Topic: Energy and Environment

Some Blessings of Cheap Oil and Low Inflation

1. Cheaper oil lowers the cost of transporting people and products (including exports), and also the cost of producing energy-intensive goods and services.  

2. Every upward spike in oil prices has been followed by recession, while sustained periods of low oil prices have been associated with relatively brisk growth of the U.S. economy (real GDP).

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3. Far from being a grave danger (as news reports have frequently speculated), lower inflation since 2013 has significantly increased real wages and real consumer spending.

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4. Cheaper energy helps explain why the domestic U.S. economy (less trade & inventories) has lately been growing faster than 3% despite the unsettling Obama tax shock of 2013.

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The NYT Reportage on Government Lands Forgets a Chapter

The recent “occupation” of government-owned lands in Eastern Oregon by disgruntled ranchers’ motivated Quoctrung Bui and Margot Sanger-Katz of the New York Times (NYT) to produce an edifying essay on January 6th. It was aptly titled “Why the Government Owns So Much Land in the West.” Curiously, the NYT essay fails to mention one of the most significant, recent, and contentious attempts to “dispose” of federal public lands.

When Ronald Reagan was elected president for his first term in 1980, he received strong support from the so-called Sagebrush Rebels. The Rebels wanted lands owned by the federal government to be transferred to state governments.Their champion was James Watt, a self-proclaimed Sagebrush Rebel who became the Secretary of the U.S. Department of the Interior.

When I was operating as one of President Reagan’s economic advisers, an early assignment was to analyze the federal government’s landholdings and make recommendations about what to do with them. This was a big job. These lands are vast, covering an area six times that of France.

You Ought to Have a Look: Use and Abuse of the Social Cost of Carbon, Taking Down the Precautionary Principle, and the Rebound Effect from Energy Efficiency

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

Here we highlight a couple of things that we’ve been paying attention to as the new year unfolds.

First is an on-the-ground example of the extensive and invasive power of the federal government’s social cost of carbon. David Roberts, writing for Vox, describes the ongoing situation in a Colorado coal mining region which pits local, near-term coal mining interests (i.e., economic activity) against the federal government’s desire to mitigate potential damages that may result from climate change sometime in the future some place on the globe. So far, the present inhabitants of Colorado are losing out to the yet unborn future inhabitants of some faraway Pacific Island—a loss happily facilitated by the federal government.

Specifically, a federal judge has told the U.S. forest Service (USFS) that it did not adequately consider climate change when granting a special exception for coal mining activities on a protected tract of federal forest around Paonia, Colorado. The judge cited the National Environmental Policy Act (NEPA) as grounds for his decision.  When the USFS came back with its new analysis, it reported a huge, negative net impact of coal mining in the region.

How so? Because under the new federal guidelines for interpreting NEPA, the USFS had to consider not only the local environmental impacts of mining activities when compiling its Environmental Impact Statement, but also the impact that burning the mined coal to produce electricity would engender via the carbon dioxide emitted in the process.

If this sounds absolutely ludicrous, it is. And as you might imagine the locals are a bit flummoxed. “Who would have thought that they would have had to analyze the burning of coal in a power plant somewhere?” says Kathy Welt, a mineworker potentially impacted by the decision.

On the Bright Side: The Interactive Effects of Elevated CO2 and Phosphorus Supply on Three Cereals

Phosphorus (P) is an important macronutrient necessary for plant photosynthesis. When present in sufficient quantities, it has been shown to benefit plants by stimulating the formation of oils, sugars and starches, fostering rapid tissue growth and development, increasing stalk and stem strength, improving resistance to disease, enhancing crop quality, aiding flower and seed production, and benefiting a host of other growth- and development-related factors and processes. Out in the real world, however, P availability is often limited. Consequently, plants have developed multiple adaptive mechanisms (morphological, physiological and molecular) to help them cope with P insufficiency (Pi).

Despite such adaptive mechanisms, there are concerns that Pi will increase in the future as atmospheric CO2 concentrations rise. This hypothesis is based upon the recognition that elevated CO2 stimulates plant photosynthesis and growth. Such stimulation, however, is expected to require additional amounts of P in order for plants to sustain the projected CO2-induced growth enhancements. Otherwise, if P is limiting in the growth medium, or if plant adaptive mechanisms cannot compensate for the increased P demand, the growth benefits of CO2 enrichment may be reduced, and possibly wholly overcome, by Pi.

Will the Natural Monopoly in Energy Distribution Come to an End? Here’s Hoping

Dr. Ben Ho’s piece in Tuesday’s New York Times entitled “The Conservative Case for Solar Subsidies” is certain to raise a few eyebrows amongst the conservative crowd. But Ho asks a valid question that I’m not sure conservatives have seen fit to fully address in the last few years: What, precisely, should free market denizens hold true about energy policy?

The facile response–that there should simply be no government role–doesn’t quite work here. To be fair, few conservatives suggest such a thing. Ho points out that when there are negative externalities to the production of a good or service the economically efficient policy response requires a tax, and our carbon-based fuels emit a variety of pollutants when burned. This holds true regardless of one’s opinion about the verities of carbon emissions and climate change: Smog–which results mainly from automobile emissions–remains a key contributor to myriad health problems in the United States, and particulate matter resulting from coal burning bedevils asthmatics.

But the libertarian solution is not quite as simple as imposing a tax that covers the socialized pollution costs of burning fossil fuels. We have a nationwide energy grid, one that the federal government played an integral role in conceiving and constructing. Without eminent domain, such a thing would have been all but impossible. The federal government’s regulatory apparatus also has an integral role in regulating power providers, and since the provision of power is a natural monopoly, it’s hard to conceive of an alternative, at least for the moment.

A Western Film Noir

The more I read about the case of Dwight and Steven Hammond, the more convinced I am that their prison sentences are a gross miscarriage of justice. After conducting prescribed fires on their own land that crossed onto a few acres of federal grasslands, they were convicted of arson on federal lands, which under a 1996 anti-terrorism law carries a five-year mandatory minimum sentence.

The law says, “Whoever maliciously damages or destroys … by means of fire or an explosive, any … real property in whole or in part owned or possessed by, or leased to, the United States … shall be imprisoned for not less than 5 years.” The key word is “maliciously”: there is nothing malicious about starting a prescribed fire, something that is regularly practiced by thousands of landowners as well as the government itself.

In its opinion on the case, the Ninth Circuit concluded that a 2001 fire (which the Hammonds started on their own land but which escaped to federal land) was malicious because Dwight Hammond’s grandson and Steven’s nephew, who was a 13 years old in 2001, “testified that Steven had instructed him to drop lit matches on the ground so as to ‘light up the whole country on fire.’” This betrays a divide between urban and rural cultures. To urbanites such as the judges on the Ninth Circuit, “the whole country” means the entire United States.

This obviously makes no sense; no one would think that a teenager with a few matches could light the whole nation on fire. This is probably why some press accounts reported that Steven told the teenager to “light the whole county on fire,” but even that makes little sense: Harney County, in which the Hammonds live, is the largest county in Oregon and bigger than the entire state of New Jersey.

Ruralites use the word “country” to mean something other than “United States.” Instead, it means what urbanites would call “land” or “countryside” (another word used in some press accounts). Steven Hammond’s instruction to the teenager probably was intended to mean, “burn this entire field.”

No Good Guys in the West

There are no good guys to cheer for in the militia takeover of an Oregon federal office building on January 2. The ostensible issue is the re-sentencing of two Oregon ranchers–Dwight Hammond and son Steven Hammond–for arson, while the underlying issue is federal land ownership of much of the West.

The arson fires lit by the Hammonds in 2001 and 2006 may have actually represented sensible land management, but the Hammonds lost the high ground by their failure to coordinate with the government agency managing the land they burned. Prescribed fire is a tool used to improve wildlife habitat, increase land productivity, and control wildfire. The 2001 fire aimed at improving productivity, but the government says the ranchers didn’t bother informing the Bureau of Land Management (BLM) they planned to burn until two hours after they lit the fire. While they lit the fire on their own land, it escaped and burned 139 acres of federal land, but that burning probably did not do serious damage to the grassland and they put the fire out themselves.

The 2006 fire was more questionable. A wildfire was burning on BLM land near the Hammond’s ranch, so to defend their land they lit a backfire on their own land. That would be standard procedure except, again, they didn’t tell anyone and when their fire crossed over onto federal land it endangered firefighters who the Hammonds apparently knew were located between the wildfire and their backfire. Due to severe fire hazards, the county had a no-burn rule which the Hammonds apparently violated, but this was hardly a terrorist act.

For these actions, they were sentenced to a year in jail, which possibly was appropriate considering they endangered people’s lives. But the federal government, citing an anti-terrorism law that sets a mandatory minimum sentence of five years for arson on federal land, demanded that they be re-sentenced. Having already served the first year, they were scheduled to be re-incarcerated for four more years after the New Year. It is always disturbing when the federal government uses laws aimed at foreign terrorists to oppress citizens who have political differences of opinion with government policy. The Hammonds, who have paid $400,000 in fine related to the fires they lit, probably should not have been re-sentenced to four more years in prison, but that’s a problem with mandatory sentencing laws and overly aggressive prosecutors, not federal land management.