Tag: "federal government"

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

Economic Repercussions of the Renewable Fuel Standard

American Petroleum Institute’s Renewable Fuel Standard Facts:

The Energy Independence and Security Act of 2007 included an expanded Renewable Fuel Standard (RFS), which the EPA used to develop a final rule effective July 1, 2010. To comply with the Standard, biofuel producers and importers must blend increasing amounts of biofuels into gasoline and diesel.

However, there have been problems with the government’s original predictions regarding the supply and demand of gasoline; U.S. gasoline demand has dropped while supply has increased due to the shale and natural gas revolution in North America. Also, cellulosic technologies have not developed as quickly as expected and there are no commercial plants to date. The EPA rushed through approval of an up to 15 percent ethanol blend (E15) without adequate testing, leading to compatibility problems with E15, poor consumer acceptance and significant infrastructure and cost challenges. EPA proposed to address the problem, but has been incapable of finalizing its rule.

A study by NERA Economic Consulting (NERA) buttresses the argument that the RFS is irretrievably broken saying that, RFS ethanol mandates could:

  • Lead to fuel supply disruptions that ripple adversely through the economy.
  • Cause the cost of diesel to rise 300 percent and the cost of gasoline to rise 30 percent.
  • Decrease U.S. GDP by $770 billion.
  • Reduce worker pay $580 billion.
Jul 08, 2015 | Leave a Comment | by

Raise Airport Facility Charges and Give Up Improvement Program Funding

Currently, U.S. airports and airlines are fighting a public battle over Passenger Facility Charges (PFCs). PFCs are one of the main mechanisms to fund capital projects such as baggage systems, gates and international arrival facilities. Airports want to increase the fee, and argue that the current $4.50 passenger facility charge, which has not been increased/adjusted since 2000 and equates to $2.45 today, is insufficient. Airlines argues that the PFCs should be kept at $4.50 since over the past 25 years the number of taxes airlines pay has increased from six to 17 and the amount paid has increased from $3.7 billion to $20 billion.

While both sides raise some valid points, airports make the better argument and should be allowed to increase PFCs to whatever level they deem necessary.

First, our aviation system follows the same users-pay/users-benefit principle as our surface transportation system. And PFCs are the purest users-pay/users-benefit funding mechanism. A users pay system is fair since those who pay are the ones who benefit. A users-pay system is proportional since those who fly more pay more and vice versa. A users-pay system is self-limiting since the taxes will be used only on needed infrastructure. A users-pay system is predictable, since such a system, unlike airport improvement funds, will not disappear at Congress’ whim. Finally, a users-pay system provides guidance on the correct amount of investment to make.

Second, airports need continual improvement. With growing passenger traffic many airports need additional gates. Others need to modernize their badly aging security areas and baggage systems. While airports have other tools, principally bonding and airport improvement program (AIP) funds, both these tools are limited. PFCs are more versatile and can be used for a variety of projects including landside (terminal) projects, road access, noise-remediation projects, bond-interest and airside projects.

Third, airports as quasi-independent agencies should be able to raise their own funds. Airlines have added a bevy of tax-exempt fees, which incur no taxes because they are special services and not a part of standard fares. Passengers now pay to check bags, use internet service, reserve seats, purchase food, and purchase priority boarding services. Just as it is the airlines’ right to charge passengers for these optional services, it is the airport’s right to charge passengers for a better baggage system.

Fourth, just as passengers have some choice of airlines they also have some choice of airports. In most of the 20 largest aviation markets there are two or more airports. If an airport goes on a drunken spending spree as Miami International Airport did, airlines and passengers can choose the cheaper alternative of Fort Lauderdale International. Price is a powerful motivator that should keep airports from unreasonable PFC increases.

However, I understand the airline’s concerns of overcharging. And while the cheaper Fort Lauderdale provides an option to overpriced Miami, it would be preferable if such exorbitant costs were prevented in the first place. So in exchange for removing the limit on PFCs, large hub airports should give up AIP funds. Large hub airports rely less on AIP funds than other airports and with PFC funds uncapped, AIP funds become a nice-to-have product not a requirement.

 

Jul 06, 2015 | Leave a Comment | 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

Addressing Texas High Speed Rail Concerns

The proposed new high-speed rail (HSR) project in Texas has become a lightning rod for criticism. While the project is different from the now cancelled publicly funded HSR projects in Florida, Michigan, and Ohio and the ongoing project in California, critics remain concerned.

The Texas project supported by Texas Central Railway (TCR) is fundamentally different from the U.S. public government approach in several ways. First, it focuses on one specific corridor (TCR chose one out of 97 it had identified). HSR succeeded in France and Japan because both countries build their first HSR lines on the most optimal corridor, not the most shovel-ready. Contrast that with the Obama Administration’s plans to give money to nearly 40 states. The TCR project is focused on true 200 mile-per-hour high-speed rail while the government program has a multitude of aims:

  • build HSR
  • improve existing rail
  • build political bridges
  • develop passenger rail

Second, the Texas developers are seeking advice and parts from the Japanese, who operate the most successful HSR line in the world. TCR plans to use higher-speed Japanese Shinkansen trains which will travel fast enough to offer 90-minute trip times. Many of the government-funded rail lines are upgrades of existing lines with top speeds of 110 miles per hour.

Third, TCR’s line will link two of the quickest growing metro areas in the country. The metro area populations of Dallas and Houston are expected to double. Contrast that with Los Angeles and San Francisco that are seeing little if any growth in population.

Fourth, both are privately funded. While TCR will not accept grants or subsidies, it will consider existing federal credit assistance such as Railroad Reinvestment and Financing (RRIF) or Transportation Infrastructure Finance and Innovation (TIFIA) loans. TIFIA financing requires an investment-grade rating while RRIF is being strengthened to include similar provisions. TCR might also seek DOT approval to issue tax-exempt private activity bonds (PABs), which are widely used on highway P3 concession projects. Such bonds are backed solely by project revenue. Taxpayers are not on the hook in case the project defaults; only the bond-buyers are.

Project opponents have raised legitimate concerns but none of them should delay the project. Some farmers and ranchers are concerned that their properties will be acquired through eminent domain. However, TRC only needs about 100 feet of eminent domain. Additionally, the agency plans to use eminent domain (as other private parties including pipelines companies and electric companies do) as a last resort and only after making market-value offers. Further, if there are abuses of the system, Texas has a detailed appeal system already used for the Keystone Pipeline.

Others are concerned that taxpayer subsidies will be required. Whether TCR can build its project within the budget estimated is an open question. Given the challenges of breaking even on HSR in a low-density state such as Texas, skepticism is appropriate. However, as long as taxpayer funds are not used, project sponsors should be allowed to try to build the train. If the project later requires taxpayer subsidies, Texas taxpayers should kill it. While the financial realities are a legitimate concern for those who invest equity in the program or buy bonds, the program should receive the same level of legal and regulatory scrutiny as any other private railroad project.

Jun 29, 2015 | 3 comments | 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

Lawmakers Should not Speed-Up Positive Train Control Deadline

Trains are among the safest form of transportation but on rare occasions when crashes occur, the death toll is often high. The crash earlier this week of a Northeast Regional train en route from Washington D.C. to New York City has brought Positive Train Control (PTC) back into the news.

First mandated in the resultant Railroad Safety Improvement Act of 2008 (RSIA 2008) as a result of a tragic train crash in California in 2008 that killed 25 people, PTC remains an expensive, unnecessary government mandate. Cheaper technology that is just as effective is a better way to increase safety. Legislators cannot let the emotion of the moment sway them into adding unnecessary mandates or spending more taxpayer funds on passenger rail.

Railroads are one of the safest forms of transportation. The National Safety Council compared four modes of transport: airlines, passenger trains, buses, and light duty vehicles (includes passenger cars, light trucks, vans, and sports utility vehicles). In 2009 the passenger death rate in light duty vehicles was 0.53 per 100 million passenger-miles. The bus fatality rate was 0.04; the rate for trains is 0.02. Only airlines were safer at 0.01.

In the California train crash, a Metrolink commuter train collided with a Union Pacific freight locomotive killing 25 people. The crash was the worst U.S. train accident in 15 years. Federal investigators revealed that the train driver was sending and receiving text messages just before his commute train skipped a red light and hit the freight locomotive. Even before the final safety report was released, Sen. Dianne Feinstein (D-Calif.) began pushing to mandate automated safety equipment for all large railway systems. According to Feinstein the accident occurred because of “resistance in the railroad community.” Kitty Higgins of the National Transportation Safety Board (NTSB) also began lobbying for positive train control less than 24 hours after the collision and before the full safety investigation began. Swept up in the emotion, Congress in 2008 failed to seriously consider any solution except PTC. The PTC bill passed October 16, 2008 with limited debate only a month after the crash.

Positive train control is one of several methods to improve railroad safety. While PTC can prevent accidents by using GPS, sensors, and other technology to stop trains remotely, the costs are astronomical. The Federal Railroad Administration (FRA) places the cost at more than $13 billion to install and maintain a nationwide class I PTC system. Consulting firm Oliver Wyden estimated that PTC has a 20 year benefit of $0-$400 million. Even if all $400 million in benefits are realized, the cost/benefit ratio range is $1 in benefits for every $20 spent on the system.

Although Congress failed to consider an alternative, there are several technologies that could prevent the most serious train crashes. The most obvious solution would be to expand Amtrak’s existing automatic train control system that regulates speed. Automatic train control systems can be programmed to send information to a train about the speed limit for a section of track. Equipment inside the locomotive senses when a train is exceeding the limit and sets off an alarm. If the engineer fails to slow the train, the system triggers the train’s emergency brakes. Amtrak installed this technology on the southbound track but not the northbound track, because among other trains it slows trains too much. If the technology was installed on the northbound track, the train likely would have gone around the curve at 80 miles per hour and not come off the track.

Other options include rerouting freight trains, reducing the speeds of trains to minimize the impact of collisions or implementing schedule changes to increase headways between trains. These solutions can be implemented with no direct costs and only the indirect time costs of slower trains and longer commutes.

There are several other PTC complications that leaders have not taken into account. Immediate implementation of PTC could impair safety. PTC is forecast to prevent only 4 percent of railway accidents and the $13 billion spent enacting the technology is money that cannot be spent on infrastructure upgrades and other safety improvements. Further, despite claims to the contrary PTC by itself will not improve track efficiency. Increasing the train frequency requires precision dispatching. While precision dispatching can be implemented, it is a separate technology and different issue than positive train control. Additionally, Current PTC systems will make train tracks less efficient. Today’s systems do not estimate braking times accurately. As a result, these systems slow a train prematurely when compared with human control, reducing the number of trains that can fit on a section of track.

The Federal Railroad Administration (FRA) has studied PTC repeatedly. In 2005 the agency noted that a regulatory mandate for PTC system implementation [can] not be justified based on cost-benefit principals and direct safety benefits.

Why despite FRA’s advice is positive train control mandatory? Advocates who had been pushing for the technology for 20 years saw an opening. At the same time, many members of the House and Senate were swept up in the emotion of the situation and failed to consider the cost/benefit ratio or alternative technologies.

Fortunately, Congress has a chance to learn from its mistake. No action should be taken until a preliminary investigation is completed. FRA should study other technologies including Amtrak’s existing automatic train control to determine if there is a long-term solution that is just as effective at a more reasonable price. Safety policy is too important to be decided in the emotional aftermath of a tragic accident.

May 21, 2015 | Leave a Comment | by

New Opportunities for U.S. Oil?

In a surprising Monday move, the U.S. government approved Royal Dutch Shell PLC’s plans to drill in the Arctic Ocean this summer. The company has been pursuing drilling in the Arctic since 2007 and was set back by bad weather and mechanical failures in 2012. While the new drilling project will face tight restrictions, Royal Dutch Shell will be the first energy company to drill in the U.S. portion of the Arctic Ocean.

Opening up the Arctic Ocean is a big step for the oil and gas industry, but it still leaves 87 percent of the Outer Continental Shelf off-limits to the industry. While it’s a good sign of progress, this “big step” isn’t enough for some members of Congress. Three bills were introduced to the Senate on Tuesday that aim to open up parts of the Atlantic Ocean, Gulf of Mexico and the Arctic to offshore drilling.

With the Interior Department considering drilling in the Atlantic for the first time in decades and Alaskan legislators calling for more ― not less ― oil and gas activity in the area, now is a great time to push the Obama administration to reconsider its restrictive drilling regulations and proposals.

May 13, 2015 | Leave a Comment | 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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