Topic: Energy and Environment

Permitting Oil and Gas Exports Is a No-Brainer

Following today’s deadline for interested party comments, the U.S. Department of Energy will begin to consider sixteen pending applications to export natural gas to countries like Japan with whom the United States does not have a free trade agreement.  The issue is a contentious one: energy producers, many other U.S. companies and a large, bipartisan swath of Congress have urged DOE to approve all export license applications, but opposition has materialized among certain domestic consuming industries and environmental groups.  As a result, the Obama administration has delayed consideration of all but one application, and is expected to eventually permit a portion of the remaining exports in an attempt to placate both sides of the debate.

As I explain in a new Cato Institute paper, however, such a Solomonic decision might achieve the administration’s political objectives but will do nothing to fix the fundamental problems raised by U.S. export regulations for natural gas or similar rules for crude oil.  These exports continue to be governed by licensing systems adopted when the United States was a net energy importer and dependent on fossil fuels for energy production – a picture far different from the production, price, and trade realities that exist today due to revolutionary fossil fuel extraction technologies like hydraulic fracturing (“fracking”) and horizontal drilling.  In fact, domestic production of crude oil and natural gas has skyrocketed in recent years, driving down prices, boosting downstream industries, creating ample export opportunities and potentially reversing the United States’ historic position as a net energy importer.  However, our gas and oil export licensing systems – respectively governed by the Natural Gas Act of 1937 and the Energy Policy and Conservation Act of 1975 – continue to treat fossil fuel exports as a rarity and subject them to a long, opaque approval process under which the federal government retains ample discretion to approve or deny most export license applications.

Perhaps unsurprisingly, these outdated systems, and the restrictions they impose on U.S. exports, create a host of problems:

  • First, by depressing domestic prices and subjecting export approval to the whims of government bureaucrats, the U.S. licensing systems retard domestic energy production, discourage investment in the oil and gas sectors, and destabilize the domestic energy market. Artificially low prices prevent producers from achieving a sustainable rate of return on the massive up-front costs required to drill and extract oil and gas, and investors lack any assurances under the discretionary licensing systems that domestic prices will not collapse when output increases.  Such concerns have led the IEA to recently warn that U.S. export restrictions put the “American oil boom” at risk.  And contrary to certain politicians’ claims, independent reports show that the exportation of oil and gas would not cause a traumatic spike in prices, thus enabling consumers to continue to benefit from hypercompetitive U.S. fuel and feedstock supplies.
  • Second, restricting U.S. gas and oil exports could hurt the U.S. economy. Recent studies indicate that these exports - even in unlimited quantities - would not only benefit U.S. energy producers, but also increase real household income.
  • Third, both export licensing systems raise serious concerns under global trade rules.  The General Agreement on Tariffs and Trade (GATT) prohibits WTO Members from imposing export restrictions implemented via slow or discretionary licensing systems like those at issue here.  Moreover, several nations, including the United States, impose anti-subsidy measures (called “countervailing duties” or “CVDs”) on downstream exports (e.g., steel) due to export restrictions on their upstream inputs (e.g., iron). Thus, the crude oil and natural gas licensing systems could lead to anti-subsidy duties on energy-intensive U.S. exports that negate the very price advantages created by the licensing systems – a heightened risk, given that American exporters are increasingly targeted by foreign CVD actions.
  • Fourth, current policy contradicts several other Obama administration priorities.  Most obviously, restricting oil and gas exports undermines the president’s National Export Initiative and stands in stark contrast to his full-throated advocacy of other energy exports, particularly renewables like biofuels and solar panels. Moreover, the use of export restrictions to benefit downstream industries contradicts longstanding U.S. policy of using countervailing duties to discourage foreign imports that unfairly benefit from export restrictions on upstream inputs.  Finally, the U.S. government has long opposed restrictive and opaque export licensing systems in WTO negotiations and dispute settlement.  The current U.S. export licensing regulations for oil and gas contradict these positions and undermine multilateral efforts to rein in such restrictions.

If President Obama really wants to develop America’s vast energy resources, grow the U.S. economy, restore some coherence to U.S. trade and energy policy, and avoid potentially embarrassing trade conflicts, he should order DOE to immediately approve all, not just some, of the pending license applications for natural gas and crude oil.  He then should pursue, with Congress, an overhaul of our archaic licensing systems so that they reflect the new American energy landscape and the United States’ position as a global export power.  Such reforms would bolster investment, production, and employment in the oil and gas sector, stabilize the U.S. energy market and benefit the overall economy, avoid the myriad policy and legal problems raised by the current system, and produce a rare moment of bipartisan comity in Washington.  It’s a no-brainer.

 

Current Wisdom: New Findings on Black Carbon Spell Trouble for Climate Models

The Current Wisdom is a series of monthly articles in which Patrick J. Michaels, director of the Center for the Study of Science, reviews interesting items on global warming in the scientific literature that may not have received the media attention that they deserved, or have been misinterpreted in the popular press.

Have climate models, which are claimed by our friends like Ben Santer, to accurately represent the climate of the 20th century gotten things right for the wrong reasons?  New research on the role of carbon aerosols suggests that this may be the case. If it is, it does not bode well for the accuracy of forward projections made by the same climate models.

This would represent a classic case of “overfitting”— building a model with bells and whistles added and tuned so as to match the data at hand, but which then breaks down when trying to predict out-of-sample observations. This occurs because the overfitted model has been polished up to give the appearance of capturing the underlying behaviors driving the system—an appearance that is often good enough to fool even the model builders—but, in fact, the appearance is only skin deep, and the mechanisms driving things in the real world differ from those from which the model was built.

A recent paper by Dr. Tami Bond and colleagues finds that carbon aerosols—particulates released into that atmosphere from a variety of human activities including diesel engines, open cook stoves, poorly filtered coal burning, and open burning, etc.—have played a much larger role in impacting the climate than has been previously recognized (and included in climate models).

For instance, Bond et al. report that black carbon aerosol, or soot, is second only to carbon dioxide as the substance emitted by human activity that has the greatest warming influence on the climate—contributing a quarter (or perhaps even a bit more) to the current overall anthropogenic warming effect. Bond et al. find that the total warming impact from black carbon emissions is about 70% as large as that from carbon dioxide emissions.

These finding are similar to those reported a few years ago by Ramanathan and Carmichael but grossly dissimilar to those from the U.N.’s  Intergovernmental Panel on Climate Change (IPCC), which says that black carbon is responsible for only about 10% of the total anthropogenic warming influence. 

Apparently, climate models incorporate even less of an influence from black carbon.  According to Bond et al. “global atmospheric absorption attributable to black carbon is too low in many models, and should be increased by a factor of almost three.”

There are several interesting implications.

Media Matters Misses on Keystone XL

Media Matters is not a particularly big fan of Cato’s climatologists and their views on climate change. Apparently Media Matters prefers anthropogenic climate change be portrayed as producing a much more desperate situation than either Pat Michaels or myself is fond of presenting.

In a piece last week, Media Matters’s Jill Fitzsimmons included a quote from my recent Wall Street Journal op-ed as supporting one of the “myths” about the Keystone XL pipeline that she was set on busting. While my WSJ article was largely focused on the climate aspects of the Keystone XL, she chose a sentence from it that had to do with rerouting the pipeline to avoid the (supposedly) environmental sensitive Sands Hills region of Nebraska. Apparently she didn’t agree with my statement that “the arguments against the pipeline have all but evaporated. The route now largely bypasses the most ecologically sensitive regions,” despite a slew of environmental studies that so concluded.

But, I am less concerned about what she did quote from me than what she didn’t.

The first “myth” she took on was “Would Keystone XL contribute to climate change?” Fitzsimmons excerpts several prominent articles where the “myth” that it wouldn’t was promulgated. She quotes pieces from the Washington Post, the Washington Times, Fox News, and the Washington Examiner. But my WSJ article was not among them.

The reason why became quickly obvious—despite her claims, she really wasn’t interested in assessing the actual climate change impact of the pipeline oil, but rather in leaving the impression that it must be large.

She did this by employing the tactic commonly used by those who think that their climate mitigation plan is actually going to “do something” about climate change—that is, focus on greenhouse gas (GHG) emissions rather than climate change.

Emission mitigation from such plans, free from any larger perspective, often sounds impressively large. For instance, Fitzsimmons quotes a recent Congressional Research Service report that “the estimated effect of the proposed Keystone XL pipeline on the U.S. GHG footprint would be an increase of 3 million to 21 million metric tons of GHG emissions annually.” 

Wow. That sounds like a lot.

But, she left out that this is only between 0.06% and 0.3% of the annual U.S. carbon dioxide emissions.

She also left out the actual climate change impact of what such emissions would cause—which was, after all, the topic of her “myth.”

Since she was familiar with my WSJ article, I know she was familiar with the answer about the climate.

Here is what I wrote:

A study last year by the Congressional Research Service found that the greenhouse-gas emissions from energy produced from Canadian tar-sands oil delivered by the pipeline would increase U.S. annual greenhouse gas emissions by a paltry 0.06%-0.3%. These additional emissions have virtually no impact on the rate of global warming, increasing it by an infinitesimal 0.00001 degrees Celsius per year. This amount is too small to detect, much less to worry about.

Fitzsimmons, of course, doesn’t have to believe me, but before she doesn’t, she ought to try to do the calculation for herself. I am sure that she won’t like what she finds—which is that the story that the Keystone XL pipeline will have virtually no impact on the future of climate change is not a myth at all.

Protests at the White House, rallies on the National Mall, Media Matters articles, and all other forms of foot stomping won’t do anything to change that fact.

The Best Government Action on Climate Change Is No Government Action on Climate Change

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Many eyes will be on President Obama’s State of the Union address tonight watching to see how he follows his inauguration promise to “respond to the threat of climate change.” Rumors are flying that he will use his executive power to bypass Congress and further EPA efforts to regulate greenhouse gas emissions. But his best response would be to get the federal government out of the energy market and allow it to flourish as it may. The inconvenient truth is that the U.S. influence on global climate is rapidly diminishing as greenhouse gas emissions from the rest of the world rapidly expand. As a consequence, whether or not the United States reduces its emissions at all is immaterial to the path of future climate change and its impacts.

Several reports last week have shown that carbon dioxide emissions from the United States declined in 2012 and now stand at a level on par with what they were back in 1994. U.S. carbon dioxide emissions have dropped about 13 percent from their high in 2007.

All the while, global carbon dioxide emissions have been on the rise—primarily fueled by rapid emissions growth in developing countries, namely China (which is responsible for about two-thirds of the global increase during the past decade).

Figure 1. Emissions of carbon dioxide from the U.S., China, and the rest of the world, 1990-2010 (data from U.S. Energy Informat

Since carbon dioxide is well-mixed in the atmosphere, who actually emits it is of little consequence when it comes to its potential to lead to global warming.  This means that the global percentage of a country’s annual carbon dioxide emissions is equivalent to its annual percentage contribution to the increased warming pressure (we use the term “warming pressure” to indicate that things other than the atmospheric concentration of greenhouse gases also act to influence that global average temperature from one year to the next). Since total global carbon dioxide emissions are quickly distancing themselves from U.S. emissions, as time passes, the relative influence of U.S. emissions on the future state of the global climate is rapidly declining.

Live Blog of the 2013 State of the Union Address and the GOP Response

Please join us at 9:00PM ET on Tuesday, February 12, for live commentary during President Obama’s State of the Union address, the GOP response by Sen. Marco Rubio, and the Tea Party response by Sen. Rand Paul. Here is our panel of policy experts by research area:

General Comment and the Presidency:

Banking and Financial Regulation:

  • Mark Calabria, Director of Financial Regulation Studies (@MarkCalabria)

Infrastructure and Fiscal Policy:

Law and Civil Liberties:

Telecom and Information Policy:

  • Jim Harper, Director of Information Policy Studies (@Jim_Harper)

Health Care:

Immigration:

Education:

  • Andrew Coulson, Director - Center for Educational Freedom (@Andrew_Coulson)
  • Neal McCluskey, Associate Director - Center for Educational Freedom (@NealMcCluskey)

Energy and Environment:

  • Patrick J. Michaels, Director - Center for the Study of Science (@CatoMichaels)
  • Chip Knappenberger, Assistant Director - Center for the Study of Science (@PCKnappenberger)

Foreign Policy and National Security:

Follow their comments directly on Twitter, or come back to this page at 9:00 PM ET on Tuesday, February 12, to join us. We look forward to having you, and sharing our insights with you.

You can also follow the conversation on Twitter by following @CatoInstitute and the hashtag #SOTU.

Also watch Cato’s Libertarian State of the Union.

Why High-Speed Rail Is a Ridiculous Fantasy

High-speed rail supporter Alfred Twu has gotten a lot of attention for having boldly drawn a map of where he thinks high-speed trains should go. Never mind that Twu’s map is even more absurd than Obama’s plan. What’s sad is that the romance of trains still manages to hold peoples’ attention long after passenger trains have become technologically and economically obsolete.

Slate calls this the “liberals’ dream [of] what America’s high-speed rail network looks like.”

Anybody can draw a map, and that map is likely to reflect their own particular preferences. My ideal high-speed rail line would connect my home in Camp Sherman, Oregon (population 380) with Cato’s offices in Washington, DC. Of course, I tend to move about every eight or nine years, so by the time the rail line was finished the only potential regular customer would be gone. But just think of the jobs that would be created!

Twu lives in California, and his map has six lines radiating from Los Angeles and two from San Francisco. Twu is probably thinking either of where he would like to go by high-speed train or that everyone else would like to come to California by high-speed train. (He would also like us to “imagine no cars” in which case everyone would happily live in high-density, mixed-use developments. Like many planning types, he doesn’t understand the economics behind the horror of dumbbell tenements.)

Economist Megan McArdle points out that Twu’s New York-Los Angeles line makes little sense. Few people will want to spend 18 hours (McArdle’s estimate) in a coach seat when planes can do the same trip in six at a far lower cost. Nor will many intermediate segments, such as Chicago to Omaha or Denver to Las Vegas, attract large numbers of passengers. Thus, the trains will be fairly empty for much of the route.

McArdle doesn’t mention the even more absurd Los Angeles-Miami line on Twu’s map. As this analysis shows, Los Angeles-New Orleans is Amtrak’s least-used long-distance train, and Amtrak’s attempt to extend this route to Miami failed (partly due to Hurricane Katrina) after just a few years.

Twu’s map also includes routes from Cheyenne to El Paso; Chicago to Montreal; and a line to McAllen, Texas and beyond into Mexico. Other than the politicians that represent these regions, how could anyone take these routes seriously?

Twu’s map violates conventional wisdom among high-speed rail aficionados, which holds that trains are most competitive in 100- to 600-mile markets, not 2,000- to 3,000-miles. By “most competitive,” of course, they mean “able to capture 5 or 6 percent of the market,” which–when all modes are counted–is all that Amtrak has in the Boston-to-Washington corridor.

Rail supporters argue that Amtrak’s Northeast Corridor barely qualifies as high-speed rail as its top speed is only 150 and its average speed only about half that (which also means that none of the lines funded by the Obama administration, outside of California, qualify either). But dreaming about faster trains does little to change the fact that the fastest trains in the world are only about half as fast as jet aircraft, nor the fact that more Americans live and work within a few minutes of airports than downtown train stations. Anyone who is really serious about speeding travel would find ways to speed airport security, which would cost a lot less and do a lot more to help a lot more travelers than building multi-billion-dollar rail lines.

Here’s the real problem: America is a two-dimensional place, and we have a 4-million-mile network of highways and streets that allows anyone to get from practically anywhere to practically anywhere else in the contiguous 48 states. Rail lines are one dimensional, and what is worse they serve only selected points on that one-dimensional line. The number of people going from one point served by trains on a line to another point will be a small fraction of the total travelers in any given corridor.

Cato Scholars Speaking at Students for Liberty Conference — Join Us

The 2013 International Students For Liberty Conference, now in its sixth year, will bring over a thousand students and young liberty activists to Washington, D.C. to talk about ideas, hear from leading policy experts, and network with organizations and each other. I’m proud to have been the first speaker at the first ISFLC conference, in New York in 2008.  This year, the conference will be hosted at the Grand Hyatt Washington Hotel, just three blocks from the Cato Institute.

I will be presenting two lectures that weekend, a session with Young Americans for Liberty on “The Ten Ways to Talk about Freedom” and a luncheon keynote in Cato’s Yeager Conference Center on Reclaiming Freedom: The Case for Libertarian Ideas in Mainstream Politics. Plus I’ll be on a special taping of the “Stossel” show.

Other Cato scholars will be speaking on policy issues throughout the conference.  All of the below sessions will be taking place in the Hyatt’s Constitution room B.

Saturday, February 16
10:00-10:45am Restoring Constitutional Liberty Roger Pilon
11:15-12:00pm Privacy Under Attack Jim Harper
12:10–1:20pm Reclaiming Freedom: The Case for Libertarian Ideas in Mainstream Politics *Luncheon @ the Cato Institute* David Boaz
1:30-2:15pm The Clone Wars: Fighting to Educate Free Individuals Neal McCluskey
2:45-3:30pm A Foreign Policy for Advancing Liberty Abroad (without Undermining It at Home) Christopher A. Preble
4:00-4:45pm Economic Growth and the Future of Liberty Brink Lindsey
5:15-6:00pm How the Government Uses “Science” to Take Away Your Stuff Patrick J. Michaels
     
Sunday, February 17
10:00-10:45am How to Win Every Libertarian Argument Jason Kuznicki
11:15-12:00pm Why Libertarians Should Care Much More about Immigration Alex Nowrasteh

To attend the student luncheon event, please register online or sign up for your ticket at the Cato booth at the conference exhibit hall.