a distinct “species,” then how can the government determine as to what defines an “endangered” one? The ESA defines an endangered species as being “in danger of extinction throughout all or a significant portion of its range.” However, it never defines what separates one species one from another, to determine the relative scarcity of a given species. It presumes this definition is commonly understood and broadly supported by science, which it is not.

Take another sip and bear with me, as an example will illustrate my point. The Baltimore Oriole and the Bullock’s Oriole were each once considered to be the same species. They were referred to collectively as the species Northern Oriole. Changes in how scientists perceived the definition of species led biologists to now consider them as distinct and separate species. What if the strain of birds now known as Bullock’s Oriole was rare and nearly extinct, while the strain now known as Baltimore Oriole was vibrant and ever present. Should the ESA stifle economic activity that endangers the Bullock’s Oriole if the “acceptable” definition of species were still considered inclusive, rather than exclusive of the two strains?

I can see you are almost finished with your drink. I’ll let you think about that question for a while, because who knows? Maybe the definition of the Oriole species will again change soon. Go on. Take another sip…

Mar 31, 2014 | 6 comments | by

EPA Raises a Stink over Sulfer Restrictions for the Oil Industry

The Wall Street Journal (WSJ) reports that the Environmental Protection Agency (EPA) has recently issued rules to cut the sulfur content of gasoline by 67% and to significantly reduce tailpipe emissions in cars and pickups, starting with the 2017 models. These new rules are known as “Tier 3 standards.” They are designed to reduce the smog created from tailpipe emissions and the subsequent incidence of various lung diseases.

Not surprisingly, both the WSJ and the New York Times (NYT) reports that federal adoption of these stricter Tier 3 standards found broad based support among many environmental and health groups. The Natural Resources Defense Council said the Tier 3 standards could save America $19 billion a year in health-related costs by 2030. The American Lung Association said that Tier 3 standards will reduce pollution equivalent to taking 33 million cars off the road.

Mar 10, 2014 | 2 comments | by

Sue and Settle: The Performance Enhancement Drug (PED) of Public Regulators

When Bruce Yandle wrote his classic article in Reason Magazine entitled, “Bootleggers and Baptists: The Education of a Regulatory Economist,” he artfully explained how profit seeking law breakers sidled up with religious do-gooders to accomplish a common social objective: keeping liquor sales illegal. More and more examples of such unexpected bedfellows are appearing in Washington each year. To understand why, just think like a federal bureaucrat.

Mar 05, 2014 | 6 comments | by
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