On Thursday, January 17, the Tax Foundation (TF) issued a paper arguing that only 32 percent of state and local highway costs were paid out of user fees, while the remaining costs came from “general funds.” In a post here, I pointed out that, actually, user fees for highways cover 76 percent of the costs of roads and most of the remaining 24 percent come from interest on user fees before they are spend and bond sales that will be repaid out of user fees.

TF replied, saying “O’Toole conflates taxes and fees.” In fact, TF specifically said that state gas taxes are user fees, but somehow defined federal gas taxes as “general funds.” I simply argued that, to be consistent, TF should count federal gas taxes as user fees as well.

TF went on to say, “O’Toole suggests we include federal gasoline tax collections in state-local revenue.” Again, TF said that federal gas tax collections are “general funds” and I disagreed with that statement. If state gas tax collections are user fees, then federal gas tax collections are too. They are certainly not general funds, any more than state gas taxes are general funds, since federal law dedicates them to transportation projects and mostly to highways.

TF said, “O’Toole suggests that we include motor vehicle registration taxes and fees, but not the associated expenses” such as highway patrols. In fact, I said nothing about the associated expenses because, for the most part, those expenses are already included in the reported $155 billion cost of highways.

TF said, “O’Toole suggests that we include state and local bond sales for road construction, which would double-count revenue.” But nothing I said would double-counting revenues. What I said was that bond sales for highways are not, in any sense, “general funds” if they will be repaid out of user fees.

TF said, “O’Toole suggests that we include $13 billion in “investment income” on state-local gasoline tax and user fee revenue, but that is not a net interest figure.” What TF means is that some of that interest might come from investments of non-user fees, which is true. But since user fees cover the vast majority of state and local road costs, interest on those user fees makes up the vast majority of interest. Yet TF counted all interest as “general funds.”

TF said, “O’Toole suggests that we use Federal Highway Administration data rather than U.S. Census Bureau data. We have no evidence that the U.S. Census Bureau is unreliable in this area.” I suggest that the fact that the Census Bureau, which uses secondary data, differs from the Federal Highway Administration, which uses primary data, is itself evidence that the Census Bureau data are unreliable.

In sum, by TF’s own definition of user fees as being gas taxes and tolls, something like 55 percent of the cost of roads is collected in user fees. Adding vehicle registration fees brings this to 76 percent, and most of the rest is covered by bonds that will be repaid by user fees and interest on those user fees. TF’s reply failed to address my main point, which is that none of these revenues can be considered “general funds.”

The Washington Post has an article today on the battle over the Keystone XL pipeline.  There is a sense of urgency on both sides as the decision on the project is expected to be fast approaching.

The Post features arguments from pipeline proponents that the project will provide an economic boost to the state of Nebraska, and from pipeline opponents that the oil carried though it will lead to more carbon dioxide emissions than previously thought, thus upping the impact on global warming and climate change.

But the numbers being tossed about don’t tell the whole story.

First, a look at the new economic claims. An analysis from the Consumer Energy Alliance concludes that during the two year construction phase of the pipeline, the economic activity in Nebraska will increase by a bit more than $400 million per year—generating directly or indirectly, about 5,500 new jobs. Sounds impressive, but this boost is short-lived. After that, for the next 15 years, the economic input drops down to about $67 million/yr, supporting about 300 jobs.  A net positive, but not as much as many proponents claim.

The climate claims are even less significant. In its new report, Oil Change International asserts that the current estimates of the well-to-wheel (WTW) carbon dioxide emissions from oil extracted from the Alberta tar sands have been underestimated. They claim that the State Department failed to fully include carbon dioxide emissions from the burning of the petroleum coke that is produced as a side product of producing oil from the tar sands. This “petcoke” can be burned like coal, and in fact, is cheaper and more energy dense than coal, so it is often preferable.  According to Oil Change International, including the petcoke in the calculation would increase the WTW carbon dioxide emissions by about 13 percent.

There are several things wrong with the Oil Change International analysis. First is that the State Department actually did include a considerable discussion of the influence of the treatment of petcoke in its assessment.  It concluded, just like Oil Change International, that if the petcoke is burned, it increases the total wells-to-wheels carbon dioxide emissions of Canadian tar sands oil by the same 13 percent.  But what the State Department points out, and which Oil Change International plays down, is that the burning of petcoke to produce energy by and large displaces the use of coal for the same purpose.  So instead of the total emissions, what is important is the incremental carbon dioxide emissions produced from using petcoke instead of coal. And when that number is used, the WTW emissions increase by less than 1 percent—which is why the State Department concluded that the fate of the petcoke really wasn’t all that significant in the overall WTW emissions calculation.

But whether consideration of petcoke increases the WTW carbon dioxide emissions of the tar sands oil by 1%, 13%, or any number in between, really doesn’t matter anyway in terms of its impact of global warming.  For as I have shown previously, the global warming potential of the Keystone XL pipeline oil is only about 0.00001°C/yr.  Increase that by 13% and you basically get the same environmentally insignificant number.  In fact, you’d have to increase it by several orders of magnitude before it is even worth paying attention to.

The war over the pipeline will probably rage on until (and even after) a decision is reached in a couple of months. Hopefully, emotion will play a role secondary to facts.