Topic: Energy and Environment

EPA and the ‘Necessary Bankrupting’ of Coal

In its proposed rulemaking on emissions from coal-fired power plants, the Environmental Protection Agency has fulfilled President Obama’s campaign statement that his administration would “essentially bankrupt” anyone who had the audacity to hope to build a new generation facility. By essentially prohibiting the production of new plants, the administration is again picking winners and losers in our energy economy, something which is best done by the market.

Supporters of this policy will claim that it is cheaper to generate electricity from natural gas, and that is true for now.  But major producers using hydraulic fracturing and new horizontal drilling techniques in shale formations have recently stopped drilling new wells because the price is so low.

If it ultimately costs more to produce electricity from gas than it does from coal, the administration will have slapped yet another energy price hike on us—in addition to what we already pay to subsidize solar power, windmills, and Chevrolet Volts while taxpayers absorb the debt from the multiple bankruptcies of other politically correct energy concerns like Solyndra, Range Fuels, and a host of others.

Red Team, Blue Team, and Gas Prices

The Washington Post puts public opinion on gas prices in stark red and blue:

Pretty clear Red Team/Blue Team answers. Republicans in 2006 accepted that there wasn’t much the president could do to reduce gas prices, but most of them think Obama could. Democrats show an even sharper shift; they overwhelmingly said that Bush could bring prices down, but few expect Obama to do so. I hope the fact that both Independents and Americans as a whole are 12-13 points less likely to think that presidents set gas prices is a sign of improvement in general economic understanding.

Back around 2003 or 2004 a colleague was escorted through the hallways of CNN by a junior staffer or intern, who asked him, “Do you think Bush is raising gas prices now so he can lower them before the election?” With perceptions like that among budding journalists, is there any hope for better public understanding of economics?

For examples of informed and nonpartisan analysis of gas prices, check out

DOT Moves to Support Even More Wasteful Transit Projects

The Department of Transportation (DOT) is proposing new rules that would allow it to fund exceedingly wasteful rail transit projects that do nothing to relieve congestion. While the existing rules require transit agencies to demonstrate that proposed new rail lines are at least minimally cost effective, the proposed rules focus instead on such vague criteria as “livability” and “environmental justice.”

This rule goes back to 1991, when Congress created the “New Starts” fund to provide grants to transit agencies that want to build new rail lines or other fixed transit lines (such as busways). There were no limits on how much transit agencies could ask for, and the agencies quickly discovered that cities that proposed the most expensive projects got the most money. This sent the cost of rail projects soaring.

For example, in 1986–before New Starts–Portland completed a 17-mile light-rail line that cost about $200 million. In 1998, after New Starts, it completed a 13-mile light-rail line that cost $950 million. Both received the same percentage of federal matching funds, but the second line was “gold plated” as part of Portland’s effort to capture “its share” of the New-Starts pot. Predictably, the city is now working on a 7-mile line that will cost $1.5 billion.

In an effort to put a cap on this wasteful spending, the Bush administration passed a rule in 2005 requiring that New Starts projects meet a minimum test of cost effectiveness. That test required that projects cost no more than $24 for every hour of time that the transit project saved travelers, including both transit riders and highway travelers who enjoyed congestion relief from the project. Even $24 an hour is pretty wasteful considering that most bus improvements save time at a cost of only $1 to $6 an hour, but the rule did put a damper on some excessively wasteful rail proposals.

Also in 2005, Portland Congressman Earl Blumenauer persuaded Congress to create a “Small Starts” program for streetcars and similar projects costing less than $100 million. Blumenauer and others were angered when the Bush administration wrote a rule requiring transit agencies to prove that streetcars were cost effective relative to improved bus service. Since a single streetcar costs ten times as much as a bus, there is no way streetcars can be more cost effective than buses, so no streetcar projects were funded out of Small Starts.

Unlike the Bush administration, the Obama administration has drunk the Kool-Aid of streetcars and rail transit. In 2010, Secretary of Transportation–or, as I prefer to call him, Secretary of Immobility–Ray LaHood announced that he was changing the rules so that he could fund streetcars and other wasteful projects out of Small Starts and New Starts. (Funds for the streetcar grants that LaHood provided to Atlanta, Cincinnati, Dallas, Tucson, and other cities came out of stimulus monies, not Small Starts.) LaHood has freely admitted that his goal is to “coerce people out of their cars.”

Ironically, soon after LaHood’s announcement, the head of the Federal Transit Administration (FTA), Peter Rogoff, gave a speech castigating transit agencies for seeking funds for new rail projects when existing rail transit lines suffer from a $60 billion maintenance backlog. “Paint is cheap, trains are expensive,” Rogoff said, observing that agencies that paint buses a special color and call them a special bus often gain as many new riders as agencies that build expensive rail line. The DOT soon removed Rogoff’s speech from its web site, but copies have been preserved here.

Cato’s 2010 comments on LaHood’s proposal pointed out that a true cost-effectiveness analysis, which is required by law, requires transit agencies to compare rail proposals with a full range of alternatives. The draft rules that the FTA released in January, 2012, however, only require agencies to compare the cost effectiveness of rail against doing nothing.

Moreover, instead of measuring cost effectiveness by the number of hours of time the projects save travelers, the proposed rules would measure it by the number of new transit riders the project is projected to gain. This means that projects that increase congestion (by, for example, building streetcar lines in streets or running frequent trains across grade crossings), wasting most people’s time, will actually score higher because planning models assume congestion leads more people to ride transit.

Cato’s comments on the proposed rules also point out that the law requires the FTA to account for the effect of projects on congestion and mobility. However, the law does not allow the FTA to consider livability, environmental justice, or the other new criteria proposed in the rules. The draft rules therefore violate the law in several places.

Comments on the proposed rules are due March 26 and can be submitted on line. While it is uncertain whether LaHood will pay any attention to your comments, what is clear is that the Obama administration is more interested in imposing its utopian view of how people should live on American cities than it is in increasing people’s freedom and mobility.

This One’s a True Porker

The Senate passed a transportation bill this week to replace a House bill that was killed by fiscal conservatives for being filled with “pork and special interest projects.” Not surprisingly, the Senate bill is far worse.

Where the House bill authorized deficit spending to the tune of about $10 billion a year, the Senate bill would deficit-spend about $15 billion a year. Where the House bill had no earmarks and few big-government expansions, the Senate bill has several earmarks, discourages the states from leasing roads to private partners, and expands federal regulation of public and private transit and intercity bus systems.

Fiscal conservatives pinned their hopes on an amendment that would allow states to opt out of federal funding by raising their gas taxes by the 18.4 cents that the federal government collects, thus cutting out the feds as middle man. The Senate predictably and decisively rejected this amendment by 68 to 30. Sen. Barbara Boxer (D, Calif.) argued that the amendment would “devolve” the highway fund, which of course was the whole point.

I’ve long argued that the only way to devolve federal transportation spending to the states is to first take the pork out of the gas tax. The House bill did this by rededicating gas taxes to roads (making them once again a true user fee), distributing gas taxes using formulas (preventing Congress from earmarking), and paying for transit out of other funds. Once the pork was gone, Congress would lose interest and let the states take over. The Senate bill, of course, does none of these things, and in particular continues to dedicate a share of gas taxes to transit, which will make it a lot harder to devolve gas taxes to the states.

The only good news is that the Senate bill is just a two-year bill, which means the whole debate can begin again in 2014 if not 2013. But the House has just two weeks to accept or reject the bill, as the current law expires on March 31. If they can’t reach an agreement by March 31, they are likely to simply extend the current law, which is not a whole lot different from approving the Senate bill.

If the House had been able to pass its bill, it would have been in a much stronger position to negotiate some improvements to the Senate bill. As it is, it now has a choice between the bad law now on the books or the slightly worse bill passed by the Senate. Fiscal conservatives should encourage the House to reject the Senate bill and start the debate over.

You Keep Using the Word ‘Affordable.’ I Do Not Think It Means What You Think It Means.

The federal government gave a $10 million “affordability” prize to a giant corporation for manufacturing a $50 lightbulb. The Washington Post:

The U.S. government last year announced a $10 million award…for any manufacturer that could create a “green” but affordable light bulb.

Energy Secretary Steven Chu said the prize would spur industry to offer the costly bulbs…at prices “affordable for American families.”…

Now the winning bulb is on the market.

The price is $50.

Retailers said the bulb, made by Philips, is likely to be too pricey to have broad appeal. Similar LED bulbs are less than half the cost.

This is the same federal government that refers to ObamaCare, which costs more than $6 trillion, as the “Affordable Care Act.”

Obama: Running on Empty

Last week’s energy speech was vintage Obama: repeating the same bad ideas that he has advocated since his pre-2008 election campaign and misrepresenting both his actions and the opposition.

To be sure, he is correct that the Republicans are overstating what can be done immediately to alleviate oil price spikes.  However, he falls into the same trap as the Republicans in believing that a sensible policy exists to avoid the inevitable fluctuations in world oil prices. These fluctuations are more tolerable than the possible alternatives.

His selective statement of his policies ignores at a minimum its general anti-fossil fuel thrust with slowdowns in oil and gas leasing on federal land, the temporizing on the Keystone XL pipeline, and the massive anti-coal regulations promulgated by the Environmental Protection Agency. He continues on the paths of dictating fuel-efficiency standards and pursuing dubious alternative energy incentives. Moreover, Republican criticisms of these actions belie the assertion of exclusive concern with drilling.  There may be no silver bullet, but there are more sensible policies than Obama’s.

Otherwise the speech differs in no substantial respect from his prior efforts. Every key point from the America-can-do-it pep talk to his misleading argument about tax benefits to the oil industry was critiqued in my Cato Policy Analysis: “The Gulf Oil Spill: Lessons for Public Policy.”

Nancy Pelosi on Gasoline Prices

The congresswomen’s comments are so cartoonish, I don’t even have to comment on them. But I thought Cato readers would like to know what the minority leader of the U.S. House is saying about rising gas prices. From a Nancy Pelosi press release today:

Independent reports confirm that speculators are driving up the cost of oil, hurting consumers and potentially damaging the economic recovery. Wall Street profiteering, not oil shortages, is the cause of the price spike.

We need to take strong action to protect consumers from this speculation. Unfortunately, Republicans have chosen to protect the interests of Wall Street speculators and oil companies instead of the interests of working Americans by obstructing the agencies with the responsibility of enforcing consumer protection laws.

We call on the Republican leadership to act on behalf of American consumers and join our efforts to crack down on speculators who care more about their profits than the price at the pump even if these spikes harm the American consumer and our economy.

For a rational discussion on energy policy, see Downsizing the Department of Energy.