Jul 11 2009
TCE Exclusive Interview: Watch Out For Politically Correct Energy
On occasion, The Chilling Effect interviews experts on environment and energy. This week, we discuss current events with Tom Pyle, president of the Institute for Energy Research.
1) Tell our readers a little about IER’s history and its recent expansion in Washington, D.C.,
Our CEO, Robert Bradley, founded IER in 1989 as a repository for his scholarly endeavors with respect to free markets and energy policy. In addition, Dr. Bradley, a prolific writer and lecturer, worked to educate others in the free-market community to apply their philosophy to energy policy. Over the last few years, it became clear to our Board of Directors that energy policy was dominating the agenda in Washington and that the free-market perspective was absent from the debates. To fill that void, the Board expanded IER by opening an office in D.C. The results speak for themselves. IER led the effort to educate Congress and then-President Bush about the need to lift the offshore drilling ban. Today, we are elevating the dialogue on the fallacies of “green jobs”, cap and trade, and the real economic consequences of artificially increasing the price of energy. We are proud to say that we are considered one of Washington’s most respected all-energy-all-the-time think tanks.
2) In your research, what have you found about the cost to average American families from some of the biggest-buzz energy plans floated by politicians?
Across the board, these energy plans—cap and trade, renewable portfolio mandate, CAFÉ standards, subsidies for “green jobs”—will significantly change the American economy. We’re not just talking about an increase in electricity bills and gas prices. Energy is the lifeblood of our economy and it affects everything we need, from clothes to food to pharmaceuticals. Every product, every service, every facet of our economy requires energy, and if energy prices go up, so will everything else.
3) What do you think is the biggest misperception by Americans about energy policy, costs, etc?
The biggest misconception about energy policy is that it is possible to obtain the same reliable and efficient energy we enjoy today from politically correct sources of energy, like wind and solar. Unfortunately, these energy sources are completely reliant on government subsidies to exist.
While proponents of these sources may tell you that we can replace coal,
oil, and natural gas with wind and solar and still have affordable and reliable energy, they’re wrong. The fact is, if wind and solar were affordable and reliable, they’d already be in the market in their own right, and not be dependent on our tax dollars to exist.Wind and solar may have a future, but they will never replace the efficient, abundant, and affordable energy sources we rely on today.
4) “Green Jobs” seems to be a panacea that can cure the blind, make the lame walk, etc. What has IER found about the real nature of “green jobs”?
Well, you’re right that so-called “green jobs” are President Obama’s economic cure-all.
Unfortunately, our research shows that he’s selling little more than snake oil. In fact, one of our studies, which looked at Spain’s experience with a green jobs plan, showed that green jobs actually kill real jobs. For every green job that was created in Spain, 2.2 were destroyed in the productive economy. What’s more, out of every 10
green jobs created, nine no longer exist. To service the subsidies (debt) for these jobs, Spain’s energy prices would have to increase by 31 percent.
5) What’s your prognosis for the future of American energy policy? Will rationality return?
We certainly hope so! IER is committed to doing our part to inject truth into this debate. We consider our work to be very important, and will continue to educate consumers and taxpayers about the dangers of excessive government intervention into energy markets.
Editor’s note: We thank Tom and IER, like all of our interviewees, for taking the time to share their expertise and opinions. If you know someone who would make for an enlightening interview, please contact us at editor(at)thechillingeffect.org.
You write:
“If you know someone who would make for an enlightening interview, please contact us at editor(at)thechillingeffect.org.”
Below, I’ve copied an e-mail exchange that I have had (my reply this morning) recently with NJ Repr. Leonard Lance. Repr Lance was one of the eight Republicans that crossed the aisle to vote with the Democrats in the “Cap and Trade” two weeks ago in the House of Representatives.
The position I espouse is one that I feel takes a longer term view of all related concerns. Repr Lances’ position seems to be speaking to the “bring home the bacon = $$” for NJ- today, mentality.
I understand that perspective however I don’t agree with it.
Therefore I am proposing NJ Repr.Lance (R) (Flemington, NJ) as someone to be interviewed….for enlightenment of course.
Representative Lance, July 11, 2009
While I appreciate the positions that you have taken on the great majority of the issues for which you have voted, on the “Cap & Trade” legislation I remain opposed. The litany of immediate benefits you have listed for New Jersey are certainly impressive but I remain concerned about the longer term implications in creating an entirely new marketplace for the trading of these Carbon Tax Credits. Why not a simple, immediately quantifiable and transparent Energy Tax?
My background is in the engineering, procurement and construction (EPC) service industry. I estimate and report the costs associated with the design and construction for these sorts of facilities (e.g. power, pharma, chemical). As I’m sure you are aware, ratepayer supported power plants require the pro forma of utility board cost reviews prior to the granting of permits required for construction. This, to protect the interests of the ratepayers as consumers.
The idea of introducing a variable of capital cost tied to a fluctuating trading market that will be overseen by a government beaurocracy seems like overkill, or worse, to me. The recent financial disaster engineered by Repr.Barney Franks, Chris Dodd and Howard Reines using Fannie & Freddie to influence and then act in concert with Wall Street come to mind. To even risk a repeat of this debacle in the potential for bundling and selling off collateralized energy investment instruments should give everyone pause.
One of the primary architects of this vision, Repr. Waxman, hails from a state (CA) that is currently reeling from the cumulative effects of similar short sighted decision making. Mr. Waxman was quoted as proposing that these Carbon Tax Credits be required to be purchased even for routine maintenance projects – “turn-arounds” in industry jargon.
I fail to understand why a plant that has been built to a specific output capacity using a specific design technology would need to continually return to this carbon market (every two years or so), to purchase financial instruments that provide no further reduction in overall pollution output.
Can the costs be fully recovered by added rate increases every two years or will this particular market driven scheme result in a concatenation of unsustainable debt levels? Have these questions been raised and addressed in the sessions you have participated in ? Do you normally solicit California based Democrat politicians for your fiscal advice?
As a result of these uncertainties within the business community of public utility providers most ongoing power projects have now been cancelled. I was working for Foster Wheeler Power Group until mid-May 2009 when I too was laid off. There will be another round of lay-offs within a few weeks. Foster Wheeler Power Group North America, most likely will not survive. This is a 120 year old NJ based Engineering company. These are the true “Green Jobs” being lost as we are the ones who are most qualified to produce the next generation of power plants. We are the people who modified the power plants in the Ohio River Valley with scrubber systems that resulted in better air quality here in the east.
As a group we are growing old. Our average age is about 56 (my age). Soon enough we will all be retired and the task of building the next generation of power plants, surely a large and concerted effort, will fall to a far smaller available group of engineers. Now would seem to be the ideal time to leverage this experienced talent pool based on these issues alone. Instead we’re being laid off prematurely as a result of the feckless and myopic actions of the likes of Repr. Waxman and his acolytes in government and media.
I recently read a Washington Times article (July 3, 2009 “Energy job losers could get windfall”) outlining a stipulation included in this legislation that will ‘provide a weekly paycheck for up to three years at 70% of ones former salary.’
Of course, it wouldn’t take effect until 2012….
At the very least, this is a tacit admission that many jobs are to be lost and have been lost already. It is also a cynical attempt, at best, in making amends for the human costs resulting from the handling of this issue with the passage of this ill advised legislation.
As I see the energy problem it is one that should be dealt “on the ground” by those with the training and experience to provide the real solutions.
These solutions will take a requisite amount of time and can best be influenced by affecting normal market based investment tax incentives. In a word; harnessing the business community not harvesting them. Accelerated capital write-down’s of critical plant equipment and other associated costs are the proper way to do it. You are not going to replace coal (presently >50% of power produced) with alternatives (+/- 2% today) more quickly by enacting this legislation.
This is a calculus problem where the correct answer changes with the passage of time. Acting in haste will only ensure the creation of a new beaurocracy to support – and idle, prematurely, your engineers which are already in short supply today.
Precisely the wrong answer.
Regards,
E J Burns
—– Original Message —–
From: The Office of Representative Leonard Lance
To: blackwatch4@comcast.net
Sent: Friday, July 10, 2009 3:27 PM
Subject: A Message from the Office of Representative Leonard Lance
Dear Mr. Burns:
Thank you for contacting me in opposition to H.R. 2454, the “American Clean Energy and Security Act.” I appreciate your taking the time to share your views with me.
I voted in favor of the American Clean Energy and Security Act because the legislation greatly benefits New Jersey. The measure also moves us closer to a national energy policy that reduces our dependence on foreign oil, ensures our national security and leads to a path toward cleaner energy.
BENEFITS FOR NEW JERSEY:
“New Jersey would be a big winner under cap and trade, because emission standards here already are very stringent, allowing state firms meeting them to sell carbon or ‘pollution’ credits to others out of state.” (Daily Record, July 8, 2009)
Much of my support for the energy bill stemmed from the fact that New Jersey greatly benefits under the legislation.
New Jersey does well under the bill because we have invested in new, clean energy technologies like nuclear power that have reduced greenhouse gas emissions and created thousands of jobs. In fact, businesses created more than 25,000 such energy-related jobs in New Jersey alone.
According to the Star-Ledger, New Jersey is a “big winner” under the energy bill:
“..[M]aps, produced by the GOP leadership, that showed the winners and losers among the states. New Jersey is a big winner.
“One map shows that New Jersey ranks third behind only California and Washington state in a possible windfall from sale of allowances to other states — realizing $104 million.
“The other map.shows New Jersey as one of only 10 states that would not face increased costs for products as a result of the effort to lower carbon emissions.” (Star-Ledger, July 6, 2009)
The energy bill has been endorsed by a number of New Jersey’s leading businesses including PSE&G, DuPont, Johnson & Johnson and Petra Solar because they firmly believe the legislation would strengthen our state economy through innovative and sustainable job creation.
Former New Jersey Governor Thomas H. Kean personally telephoned me to urge my support for the legislation. I was honored to have received Governor Kean’s request.
You can find more information about how New Jersey benefits by visiting my congressional website lance.house.gov.
LEVELING THE PLAYING FIELD:
New Jersey and the Northeast are well ahead of the curve on many of the key elements of the legislation before the House. ??
Here at home, the state of New Jersey is already subject to limits on greenhouse gas emissions from power plants under the ten-state Regional Greenhouse Gas Initiative. And our state renewable portfolio standard is more aggressive than the federal program contained in the bill.
I believe it is time for other states to follow New Jersey’s leadership and do their share to set limits on greenhouse gas emissions and accelerate development of low-carbon energy sources and green jobs. By leveling the national playing field New Jersey businesses and consumers will benefit by playing under the same rules as those in other states.
Also, our air quality will improve as other states, such as Ohio and Pennsylvania, move toward low-carbon energy sources.
COST:
There has been much discussion about the cost of the energy bill should it become law. While there have been both conservative and liberal analyses of the bill, I relied upon the following cost-estimates.
First, the U.S. Department of Energy’s Energy Information Administration suggested New Jersey residents might see less than a $50 increase in 10 years, owing to the fact that the state already has similar regulations in place.
Second, the nonpartisan Congressional Budget Office (CBO) estimated nationally people would expect to see a $175 increase in annual energy costs by 2020. This is a national average over the next decade. New Jersey would not even see this level of increase because we already rely heavily on clean energy technology.
After reviewing these two non-partisan estimates, I concluded that the costs to New Jersey’s citizens would be minimal and the benefits great.
MISPERCEPTIONS OF THE ENERGY BILL
I have heard from a number of misperceptions about the energy bill.
Claim: “The legislation will mandate home efficiency standards in which the government will come in and inspect a home before it can be sold.”
New and existing houses and commercial buildings built prior to 2014 would not be affected by provisions in the energy bill.
Claim: “There’s nothing in the bill for nuclear energy.”
The Nuclear Energy Institute (NEI.org) representing our nation’s nuclear industry wrote:
“The nuclear energy industry welcomes the inclusion of provisions promoting greater use of clean-energy technologies, including nuclear energy, as part of the American Clean Energy and Security Act. House members are to be commended for including within H.R. 2454 provisions that will accelerate deployment of clean-energy technologies.
“The legislation can help stimulate construction of the advanced-design nuclear power plants that our nation needs. These provisions can help mobilize private capital and facilitate debt financing on reasonable terms for the first wave of nuclear plant projects to help reduce uncertainties and ultimately lower the cost to consumers of the electricity produced by these new energy facilities.” (NEI press release, June 26, 2009)
Claim: “The energy bill will add to our already growing national debt.”
The energy bill adds nothing to our national debt. In fact, the legislation covers its own costs and actually brings in revenue for consumers through rebates and tax credits as well as to invest in more clean energy and energy efficiency innovation.
MY FISCAL RECORD:
For my part, I am proud of my fiscally conservative record in Congress.
I am working hard to stop out-of-control spending and borrowing mandated by the federal stimulus, the congressional budget and the 9,000-earmark omnibus appropriation bill – all measures that I opposed on the floor of the House of Representatives.
Soon the Congress will turn to healthcare where I am firmly opposed to a single-payer public option. Instead, I am taking a leading in crafting a fiscally responsible health care reform alternative.
A few of my fiscally responsible votes include:
o Voting against the $1 trillion stimulus package;
o Voting against President Obama’s $3.6 trillion budget plan;
o Voting against the $500 billion omnibus spending bill;
o Voting against this spring’s $350 billion TARP bailout legislation;
o Voted against the $106 billion war supplemental measure that included billions of dollars for the International Monetary Fund;
o Voting to cut billions of dollars in wasteful and duplicative government spending; and
o Voting against raising the federal debt ceiling from $9.815 trillion to $10.615 trillion – an $800 billion increase.
IN CONCLUSION:
After careful analysis, including reading the bill and listening to the floor debate on the subsequent 300-page amendment, it is my strong view that my vote in support of the energy bill was cast with New Jersey’s best interests in mind and is consistent with my long-standing record of fiscal and environmental responsibility.
Best personal wishes.
Sincerely,
Leonard Lance
Member of Congress
Let’s apply our creative abilities to discovering and exploiting new forms of energy and get out of this static debate about the place we are at now.