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Posts from — February 2012

Petroleum Development in the Ecuadorian Amazon: Setting the Record Straight (Part I: Was Ecuador ever subservient to foreign oil firms?)

[Ed. Note: In this three-part series, Douglas Southgate, an economist and professor at Ohio State University, addresses key issues at the heart of Ecuador’s claims of “reckless environmental damage” against Chevron, and, through them, international oil companies (IOCs). Part II and Part III will address two other charges: that the small, South American nation has benefited little from energy-resource development, and that environmental damage is the responsibility of foreign firms alone.  These postings are timely in light of a recent article in The New Yorker,[2] a new book about the construction of a trans-Andean pipeline,[3] and other literature in which IOCs’ actions in Ecuador are criticized.]

Part I in this series challenges the charge from the Ecuadorian régime’s (and its U.S. backers) that:

(1) Ecuador was an innocent seduced by the siren song of Big Oil, and became a vassal to their interests;

(2) Ecuador’s relationship to its oil potential was merely passive; and

(3) Oil development monies did not benefit Ecuador.

In fact, the country moved aggressively to capture the lion’s share of the benefits created by private investment. Nationalization and taxation left the government with 97.3 percent, or $22.7 billion, of the monetary returns created by the concession originally developed by Texaco and Gulf between 1972 (when production and exports began) and 1992 (when the state oil company gained complete ownership of the concession).[1]

The Legal Setting

Continuing appeals of a February 2011 ruling by a district court in the Amazonian lowlands of eastern Ecuador and charges of fraud leveled against plaintiffs’ counsel [4] are recent and noteworthy developments in a legal campaign launched nearly two decades ago against Texaco, which along with Gulf Corporation began drilling for petroleum in the region during the 1960s and which has been affiliated since 2001 with Chevron. [Read more →]

February 15, 2012   3 Comments

Regulatory Fatigue: A Small Business Perspective (Industrial heating industry needs affordable energy)

The health of our businesses is (or should be) a concern for all of us. As 2012 is still in its infancy, let’s take some time to reflect on new and upcoming regulations. Why? Because regulations are a part of the reason we are stuck between 8 and 9 percent unemployment and why business leaders are so uncertain of our economic future and unwilling to invest in it to create jobs. It’s a vicious circle.

This vicious circle has consequences, as explained by Cynthia Magnuson of the National Federation of Independent Business. She indicated that Washington’s recent policies have worsened the three top concerns among employers: healthcare costs, corporate tax complexity, and increased government regulations. Another business leader suggested that we “need to drain the regulatory swamp.”

Over the past three years, that swamp has gotten deeper. There are currently more than 4,200 proposed federal rules awaiting approval. Those that impact small businesses have increased more than 11% since 2009. The rule maker hurting job creators the most – and likely to have the greatest impact in our industry – is the EPA. They are currently considering hundreds of regulations.

To see the regulation shift over the past decade, go to www.industrialheating.com/regs. [Read more →]

February 14, 2012   3 Comments

Wind Power Panic: AWEA’s Last Stand (death spiral looms for taxpayer-dependent industry)

If you haven’t heard from the American Wind Energy Association (AWEA), you probably will.

Ominous, scary ads are running nationwide warning of the crushing blow to American jobs if Congress fails to extend the Production Tax Credit (‘PTC’), the 20-year ‘temporary’ subsidy most credited for market growth in the wind sector. The PTC is due to expire at the end of this year.

Most of the ads target particular House members who, so far, have resisted the industry’s demands for their PTC earmark. The pressure is particularly heated right now as Congress negotiates the payroll tax holiday bill, which is viewed by many as the last best chance to attach an extension of the PTC before November’s presidential election.

AWEA is also leaning on its friends to do its bidding. Politicos from wind-friendly states like Iowa, and Kansas have written letters to members of the Congressional conference committee that’s now hashing out the tax bill. The letters repeat the same tired talking points about jobs.

Jobs Fallacy

It’s embarrassing to see these politicians blindly repeat what they’ve been told with no apparent understanding of the costs and impacts of pro-wind policies. Government (taxpayers) do not create jobs on net. Resources taken from the private sector reduced demand and thus (unseen) jobs to create the seen (wind) jobs.

But higher energy costs and misallocated resources in the process make us all poorer. Henry Hazlitt refuted ‘green jobs’ decades before the term was invented in Economics in One Lesson via his explanation of seen-versus-unseen jobs.

A Ballooned Subsidy

Do you think Senator Harkin or Governor Brownback realize that since the PTC was adopted in 1992, its annual cost has ballooned from $5 million a year in 1998 to over $1 billion annually today. Or that this open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh? In many regions of the country the PTC equals, or exceeds the wholesale price of power! [Read more →]

February 13, 2012   41 Comments

Julian Simon Remembered (Would have been 80 today)

“[Julian] Simon found that humanity progressed not only by solving immediate problems within the existing institutional framework but also by creatively improving the framework over time. . . . In the short run, members of society adopt localized technical and contractual fixes. In the medium range, they may explore government regulatory policies. In the longer term, they expand the scope and scale of the liberal institutions. These institutions of economic freedom—private property, binding contracts, and the rule of law—improve incentive structures that foster both economic well-being and environmental stewardship.”

- Fred Smith, “Introduction,” in Robert Bradley, Julian Simon and the Triumph of Energy Sustainability (Washington, D.C.: ALEC, 2000), p. 12.

Julian Simon (1932–98) would have been eighty years old today. MasterResource is inspired by his contributions to energy (what he labeled “the master resource”), as well as his open-ended view of human ingenuity (what he called “the ultimate resource”).

Who can forget Simon’s statement: “It’s reasonable to expect the supply of energy to continue becoming more available and less scarce, forever.” [1] That one got the neo-Malthusians (fixity-depletionists) mad!

Or this: “Discoveries, like resources, may well be infinite: the more we discover, the more we are able to discover.” [2] The cascading effect of human discovery, indeed, the open-endedness of entrepreneurship (and in the mineral world, resourceship), is a very powerful explanatory concept.

And his public policy conclusion: “The world’s problem is not too many people, but a lack of political and economic freedom.” [3] Simon elaborated:

[

February 12, 2012   10 Comments

How Capitalism Makes Catastrophes Non-Catastrophic (Key data point for energy/climate debate)

One of the greatest and most unheralded successes of industrial capitalism is making our climate eminently livable.

The mass-production of sturdy, weather-proof buildings … the universal availability of heating and air conditioning … the ability to flee the most vicious storms through modern transportation … the protection from drought through modern irrigation … the protection from disease through modern sanitation–all of these have led to a 99 percent reduction in the number of climate-related deaths over the last century.

Given how obsessed America is about climate change (or some intellectuals/politicians want us to be), these facts should be well-known and incorporated into every discussion of industrial policy. Those who claim to care about a livable climate for the future should strive to understand the mechanisms by which industrial capitalism has already created the most livable climate in history.

If they did so, they would learn from such thinkers as Ayn Rand and Ludwig Von Mises how capitalism, by permitting only voluntary associations among men, unleashes the individual human mind–and that millions of such minds, free to associate and trade however they choose, will engage in stupendously intricate, collaborative planning for everything from how to make sure they can always get groceries to how to account for nearly any conceivable weather contingency.

Armed with an understanding of individual freedom and individual planning, the climate-concerned would suspect that any preventable problem in dealing with weather–such as widespread vulnerability to flooding–is caused by government interference in voluntary trade, such as taxpayer-financed flood insurance that encourages people to live in high-flooding areas.

Center for American Regress?

Unfortunately, an understanding of capitalism and climate is sorely lacking at the Center for America Progress, the hottest left-wing think-tank today. On its blog, ThinkProgress, the Center recently ran a piece by Christian Parenti entitled Climate Action Opponents Are Ensuring the Outcome They Claim to Oppose: Big Government. [Read more →]

February 10, 2012   16 Comments

Texas Windpower: EU Energy, Enron Legacy

Texas and Europe don’t have a lot in common. But when it comes to government support for renewable energy, the Lone Star state has followed the same course as many European nations.

In the late 1990s, while the European Union was urging member nations to adopt targets for the percentage of their energy produced from renewable sources, Texas enacted a renewable portfolio standard (RPS) mandating that the state’s competitive electric providers buy a minimum 2,000 MW of qualifying renewable energy by 2009. The purchase mandate was part of a broad electricity restructuring bill sponsored by Enron Corp., parent of Enron Wind Corporation, a story detailed elsewhere at MasterResource.

The Texas Legislature, with the support of Governor Rick Perry, later increased the RPS to 10,000-MW by 2025. Texas met this target for installed wind capacity in 2010, a full fifteen years ahead of schedule. Subsequent attempts to increase the mandate, and to carve out a solar mandate, have been repulsed by a more free-market legislature.

Almost all of this renewable generating capacity comes from wind, and in particular from industrial wind parks in the rural West Texas. Texas is currently one of the world’s largest producers of wind energy, and home to the largest single wind facility in the world, the 781-MW Roscoe Industrial Wind Park.

Appendage Energy

In practice, Texas windpower offers much less energy than first appears. Texas’s wind farms are concentrated in the Texas Panhandle, far from the focus of the state’s electricity demand along the I-35 corridor. In addition, Texas wind tends to blow hardest at night and during off-peak (non-summer) months, when there is less overall demand absent air conditioning load. [Read more →]

February 9, 2012   14 Comments

‘Windfall’: A Civil War Film (Roger Ebert et al. reviews spell trouble for Industrial Wind; DC Environmentalism)

“‘Windfall’ left me disheartened. I thought wind energy was something I could believe in. This film suggests it’s just another corporate flim-flam game. Of course, the documentary could be mistaken, and there are no doubt platoons of lawyers, lobbyists and publicists to say so. How many of them live on wind farms?”

- Roger Ebert (February 1, 2012) 

Three major reviews on WINDFALL–a 1 hour 22 minute exposé that I previously reviewed at MasterResource–is another important development in the growing grassroots pushback against industrial wind parks. As such, it  is a welcome advance from the photo-shopped image of wind as a benign, costless form of modern energy.

Here are excepts from each of three reviews of national import.

Roger Ebert

Here is Robert Ebert’s review of Windfall (February 1, 2012). [Read more →]

February 8, 2012   16 Comments

California Condors vs. Industrial Wind (a biodiversity warning that Big Environmentalism does not want to hear)

Save the Eagles International (STEI); North-American Platform against Windpower (NA-PAW); and the World Council for Nature (WCFN) just issued a biodiversity warning concerning the California Condor. The press release, slightly edited, follows.


Having spent tens of millions of dollars of taxpayers’ money to recuperate the species, politicians are now allowing its habitat to be invaded by hundreds of wind turbines, of the kind that are killing an estimated 2,000 vultures a year in Spain.

Compared to Spain’s population of 40,000 vultures, there are only 400 California condors, most of them likely to have close encounters with Kern County’s projected wind turbines at some point in their long lives–unless the birds are kept captive, as many presently are.

Kern County Problem

As reported by Forbes Magazine in the January 16, 2012, piece, Wind vs. Bird, U.S. Fish & Wildlife Service biologists have alerted Kern County officials to the fact that most of the wind projects on their drawing board, as well as at least one existing wind farm, are a threat to the condor. (1)

“The service requests that the county of Kern exercise extreme caution in developing wind energy within the Tehachapi area because it falls within the range of the California condor,” warned senior biologist Raymond Bransfield. But county officials are now poised to approve lethal wind turbines where condors fly. Humans are not treated differently: health and other adverse effects on local residents are also being overridden to meet Sacramento’s green energy targets. [Read more →]

February 7, 2012   4 Comments

Reverse Protectionism: Waxman/Markey ‘Fix’ for Keystone XL

Today and tomorrow, the House Energy and Commerce Committee will mark up H.R. 3548, the “North American Energy Access Act,” Rep. Lee Terry’s (R-Neb.) bill to nullify President Obama’s rejection of the Keystone XL Pipeline. The bill requires the Federal Energy Regulatory Commission (FERC) to issue a permit for the pipeline within 30 days of receiving an application. If FERC fails to act on the application within the 30-day period, the bill deems the permit to have been granted.

Waxman and Markey: From Cap-and-Trade to Ban-the-Trade

Committee Democrats lack the votes to defeat the bill, but they hope to use the markup to turn the rhetorical tables on Republicans, who claim Keystone XL will enhance U.S. energy security by reducing our dependence on Middle East oil.

Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) will offer an amendment barring exports from the USA of any Canadian oil shipped via the pipeline and requiring all petroleum products made from Keystone crude to be sold in U.S. domestic markets.

Waxman and Markey know full well that such restrictions would impair the profitability and competitiveness of U.S. refiners, potentially causing them to back out of the long-term sales contracts they negotiated with pipeline builder-operator TransCanada Corp. They know, in other words, that the amendment could scuttle the Keystone XL project and, therefore, that Republicans will vote against it.

But that’s the point. By forcing Republicans to vote no, Waxman and Markey hope to “expose” Keystone XL as an “export pipeline” and, thus, supposedly, as an energy security “scam.” The question they’re likely to pose again and again: If you Republicans really believe the pipeline will reduce U.S. oil imports from unstable, undemocratic, or unfriendly countries, then why won’t you guarantee in law what you say is going to happen anyway? [Read more →]

February 6, 2012   16 Comments

Bradley’s Political Capitalism Project (Part IV: Who is John Galt?)

In the closing act, we have the protagonist foisting on the world a set of insights, which we proceeded to dissect in Act II and Act III. Is there a happy ending to our play? Alas, it is a tragedy.

The Bradley Project, which can be overviewed at his website Political Capitalism,  brilliantly narrates the ethos of what he calls “Heroic Capitalism” in contrast with “Political Capitalism.” As applied to energy policy, Bradley is largely correct in his insights that the energy industry has become so mixed up with the mixed economy that corporate leaders legitimately fear that capitalist advocacy will be punished.

As an out-of-the-closet energy policy market advocate, I have often been privately besieged to take public positions that corporations were loath to take publicly because of their fear of regulatory retribution.

Thus, we have lost any truly national champions for the views expressed in the Bradley Project. We have bit players. I have run small pro-market energy think tanks for more than a decade, after a career of almost 20 years in government advocating pro-competitive energy policies. Bradley has run the Institute for Energy Research even longer. We have been on the front lines, as have some others in the think tank community, credit the Cato Institute, Heritage Foundation, American Enterprise Institute, and even to some extent, Brookings Institution.

But Bradley names only one nationally recognized corporate advocate of pro-competitive energy policies: Charles Koch. I would argue, however, that while Mr. Koch has applied his pro-competitive thinking to his company and has generously supported some think tank efforts, he has not really taken on the mantle of the national leader of a free-market-in-energy movement. [Read more →]

February 5, 2012   2 Comments