Read about the "fiction" in Obama's recent Energy Speech

Rust points out the "disastrous" results if the president's plans are put into effect

President Obama’s University of Miami Energy Speech---

A Prescription For Disaster

James H. Rust

President Obama’s Energy Speech at the University of Miami February 23 added more details to his energy thoughts as given by his State Of The Union Speech and 2013 Fiscal Year budget submitted to Congress. An advance copy of President Obama's Miami Energy Speech posted by Steve Milloy's Junkscience is given by the following url: http://junkscience.com/2012/02/23/obamas-miami-energy-speech/

These ideas are based upon curtailing use of fossil fuels, in particular coal, due to fears carbon dioxide produced from combustion causes catastrophic global warming. This motivation will guide future energy policies for the next four years. Policies implemented and policies ignored lead to a dismal economic future for the United States.

The United States has the most abundant fossil fuel reserves in the world, the greatest agriculture system, and the most innovative population, which should lead to prosperity for centuries. A few remarks about current energy policies follow:

President Obama decried high gasoline prices and said his opponents will shout the 30-year old solution—"drill, drill, drill"—that has not worked. He said: “Anyone who tells you we can drill our way out of this problem doesn’t know what they are talking about…The U. S. consumes more than a fifth of the world’s oil. But we only have 2% of the world’s oil reserves.” President Obama could not be more wrong.

Our annual consumption of oil is about 7 billion barrels. Reserves in Alaska exceed 35 billion barrels of oil, reserves offshore 29 billion barrels, and oil shale reserves in Texas, Wyoming, Montana, and North Dakota exceed 1 trillion barrels. Another trillion barrels of oil are in Canada’s Alberta province adjacent to Montana. TransCanada’s proposed Keystone XL pipeline, for which President Obama refuses to allow construction, is to transport 700,000 barrels per day of Alberta’s oil to Texas. Individuals with President Obama's thinking have stalled developing the more than 10 billion barrels of oil in the 2000-acre portion of the 19 million-acre Alaskan National Wildlife Refuge for more than 30 years.

President Obama mentioned the United States produced more oil in 2011 than in the past eight years. This is true due to recent increased oil production on state and private lands in North Dakota, and natural gas wells in Texas, Ohio, and Pennsylvania. This is in spite of millions of acres of Western land being declared out of bounds for exploration by the Department of Interior, delays in permitting exploratory drilling in Alaska, and delays in off shore drilling on the East Coast and the Gulf of Mexico. Has Shell Oil Company been given permits to do exploratory drilling off Alaska that it has been seeking for years? The year 2011 had a few glimpses of economic brightness due to increased private sector oil and natural gas production, in spite of Obama Administration policies.

President Obama made a big issue of an agreement with Mexico to open 1.5 million acres (2350 square miles) of the Gulf of Mexico for exploration that could yield 172 million barrels of oil and 304 billion cubic feet of natural gas. These numbers may appear large; but they only amount to 9 days consumption of oil and 5 days consumption of natural gas by the United States. This amount of oil that would take decades for delivery to the United States what could be delivered in 250 days by the Keystone XL pipeline. Just one of the new 1100 Megawatt nuclear power plants being constructed near Augusta, GA, could save this amount of natural gas in 3.7 years.

President Obama said the country needs to exploit “every available source of American energy—oil, gas, wind, solar, nuclear, biofuels, and more.” He complains “four billion of your tax dollars subsidizes the oil industry every year.” At the same time, we need “to double-down on a clean energy industry that’s never been more promising.”

Wind, solar, and nuclear provide electricity, and we use very little oil in producing electricity. Thus, these sources provide no immediate relief from oil consumption. For years solar and wind has been provided subsidies of grants or government-guaranteed loans for plant construction, requirements for utilities to buy back electricity from these plants at costs way above conventional electricity costs (feed-in-tariffs), and mandates (renewable portfolio standards--RPS)to use their electricity regardless of cost. California has one of the most stringent mandates in the nation with an RPS of 20 percent renewable electricity by December 31, 2013 and 33 percent by 2020. As of May 2011, the all-sector cost of electricity in California was 13.38 cents per kilowatt-hour—36 percent higher than the national average of 9.87 cents. A string of bankruptcies from solar energy plants show solar energy is not economical—winners are bankruptcy lawyers and losers are taxpayers and electricity-rate payers.

Biofuels consist mostly of ethanol produced from corn. In 2011, five billion bushels of corn was converted to twelve billion gallons of ethanol, which caused the wholesale price of corn to rise to $7 per bushel against $2.50 a few years earlier. Much research shows it requires more energy to make ethanol than is contained in the product. The situation will get worse in the future due to mandates from the 2007 Energy Independence and Security Act to use 35 billion gallons of ethanol as fuel by 2022. Wikipedia states a 2010 study by the U. S. Congressional Budget Office found the cost to taxpayers to replace one gallon of gasoline with ethanol was $1.78. The whole country suffers because of food price inflation due to this program. Some policy experts speculated increased worldwide corn prices might have been a primary cause of Arab Spring uprisings that started in January 2011 due to starvation-level food prices. Let U.S. farmers export the five billion bushels or more of corn wasted on ethanol production, or its equivalent, to alleviate world hunger.

One of the “more” clean energy forms referred to by President Obama is battery-powered cars. Presently electric car purchasers are given $7500 by the federal and various other amounts by state governments to stimulate sales. In order to stimulate more sales from the dismal 16,000 in 2011, President Obama is proposing raising the “gift” to $10,000 in 2013. Because electric cars cost from $35,000 to over $100,000, these subsidies are clearly for the highest-income people in the country. It is easy to show electric cars provide no energy savings because their energy use must be traced back to power plants from which electricity to charge batteries originated. These cars are compacts and their equivalent energy consumption is the order of 30 mpg versus 40 mpg from cars they compete against. About $5 billion has been given as subsidies to manufactures, buyers, and placement of charging stations in homes and elsewhere.

President Obama only mentioned nuclear power once in his speech; but it has promise for extending our fossil fuels hundreds of years in the future. Just one of the two 1100 Megawatt nuclear power plants under construction near Augusta, Georgia could save the consumption of 230 million tons of coal or 5 trillion cubic feet of natural gas during its 60-year lifetime. These numbers represent 23 percent current consumption of coal or natural gas in the United States.

The public may not be aware; but since 1983 all electricity produced by nuclear power paid a fee of 0.1 cents per kilowatt-hour to the federal government for future storage of nuclear waste. The annual fee today is $800 million and cumulative payments the past 28 years have to exceed $16 billion. Back in the 1980s a multi-year search was made all over the United States to find the best location to store nuclear wastes. After much study, it was decided the Nevada Yucca Mountain location was best and construction started to prepare the site. After $13 billion was spent on the project, President Obama decided to stop construction and revisit site selection. After all the work and money spent on Yucca Mountain, it seems inconceivable a better site could be found.

Only a few percent of materials in nuclear power plant spent fuel elements is considered waste. This is a small volume compared to fuel element volume. The majority of materials is uranium and plutonium that can be used as fuel for future power plants. These materials are reclaimed by a process called nuclear fuel reprocessing. To date the United States has not built a facility to reprocess fuel elements from our commercial nuclear power plants. As a result of this policy, spent fuel elements are stored on site at nuclear power plants for times exceeding forty years. One of the lessons learned from the Fukushima Dai-ichi nuclear power plant accident is the presence of spent fuel elements creates problems. It seems prudent for the United States government to reprocess nuclear fuels to remove spent fuels elements from plant sites. This dramatically reduces nuclear-waste volume and allows a site like Yucca Mountain to permanently store materials for thousands of years. Building these facilities will create jobs. Taxpayers should not to pay for this project—use fees paid by customers of nuclear power generation.

President Obama’s energy speech was long on words and solved no problems. He suggested expanding subsidies for renewable energy that are a total waste. Solar and wind power plants have lifetimes of 20 to 25 years. After this time, there is nothing left to show for money spent. Biofuels are not needed at this time because of our vast fossil fuel reserves. Some projects to conserve oil can be achieved at no cost to taxpayers. Eliminate use of heating oil by extending natural gas pipelines to areas where heating oil is used. Due to heating oil costing 6 or 7 times more than natural gas, customers can pay for pipelines by lowering their heating bills by a factor of two. Once pipelines are paid for, customers receive true cost benefits. Use liquefied natural gas for producing electricity in Hawaii instead of oil. This could substantially reduce electricity cost of 36 cents per kw-hr paid by Hawaiian customers.

President Obama mocked the four billion dollar subsidy given oil companies each year. Is it in the form of taxpayer grants to oil companies for explorations, build pipelines, build refineries, or build filling stations? Is there a mandate forcing citizens to buy gas from a particular company or pay a government selected price? Or is it a tax deduction for costs of doing business that all other forms of business are granted? Oil companies seem like a nice whipping boy in times of stress. That can divert attention away from terrible mistakes in energy policy. There are vast oil reserves across the world. It would not be prudent energy policy driving oil companies to other countries to search for oil as was done in 2010-11. Multi-million dollar rigs that left the Gulf of Mexico in 2010 for exploration in Brazil, Africa, and the Middle East may never come back.

Much attention is devoted to the United States’ loss of employment in the manufacturing sector due to technology improvements and movement of jobs out of country for lower paid employees. Production of energy from coal, uranium, oil, and natural gas is manufacturing. Six hundred tons of coal, four hundred barrels of oil, or ten million cubic feet of natural gas has the same economic value of making a $30,000 car or harvesting 4000 bushels of corn. Millions of high-paying jobs can be created to satisfy domestic energy use and an expanding export market. These jobs can't be outsourced because raw materials are domestic. The beauty of this activity is no government subsidies are required, and government revenues increase by trillions of dollars through royalty payments, business and income taxes.

It is difficult to find reasons for energy policies we have today. In this Lenten season it may be wise to fall back on the words of Jesus two millennia ago when on the cross he said, “Father forgive them, for they know not what they do."

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Dr. Rust is a retired nuclear engineering professor from Georgia Tech with over fifty years of experience in areas related to energy policy.

Coming to a state near you - a tax on miles driven, instead of fuel consumed

Read Care favorite Furchtgott-Roth's take on the issue

Taxing Miles Driven Over Fuel Consumed

By Diana Furchtgott-Roth

RealClearMarkets.com
March 1, 2012

SALEM, OREGON--It was an unusually sunny day in Oregon on Monday, and at the Oregon Department of Transportation Jim Whitty was in a sunny mood. Even though last year the state legislature ended his pilot program to replace motor vehicle fuel taxes with a charge for vehicle-miles traveled, he is going back to the drawing board to come up with a revenue substitute for taxes, road charges based on gallons of fuel purchased.

Cars are becoming more fuel-efficient and rising gasoline prices are discouraging driving. As the Transportation Department's Manager of Innovative Partnerships and Funding, Whitty hopes to submit to the legislature in 2012 a new proposal for collecting revenue on the basis of miles driven, rather than on motor fuel consumed.

Other states, also concerned about their future revenues, have been developing their own programs. They are monitoring the progress of Oregon's pilot project and waiting to see what Whitty and the Beaver State will try next.

Whitty anticipates increased use of hybrid vehicles, which burn less motor fuel. If hybrid or electric cars are the wave of the future, states and Uncle Sam will have to work out how to charge owners of these vehicles for road use.

It is now technically practicable to charge drivers on the basis of vehicle-miles traveled, or VMT, either by on-board meters that use GPS, or by odometer readings, or by tapping into an automobile's internal electronics. With prices of transponders and on-board meters falling, sophisticated and efficient systems are now available, with drivers paying as easily as they pay for cell phones or E-Z Pass tolls.

Groups such as the National Surface Transportation Policy & Revenue Study Commission, the American Association of State Highway Transportation Officials, the International Bridge, Tunnel and Turnpike Association, and the National Surface Transportation Infrastructure Financing Commission have endorsed the concept of VMT as a substitute for motor fuel taxes.

One advantage of VMT taxes is that it might lead to roads financed by private capital instead of by governments. Such private investment in roads was the norm in the 18th and 19th centuries but fell out of favor in the 20th, because of the unpopularity of paying tolls.

One exception is the ten-mile express "tollway" added to California's State Route 91 (east of Los Angeles) which is subject to variable tolls, the tolls being varied electronically to ensure that traffic on them is uncongested at all times. Another example is the Dulles Greenway in Virginia.

Private road building and financing would let market-economy criteria for pricing and investment be applied to roads, thus enabling motorists to get most of the roads they would be prepared to pay for. Road providers could set tolls in conjunction with the state, like a regulated utility, because there might be controversy about letting them set tolls unilaterally.

Oregon has been a leader in charging for road use. It was the first state to levy a gasoline tax, in 1919. In 2001, a voluntary pilot program incorporating GPS-based distance measurements was designed to replace the fuel taxes that pay for the construction and maintenance of roads. In 2006 and 2007, the 299 drivers in the pilot program had a choice of paying either fuel taxes or mileage charges. When they filled up at participating gas stations, a device on their car calculated how far they had driven. Instead of being charged the gas tax with their purchase, they were charged for the miles they had driven in Oregon.

Although Oregon's program was technically successful, the legislature did not renew it in 2011, citing, among other issues, privacy concerns. With government-provided GPS devices on their cars, some people feared that the government was tracking their movements and whereabouts. Oregon assured residents that their whereabouts were not recorded, but quite a few Oregonians were not convinced.

So, Jim Whitty has moved on to a different way to charge for miles driven. It would allow road users, if the legislature approved, to choose from a variety of devices, supplied by different providers, so that the VMT system is not necessarily linked to GPS.

Whitty told me, "Providing drivers choices of devices and choices of providers may well lead to public acceptance of mileage fees as an alternative revenue source for our nation's roadways."

His object now is to build a road user-charging system based on existing realities in the marketplace. Rather than requiring motorists to use a particular device, such as a government-supplied GPS monitor, people would choose their own device. It would not have to have GPS, so they would not have the feeling that Big Brother was able to watch them.

One must note that there is some inconsistency in the privacy objection. These days ever more people are walking around with smartphones, which contain GPS software capable of tracking their movements. This does not appear to trouble them. They are troubled if the government, rather than a private vendor, asks them to purchase a GPS compatible device. This leads Whitty to believe that if individuals have a choice about the device to monitor their driving, they will find it less objectionable.

Such a device could be an app on a smartphone, or perhaps an invention still to come. The important point is that it is chosen by the consumer, and it has the capability of being integrated with other systems.

The Oregon Transportation Department is developing standards for such devices to be designed by private sellers. Motorists will be able to choose a device, and also pick a method of payment, such as mileage charges on a credit card, phone bill, or gas or electricity bill.

The devices and accounting methods would be certified by the state to make sure they are private, efficient, and free of fraud. Rather than becoming a provider of VMT devices and a collector of revenues, the State of Oregon would become a certifier of different technologies and accounting methods, while the road providers (whether public or private sector) would collect the revenues.

Possible technologies include reporting of mileage from a car's odometer, or from an onboard device. Another possibility is a flat annual fee to cover unlimited driving. In addition, providers would be able to offer services that could be related to mileage driven, such as vehicle insurance. Such devices could also be used for purchasing parking, or as a phone, or for music storage.

Whitty is asking companies to demonstrate technologies that they would like to sell to drivers, and he is asking drivers to volunteer to test them, paying VMT charges instead of motor fuel taxes. He hopes to be ready for demonstrations of the devices by December.

In 2013, the project would go before the state legislature for a vote. If approved, the system could be phased in, starting on a voluntary basis in July 2013, according to Whitty's ambitious timetable. A compulsory system, covering all vehicles, including security features, could take several more years, including establishing an independent certifications agency, setting standards for security, anti-tampering, accuracy, and privacy, as well as auditing and enforcement.

Other states are interested. Pilot projects and draft legislation are under way in Nevada, Colorado, Ohio, Maryland, Pennsylvania, and Wisconsin.

As fuel efficiency increases, and as Americans purchase more hybrid and electric cars, it has become time to look beyond the gas tax for revenues for road use. Whitty is to be congratulated for moving the ball forward.

Diana Furchtgott-Roth is a senior fellow at the Manhattan Institute.