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$7 Gas? No Thank You!
Posted By:  - 06/18/10

I've come to really appreciate and look forward to the Heritage Foundation's "Foundry" posts each day. They're interesting, informative, and, more importantly, in tune to current events long before they could even be considered as such.

This morning's piece was no exception. The author, Ben Lieberman, wrote on President Obama's response to the oil spill and mission to "repackage" energy climate legislation. You may recall that the House voted on its version of cap-and-trade last summer. NTU fought ferociously to defeat the tax-hiking, job-killing bill that ultimately stalled in the Senate. Why have members dragged their feet, you ask? Because the power of public opinion is often underestimated, and Congressional leaders are never likely to bring up such a contentious issue (just as unpopular as Obamacare) in an election year...that is, until the oil spill occurred. Now the Administration thinks they have a legitimate opportunity to move forward with their climate change agenda. Disguise it as an oil spill "relief" package! That's right, we're on to you.

According to Heritage, we could see an energy tax so high that it dramatically reduces demand for gas and electricity because we might not be able to afford them! In today's Foundry, Lieberman cites a Harvard University study that estimates the price of gas could rise to as high as $7-a-gallon:

"Now the president is repackaging cap-and-trade - again - as a long-term solution to the oil spill. But it's the same old agenda, a huge energy tax that will raise the cost of gasoline and electricity high enough so that we're forced to use less."

"The logic linking cap-and-trade to the spill in the Gulf should frighten anyone who owns a car or truck. Such measures force up the price at the pump - Harvard Kennedy School's Belfer Center for Science and International Affairs thinks it 'may require gas prices greater than $7 a gallon by 2020' to meet Obama's stated goal of reducing emissions 14 percent from the transportation sector."

And while Obama claims less demand will simultaneously diminish the need for drilling, Heritage points out that energy will continue to be a "vital part of America's energy mix." Congress needs to explore and implement practical solutions, not a cap-and-trade bill that will kick our friends on the Gulf Coast while they're already down.

We couldn't afford $4 gas. $7 is simply unimaginable.

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NTU comes out against tax hikes in Pennsylvania
Posted By:  - 06/09/10

Today, NTU sent a letter to the Pennsylvania State Legislature, urging them to reject tobacco and natural gas taxes. Instead, NTU urges legislators to look at budget and tax reform to solve the state's fiscal crisis. The relevant parts of the letter say:

"[A] tax increase on tobacco products is the last thing that Pennsylvanians need in the midst of a recession. History shows that tobacco taxes consistently fail to produce promise revenues. A proposed 30% tax increase on the retail price of cigars and smokeless tobacco products would harm small retailers, such as convenience stores along Interstate 81 and cigar shops in Bucks County, who will see sales diminish as consumers seek out less costly products in neighboring jurisdictions. Further, a tobacco tax would also impact small farmers in the Commonwealth, many of whom grow tobacco to supplement their income."

"Additionally, a severance tax on natural gas production would only increase energy costs for consumers and stifle gas production in the Commonwealth. Energy companies will pass the cost of the tax onto consumers in the form of higher utility bills. According to the Commonwealth Foundation, states with severance taxes, such as West Virginia, have not experienced as much growth in the energy sector, including job creation, as states without a severance tax. Many other states, such as Texas and Arkansas, have delayed or reduced their severance taxes to encourage more natural gas production. Given the recent opening of the Marcellus Shale area, Pennsylvania should use this opportunity to expand and invest in the state's energy sector, which would offer benefits to all Pennsylvanians through cheaper energy and more jobs, not higher taxation."

"Rather than raising taxes, the best way to solve Pennsylvania's budget problems and clear the path to prosperity is to trim government spending and reform taxes. Governor Rendell's proposed $29.3 billion budget is four percent higher than last year. This recession has forced Pennsylvanians to prioritize their expenses and then cut what they cannot afford. It is only reasonable for their government to do the same in crafting the next budget. Moreover, Pennsylvania has the eleventh-highest tax burden in the nation, which includes some of the worst corporate tax rates in the country. By reducing government spending and reforming taxes, Pennsylvania can address its budget deficit while also laying the groundwork for economic growth."

Let's hope that the Pennsylvania legislature takes this advice to heart as they work towards crafting a budget. 

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Ethanol Still Looking for Help
Posted By:  - 06/02/10

American ethanol producers are now exporting ethanol to Abu Dhabi, off all places.  Yet, with 80 million gallons exported in the first quarter of this year to countries around the globe, the ethanol industry is still looking to taxpayers for continued support.  Matt Hartwig of the Renewable Fuels Association tells the Lincoln Journal Star, "Let's create a market here, so we can use every drop of ethanol we can produce."  As production has increased, the industry has lobbied the EPA to increase the amount of ethanol in gasoline from 10% to 12 or 15% to absorb the industry's overproduction.  If ethanol hasn't been able to create a market here after decades of generous taxpayer subsidies, artificially-created markets, and tariffs that keep out foreign ethanol, one has to wonder when ethanol is finally going to take off in the marketplace.

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Oil Spill Could Fuel Anti-Pollution Tax
Posted By:  - 06/01/10

The Gulf of Mexico oil disaster has prompted more planning by lawmakers in Washington State to increase taxes on oil companies to pay for preventing oil spills and toxic runoff in the state's waters.  The proposed tax would make up for a 43 percent funding decline in Washington's oil spill prevention program since 2006.  The House Ecology and Parks Committee discussed a tax on oil companies and possible regulatory changes.  It is likely that some form of the proposed tax will be introduced, although a similar proposal died earlier this year after intense lobbying by the oil industry. 

House Bill 3181 was considered last year to boost spill response and curb storm-water pollution.  The bill would have more than doubled a tax on hazardous substances and added about $100 million to the $250 million in storm-water funding already raised by cities throughout the state.  Now that the oil industry may have less traction with legislators and voters, it is likely that these companies will soon be paying additional taxes on top of what they're already paying. 

It appears legislators are using the oil disaster to hit taxpayers once more. 

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Wind More Pork Than Power
Posted By: Dan Barrett - 05/06/10

Cape Cod looks to have a change in scenery in the coming years as 130 wind turbines will soon be visible on the horizon of such historic areas as Nantucket Sound and Martha's Vineyard. But instead of calling the project a boon for environmental "green energy," it looks as though it's a bust in environmental, industrial, and economic spheres.

Environmentally, wind energy creates little to no carbon emissions but the manufacturing process most certainly does. The metals, plastics, and transportation of the massive fans are created in a petroleum-rich system. Much like ethanol, the efforts put into the process offset the gains in the clean energy. The FAA has also raised safety questions because the turning blades interfere with aviation radar instruments. Underlying the entire change to wind power are the displaced workers of more traditional industries.

Taxpayers have grounds to be concerned because the costs won't be recovered, as the power generated will likely not meet regional power demands (unless the government sees fit to ration it as it will with healthcare). A New York Times article projects a $1 billion cost by supporters (real numbers have been kept confidential), with up to $10 billion likely spent on grid and transmission upgrades as greater energy storage capacity will be required because winds are not constant or wholly predictable. When in place, the system COULD produce up to 75% of Cape Cod power needs. With a year-round population of only 230,000 people, it looks as though a lot of money will go towards status quo results and remains to be if it will be financially self-sufficient.

After some research, I found the project is really projected to cost closer to $2.2 billion overall and that subsides will cost the American people roughly half that price tag, according to Beacon Hill Institute Senior Economist Jonathan Haughton. The handout comes in forms of both the federal and Massachusetts tax credits and subsidies, all totaling almost $1.1 billion.

Some energy sources don't require government money to startup or remain in business. However if the government subsidy didn't exist, the wind turbines wouldn't be built. The plan to clean up energy production is a noble venture but not one to sacrifice American economic longevity. With about 42% of the entire new 2008 power-producing capacity added in the US being wind, totalling $17 billion in that same year, we must ask who will benefit and who will be left picking up the tab.

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California Cap & Trade
Posted By:  - 04/06/10

The Journal's editorial page today takes a look at California's AB32, aka California's cap & trade bill.  Here are the opening couple of paragraphs as background:

California originates many ideas that roll across the country, for better or, lately, for worse. Now it has a global-warming law with no real name, just this: AB32. Last month, the California Air Resource Board (CARB) proclaimed in a report that AB32 would grow 10,000 jobs. This was widely cheered as good news. That's true only if you also repeal basic market economics and the state's current business indicators.

AB32 creates a statewide cap-and-trade program and imposes numerous command-and-control mandates that CARB calls "complementary measures" on businesses, such as low-carbon fuel standards and a goal of achieving 33% energy from renewable sources by 2020. Companies say compliance costs will force them to cut jobs and raise prices.

Unfortunately for Californians, an independent analysis of the measure by Charles River Associates finds that AB32 "would reduce income by 0.9% or $414 per year. Using a variety of scenarios, Charles River calculated the program would cost between $28 billion and $97 billion over the next decade. (emphasis added)"

Fortunately, for Californians, NTU is joining with the Howard Jarvis Taxpayers Association and many other allies with the California Jobs Initiative to circulate petitions to protect the state and its citizens from this predatory legislation. To find out how you can help, click here.

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Drill Baby Drill
Posted By:  - 03/31/10

As an organization that works to reduce the size of government and lower the tax burden for citizens, we’ve looked into offshore drilling as a way for the government to raise revenue without raising taxes.  Yesterday, the Obama administration proposed opening vast expanses of water along the Atlantic coastline, the eastern Gulf of Mexico, and the north coast of Alaska to oil and natural gas drilling.  The proposal would end a longstanding moratorium on oil exploration along the East Coast from the northern tip of Delaware to the central coast of Florida.  Under the plan, the coastline north of New Jersey would remain closed to oil and gas activity as well as the Pacific Coast.  The proposal is intended to reduce dependence on oil imports and generate revenue from the sale of offshore leases.

Our country’s energy future deserves more than political gamesmanship and the Administration may be onto something here.  In fact, California alone consumes more natural gas than all but a handful of countries, ranking tenth in worldwide consumption.  We mandate the use of relatively clean natural gas for over half of our electricity generation and yet we severely restrict its production.  We also pay the highest natural gas prices in the world!

Interestingly enough, the United States is the only country that bans ocean production of natural gas.  Natural gas prices are based on local supply constraints much more than are oil prices.  Development of more domestic sources will likely bring lower prices.  This is an opportunity to use natural gas to help achieve our goals of reducing greenhouse gases and other emissions and promote energy self-sufficiency. 

Additionally, states are also likely to claim rights to the revenues from oil and gas deposits within 3-12 miles of shore and to some portion of lease proceeds.  Offshore drilling opens a new chapter in our nation’s search for a comprehensive energy policy and can provide states will the much-needed revenue in order to balance their budgets.  Offshore drilling will create jobs and increase the energy supply without cost to the taxpayer.  It will create revenues for financially strapped state government and increase revenues for federal governments.  President Obama said in his State of the Union address that we should make tough decisions about offshore drilling- looks like a pretty easy decision to me. 

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Cost of fuel for Defense Department: location and planning
Posted By: Dan Barrett - 03/26/10

With the cost of petroleum climbing, and more importantly unpredictably fluctuating, the Pentagon is looking at ways to balance out its behemoth gas consumption – 300,000 per day totaling 1.5% of national consumption. Cost scores include factors such as direct and indirect fuel infrastructure operations, environmental considerations, and regulatory compliance, but force protection for convoys is quickly becoming the largest piece in getting fuel where troops need it.

In a new National Defense article, How Much Does the Pentagon Pay for a Gallon of Gas?, Sandra Erwin helps break down the location costs of military fuel through Defense Logistics Agency estimates:

  • Up front military fuel: $2.82 per gallon
  • Ground shipped to forward-deployed location (peacetime): $13.00 per gallon
  • In-flight refueling: $42.00 per gallon
  • Army helicopter delivered: $400 per gallon
  • Hostile “in theater”: between $100 and $600

Of course, costs vary depending on the level of development and connectedness of a particular theater. A $400 per gallon cost in Afghanistan, likely an inflated figure, maybe half the cost in Iraq because, according to Undersecretary of Defense for Acquisition, Technology, and Logistics Ashton Carter, Afghanistan is “landlocked, rugged, [and] the road network is much thinner than Iraq and it has fewer airports.” There are also many crossover fuel exchanges between branches, especially with the Air Force refueling Navy planes but the AF is billed for the consumption.

The Pentagon is looking at ways to both cut consumption with cleaner technologies (flex fuels and fuel cells) and to start seriously considering platform energy consumption at time of design and purchase. With the M1 Abrams Battle Tank performing at 0.6 miles per gallon, we can all get behind more bang for our tax dollars through better practices and goals.

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Tom Price of the RSC at CPAC
Posted By: Dan Barrett - 02/19/10

Representative Tom Price gave one of the last speeches at CPAC day 2. Price serves as Chairman of the Republican Study Committee which “is a group of over 110 House Republicans organized for the purpose of advancing a conservative social and economic agenda in the House of Representatives.” He pointed out America is too great to be managed by just one man, especially one man in the While House. That attempted control has resulted in “1 trillion dollars stolen from future generations to weatherize homes” and other decisions American citizens should be making for themselves.

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