The Case Western Reserve Law Review has published its fall symposium on “The Law and Policy of Hydraulic Fracturing: Addressing the Issues of the Natural Gas Boom.” I blogged about the symposium here. The full issue is available onilne in PDF, and I’ve posted links to the articles below.
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Wind turbines may be a promising low-carbon power source, but the communities in which they are sited do not always welcome them with open arms. Residents of the Forest hills subdivision in Washoe Valley, Nevada, were none to pleased when one of their neighbors planned to erect a wind turbine to power his home. They sued, alleging the 75-foot-tall turbine would constitute a nuisance, and won. While noting that “the aesthetics of a wind turbine alone are not grounds for finding a, nuisance,” the Nevada Supreme Court ruled that “a nuisance in fact may be found when the aesthetics are combined with other factors, such as noise, shadow flicker, and diminution in property value.” On this basis, the court upheld the lower court’s determination that the wind turbine would constitute a nuisance, and could be enjoined.
Former Secretary of State George Shultz and Nobel laureate economist Gary Becker take to the pages of the WSJ to urge a revenue-neutral carbon tax.
we propose a measure that could go a long way toward leveling the playing field: a revenue-neutral tax on carbon, a major pollutant. A carbon tax would encourage producers and consumers to shift toward energy sources that emit less carbon—such as toward gas-fired power plants and away from coal-fired plants—and generate greater demand for electric and flex-fuel cars and lesser demand for conventional gasoline-powered cars.
We argue for revenue neutrality on the grounds that this tax should be exclusively for the purpose of leveling the playing field, not for financing some other government programs or for expanding the government sector. And revenue neutrality means that it will not have fiscal drag on economic growth.
They recommend that revenue neutrality be achieved by fully rebating proceeds from the tax, and doing so in the most direct and transparent way possible — both good ideas. Their piece also urges the elimination of loan guarantees and other attempts by the federal government to play venture capitalist in the energy sector. Now if only they’d endorse prizes too.
Several years ago, many policymakers and industry experts believed nuclear power was on the verge of a renaissance. New reactor designs, a streamlined approval process, and the desire for carbon-free electricity generation were to herald a rebirth for this power source. Yet as the Washington Post reports, it has not worked out that way.
companies are holding back in the face of falling natural gas prices and sluggish and uncertain electricity demand. Only five new plants are under construction, while at least that many are slated for permanent closure or shut down indefinitely over safety issues.
On Monday, the Nuclear Regulatory Commission (NRC) reiterated its refusal to issue a license for a new unit at Calvert Cliffs, Md., that a French company had hoped to make the model for a fleet of reactors. A pair of reactors in Southern California are under scrutiny over whether a major contractor and a utility there concealed concerns about potential cracks in the tubes of a steam generator. And nuclear plants in Wisconsin and Florida are closing down because their owners said they cannot compete with less expensive natural-gas-fired electricity.
Significant regulatory hurdles for new nuclear plants remain. More importantly, low natural gas prices have undercut any economic arguments for nuclear power. Even if new environmental regulations constrain the use of coal, it looks increasingly unlikely that nuclear will be used to pick up the slack.
How much has hydraulic fracturing and associated technological improvements in oil and gas development affected the economics of energy? In August of this year the Energy Information Administration reported a record increase in proved reserves of oil and gas in 2010. Here are the relevant graphs:
Technological improvements deserve most of the credit, though higher energy prices, and the resulting incentive for increased exploration, played a role as well. This illustrates the potential significance of hydraulic fracturing.
This morning, Columbia’s Thomas Merrill delivered the keynote address at the Case Western Reserve Law Review symposium on “The Law and Policy of Hydraulic Fracturing: Addressing the Issues of the Natural Gas Boom.” His talk, “Fear of Fracking,” sought to addressed four important questions about fracking: 1) Why did fracking technology emerge in the United States rather than somewhere else? 2) Does fracking present any novel environmental risks? 3) Insofar as there are novel risks from fracking, how could they be best addressed? 4) What should a citizen concerned about climate change think about fracking?
These are important questions about an important topic. As Merrill noted, fracking has rapidly emerged as intensely polarizing environmental issue, celebrated by some as an economic and ecological savior and decried by others as a threat to landowners, local communities, and the environment. The Wall Street Journal believes fracking heralds the rise of “Saudi America,” while some environmental groups fear fracking will further feed America’s addiction to carbon-based fuels.
Whatever its ultimate ecological impact, the combination of hydraulic fracturing and horizontal drilling promises to dramatically increase domestic oil and gas reserves, drive down energy prices and fundamentally transform the energy sector. North Dakota now produces more oil than any state but Texas and the oil and gas boom in this state is enriching landowners tremendously. Every president since President Nixon has called for energy independence. Fracking’s rise could make this possible within the next few decades. Beyond that, fracking and the proliferation of cheap gas, Merrill suggested, likely means the end of the nuclear power industry in the United States and has thrown the coal industry into a tailspin. Cheap gas is a bigger threat to coal than any alleged “war on coal” waged by the Environmental Protection Agency. It also threatens the future of alternative energy technologies dependent upon government subsidies for their economic viability.
[My write-up of the rest of Professor Merrill’s remarks is continued below the fold.]
Daylight savings time ends this weekend, but should it be ended for good? Georgia State economist Spencer Banzhaf has an op-ed in today’s WSJ questioning the case for shifting the clocks over the summer. Here’s a taste:
The United States adopted the annual use of daylight-saving time permanently in 1966, then lengthened its duration on the calendar in 1986 and again in 2007. For the past five years, an extended daylight-saving period has begun the second Sunday of March and ended the first Sunday of November. . . .
It is a fallacy to think that if something is good, then more of it must be better. In early November or mid-March, few people—college students excepted—are still sleeping through morning daylight. A household waking at, say, 6 a.m. and going to bed at 11 p.m. won’t experience any more daylight when its schedule is moved up an hour, to 5 a.m. and 10 p.m. No daylight wasted, no daylight to be saved.
So the extension of daylight-saving time gives us cold, dark mornings without the energy savings to compensate. Often it actually causes us to expend more energy: Even in my Atlanta home, for the past few weeks we’ve turned the heat on in the early-morning hours. The effect must be even more pronounced in colder climates.
The rationale for extending daylight savings time is that it’s supposed to save energy. But it doesn’t seem to actually work out that way. As Banzhaf notes, a study of several Indiana counties forced to adopt daylight savings time found that it actually increased energy use, likely due to increased residential air-conditioning use in the summer (due to more at-home daylight hours) and increased heating use in the winter (for fall mornings). Notes Banzhaf:
One could argue that long summer days are a social good and well worth the energy and environmental costs. But making that argument means recognizing that daylight-saving time is no win-win proposition.
As anticipated in yesterday’s post, today President Obama acted on the pending CFIUS report regarding the Chinese-owned wind-farm developer (Ralls Corp.) and its four wind-farm projects in Oregon. The President’s order is noteworthy for being even broader than the two CFIUS orders it supersedes (which are described in my first post).
Such presidential orders are quite rare; a colleague of mine thinks this may be only the second or third such order since 1988.
The President first finds–without additional detail–that Ralls and its affliates and subsidiaries, through their control of the wind-farm projects, “might take action that threatens to impair the national security of the United States.” The President does not specify how, but the Department of the Treasury issued a press release that provides one possibility, stating that “The wind farm sites are all within or in the vicinity of restricted air space at Naval Weapons Systems Training Facility Boardman.” (As noted here, Ralls relocated one project at the Navy’s request to avoid that airspace, and Ralls’ lawsuit alleges that after it did so, the Navy recommended that Oregon regulators issue the necessary approvals–although they did emphasize that even the new location “may have negative national security implications”.) In light of some of the order’s restrictions, I don’t think the proximity of the Naval base is a full explanation of the government’s concerns.
The President’s order then prohibits Ralls’ already-completed acquisition of the four projects and their assets and orders Ralls to divest them within 90 days (with a possible three-month extension on such terms as CFIUS may require). Ralls is even required to divest all interests in the projects’ “intellectual property[ and] technology.” Ralls is given just 14 days to remove “all items, structures, or other physical objects . . . (including concrete foundations),” from the four sites, and aside from CFIUS-cleared U.S.-citizen contractors removing those items, Ralls and its employees “shall cease all access” to them. Ralls cannot sell the four projects if CFIUS objects.
One of the most noteworthy aspects of the President’s order that is lacking from CFIUS’s orders is its authorization of inspections. ”[O]n reasonable notice,” government employees “shall be permitted access, for purposes of verifying compliance with this order, to all premises and facilities” of the four project companies, as well as those Ralls, its subsidiaries, and even those of Sany Group–the very large Chinese manufacturer that is affiliated with Ralls (two Sany executives own Ralls):
(i) to inspect and copy any books, ledgers, accounts, correspondence, memoranda, and other records and documents . . . that concern any matter relating to this order;
(ii) to inspect any equipment and technical data (including software) in the possession or under the control of the Companies . . . .
Perhaps significantly, the inspection of equipment and technical data is not limited to those “that concern any matter relating to this order”– although it would appear to be subject to the general provision that the inspections would be “for purposes of verifying compliance with this order.”
With my firm’s CFIUS experts, I put together a fuller analysis of the potentially significant CFIUS lawsuit I blogged earlier this month. For those just tuning in now: the U.S. government’s Committee on Foreign Investment in the United States issued an order that blocked a Chinese-owned developer from proceeding with four wind-farm projects in Oregon; the developer sued, challenging not only the lack of transparency in CFIUS’s procedures and decision making, but also CFIUS’s authority to block or unwind the transaction.
There have been a few noteworthy developments in the case. First, just hours before the government was due to file its opposition to Ralls’ motion for a TRO, Ralls withdrew the motion after reaching an agreement with the government that allowed it to resume preliminary construction at the wind-farm site while the suit is pending; the CFIUS order previously directed Ralls to “cease all [c]onstruction and [o]perations at the site.” Although correlation does not imply causation, it suggests that the suit has improved Ralls’ position with respect to CFIUS.
Second, although correlation still does not imply causation, the day after the suit was filed, CFIUS sent a report to the President describing its assessment of the risks; by statute, once CFIUS sends such a report, the President has 15 days to decide whether to take action (e.g., to block or mitigate the transaction). The deadline runs tomorrow.
Because the Foreign Investment and National Security Act of 2007 provides that the President’s actions and supporting findings “shall not be subject to judicial review,” there would be a question whether the President’s own actions (if any) would moot the lawsuit. Ralls has a response (that the suit could continue under the “capable of repetition but evading review” exception to mootness doctrine. as CFIUS reviews each transaction in the first instance). But at a minimum, presidential action will be another factor the judge will have to consider as the case proceeds.
It will be interesting to see how things shape up. For an insightful discussion of the matter, see China Hearsay.
Today I am at Duke to participate in a conference on “Conservative Visions of Our Environmental Future,” sponsored by the Duke Environmental Law and Policy Forum, Nicholas Institute for Environmental Policy Solutions, Nicholas School for the Environment, Duke Federalist Society, Duke College Republicans and the Energy & Enterprise Initiative. The conference is being live streamed here, and I’ll be offering comments on the proceedings below.
If you deal regularly with the federal government, there are more candidates for the “most important government office that you’ve never heard of” than you can count. My post tonight concerns not an office, but a federal interagency committee: the Committee on Foreign Investment in the United States, known by its acronym CFIUS, which is undeniably powerful, but sufficiently obscure that even the hardcore law nerds of the Volokh Conspiracy have mentioned it only once before.
On Wednesday, a Chinese-owned wind-farm developer sued CFIUS to seek review of recent CFIUS orders that effectively require the developer to unwind its purchase of four wind-farm projects in Oregon. The suit is a rarity in a field that has seen virtually no efforts to obtain judicial review. Even partial success by the plaintiff in obtaining review of CFIUS’s decision could have major implications for foreign direct investment in the United States and increase the transparency of a historically opaque government approval process. More after the jump. Continue reading ‘Landmark Foreign-Investment Suit Filed’ »
Andrew Morriss and Donald Boudreaux have an op-ed in today’s WSJ explaining why gasoline prices have become more volatile. The short version: Boutique fuel requirements have balkanized the gasoline market, magnifying the effects of local supply disruptions.
For most of the 20th century, the United States was a single market for gasoline. Today we have a series of fragmentary, regional markets thanks to dozens of regulatory requirements imposed by the federal Environmental Protection Agency (EPA) and state regulators. That’s a problem because each separate market is much more vulnerable than a national market to refinery outages, pipeline problems and other disruptions. . . .
The role of regulators in fuel formulation has become increasingly complex. The American Petroleum Institute today counts 17 different kinds of gasoline mandated across the country. This mandated fragmentation means that if a pipeline break cuts supplies in Phoenix, fuel from Tucson cannot be used to relieve the supply disruption because the two adjacent cities must use different blends under EPA rules.
To shift fuel supplies between these neighboring cities requires the EPA to waive all the obstructing regulatory requirements. Gaining permission takes precious time and money. Not surprisingly, one result is increased price volatility.
Another result: Since competition is a key source of falling gas prices, restricting competition by fragmenting markets reduces the market’s ability to lower prices.
While most of the fuel standards were adopted in the name of the environmental protection, many are actually the result of special interest pleading. Producers of various products, ethanol in particular, sought fuel content mandates or performance requirements that would benefit their particular product. (I detailed part of this history in “Clean Fuels, Dirty Air,” in Environmental Politics: Public Costs, Private Rewards (Greve & Smith eds. 1992).) Worse, some of the content requirements are irrelevant for new cars due to modern pollution control equipment. Federally imposed boutique fuel requirements have outlived whatever usefulness they ever had.
In yesterday’s NYT, Yoram Bauman and Shi-Ling Hsu explained why the U.S. would be wise to follow British Columbia’s example and impose a carbon tax and use the revenues to reduce other tax rates.
On Sunday, the best climate policy in the world got even better: British Columbia’s carbon tax — a tax on the carbon content of all fossil fuels burned in the province — increased from $25 to $30 per metric ton of carbon dioxide, making it more expensive to pollute.
This was good news not only for the environment but for nearly everyone who pays taxes in British Columbia, because the carbon tax is used to reduce taxes for individuals and businesses. Thanks to this tax swap, British Columbia has lowered its corporate income tax rate to 10 percent from 12 percent, a rate that is among the lowest in the Group of 8 wealthy nations. Personal income taxes for people earning less than $119,000 per year are now the lowest in Canada, and there are targeted rebates for low-income and rural households.
According to Bauman and Hsu, adopting a similar tax in the U.S. could allow for substantial reductions in corporate and income tax rates.
What would a British Columbia-style carbon tax look like in the United States? According to our calculations, a British Columbia-style $30 carbon tax would generate about $145 billion a year in the United States. That could be used to reduce individual and corporate income taxes by 10 percent, and afterward there would still be $35 billion left over. If recent budget deals are any guide, Congress might choose to set aside half of that remainder to reduce estate taxes (to please Republicans) and the other half to offset the impacts of higher fuel and electricity prices resulting from the carbon tax on low-income households through refundable tax credits or a targeted reduction in payroll taxes (to please Democrats).
The threat of climate change is one reason to support a revenue-neutral carbon tax proposal like this. But even those skeptical that warming poses much of a threat could come on board simply because broad-based consumption taxes of this sort are more efficient than taxes on labor and wealth creation. Furthermore, as Bauman and Hsu note, a carbon tax, as a consumption tax, would “give Americans more control over how much they pay in taxes.” Households and businesses could alter what they pay the government by altering their behavior. This is but another reason to favor shifting the tax burden away from income and on to consumption of carbon.
The New York Times has an article describing how the TransCanada corporation is using eminent domain to forcibly acquire property to build the Keystone oil pipeline:
When the TransCanada men first came, Julia Trigg Crawford said, they were polite. They offered money. Seven thousand dollars to let the Keystone XL pipeline cross her family’s 600-acre farm on its way from the Alberta tar sands to the refineries on the Gulf Coast....
Ms. Crawford, 52, who serves as the farm’s manager, called the rest of the family. They agreed to sign. “We thought that at least if we signed we’d have some say in what happened,” she said.
They called the TransCanada representative. “He told us that if we could come up with a contract that worked for both parties, they wouldn’t condemn the land,” Ms. Crawford said.....
“I fully expected them to counter,” she said. “There were about five or six things we wanted, and we would have been happy to take one or two.”
Then, she said, TransCanada “went full radio silence.” The Crawfords never heard back from them — until October, when they got a letter saying their land had been condemned and a lease awarded to TransCanada.
But as the Crawfords discovered, when voluntary compensation agreements are not reached, Texas law allows certain private pipeline companies to use the right of eminent domain to force landowners to let pipelines through. This was true even for TransCanada, which has yet to get State Department permission to bring the Keystone XL across the Alberta border.
The article notes TransCanada’s claim that it has acquired the overwhelming majority of the property they needed for the pipeline through voluntary land sales. This may be true, but it is misleading. Like the Crawfords, these owners agreed to sell their land under the threat of eminent domain if they refused. Some might well have refused to sell for the price offered by the firm if eminent domain were off the table. The voluntariness of land sales undertaken in the shadow of threats of condemnation is dubious at best.
Back in 2006, co-blogger Jonathan Adler and I published an article explaining the environmental dangers of allowing the use of eminent domain for private economic development projects, as the Supreme Court ruled in the Kelo case. At the time, some environmentalists pooh-pooed the article, and one group even declared our article the environmental “outrage of the month” (it must have been a slow month for actual pollution). Ironically, as Jonathan explained here, several environmental groups are now trying to use post-Kelo reform laws restricting economic development takings to block the Keystone takings.
Such efforts are unlikely to succeed in Texas. As I described in this article, Texas is one of many states that have passed post-Kelo reform laws that pretend to constrain economic development takings without actually doing so. They might have a better chance in one of the other states through which the pipeline must pass.
Even if Kelo had been decided the other way, some pipeline takings might still be constitutional. The Constitution permits takings for “public use,” and even under the traditional definition of public use advocated by Kelo’s critics, condemnations for public utilities or common carriers that the general population has a legal right of access to are often permissible. However, pipeline takings would be subject to tougher constitutional constraints than under Kelo, and the government would at least have to prove that the pipelines in question really are public utilities or common carriers open to the general public.
Regardless, as Jonathan points out, the controversy over Keystone has led “some environmentalists... to recognize that allowing the government to seize private property for the purpose of encouraging private economic development can facilitate environmentally undesirable projects.”
UPDATE: In a response to this post, Mark Kleiman claims that Jonathan Adler and I “don’t seem interested in the fact that none of their friends on the side of inalienable property rights seems to have any problem with the use of eminent domain to build Keystone (any more than they objected to George W. Bush’s use of it to enrich himself and his business partners in the Texas Rangers by seizing private property to build, not merely a stadium, but a shopping mall).” Actually, people who are genuinely “on the side of inalienable property rights” are likely to be opposed to the use of eminent domain for this project. But if Kleiman means to refer to the GOP, I thought the fact that most Republicans support the pipeline is too well-known to require dwelling on. By contrast, (some) environmentalists’ change of heart on eminent domain is a development that is much less widely appreciated.
I have, however, criticized eminent domain abuses advocated by Republicans in many previous posts, such as here and here. In this 2006 post, I noted the inadequacy of the Bush administration’s response to Kelo. Few if any opponents of Kelo approve of the use of eminent domain to build sports stadiums. George W. Bush’s exploitation of it, of course, occurred many years before Kelo thrust the issue of eminent domain into the limelight, and few nonexperts remember it today.
The folks at the Heartland Institute are mad, and that seems to have driven them a little mad. For years environmental activists have compared climate skeptics and those who raise questions about the likelihood of a warming-induced apocalypse to Holocaust deniers and worse. In 1989, then-Senator Al Gore famously compared those who downplayed the climate threat to those who ignored Hitler’s rise and NASA’s James Hansen compared coal-bearing trains to the rail cars headed to Nazi crematoria, drawing a moral equivalence between the use of coal and the Holocaust. Think Progress also trumpeted the “climate denial” views of Norwegian terrorist Andrew Breivik and claimed he was “inspired” by mainstream climate skeptics.
Then, earlier this year, Heartland was the target of directed smear campaign after the Pacific Institute’s Peter Gleick surreptitiously obtained internal Heartland documents by impersonating a board member. Gleick anonymously distributed the purloined documents together with a forged memorandum purporting to provide further evidence of Heartland’s internal dealings. Progressive bloggers trumpeted the materials, and the forged memo in particular, as evidence of Heartland’s sinister machinations. While it seems likely that Gleick himself forged the memo (or knows who did) Heartland may have difficulty seeking legal redress for his actions. I posted on what some call “Fakegate” here and here.
Instead of trying to retain the moral high ground by defending the substance of its views, Heartland adopted the tactics of its most unhinged critics, purchasing a billboard comparing those who believe in global warming to the Unabomber. According to Heartland, this was to be the first in a series featuring famous “global warming alarmists,” including Osama Bin Laden, Fidel Castro and other “rogues and villians.” Heartland explained the campaign this way:
what these murderers and madmen have said differs very little from what spokespersons for the United Nations, journalists for the “mainstream” media, and liberal politicians say about global warming. They are so similar, in fact, that a Web site has a quiz that asks if you can tell the difference between what Ted Kaczynski, the Unabomber, wrote in his “Manifesto” and what Al Gore wrote in his book, Earth in the Balance.
The point is that believing in global warming is not “mainstream,” smart, or sophisticated. In fact, it is just the opposite of those things. Still believing in man-made global warming – after all the scientific discoveries and revelations that point against this theory – is more than a little nutty. In fact, some really crazy people use it to justify immoral and frightening behavior.
The response to this ad was quite negative from friend and foe alike, prompting Heartland to pull the ad within 24 hours. Heartland now claims the billboard was an “experiment.”
“This provocative billboard was always intended to be an experiment. And after just 24 hours the results are in: It got people’s attention.
“This billboard was deliberately provocative, an attempt to turn the tables on the climate alarmists by using their own tactics but with the opposite message. We found it interesting that the ad seemed to evoke reactions more passionate than when leading alarmists compare climate realists to Nazis or declare they are imposing on our children a mass death sentence. We leave it to others to determine why that is so.
Well lots of folks didn’t get the joke, including many of Heartlands friends and funders. Several speakers have withdrawn from Heartland’s annual climate conference, including Rep. James Sensenbrenner and IPCC critic Donna Laframboise. (More reactions here and here.) E&E News also reports the publicity stunt is costing Heartland financial support, and could prompt staff departures too.
Even if the billboard was initially designed as an “experiment,” it was a stupid idea. The implicit argument of the billboards is completely unjustifiable. So what if some tyrants and whackjobs believe in global warming. This is like arguing someone should eat meat because Hitler was a vegetarian. Lots of evil, crazy, and stupid people believe plenty of sensible things (and lots of brilliant people have embraced nutty ideas). Heartland’s justifiable anger at the vitriol spewed by its most extreme or unhinged opponents does not justify sinking to their level. If the folks at Heartland believe there is a double-standard — and I believe there is, even though I also believe anthropogenic global warming is a real problem — then they should explain why. There’s no need to provoke and offend countless commuters and others by suggesting that a believing in global warming makes one like the Unabomber. It was a know-nothing message, and not just because most so-called “skeptics” actually believe in global warming too, and only reject apocalyptic climate projections. I expect this sort of stunt from extreme animal rights groups, not those who purport to want an open and honest scientific debate. However angry the Heartland folks may be with some of those on the other side, this stunt was unjustified and unwise — and by all accounts it looks like it will cost Heartland dearly.