Nutter's Washington

Desparate Biden Taps Strategic Petroleum Reserve

President Biden--Mr. Climate Change-- has ordered in an act of total political desperation, 50 million barrels of oil be released from America’s strategic reserve to help bring down energy costs. Since he can not get the OPEC nations to increase their production after humiliating begging them, he has decided to tap our own domestic supplies in storage in a futile effort to reduce gasoline prices.

Whoa, wait a minute, I thought fossil fuels were verboten and inflation was a temporary problem.

The Strategic Petroleum Reserve is an emergency stockpile to preserve access to oil in case of natural disasters, national security issues and other extraordinary events. The SPR was created in 1975 as a hedge against the “Energy Crisis” created by the Arab Boycott. The reserves are stored in caverns created in salt domes in Texas and Louisiana, about 600 million barrels.

The Biden administration has argued the reserve is the right tool to help ease the supply problem. However, the amount will not have a significant effect on supply, or any meaningful effect on prices. America uses an average of 20 plus million barrels a day, so the release is about two-and-a-half days of additional supply. Yawn.

Mr. Biden has done everything possible with more to come to discourage domestic oil and gas production. Now, he wants to use the SPR to influence the market and show he is doing something about inflation, a purpose for which it was never intended. Pathetic political gimmickry.

Highway Trust Fund: Spending or Funding?

The Highway Trust Fund, used to finance a variety of transportation projects across the county, is projected to dry up in coming weeks unless reauthorized.

The HTF receives money from the 18.4 cents per gallon tax on gasoline and 24.4 cents per gallon of diesel fuel and other related excise taxes. It was established in 1956 to finance the federal interstate road system. 

The gas and diesel tax rates have not changed since 1993, and account for 90 percent of the fund’s revenue. The remainder comes from taxes on tires, trucks and trailers, and certain kinds of vehicles

The Highway Trust Fund is essentially divided into two accounts. The Highway Account disburses about 85 percent on roadway infrastructure and other projects with the Mass Transit Account expending about 15 percent on such items as rail, buses, and streetcars.

The key word in the Highway Trust Fund is, of course, Highway. The gas tax is paid,  under the theory, by the people who use the roads—classic user fee. You use it, you pay for it. However, the program now subsidizes mass transit and other programs -- like, bike trails and lanes, hiking trails, streetcars, ferries and more. Federal spending on such side projects has increased dramatically in the last few years while actual highway spending has been flat.  

In addition, Congress and the states divert roughly 25 percent of the Highway Trust Fund spending to non-highway projects. The largest of these diversions is the Mass Transit Account, which spent some $8 billion in 2014 on buses, rail, streetcars, and other projects, really local not federal responsibility. Other programs include the Transportation Alternatives Program, which spent almost a billion dollars last year on the critical needs of sidewalks, bike paths, scenic overlooks, vegetation management, and recreational trails.

So what we have here is not a highway spending problem but a program that has overflowed its original banks of its purpose. As usual in government programs, it is the lack of money, not the amount of spending that is important.  

Congress has not passed a long-term transportation-funding bill since 2005 but instead has passed 33 short-term fixes. 

In the past few years, spending shortfalls have been made up of general revenues. However, these short-term fixes are unsatisfactory and some sort of solution has become the “must do legislation de jure”.

The issue, however -- is how will a new transportation bill be funded?  The proceeds from the original three-cent gas tax built the interstate system. Increases in the federal gas tax have paid for expansion and upgrades since. However, better fuel economy, the recession, less driving has not provided the funds for the voracious spending appetite of the expanded program.  

The focus is centered on taxes, not on programmatic issues.  Both parties love to dole out highway money. Liberals get subsidized mass transit, bike paths and plenty of money for their unions buddies. Republicans get roads built and giant projects for all the construction companies.

The House Ways and Means Committee and the Senate Finance Committee have given lots of lip service but not much action. Well, no action. As there has been much talk about broader and long-term "tax reform," both committees are weighing the short-term potential of using "corporate tax changes" or "international" tax changes to fund transportation programs. The idea faces significant hurdles. The simple solution of just raising the gas tax is a nonstarter. Suggestions of charging for miles driven through some sort of big brother monitoring systems are chilling as well as a long way off.  It is a mess.

The honest way would be to scrap the HTF and admit that the HTF is a general transportation program and treat it as such.

If the effort to use a tax overhaul to pay for roadwork fails, lawmakers likely will fall back on a patchwork approach to fund the program for the next six months or whatever from a hodgepodge of sources or perhaps not to offset the cost of some or all the highway spending, as they have in the recent past.

Now, for the most important part.  Why does it take so so long to ever get anything built? I have driven by the same construction zones for years and years. In my area, it took more than a year to build a bridge not much longer than my car and this was after work actually started.

Drive by a construction site and no one is working and if there is some movement, there is still 14 guys holding a shovel doing nothing and another 14 just squatting on the ground. With millions of people not employed, leaving the work force, it would seem you could throw say 5,000 people on a project and get it done in 2 weeks, not 4 years. 

 

Keystone XL Pipeline: Veto a Coming

 

The new Republican Congress will consider in the next few days legislation to remove Presidential authority and impediments preventing the construction of the Keystone XL pipeline. This construction project to bring Canadian tar sand oil into the United States for refining and use has been studied and examined for many years. I mean many years. If the pipeline is not built, the oil will be transported by other means and a good deal of it will be exported to Asia.

This is not a government project. It is a private endeavor needing government approvals. It is not like Solyndra, needing hundreds of millions of dollars in subsidies to be feasible and then still fail. The companies are big boys and they can make their decision based on the “market”. The fact is: this country will be using petroleum as a primary fuel for the next 50 years. Having a secure and reliable supply from friendly and neighborly Canada is in the national interst. 

The Obama government has done all it can to stop the project. Delays, studies, more permits, confusion with their climate policy agenda, right of ways, aquifer problems, litigation and more. The Administration has been less than candid (no surprise there) and has made one excuse after another.

Time is up and a majority in this Congress has had enough.

The White House has issued a veto threat and I have no doubt the measure, if passed, will be vetoed. Mr. Obama beholden to his anti-oil, anti-fossil fuels, anti-business, no growth environmental friends never, ever intended to allow the construction of the pipeline. Oh, there will be reasons given for the veto but hardly digestible. The fact remains, Mr. Obama could have given support to Keystone, could have push the approval process along, could sign the legislation. He simply for does not want it and he refuses to fess up about it.

This is what we have done to ourselves; this is the continuing consequences of 2012. 

War on Coal: Much More Than That

The Environmental Protection Agency (EPA) released a proposed new rule yesterday pursuant to section 111(d) of the Clean Air Act) that seeks to change the way electricity is generated and to push its cost up so alternative, renewable and more expensive forms of energy can be used. It intends to impose a state-by-state carbon dioxide (CO2) emission reduction goal for existing fossil fueled electric generating facilities. Depending on what piece you are reading, it is all in the name of preventing the climate from its inexorable change, a health initiative or a giant jobs creator.

Under the proposed rule, EPA would require states to meet CO2 emission “goals” or targets starting in 2020 on a statewide basis. States could allow their power plants to use a number of measures to meet those goals, including energy efficiency, plant retirements, and renewable energy. EPA projects power sector emission reductions of 30 percent from 2005 levels by the 2030.

The action is very controversial with the sides clearly drawn. The cry of a “war on coal” is in the air. Indeed, one of the purposes of the dictat is to reduce the use of coal. However, this is a much larger issue, a more insidious issue. It is about government growth, influencing or controlling the means of production. I have no doubt the sincerity of some of those who believe reduction of carbon dioxide, a pollutant that living organisms also produce, is the solution to ensure the civilization survives. I simply do not know.

The Government is proceeding using a little used provision of the Clean Air Act that was never intended to be used for this purpose. The action will be challenged in Court for years but like most things, in the end, the government will prevail. As in most government action, there will be winners and losers. However, on thing is clear, the results will be higher, artificially induced cost of the use of electricity.

Those that oppose this proposed rule, its adverse impact are powerless to mitigate its consequence much less stop it. That is the price of an arrogant system that goes on not caring of the consequences of its actions. With nations like China and India and charcoal burning for all kinds of things in third world countries, this unilateral action is ineffective except for making costs go up here and eventually making producing businesses to seek other venues. A real legacy, indeed.

Politically, the opposition will roar. States that depend on coal fired generated electricity will howl. This included both Republicans and Democrats. Again, the Administration does not care. They are immune to criticism. After the Rule becomes final in a year or more, it opponents will use a procedure called the Congressional Review Act to repeal the regulation. The law allows CRA resolutions to pass with only 51 votes, and it cannot be kept from being considered, even under the no-amendment tyrants in the Senate leadership. Even if it did pass, there is no doubt the President would veto it.

Trying to repeal the measure by other means or measure would also elicit a veto. Therefore, like it or not, Congress is impotent to counteract the regulatory juggernaut.  

 

 

 

Battle Brewing over LNG in Washington

There is a new battle about to happen in Washington that will pit some of the biggest names in Washington politics, including some of the giants of American industry, against each other.

 

It's not about taxes or the debt ceiling, or immigration or gun control; it involves natural gas, the now carbon-based fuel of choice. Strangely, it does not involve what we think of natural gas that powers heaters, stoves, mammoth generators and factories. It is the kind of gas that is liquid or LNG and there are big players in Washington and in Corporate American who think it is worth arguing about

Expanded production of LNG could have adverse effects on many industrial and manufacturing companies that directly and indirectly use enormous amount natural gas in their business. This means production of steel, fertilizer, chemicals, cement, aluminum, metal smelting, glass and paper, for example. If over the next few years, enough gas is liquefied for export, gas prices could rise, erasing the benefits of current low prices.

Carbon Tax: Resurrected Idea that will not go away

Some ideas in Washington never seem to go away. They lie dormant, hibernate, and kept alive by the cottage industries supporting them. They rise now and again, chains rattling, grandiose plans set forth. The last few days has seen such a resurrected idea in the form of the “Carbon Tax.

Imposing a tax on energy, carbon or otherwise, has been around since the 1970’s. Initially proposed by the Carter Administration, it was again put forth in the early days of the Clinton Administration. It received additional attention from global warming advocates during the consideration of the ill-fated Cap and Trade bill in the last Congress.

Result of Another Court Case: Coming Soon: Air Permit for the Bar-be-que

Washington has been focused this week on the U.S. Supreme Court case on the constitutionality of the Affordable (sic) Care Act. However, there is another case that has incredible substantive and political impact that came down on Wednesday when a three-member panel of the federal appeals court in The District of Columbia upheld the U.S. Environmental Protection Agency’s authority to regulate greenhouse gas emissions.

By way of background, in 2007, the U.S. Supreme Court, in a tortured ruling, gave the EPA authority to regulate greenhouse gases such as carbon dioxide and methane under the Clean Air Act if the agency declared them a public danger. It did not take the Obama Administration long once in office to make such a determination.  No surprise when the EPA issued an endangerment finding in December 2009, clearing the way for regulation of emissions from power plants, factories and other GHG sources associated by some with global climate warming. The fact that the Clean Air Act enacted some 30 years ago was ill suited for such regulation made no difference. It was an opportunity to slay the evil fossil fuels industry. The fact that taken to logical conclusion the regulations could deal a crushing blow to the economy and the generation, and use of tradition energy made no difference.

The court found that state and industry petitioners’ challenges of the adequacy of evidence supporting the endangerment finding and questions about significant scientific uncertainty without merit. 

Industry trade associations, state governments, and nongovernmental organizations filed numerous petitions challenging EPA's series of greenhouse gas rulemakings. The Circuit Court consolidated these petitions under Coalition for Responsible Regulation, Inc. v. EPA, and dismissed or denied all challenges. 

The case is a critical support and justification in EPA's continued quest to regulate greenhouse gases and elimniate the use of fossil fuels. (not sure what will replce them, yet since Solyndra is gone) 

Congress attempted and failed in the last Congress to pass regulation of greenhouse and other gases. The House passed a bill installing a cap and trade system but it ultimately failed in the Senate due to environmental overreach and lack of a push by the Administration.

The court decision has to be put in context of the election. The Administration has a green light, an almost unfettered right to regulate about anything that emits a greenhouse gas. The current rules, edicts and direction of the EPA have been somewhat restrained as a sop to Midwestern Democrats up for re-election but if the current regime is returned in November, there is no impediment for the EPA to extend and amp up the curtailment of fossil fuels under the cloak of the Clean Air Act.  Only Congress can stop or redirect the effort and the ability of Congress to do about anything has been demonstrated.

Businesses that rely on energy to produce goods should be wary. High-energy cost will mean an exit to foreign markets. This holds true even thought the price of natural gas has come down. Homeowners should expect their utility bills to increase. Of course, coal production will be effected with more and more exports going to Asia (where the burning the fuel creates more GHG for the same lump due to lax pollution controls than if it were burnt here.

The health care court decision will have a dramatic impact on all of us. I am not sure how to reform, improve the delivery of health care. I do think the mission of the liberals is to eventually have complete control and takeover of the national health care delivery system. So from that viewpoint, the decision is a path to completion as once these programs are in place, even if they are flawed, they are never repealed. Never. So if you like your current private health care plan, use it while you can.  

However, the implementation of continuing and expansive regulation on GHG by an unresponsive and insulated EPA under a lame duck Obama Administration should be noted and a great cause of concern. This Administration has shown time and time again it does more or less what it pleases, enforces or ignores whatever laws it chooses. In this if Obama is returned and unless Congress gets into the act, the predictable will happen and the country will be poorer for it. At the end of the day, we will all need class II air permits to fire up the old bar-be-que. Like the sinking of the HMS Titanic, it is inevitable once the mighty ship hits the iceberg. 

 

Congressional Hearing on Recycling: So Many Benefits but Needs More Attention

The House Energy and Commerce Subcommittee on the Environment and the Economy are holding a Congressional Hearing on Wednesday on a draft bill entitled “The Increasing Manufacturing Competitive Through Improved Recycling Act of 2012.“ The draft has been prepared primarily at the request of Congressmen John Sullivan (R-OK) and has been worked on by various materials manufacturing organizations.

Unlike most government edicts and restrictions, recycling is a positive action. It is, indeed, for the greater good. To that fact, there is little disagreement.

Government in recent times has become the arbitrator of conduct. It tells us where we can smoke, how much soda we can drink and when not to use a mobile phone. The list of stupid, obtrusive and lack of commons sense edicts is endless. We have let government substitute its judgment for that of the individual. It continues to tighten the noose on almost every human endeavor.

However, in this case, recycling is the type of conduct the government should be encouraging and by its nature, an integral part of the materials recycling process. 

Recycling aluminum cans, steel containers, newspapers, glass bottles, paper containers, plastics, electronic waste and other materials has a myriad of benefits:

• Saves energy
• Prevents environmental degradation
• Creates employment
• Reduces green house gases
• Reduces landfill use

The aluminum can is a perfect example and poster child for the benefits of recycling. The fundamental nature of aluminum means that it can recyclable over and over with no loss of quality.  In fact, 75 percent of all aluminum ever produced is still in use today. This infinite recyclability of aluminum and high value of the recycled material means a beverage can, on average, goes from a recycling bin back to the store in about 60 days.

The impact is tremendous. The process of aluminum recycling saves 95 percent of the energy initially used to create the metal and emits only 5 percent of the greenhouse gases associated with primary aluminum production. Let’s say that again. If it takes 100 energy units to refines, smelt and process a new aluminum ingot into can sheet ready to be rolled, the same result of creating a new can from recycled aluminum takes only 5 units of energy.

The end result is less energy used, lower cost of production, lower cost to the consumer, and less crud going to the landfill. While not as dramatic, other recycled materials provide similar benefits.

 Recycling is more or less a local issue. Of course, the nosy and intrusive feds try to regulate the activity but it is the local municipalities and counties that pick up the stuff we dispose of (usually curbside) and set it on its way. There is a cost to collect the material and in recent years, unfortunately, a number of these local governments are cutting back on their recycling programs to trim their budgets. This is a worrisome trend if it continues.

 

The bill being considered in the House is quite modest. It deals with data and information collection from the Municipal Solid Waste Stream. (MSW) It is needed but will not have a major impact on recycling rates. However, it does give at least a signal that recycling is important and needs to be supported by all of us.

 

 

EPA Official: Bearer of Crosses

EPA official Al Armendariz, resigned recently, or more likely followed suggestions, to leave his post as the Environmental Protection Agency’s (EPA) Regional Administrator for Region VI. Seems like Mr. Armendariz had become a poster child for overzealous acts on the part of the Agency. He made no secret of his desire to punish businesses in the oil and gas sector. Brings new light to the “I am from the government and here to help you” motto.

Seems like he had an interesting philosophy on enforcement of environmental laws. In remarks, Mr. Armendariz painted a picture of Roman conquerors pacifying villages by “find[ing] the first five guys they saw and . . crucif[ying] them.”. An analogy of crucifixion is usually never a good idea. Mr. Armendariz suggested the most effective approach to enforcement is to “make examples out of people who are in this case not compliant with the law.”

Natural Gas Exports: Issues, Promises and Problems

Natural Gas Exports: Realistic Market Response and Political Uncertainly

April 2012

Prepared By:

Jack O. Nutter

Nutter & Harris, Washington D.C. 

 Overview:

With natural gas trading in the U.S. for about $2 per million British thermal unit, there is considerable interest by producers, gas transporters and investors to dramatically increase exports of natural gas to countries where the price is up to eight times that amount. Exporting gas may prove to be a profitable venture in-and-of-itself but also could soak up excess supply, which would bolster the domestic price.

Current State of LNG:

One way to alleviate the problem of natural gas oversupply in North America is to increase its export. The most economical way to export natural gas is to liquefy it into LNG, which is transported in specially designed transport ships. There are currently over 100 production, export and storage facilities in the U.S and several companies have submitted applications with the U.S. Department of Energy to begin LNG export.

Cap and Trade Lives Down Under: A Harbinger for Things to Come?

The Commonwealth of Australia imposed through a new law enacted last week a quasi-cap and trade scheme on carbon emissions. It is a significant development in the inexorable march to impose restrictions on the use of carbon-based fuels using climate change as an impetus. 

Prime Minister Julia Gillard’s Clean Energy Futures plan will become law on July 2012, setting a cost of A$23 ($23.80) on each metric ton of greenhouse-gas emissions.(GHG) The carbon levy is fixed until 2015 and then a more or less cap and trade system will be installed.

Australia burns coal to produce about 80 percent of its electricity. The new law is intended to cut GHG emissions by 5 percent by 2020.