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Archive for December, 2009

China Says Yes, 11 NE Guvs Say No … To Secure North American Energy Supplies

Wednesday, December 30th, 2009

 “Hello, Goodbye” is one of the Beatles most popular and widely recognizable songs of all time. The song begins: “You say yes, I say no. You say stop and I say go, go, go. Oh, no.”

While is this at all relevant? Well, today 11 northeastern governors signed an economically-devastating memorandum of understanding (MOU) that paves the way for a job-killing regional Low-Carbon Fuel Standard (LCFS).

The Hill’s Ben Geman reports this under the headline “Governors sign low-carbon accord”:

The governors of 11 states in the Northeast said Wednesday they would work to develop a low-carbon fuel standard to reduce greenhouse gas emissions from cars and trucks despite objections from the oil industry.

The memorandum of understanding sets an early 2011 deadline for a proposed framework to be completed, and piggybacks on California’s controversial effort to reduce the carbon footprint of transportation fuels. The governors of Connecticut, Maine, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont signed the MOU.

As we know, however, LCFS proposals – like California’s – aims to ban our most affordable and secure fuel supplies. Today, nearly 20 percent of nation’s fuel comes from Canada, our closest and most strategic trading partner and ally. Under an LCFS, Canadian fuel supplies – because they are more energy-intensive to produce – would be effectively banned from reaching US consumers, families, seniors, manufacturers and small businesses.

The winners under an LCFS? Are you sitting down? Some of the most unstable and unfriendly regions of the world who produce oil that is lighter, and therefore favored under an LCFS.

Oh, and China — our chief competitor in the global marketplace.

Talk about irony. On the same day that 11 US governors gave their blessings to block Canadian energy from reaching consumers in their states, China and Canada formally announced an agreement to increase Canadian oil sands production and exports to China.

In a statement entitled “Industry Minister Clement Approves the Petrochina-Athabasca Oil Sands Corporation Transaction”, Tony Clement, Canada’s Minister of Industry, says this after officially inking the deal with China’s state-owned energy company, PetroChina:

“To successfully compete in a globalized economy, we need to attract international investment, which can create jobs, raise our level of competition, and develop Canada’s long-term economic prospects. Our future prosperity relies on open markets and two-way trade and investment flows that will benefit Canada and Canadians. After a thorough review of the individual merits of this transaction, I have concluded that it will benefit Canada.”

At least an LCFS would reduce greenhouse gas emissions, right? Nada. We know gas prices for consumers would spike under this scheme, and studies also find that overall global greenhouse gas emissions would increase too. Heck, even one of President Obama’s top energy gurus has said as much.

So as China says yes to secure, affordable, North American energy reserves, nearly a dozen US governors join California in saying no.

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Wicked Cold: Draft MOU Asks Northeast Guvs to Endorse Future of Higher Gas, Heating Oil Prices

Monday, December 28th, 2009

Consumer Energy Alliance sends letter to 11 Northeast governors asking officials to look before they leap on regional LCFS

WASHINGTON – The imposition of a California-style Low-Carbon Fuel Standard (LCFS) on 11 Northeast and mid-Atlantic states would dramatically restrict consumers’ access to local and affordable supplies of motor and home heating fuel – all without doing a thing to limit global greenhouse gas emissions. That’s the message conveyed this week by Consumer Energy Alliance (CEA), as the governors of these states decide whether to formally commit their constituents to a plan that could pave the way for higher prices at the pump, and sharp reductions in the availability of home heating oil.

“An LCFS isn’t about reducing carbon emissions, it’s about restricting access,” said CEA vice president Michael Whatley, who represented the organization in two regional LCFS hearings held earlier this winter. “Unfortunately, for residents of the Northeast, that means less access not only to affordable gas and diesel fuel, but to the critical fuel oils that are used to heat more than two million homes in the region.”

Earlier this month, CEA obtained a draft copy of the LCFS Memorandum of Understanding (MOU) currently in circulation among the 11 states involved in the Northeast States for Coordinated Air Use Management (NESCAUM), a group actively lobbying for an LCFS. In it, states are asked to endorse the statement that an LCFS is “a market-based, fuel-neutral program to address the carbon content of fuels” – even though in reality the plan is government- (not market-) directed, fuel-discriminatory (especially against those from Canada), and does nothing to reduce the carbon content of fuel (which is constant).

Additionally, the MOU demands that states “commit to promote and support a national LCFS program,” the clearest admission yet that a regional LCFS scheme cannot succeed unless its burden is extended via federal mandate to competitors in neighboring states. “That’s been the purpose of this effort all along,” added Whatley. “In regional stakeholder meetings and in the draft MOU, NESCAUM has stated its ultimate goal is to implement a bad regional policy that will push the federal government into passing a national mandate – even if it means the Northeast ends up isolating itself from critical national and international fuel markets.”

According to reports, NESCAUM officials have asked each state’s governor to sign the MOU by December 31, 2009. In anticipation of that deadline, CEA last week sent each of the 11 governors participating in the NESCAUM effort a letter outlining several key considerations related to an LCFS – from the logistics involved in converting hundreds of thousands of vehicles to flex-fuel capable, to the realities inherent in the fact that 80 percent of transportation sector carbon emissions comes from the combustion of fuel, not the lifecycle components an LCFS will supposedly address.

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Governator Touts Copenhagen as ‘A Success’; LA Times Hat-Tips CA’s LCFS-Ban on Affordable, Reliable Energy

Tuesday, December 15th, 2009

Policy Could Death-Blow to Alaska’s Economy, US Energy Security

Tens of thousands of world leaders, policymakers and members of the media have barnstormed Copenhagen, Denmark this week in an effort to craft an international agreement on climate change. As the debate continues to heat up, and discussions move forward, some key players are speaking out forcefully.

Earlier today, California Gov. Arnold Schwarzenegger delivered a fiery speech, labeling Copenhagen “a success.” He also encouraged the UN to convene a future global warming summit in the Golden State.

And while many believe that the jury is still out as to whether Copenhagen will in fact be a success, California’s largest newspaper – the Los Angeles Times – took the opportunity to highlight the state’s Low-Carbon Fuel Standard (LCFS), which will effectively ban stable, reliable and affordable Canadian and other heavier forms of crude from reaching families, seniors and businesses.

This from a Greenspace blog post entitled “Copenhagen: Californians make a splash” today:

As the world’s seventh-largest economy, California attracts attention. But what Golden Staters are boasting about here is the state’s first-in-the-nation economy-wide climate legislation, its first-in-the-world low-carbon fuel standard, and its highest-in-the nation renewable-energy requirements.

In California, said Gov. Arnold Schwarzenegger, who arrived Monday, “we’ve proven that a sub-national government has the power to drive change across the nation and the world.”

Yes, California is the first state take a serious step toward implementing an LCFS. And while it’s true that California doesn’t receive much of its oil from Canada – LCFS’s most familiar target – it does receive a good bit of energy from … wait for it … California. Why is that important? Well, a large swath of the oil produced in-state happens to be classified as “heavy” – and thus, targeted for elimination under an LCFS.

Imagine that: The state of California imposes a regulation from which it thinks it will be immune, and then, right when they get close to actually implementing it, folks start to wake up to the reality that an LCFS would actually restrict California refiners from buying oil from California energy producers. Irony, you are a fickle mistress, indeed. No word on whether Gov. Schwarzenegger mentioned any of this in his speech in Denmark.

Meanwhile, up in Alaska, a considerable amount of its energy – especially along the North Slope – is heavier crude, which, as we’ve noted, is targeted for restriction under an LCFS. And the folks up there understand full-well what’s best for Malibu is not necessarily what’s best for North Slope Borough.

The Fairbanks Daily News-Miner reports this under the headline “Heavy oil might be the future of Alaska petroleum development”:

“Heavy oil is traditionally more expensive to extract and refine than light oil,” said Robert Dillon, an energy spokesman for Sen. Lisa Murkowski. Dillon said much of the environmental community objects to the prospect of developing heavy oil deposits because doing so creates more greenhouse gases than many other energy processes. “There are a number in Congress, mainly Democrats, who oppose heavy oil production and would like to combine climate legislation with a low carbon fuel standard.”

The Associated Press also reports on this critical issue in an article entitled “‘Heavy oil’ may be future of North Slope”:

The Fairbanks Daily News-Miner reports heavy oil may be the future of Alaska’s petroleum development, despite higher costs and more environmental concerns. It’s likely to be part of state lawmakers’ discussions about the oil business when they meet in Juneau.

State Sens. John Coghill and Joe Paskvan say heavy oil should be included in a review of energy policies.

“Oil is still precious up there,” said John Coghill, R-North Pole. “Heavy oil needs to be included in the discussion.”

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Copycats in Husky-Land

Thursday, December 10th, 2009

Classified memo to Gov. Gregoire reveals true intent behind Washington’s rush to copy California LCFS

There’s no truth to the rumor that the 5,000-mile flight from Olympia to Denmark is direct (or comfortable); but at least once Washington governor Chris Gregoire arrives at the Copenhagen climate summit this weekend, she’ll be greeted by plenty of familiar faces.

One of them will belong to the governor of California, on-hand to update conference-goers on the implementation of a first-of-its-kind Low-Carbon Fuel Standard (LCFS) in his state. It’s a plan of which Gov. Gregoire is reportedly well enamored. But Washington isn’t California. And the imposition of California-style fuel mandates on Washington will not be done without exacting a heavy, prohibitive toll on consumers and motorists in the state.

To understand why that is, first you have to know a little about where each state gets its energy. In California, a plurality of the state’s oil comes from overseas – with Saudi Arabia accounting for the largest share of imports. This oil is classified as “light” and is favored under an LCFS, even though it has to travel more than 12,000 miles to get there.

Washington gets some of its oil from Saudi Arabia as well, but more than 25 percent of its total haul comes from Canada. The chart below captures the relevant percentages:
WA_energy

On its face, that would seem to be a good thing, right? Canadian oil is closer, cheaper, and infinitely more secure than crude from the Middle East. Amazingly, though, Saudi Arabian oil receives a better score under an LCFS than its Canadian counterpart. California gets virtually none of its oil from Canada. Now you know why its governor supports an LCFS.

But why does Washington’s? Not only would a quarter of the state’s oil supply be threatened under an LCFS, but 10 percent of the state’s gasoline – refined in Montana, but derived from Canada’s oil sands – would also be prevented from crossing the eastern border. The effect this would have on local gas and diesel prices isn’t hard to predict: less supply means higher costs, and potentially even greater dependence on foreign regimes.

And what about jobs? Refiners in Washington directly employed 2,003 workers in 2007 (latest numbers), and indirectly supported another 20,000. They paid out more than $400 million in wages. And they sent nearly that same amount to Olympia in the form of sales, excise, occupation and sundry other taxes.

The scary thing is: Gov. Gregoire knows this. And so does her new chief-of-staff. His name is Jay Manning, and back in May while serving as the state’s top environmental regulator, he penned a confidential memo to the governor – released just this week by the Washington Policy Center – that recommends a full-steam-ahead approach to enacting an LCFS through executive decree; legislature be damned.

Sure, Mr. Manning acknowledges — the move might strike some as “controversial.” But the more punitive we make our state LCFS, the better chance we have of “increas[ing] the regulated community’s interest in getting a national program in place.”

Catch that? The Washington LCFS (borrowed from California) isn’t actually about Washington at all – it’s about coercing support for a federal, nationwide fuels mandate. And according to Mr. Manning, that federal mandate is right around the corner: “We, of course, expect a national program to be established.”

Two weeks after Mr. Manning wrote that memo, Gov. Gregoire issued Executive Order 09-05 – directing her cabinet to “assess whether the California low-carbon fuel standards … would best meet Washington’s greenhouse gas emissions reduction targets.” Consultants were hired and public workshops were scheduled. And even though serious questions remained unanswered (“Is the policy ahead of the science?” asks one agency PowerPoint), Washington was off to the races. The governor is expected to announce what comes next in July.

In the meantime, the state’s consultants are hard at work trying to determine whether an LCFS “would best meet” Washington’s “emissions reduction targets.” If they do their job right, the answer they’ll find is that it doesn’t.

Why’s that? Because an LCFS can’t change the carbon content of oil, or gasoline, or any other fuel – that’s constant. It also can’t change the fact that more than 80 percent of transportation sector emissions come from our fuel’s combustion – not the things an LCFS seeks to restrict.

And it can’t change the fact that Canada’s abundant and affordable oil reserves are going to be developed whether Washington’s governor allows her state’s citizens to access them or not. If they don’t go to Whatcom or Skagit Counties, they’ll just be sent to Beijing instead. And according to a report published in the American Economic Journal this year, that fact alone might actually render an LCFS a net-increaser of carbon emissions.

Higher prices at the pump, expanded dependence on foreign, unstable regimes, and the potential for even greater carbon emissions in the future. An LCFS might pass as sensible energy policy in California, but it shouldn’t in Washington.

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Too Spendy: Low-Carbon Fuel Standard a Bad Deal for Wisconsin

Wednesday, December 9th, 2009

Draft LCFS bill making the rounds in Madison would cut-off majority of state’s oil supply, cost consumers $3.3 billion in higher prices at the pump

Residents of Wisconsin woke up this morning to find themselves in a government-declared state of emergency, the product of a massive storm front that continues to pound the state with a treacherous mix of snow, wind and freezing rain. But although folks might not have known it, they were in a state of emergency even before the weather came; this one, a function of that fact their treasury is slated to send out $5.7 billion more than it brings in.

But at least you can’t accuse Madison of not trying to make up the difference. Later this month, state lawmakers will reportedly introduce a Low-Carbon Fuel Standard (LCFS) plan that seeks to reduce “the carbon intensity of transportation fuels” – and make the state some money in the process.

How such a program would be administered, who would be affected, what the actual restrictions would be – the draft bill does not say. The only thing it does say? Those who violate the heretofore unspoken rule “shall forfeit not more than $5,000 for each violation.” Never mind that the “violation” isn’t actually defined – five-grand here, five-grand there, and all of a sudden that budget deficit doesn’t look so daunting after all.

So an LCFS is just another tax, right? Wisconsinites would be so lucky. In reality, it’s an indirect prohibition on accessing some of the most secure, affordable, and proximate energy resources in the hemisphere – those from Canada. Maybe that’s no big deal for folks who live in Kentucky. But for residents of the Badger State, who rely on Canada for nearly 50 percent of the oil the state consumes each day, the consequences would be profound.

A recent analysis compiled by the Wisconsin Policy Research Institute sheds some light on exactly how severe those consequences would be. According to the report:

[An LCFS] would … increases costs in Wisconsin an additional $3.279 billion by 2020.  More important, Wisconsin drivers would need to cut transportation fuel consumption by the equivalent of 227.10 million gallons of gasoline.  In other words, [an LCFS] is unattainable without contracting the use of motor vehicle transportation in Wisconsin.

For a state with a total GDP of less than $200 billion, $3.3 billion in lost output and higher energy prices isn’t something to sneeze at. But what exactly should Wisconsin residents expect to receive in return for this staggering outlay in funds? More jobs? Less dependence on foreign energy? Lower greenhouse emissions?

None of the above, we’re afraid. According to one study published this year in the American Economic Journal, global carbon emissions might actually increase under an LCFS. That’s because the energy resources Wisconsin would effectively be turning away under a state LCFS would just end up being sent to China instead – and it takes an awful lot more energy (and carbon) to ship that oil half-a-world away than it does to slide it down a pipeline to America.

Unfortunately for Wisconsin, the imposition an economy-killing LCFS might already be a fait accompli. Earlier this year, a group assembled by the Midwestern Governors Association (MGA) – to which Wisconsin is member – approved a resolution to “create a uniform, regional low-carbon fuels policy.” And although no such policy presently exists, the legislation expected to be offered in Madison this month mandates the state’s Department of Natural Resources impose a plan “consistent with the advisory group’s recommendations.” So much for leadership.

Thankfully, not everyone in Wisconsin is ready to cede key decisions regarding the state’s economic future to nameless staff from MGA. Last week, a coalition of Wisconsin manufacturers, home builders, paper producers, and retailers sent a letter to Gov. Jim Doyle’s environmental task force imploring it to take another look at LCFS ahead of a scheduled meeting on December 15. In part, the letter states:

Another California idea that makes little sense for Wisconsin is adopting a California-type LCFS aimed at restricting our use of Canadian oil. Unlike California, Wisconsin relies on Canadian crude oil to produce the majority of our transportation fuel. By raising costs an estimated $3.3 billion for motorists, a LCFS will hit Wisconsin consumers at a time when we can least afford it.We couldn’t have said it better ourselves. Unfortunately, the state of Wisconsin appears willing to forfeit its spot at the FRONT of the energy supply chain for a position squarely at the back of it – the precise effect of a policy that bans Canadian energy from crossing Wisconsin’s border.

 The real question is: How does Wisconsin intend to make up the difference? In California, the solution is simple: import more oil from the Middle East. The funny thing about Middle East oil tankers, though, is that you don’t often find them sailing in Lake Winnebago. Which means Wisconsites will simply have to make do with less – all in support of a policy that won’t do a thing to reduce emissions.

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Wisc.’s Business Leaders to the Guv: LCFS is a Job-Killer

Tuesday, December 8th, 2009

In a recent memo from a nearly two dozen leading Wisconsin farming, business, manufacturing, and economic development organizations to Gov. Jim Doyle’s Global Warming Task Force, the broad coalition weighed-in on several critical policy objectives now being considered as part of a larger, comprehensive climate bill in Madison.

The coalition of businesses and consumer interests writes this:

For reasons outlined below, we respectfully ask that you consider advising the chief legislative authors that you have serious reservations over the costs and related implications of various implementation proposals, as well as the notion that all Task Force recommendations be packaged en masse into a single bill.

Of particular interest, the group highlights the damaging economic effects associated with a Low-Carbon Fuel Standard (LCFS). This policy, which is also being considered on the federal level in Congress, would effectively ban affordable and secure Canadian oil reserves – which helps meet 50 percent of Wisconsin’s needs – from reaching consumers, farmers and small businesses in the Badger state.

And the group lays this out to the task force in their memo:

The proposed Low Carbon Fuel Standard would increase costs to Wisconsin motorists by an additional $3.279 billion by 2020.

Low Carbon Fuel Standard (LCFS). Another California idea that makes little sense for Wisconsin is adopting a California-type LCFS aimed at restricting our use of Canadian oil. Unlike California, Wisconsin relies on Canadian crude oil to produce the majority of our transportation fuel. By raising costs an estimated $3.3 billion for motorists, a LCFS will hit Wisconsin consumers at a time when we can least afford it.

And while the comprehensive global warming legislation has not yet been formally introduced (though it’s just around the corner), members of this coalition – especially the Wisconsin Manufacturers & Commerce (WMC) – continue to be outspoken about the negative consequences that such proposals as an LCFS would have on the state’s business climate.

In a recent Milwaukee Journal Sentinel op-ed, WMC vice president James A. Buchen writes this under the headline “Low carbon fuel tax is lose-lose:”

A Low Carbon Fuel Standard sounds harmless enough, but this misguided policy would penalize Wisconsin’s dominant source of motor fuel: Canadian crude oil. Studies have shown that such a standard will raise gas prices … an LCFS would also threaten many of our state’s family-supporting manufacturing jobs that supply the Canadian oil industry.

Because Canadian oil is located on our own continent and comes from one of our closest allies, it represents a stable and secure source of energy for Wisconsin.

Unfortunately, an LCFS would punish Canadian oil because it requires more energy to produce, refine and bring to market than “lighter” forms of crude oil. Worse yet, an LCFS would not even reduce Wisconsin greenhouse gas emissions because gasoline refined from Canadian crude oil burns just the same as other conventional sources of gasoline.

Lawmakers must consider whether it makes sense to enact an LCFS and trade friendly Canadian oil for a greater reliance on OPEC and Middle East oil.

Thankfully, Wisconsin voters understand the threats posed by an LCFS law, and overwhelmingly oppose it.

Mr. Buchen is right: Wisconsin Consumers Soundly Reject Job-Killing LCFS Proposal.

A detailed Wisconsin Policy Research Institute analysis from November, entitled “The Economics of Climate Change Proposals in Wisconsin,” rendered this about the governor’s task force LCFS proposal:

An analysis of a similar [LCFS] proposal at the national level indicates that the 10% reduction could only be achieved at the cost of a large reduction in the consumption of energy from transportation fuels. In other words, employees of Wisconsin firms and businesses would have to drive fewer miles, and thus consume less fuel.

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