Tuesday, May 31, 2011

NY Attorney General Sues Feds Over Fracking for Natural Gas

New York Attorney General Eric Schneiderman has filed a lawsuit alleging that the federal government failed to perform required environmental reviews of proposed natural gas drilling regulations.  The lawsuit alleges that the federal government must conduct further studies of the potential environmental impacts of hydraulic fracturing ("fracking") in the Delaware River Basin.

Fracking is a process of injecting water, chemicals and sand into a well bore at high pressure to release natural gas by fracturing the surrounding shale.   The specific chemicals used in the process have not been fully disclosed by the natural gas industry, raising questions about potential harms to the environment and human health.

Regulations proposed by the Delaware River Basin Commission would allow 15,000 to 18,000 gas wells to be drilled within the river basin without the full environmental review usually required by law..

John Howley
Woodbridge, New Jersey

Friday, May 27, 2011

Conservative and Liberal Think Tanks Endorse Putting a Price on Carbon Emissions

The Peter G. Peterson Foundation asked six think tanks representing "the wide scope of American political thought" to develop comprehensive plans for putting the country on a fiscally sustainable long-term path. Four out of the six groups concluded that the US should eliminate subsidies for fossil fuels and impose either a carbon tax or a cap-and-trade program to increase federal revenues.

The American Enterprise Institute argued that the US should end energy subsidies and greenhouse gas regulations in favor of a carbon tax. AEI would begin with a tax of $26 per metric ton of carbon emissions to be phased in between 2013-2017, and then increased by 5.6% per year through 2050.

This is not coming from a bunch of tree-hugging socialists. You may recall AEI as the home of many of the intellectuals and business leaders who formed the brain trust of the Reagan Administration. Not much has changed. The AEI Board of Trustees continues to include a who's who of conservative and libertarian academics and business leaders, including former Vice President Dick Cheney.

Nor is this a new position for AEI. In 2007, AEI argued that "the best way to reduce greenhouse gas emissions is to tax the carbon content of fuel to build in the cost of the environmental impact." AEI now argues that taxing carbon emissions is also a good way to reduce the federal deficit.

The Economic Policy Institute proposed using a carbon tax or a cap-and-trade program to address the societal cost of greenhouse gas emissions and reduce the federal deficit. It also called for a gradual increase in the motor fuel excise tax by 15 cents in 2019 and 25 cents in 2024.

The Roosevelt Institute Campus Network proposed a carbon tax as more efficient than a cap-and-trade system, because a carbon tax would provide more certainty about future prices. It called for an upstream tax on carbon of $24.33 per metric ton beginning in 2013 with an increase of 5.6 percent each year. According to the Congressional Budget Office, this would reduce carbon emissions by 36 percent by 2026.

The Center for American Progress called for reducing greenhouse gas emissions and reliance on foreign oil with a price on carbon and an oil import fee. It proposed a $5 per barrel tax on oil imports and an unspecified price on carbon emissions.

Two other think tanks also participated in the Peterson Foundation's efforts to find sustainable fiscal solutions.

The Bipartisan Policy Center could not reach agreement within its organization on the issue of a carbon tax, but its report did note that “a tax of $23/mt of CO2 emissions in 2018, increasing at 5.8pc annually” would raise $1.1 trillion to reduce the deficit while cutting carbon emissions by 10%

The Heritage Foundation was the only think tank that did not include a carbon tax or cap-and-trade program in its recommendations.

What to make of all this?  Not much, I'm afraid.  Remember the Simpson-Bowles Deficit Reduction Plan?  They also proposed some honest, tough measures to get us out of our fiscal and environmental mess.  But it's not clear that we want to take the medicine.

John Howley
Woodbridge, New Jersey

Tuesday, May 24, 2011

What TEPCO Didn't Tell Us About Their Nuclear Meltdown

After nearly two months of assurances, the Tokyo Electric Power Co (TEPCO) revealed today that not just one but three of the nuclear reactors at their Fukushima Daiichi nuclear power plant suffered meltdowns of fuel rods very soon after the plant was disabled by a massive earthquake and tsunami.

This disclosure contrasts with TEPCO's earlier statements that meltdowns of fuel rods had occurred in only one reactor.

The company assures us that "most" of the melted fuel is covered with water in all three reactors now, and that the temperatures of the melted fuel rods are below dangerous levels.

Really? The massive earthquake and tsunami caused a disaster and raised serious questions about the viability of nuclear power worldwide. Now the greatest threat to the nuclear power industry is candor. If there is any hope for nuclear power, it will only come after the industry itself demands that TEPCO come clean with all the facts.

John Howley
Woodbridge, New Jersey

Saturday, May 21, 2011

Nuclear Energy's Double Moral Hazard

Tepco, the owner and operator of the stricken Japanese nuclear power plant, announced record losses of 1.25 trillion yen related to the cost of containing the worst nuclear accident since Chernobyl. That is almost 1,000 times Tepco's annual profit of 135 billion yen last year.

Granted that the triggering event for this nuclear catastrophe was an extraordinary earthquake and tsunami, but the facts so far suggest that the utility made decisions that increased the risks and harms -- from a design that put back-up generators in a part of the plant that would be underwater if a tsunami struck, to delays in emergency cooling measures after the event which some say was an effort to avoid taking actions that would render the plant inoperable in the future.

Tepco's managers, shareholders, and bondholders received the benefits and shared in the profits of this risky plant before the disaster. Will they suffer the losses and other consequences now?

The first "moral hazard" issue is:  Is Tepco too big too fail? It is the largest electric utility in Asia and the fourth largest in the world. It supplies power to a large portion of Japan including Tokyo. Will the government let the utility fail?

Of course not. The utility is too big to fail. The only issues are (a) how it will be kept alive so it can continue providing power, and (b) how much of the losses will be suffered by management, stockholders, and bondholders.

So far, the answer is muddled. The government has not taken over. Yes, the President of Tepco has resigned. But before leaving he appointed his own successor from inside the company.

On the investment side, the government must decide how to treat shareholders and bondholders when it bails out the utility in order to keep it running. The investors knew this company had nuclear power plants in one of the most earthquake and tsunami prone nations on earth.

This moral hazard may be in the past, because Japan may be finished with nuclear power (at least for now). But if Japan has any intention of building new nuclear power plants, how it treats Tepco investors in a bailout now will have a significant impact on the availability and cost of capital for those plants in the future.

Which brings us to the second moral hazard. Is it moral to place the health and environmental risks of nuclear power -- serious illness, death, contamination of the earth for generations -- on those who live and work near the plants?

John Howley
Woodbridge, New Jersey

Friday, May 20, 2011

24 Hour Solar Energy Plant Backed by US Guarantee

The US Department of Energy is providing a conditional $737 million loan guarantee to support a 110 megawatt concentrating solar power (CSP) plant in Nevada that will be capable of providucing round-the-clock electricity, even at night.

The CSP plant will use mirrors to heat molten salt to approximately 1,050 degrees Fahrenheit, which will heat up water to power a traditional steam turbine. The molten salt stays hot for up to 10 hours, allowing the plant to continue to produce power even after the sun has set.

The Crescent Dunes Solar Energy Project will be the tallest molten salt tower in the world. SolarReserve, the project proponent, expects the plant to create 600 construction jobs and 45 operations jobs. The plant is expected to produce 500,000 megawatt hours per year, enough to power more than 43,000 homes.

John Howley
Woodbridge, New Jersey

Saturday, May 14, 2011

President Obama Grants One-Year Extension on Oil Leases

President Barack Obama granted oil companies a one-year extension on leases in parts Alaska and the Gulf of Mexico. This action comes as the President faces pressure to do something about rising prices at the pump. It also comes just days after the Senate grilled oil company executives on high gasoline prices and record oil company profits. It gives the oil industry a significant win on its wish list.

The Obama Administration also announced that it will order the Department of the Interior to commence new lease sales in Alaska’s petroleum reserve, with the goal f having at least one lease sold by the end of 2011. It will also speed up environmental reviews.

John Howley
Woodbridge, New Jersey