| WHAT'S IT ALL ABOUT? COURTS CREATE CONFUSION WITH DIFFERING DECISONS ON EPA ACTIONS |
| By Bill S. Forcade January 22, 2009 http://eponline.com/articles/70518/ Regulated facilities can expect change with a capital C in 2009 in the areas of global warming, hazardous air pollutants, new source review, and enforcement. These changes will come from the Obama administration, rules promulgated in the final days of the Bush administration, and judicial opinions rejecting or modifying past U.S. Environmental Protection Agency actions. Global Warming
In its 2007 decision in Massachusetts v. EPA, the U.S. Supreme Court ruled that EPA has the authority to regulate greenhouse gases under the Clean Air Act, giving traction to efforts to control global warming. Last July, EPA issued an Advance Notice of Proposed Rulemaking (ANPR) that suggested a wide variety of possible options but set no clear direction for the path forward. In the meantime, public interest groups continued to block all new source review (NSR) permits for major sources of greenhouse gases until permitting authorities set limits on those emissions. Last November, EPA's Environmental Appeals Board (EAB) issued an opinion on the Deseret Power Electric Cooperative ruling that EPA Region 8 provided inadequate reasons for exempting a coal-fired unit at a power plant from carbon dioxide limitations. The board remanded the permit decision to the region. That decision is broadly interpreted as putting at least a temporary block on pending or recently completed NSR permit decisions where greenhouse gas challenges have been mounted. Neither the ANPR nor the Deseret decision specifically requires EPA to adopt regulations or impose permit limitations on greenhouse gas emissions. In fact, both actions identified significant obstacles to regulating those emissions under the current regulatory and permitting framework. Both decisions encouraged Congress to address this issue as soon as possible. On Dec. 18, 2008, EPA Administrator Stephen Johnson issued an interpretive memorandum that carbon dioxide was not subject to regulation under prevention of significant deterioration (PSD). "EPA interprets the definition of 'regulated NSR pollutant' in 40 C.F.R. 52.21(b)(50) to exclude pollutants for which EPA regulations only require monitoring or reporting but to include each pollutant subject to either a provision in the Clean Air Act or regulation promulgated by EPA under the Clean Air Act that requires actual control of emissions of that pollutant." Presumably, in new PSD decisions, EPA will use this interpretation, and public interest groups again will appeal those decisions. |
ENERGY: The Green Energy Revolution May Already be Underway |
By Marianne Lavelle | November 14, 2008, 9:14 am The idea of an “energy stimulus” is picking up momentum in the corridors of power, along with a fancy new title. Look for such a plan, perhaps going by the name of “green recovery” or even “green prosperity,” to be the first climate change initiative of the Obama administration and the newly bolstered Democratic leadership of the 111th Congress. The most detailed run-down on a potential plan for a job-creation bill that will, not so incidentally, reduce reliance on fossil fuels, happens to have come out of the Center for American Progress (CAP). That’s the influential think tank headed by John Podesta until he took a leave of absence to lead President-Elect Obama’s transition team. The September report, authored by Robert Pollin and University of Massachusetts Political Economy Research Institute economists, says that a $100 billion investment over two years (one-seventh the cost of the financial sector bailout bill, for those counting) would create 2 million new jobs. These jobs would run the gamut, from weatherizing homes and schools to new mass transit and water infrastructure construction to solar and wind energy manufacturing. This week, CAP further refined the vision — putting out a memo outlining $47.2 billion in short-term spending options, including money to go directly to citizens — $2.5 billion annual “cash for clunkers” program to get old, polluting autos off the road, and a $2,000 tax credit per household for purchase of energy-efficient appliances and insulation. The whole approach tackles head-on the charges by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the anti-corporate tax group American Council for Capital Formation, who argued that action on climate change would break the U.S. economy. But CAP’s idea is not to replace, but merely precede, the more complex and politically difficult idea of setting mandatory limits on the nation’s emissions of carbon dioxide and other greenhouse gases. Remarks Wednesday by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, Democrat of New Mexico, at a carbon markets conference in Washington bolstered the outlook for a green-jobs-first approach. “I think it may take more than the first year to get it all done,” he said about the proposal for an economy-wide system of carbon dioxide limits, known as “cap and trade.” “My preference is to begin with energy legislation. There is no shortage of ideas that people would like to see us move ahead with.” More proof that the “green recovery” idea has momentum: The conservative Heritage Foundation has mounted a full-frontal assault on the notion, with a policy paper suggesting that action to limit fossil fuels emissions will result in “gone jobs” rather than “green jobs.” |
THE OIL DRUM Obama's Energy Policy: Listening When we Disagree Barack Obama has said that energy is going to be one of his top priorities. I believe he is completely sincere about this and that energy will get a lot of attention early on in his administration. I believe he is committed to moving the U.S. toward energy independence and a greener energy future. However, one can recognize energy as an important priority, yet sharply differ on the policy direction that is needed. For instance, some may have energy as a high priority because they feel that gasoline is too expensive. Their priority may be to keep gasoline prices low so people's budgets aren't adversely impacted by their fuel bills. Some can see energy as a top priority, and yet promote solutions like suing OPEC for more oil. On the other hand, someone else may see energy as a top priority, but think low gasoline prices are not the solution, but instead a big part of the problem. This is the nature of my disagreement with some aspects of Obama's energy plans: We broadly agree on the big picture, but differ on how to get there. And since I recently heard him say “I may not agree, but I will listen”, here is my attempt to highlight what I feel are the flaws in his energy proposals. Up front, let me state my assumptions. These will of course influence my opinion on his proposals. I believe that the present rate of fossil fuel usage in the U.S. is unsustainable. I believe that world oil production is very near a production peak, and an energy policy that is keenly aware of the potential for energy shortfalls - which will lead to severe oil price volatility - is paramount. I believe that even if oil production does not peak in the next five years, oil production will not be able to be expanded quickly enough to stay ahead of demand. Finally, I believe our current generation of liquid biofuels is too fossil-fuel dependent to enable them to make up for significant energy shortages, and that there are no obvious silver bullet technological fixes around the corner. These key assumptions impact the direction that I believe energy policy should take. While I believe the evidence supports human-caused global warming, I don't think the world has the collective will to voluntarily reign in greenhouse gas emissions. I think this will ultimately only be accomplished by a combination of high prices and lack of availability. So the energy policy that I would propose would not focus on protocols and agreements for reducing greenhouse gases. Even though many countries signed on to the Kyoto Protocol, carbon dioxide continued to accumulate in our atmosphere - even from the signatories of the agreement. There will always be countries that will choose not to be a party to such protocols, thus I believe a greenhouse gas reduction will only come about as a consequence of a reduction in fossil fuel usage. Thus I believe a sound energy policy should focus on 1). Minimizing per capita energy usage; 2). Finding sustainable, affordable alternatives; 3). Managing the down side of the production peak such that severe shortages are avoided. 4). Communicating to the public the nature of the problem, and explaining why sacrifice is needed. The Fossil Fuel Blind Spot While I think many of Obama's proposals are spot on, and with a little tweaking he could have a great energy plan, I think he overestimates how easily alternatives can displace fossil fuels. Thus, he largely ignores the need to slow the decline of U.S. oil production. Late in the campaign, he started to pay some lip service to the need to (responsibly) drill, but not too many people are expecting him to put much emphasis on that aspect. That "responsibly" qualifier is usually a sign that 1). Someone thinks drilling is not presently responsible; 2). They are going to put hurdles in place that discourage drilling. In fact, one of the Obama proposals is • A “Use it or Lose It” Approach to Existing Oil and Gas Leases. Oil companies have access to 68 million acres of land, over 40 million offshore, which they are not drilling on. Drilling in open areas could significantly increase domestic oil and gas production. Barack Obama and Joe Biden will require oil companies to diligently develop these leases or turn them over so that another company can develop them. That sounds great. Just one problem, though. There already is such a provision. To continue to beat this drum is either pandering, or demonstrates a fundamental misunderstanding of the oil and gas regulations in the U.S. The way these leases work is that companies bid on them competitively. They bid because they think there might be oil there. They then pay annual fees to the government over the course of the lease as they explore, and then if they find economically recoverable oil they begin to develop the lease. But the time between acquiring the lease and the beginning of production (should oil be found there) is several years. You don't acquire a lease and immediately start producing oil. Further, if an oil company did acquire a lease and didn't develop it (which would happen if they don't find any oil there) then it goes back to the government anyway. Oil companies can't keep leases tied up indefinitely without developing them. The fact that these are the sorts of policies that are highlights of Obama's domestic exploration plan indicate to me that he doesn't look at domestic oil production as a big part of his overall energy plan. In fact, Geoffrey Styles recently noted the same in an essay that examined Obama's plans in detail: Senator Obama appears to consider the US tapped out for oil, and apparently expects his energy independence goals to be met without more help from that quarter. That assessment pervades his approach to the oil & gas industry, though recently he has described natural gas in more favorable terms. It is also consistent with his periodic citations of the "3% of reserves vs. 25% of consumption" soundbite, which drastically understates the remaining resource potential of the US. This may explain his 2006 vote against a modest expansion of the allowed drilling area in the Gulf of Mexico, and his restrained support for expanded access to oil & gas during this summer's Congressional debate on various drilling proposals. I think the vast majority would agree for the need to move away from oil as our principal source of energy. But fossil fuels and nuclear power presently combine to provide more than 90% of America's energy needs (Source: EIA). And I think there are too many people who fail to understand exactly why that is the case. As Geoffrey Styles put it so well in the afore-mentioned link "it is counter-productive to pit solar, wind and biofuels against domestic oil & gas, which today contribute roughly 30 times as much net energy to the US economy, and could do more." Not understanding the problem can lead to unrealistic choices. A key question for me is whether Obama will sit down with the oil companies, explain his vision, but then also listen to these companies explain the view from their vantage point. After all, these are the companies that provide the vast majority of our energy today. They might know a thing or two about energy. On a personal level, I can't count the number of times that my perception of a situation has been changed by sitting and hearing the opposite viewpoint. Had I not kept myself open to that, I would have made many more mistakes in my life. I believe that 10 years from now (the time frame we could reasonably expect today's exploration projects to start putting supply on the market) we are going to find ourselves falling into a deep supply hole, and while biofuels can help, they aren't going to fill the void. By adopting policies now that will encourage U.S. oil production, the supply void will shrink, and prices should be more stable (albeit still climbing). And as I have argued before, we can earmark the tax revenue from new production to fund alternative energy. The point here is not to keep us dependent on fossil fuels; it is to address what I see as a pending supply shortage in 10 years. Adopting policies that discourage U.S. production will exacerbate that supply shortage. If we are near an oil production peak - as I think we are - then those policies that discourage domestic production will put the country at great risk. Yet there is a second proposal in Obama's plan that will discourage domestic production: • Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families. Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief. I have had an internal debate on this one for quite a while. I favor higher gas taxes to reduce consumption. (And I give Obama high marks for resisting the calls by McCain and Clinton for a gas tax holiday over the summer). If a windfall profits tax is in place, I believe that this will discourage investment, and ultimately lead to higher prices as supply is constrained. Hence, the same objective is ultimately achieved - except the oil companies get blamed instead of the politicians. But the biggest difference is that gas taxes can be implemented or removed in short order. Taxes that discourage investment will have unpredictable results that last for many years. Let's also be clear here. The oil industry does make big profits, but they are also already one of the most heavily taxed industries. And their tax payments to governments increase along with their profits. There has been a lot of coverage given to the record profits being made by the oil companies, but much less to the record windfalls in the form of taxes that governments have received over the past few years as a result. And don't forget that we have experimented with a windfall profits tax before. It raised far less revenue than anticipated, and caused investment to fall. An article from the Cato Institute notes: We've actually been down this road before in the form of the Crude Oil Windfall Profit Tax of 1980. According to a study published by the Congressional Research Service, the tax discouraged investment in the domestic oil industry to such a degree that domestic oil production was 3 percent to 6 percent less as a result of that tax, and foreign oil imports grew accordingly by 8 percent to 16 percent. There isn't a single credentialed oil economist in the country who would argue that windfall profit taxes are good for consumers. Geoffrey Styles also weighed in on this provision: If anything, [Obama] seems to regard the domestic oil industry not as a potential source of new supply, but as a source of new tax revenue. His short-term energy program leads off with one-time energy rebates--$1,000 per family or $500 per individual taxpayer--funded by a windfall profits tax on oil companies. He hasn't put a price tag on this, but assuming all taxpayers would be eligible, it would require on the order of $20 billion dollars per year in new taxes over the next five years. Although there are legitimate differences of opinion on the justification for such a tax, its consequences for future US oil output are unambiguous: what you tax more, you get less of. I don't think there is any doubt that a windfall profits tax won't help add to supplies. And refunding it back to consumers sends the wrong message: If gas prices go up, the government will protect you by taking the money from the oil companies and giving it back to you. Where is the incentive for the consumer to conserve? For the oil companies themselves, the likely impact would be that foreign earnings wouldn't be repatriated back to the U.S., and would just be reinvested overseas. For that matter, a steep windfall profits tax would provide incentive for U.S. oil companies to simply relocate overseas. |
| JAY SAYS |
Dear Reader, The key to domestic recovery and growth is affordable and abundant energy supplies. Less known fact, the Marcellus Gas supply is 500 Trillion cubic feet, about 30 years of US consumption, is located below Pennsylvania, West Virginia and New York. Let’s develop our home based domestic fossil supplies and stop sending American dollars to our middle east, so called “friends”. Energy independence can be achieved if market driven competitive capitalism is allowed to work without government restrictions. Best regards,
Jay Klaus
JKlaus@KlausEquipment.com
Klaus Equipment Company, Inc.
President |
Klaus Equipment Company
Phone: 724-444-3420
Fax: 724-444-3425
2866 West Bardonner Road,
Gibsonia, PA 15044
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