Obama Was Wrong on Oil. We Did ‘Drill Our Way Out of the Problem.’

When gas prices topped $4 per gallon in May 2011, President Barack Obama said, “We can’t just drill our way out of the problem.”

Throughout his presidency, Obama stated some version of that sentiment every time he wanted to push to subsidize alternative energy sources.

More than seven years later, human ingenuity, technological innovation, and the power of the free market have proven him wrong. To the benefit of American families across the country, the United States is now the largest global producer of crude oil.

According to a report from the federal government’s Energy Information Administration this week, U.S. crude oil production surpassed that of Saudi Arabia and Russia. When Obama made his statement in May 2011, U.S. monthly production was 174 million barrels (5.67 million barrels per day). In June 2018, monthly production stood at 320.23 million barrels (10.67 million barrels per day).

The dramatic increase in supply shows drilling is not just a “bumper sticker” slogan, as Obama called it in his weekly address in February 2012, but a path to energy independence, prosperity, and jobs.

Domestic extraction has lowered gas prices for millions of drivers and savedthem hundreds of dollars a year at the pump. A number of factors contribute to the price of gasoline, but crude oil is the largest.

In 2017, crude prices made up 50 percent of the price of gas, with federal and state taxes (19 percent), distributing and marketing (17 percent), and refining (14 percent) accounting for the rest. Over the past decade, crude oil accounted for 61 percent of the total cost of a gallon of gas.

The economic benefits of the shale boom extend well beyond crude oil production and lower prices at the pump. When combining natural gas and other petroleum products, the U.S. has been the world leader for seven years.

Thanks in large part to smart drilling technologies, increased energy supplies lowered household energy bills. Businesses are spending less on shipping and electricity costs and can invest in new technologies or hiring more people.

In the last eight years alone, chemical companies have invested more than $200 billion in 333 projects—and cited the shale boom as the reason why they’re investing in America.

There’s no time like the present, but the future of U.S. oil and gas production looks incredibly bright, too. According to a recent report from IHS Markit, production in the Permian Basin of West Texas and New Mexico could double by 2023. The Bureau of Land Management’s lease sale in New Mexico grossed nearly $1 billion in bonus bids for 142 parcels.

In its draft proposed program in January, the Department of Interior listed 47 potential lease sales off the coasts of Alaska, and in the Pacific, the Atlantic, and the Gulf of Mexico, and would make more than 90 percent of the total federal acreage available for exploration and development. These changes stand in stark contrast to the Obama administration’s last order, which placed all but 6 percent of the Outer Continental Shelf off-limits.

Drilling doesn’t have to be the solution. But Obama and others who have dismissed conventional resource extraction are ignoring that drilling has been an extremely effective solution when energy prices get uncomfortably high.

Free, competitive markets are the solution. Higher prices for oil incentivize energy companies to extract and supply more oil and incentivize entrepreneurs to invest in innovative alternatives to oil—batteries, natural gas vehicles, or biofuels.

Drivers will examine their options as well, whether carpooling, finding alternative modes of transportation, or, over time, purchasing a more fuel-efficient vehicle.

Washington does not need to dictate the solutions because it can do more harm than good by catering to special interests and breeding cronyism. A successful energy policy is one that unleashes free enterprise and not government planning, quotas, or subsidies.

Commentary by Nicolas Loris. Originally published at The Daily Signal.

3 Residents Challenge Climate Change Rules at Delaware’s High Court

Delaware regulators have imposed costly and unlawful climate change regulations on industry in violation of legislative directives, according to three citizen activists who took their case to the state’s highest court.

But before the Delaware Supreme Court can address the substantive questions raised in the residents’ lawsuit, it first must resolve a lower court ruling that “failed to apply the correct legal test for standing,” Richard Abbott, their lawyer, said in an interview with The Daily Signal.

The Superior Court of Delaware ruled in June that residents David T. Stevenson, R. Christian Hudson, and John A. Moore did not have legal standing to challenge the state’s participation in a regional climate change agreement.

The trial court judge “applied the wrong legal standard,” their lawyer told The Daily Signal.

The three men had argued that the agreement’s regulatory restrictions on greenhouse gas emissions would raise their electricity bills. But Judge Richard Stokes decided that they failed to demonstrate this would be the case, and therefore did not have standing.

The Regional Greenhouse Gas Initiative, or RGGI, is a multistate agreement that currently includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.

State government officials who have joined the initiative argue that greenhouse gases such as carbon dioxide are responsible for dangerous levels of climate change, also known as global warming.

The gases enter the atmosphere during the industrial burning of fossil fuels such as coal, natural gas, and oil. However, a growing number of scientists question theories that link human activity to significant climate change, and instead point to natural forces.

States that are parties to the agreement must impose a “cap and trade” arrangement in which government officials set an upper limit on carbon dioxide emissions from fossil fuel plants. Companies subject to the caps may trade “allowances,” however.

Delaware became part of RGGI when it entered a memorandum of understanding with other states in December 2005. The memorandum of understanding provided the framework for cap-and-trade regulations in each participating state, built around a “model rule.”

Since there will be fewer carbon dioxide permits available for electricity generators to purchase under the regulations, the three plaintiffs argue, the price of the permits will rise in response to the realities of supply and demand, and that these higher costs will be passed along to consumers.

‘Probable Injury’

At the heart of the case is the authority of Delaware’s Department of Natural Resources and Environmental Control. Gov. John Carney, a Democrat who took office in 2017, supports the initiative.

When the lawsuit initially was filed in December 2013, the agency’s regulations had not gone into effect. For Delaware residents to have standing to sue, they needed to show there was a “probable injury” and not an “actual injury,” Abbott, the plaintiffs’ attorney, said in the phone interview.

Abbott argued that the trial court judge, Stokes, should have considered only facts that were relevant when the suit was filed, instead of relying on “postfiling facts.”

The precedent in Delaware, and in other states with cases involving energy consumers who dispute government policies, says that standing must be “broadly and liberally applied,” he told The Daily Signal.

“When making this determination about standing, it’s not supposed to be a stringent straitjacket like this judge wants to make it out to be,” Abbott said, adding:

One reason for the confusion, I think, is that it took more than four years for the court to dispose of the case, and these cases are typically done in a 12- to 18-month time period.

But it’s difficult because DNREC [Department of Natural Resources and Environmental Control] filed all kind of frivolous motions at the beginning of the case, which they always do because the government gets away with filing frivolous motions without being held accountable.

The Superior Court judge identified three methods the plaintiffs could use to establish standing: produce electric bills showing rate increases that can be attributed directly to the regulations; show proof that energy companies pursued rate increases in response to the regulations; or get “expert witness testimony” establishing a connection between the regulations and increased energy costs.

“You can’t show your electricity bills went up at the beginning of a case before the regulations even took effect, and the electricity providers can’t apply for a rate increase before they’ve had an increase in costs,” Abbott said. “This is impossible. Once again, the correct test for standing is what’s happening at the time of filing.”

Challenging Changes to the Cap

In November 2013, the Department of Natural Resources and Environmental Control altered the “size and structure” of the cap on carbon dioxide emissions. The cap became substantially lower and more restrictive than what the Delaware General Assembly approved through the memorandum of understanding with other states, the three plaintiffs say in their brief to the Delaware Supreme Court.

The three residents’ brief says the memo of understanding doesn’t permit “any changes” related to caps on carbon dioxide, requiring the agreement to be “formally amended by all signatory states” before adoption of any regulations reducing the caps from 2014 through 2018.

The caps on CO2 established in the agreement “are mandatory, static, and not expressly permitted to be changed by DNREC’s unilateral regulatory action,” their brief argues.

Delaware regulators routinely file “frivolous motions” and “play the game about standing,” Abbott said, because they want to avoid answering substantive questions about their modifications to the caps on carbon emissions without the approval of elected officials.

Officials at the Department of Natural Resources and Environmental Control “know that if the case ever gets to the merits, they are dead,” Abbott said, adding:

The state legislature said you can adopt regulations that are consistent with the MOU [memorandum of understanding], but they essentially cut the cap in half. There is no question that the regulations are illegal and inconsistent with what was authorized by statute.

I’ve litigated many cases against DNREC and have won every single case because they just ignore the law. This has gone on for decades. There is an institutional problem with this agency, where they have just gotten into the habit of doing whatever they feel like.

The Daily Signal sought comment from the agency’s public affairs department, but officials had not responded by publication time.

Virginia Set to Join Climate Pact

As The Daily Signal previously reported, Virginia Gov. Ralph Northam, a Democrat, has advanced his own regulatory proposal to make his state part of the Regional Greenhouse Gas Initiative.

The Virginia proposal, which could go into effect in December, has attracted criticism from lawmakers, policy analysts, and citizen activists who say the state should not enter the climate pact without the approval of the Virginia General Assembly.

Related: Virginia Governor Set to Bypass Legislature to Join State-Based Climate Agreement

“Gov. Northam is sadly encumbering the state of Virginia with a regulatory monster that will have no impact on the climate even if you believed every claim made by Al Gore or the United Nations,” Marc Morano, a prominent climate change skeptic, told The Daily Signal in an email. “RGGI will do nothing but saddle Virginia with meaningless climate change inspired regulations on Virginia industry.”

Morano, executive editor and chief correspondent of the Climate Depot website and author of the bestseller “The Politically Incorrect Guide to Climate Change,” has been critical of state policymakers who implement climate change regulations without popular support.

“RGGI will make states like Delaware and Virginia less competitive with other states wise enough to avoid this virtue-signaling nonsense,” Morano said. “If Gov. Northam bypasses the legislature to impose these economically strangling regulations, it will prove once again that the governor lacks the support of the people and the legislature to impose this monstrosity on the state of Virginia.”

“The same is true in Delaware, where stringent regulations are imposed without legislative approval,” he said.

New Jersey also is set to join the climate pact. Gov. Philip Murphy, a Democrat, issued an executive order in January reversing a decision by his Republican predecessor, Chris Christie, to keep New Jersey out of RGGI.

California has its own cap-and-trade program covering power plants, factories, and oil refineries.

In Washington state, voters were set to vote Tuesday on a ballot question,Initiative 1631, which would impose the nation’s first tax on carbon dioxide emissions. Gov. Jay Inslee, a Democrat, long has been a proponent of the carbon tax and cap-and-trade proposals.

Report by Kevin Mooney. Originally published at The Daily Signal.

Green Energy Mandates Could Double Your Electric Bills

Business and homeowner utility costs could double in many states if environmental groups succeed in enacting draconian solar and wind power mandates in states across the country.

Yet these mandates will have almost no impact in cleaning the air or reducing greenhouse gas emissions.

In Arizona and Nevada, voters will decide on Nov. 6 whether to adopt renewable mandates requiring local utilities to buy at least 50 percent of their electric power from green energy—mostly, wind and solar power.

At least a dozen other states are set to ramp up their mandatory standards (also called “renewable portfolio standards”) in 2019. California is set to move to 60 percent legally mandated renewable energy by 2030 and 100 percent by 2045.

These mandates come with a steep price to American families and businesses. Residents in states with existing high mandates must often pay between 50 percent and 100 percent more on their electric bills than residents of states where utilities are free to rely on the market and purchase electric power from the lowest-cost sources—often coal, natural gas, or nuclear power.

Because lower-income households spend five to 10 times more as a share of their incomes on energy than do high-income households, high renewable portfolio standards are a regressive—and unduly burdensome—tax on the poor.

Ironically, these green initiatives are usually sponsored by billionaire liberal funders, such as investor Tom Steyer of California.

While the natural growth of renewable energy sources is a positive development, mandates are an economically disastrous method that crowds out the market for affordable electricity.

Today, the United States produces more than 75 percent of its electricity from natural gas, coal, and nuclear power. Less than 10 percent comes from solar and wind power.

Given the massive federal subsidies of more than $150 billion between 2009 and 2014 to the wind and solar industries, that is an amazingly small percentage.

Comparing the states with the most stringent renewable portfolio standards (25 percent or more) with the states with low ones (10 percent or less), and then with states with none, reveals a pattern.

States with high renewable portfolio standards have electric power rates that are about 27 percent per kilowatt hour more expensive than states with low ones, and about 50 percent higher than states without them.

The Heartland Institute estimates costs could total an extra $1,000 per year per household, compared with current electricity costs, at the proposed rate increase in Arizona.

This could mean tens of thousands of dollars of higher costs for a business, depending on energy usage. For manufacturers, it could mean $100,000 or more of extra costs.

Lower-income families would be most adversely affected by stricter green energy requirements. This is because poorer households typically pay about seven times more as a share of their income in energy costs than do wealthier families.

Middle-class families pay at least twice as high a share of their income in energy bills than do the rich.

One of the critical flaws of renewable energy requirements is that they almost all squeeze out two of the most dominant and cleanest forms of energy used across the country—natural gas and nuclear power.

But from an environmental and clean air standpoint, and for the purposes of reducing greenhouse gases that may be linked to climate change, this distinction makes no sense.

It appears simply to be a multibillion-dollar corporate welfare giveaway to the solar and wind industries at the expense of ratepayers.

Even coal that is burned in Arizona, Nevada, and other states is much cleanertoday than it was 20 or 30 years ago. All of this is evidenced by the dramatic improvement in air quality nationally over the past 35 years.

Only a small percentage of this clean air progress is due to renewable energy, because over most of this period, wind and solar power have been fairly inconsequential sources of U.S. energy production.

Since 1980, total emissions of the six principal air pollutants have fallen by 67 percent.

To put that in perspective: That reduction occurred amid a dramatic expansion of the U.S. economy. Gross domestic product increased by 165 percent, vehicle miles traveled increased 110 percent, the U.S. population grew by 44 percent, and energy consumption increased by 25 percent.

For these reasons, the “clean energy” initiative is best thought of as a regressive tax imposed on those who can least afford it.

Again, this “tax” could cost middle-income and lower-income American families about $1,000 more per year in utility prices. These mandates could also negatively affect business productivity and move jobs to areas with more energy choices.

Americans deserve affordable, abundant, and reliable energy. Renewable energy mandates are a “green tax” on homeowners and small businesses that can least afford it.

Commentary by Stephen Moore and Andy Vanderplas. Originally published at The Daily Signal.

Climate Alarmists Admit They Want to Dismantle Our Free Enterprise System

The United Nations’ Intergovernmental Panel on Climate Change is warning that the dire costs of climate change are going to be here sooner than we think.

The planet is close to reaching its alleged 1.5-degree Celsius warming threshold, and civilization only has 11 years to fix it.

Oh, yeah, and the solution is to tear down the global free-enterprise system responsible for human flourishing and raising levels of prosperity for billions of people.

Don’t take my word for it.

A writer for the eco-friendly Grist tweeted, “The world’s top scientists just gave rigorous backing to systematically dismantle capitalism as a key requirement to maintaining civilization and a habitable planet.”

Eric Holthaus

@EricHolthaus

If you are wondering what you can do about climate change:

The world’s top scientists just gave rigorous backing to systematically dismantle capitalism as a key requirement to maintaining civilization and a habitable planet.

I mean, if you are looking for something to do.

Eric Holthaus

@EricHolthaus

The world’s top climate scientists are about to announce that—without radical coordinated action—the world has locked in warming of at least 1.5°C.

Heroic efforts are now necessary to save the world from catastrophic climate change.
Be a hero.
Watch live: https://www.youtube.com/watch?v=12S3dKrxj7c 

View image on Twitter

4,026 people are talking about this

The Intergovernmental Panel on Climate Change report itself warns: “There is no documented historical precedent” for the transformation (aka de-development) necessary to curb global warming.

The Associated Press reported:

A senior U.N. environmental official says entire nations could be wiped off the face of the Earth by rising sea levels if the global warming trend is not reversed by the year 2000.

Coastal flooding and crop failures would create an exodus of ‘eco-refugees,’ threatening political chaos, said Noel Brown, director of the New York office of the U.N. Environment Program.

He said governments have a 10-year window of opportunity to solve the greenhouse effect before it goes beyond human control.

The year 2000? Oh, wait a minute. The AP article is from June 30, 1989. Scratch that last warning from nearly three decades ago.

The reality is that, though the new Intergovernmental Panel on Climate Change report and proponents of dismantling the free-enterprise system have been shockingly honest in revealing their true intentions over the past few days, the sentiment is not new.

In fact, three years ago, U.N. Framework Convention on Climate Change Executive Secretary Christiana Figueres made similar remarks in a push for the Paris climate accord.

Figueres said, “This is the first time in the history of mankind that we are setting ourselves the task of intentionally, within a defined period of time, to change the economic development model that has been reigning for at least 150 years, since the Industrial Revolution.”

The current economic development model that reigns supreme does so for compelling reasons.

People that freely exchange ideas and products, that have protection from government coercion and that have well-defined and protected property rights because of a strong rule of law have done quite well for themselves.

Free, competitive energy markets drive innovation and provide the affordable, reliable energy that families and businesses need, and yield a cleaner environment.

Conversely, international efforts to combat climate change have been centrally planned boondoggles. They’ve resulted in wasted taxpayer money, higher energy prices, and handouts for preferred energy sources and technologies—all for no noticeable impact on climate.

Eighty percent of all energy consumed by Americans comes from conventional sources, such as coal, oil, and natural gas. About 80 percent of the world’s energy needs are met by these natural resources, which emit carbon dioxide when combusted.

Levying a price on carbon dioxide will directly raise the cost of electricity, gasoline, diesel fuel, and home-heating oil. But the economic pain does not stop there.

When considering the impact of a carbon tax on individuals, it is important to note that carbon is intertwined in all parts of life. Energy is a necessary component for just about all of the goods and services consumed, so Americans would pay more for food, health care, education, clothes—you name it.

The latest Intergovernmental Panel on Climate Change report suggests policy proposals that would be economically cataclysmic.

It proposes a carbon tax of between $135 and $5,500 by 2030. A $5,500 carbon tax equates to a $50-per-gallon gas tax. An energy tax of that magnitude would bankrupt families and businesses, and undoubtedly catapult the world into economic despair.

Importantly, an extreme climate policy would also divert resources away from pressing environmental concerns, such as investing in more robust infrastructure to protect against natural disasters or new, innovative technologies that improve air and water quality.

Are those costs worth it? After all, having wealth, health, and affordable power don’t mean all that much if people don’t have a planet to live on. The Intergovernmental Panel on Climate Change estimates the climate costs could total $54 trillion without action.

But is there any new revelation in the scientific literature that makes climate doom imminent?

Not according to climatologist Judith Curry, a former chairwoman of the School of Earth and Atmospheric Sciences at the Georgia Institute of Technology.

Curry asserts that the main conclusion from the report is that “things would be a little better at 1.5C relative to 2C.”

Furthermore, she notes, “Over land, we have already blown through the 1.5C threshold if measured since 1890.

“Temperatures around 1820 were more than 2C cooler.  There has been a great deal of natural variability in temperatures prior to 1975, when human-caused global warming kicked in any meaningful way.”

Another critical point Curry highlights is the fact that the Intergovernmental Panel on Climate Change largely disregards the lower thirds of likely climate sensitivity values between 1.5C and 4.5C.

Equilibrium climate sensitivity attempts to quantify the earth’s temperature response to carbon dioxide emissions, answering the question: How does the earth’s temperature change from a doubling of carbon dioxide in the atmosphere?

There is a lot of scientific debate about equilibrium climate sensitivity within the climate literature, with a fair amount of uncertainty. And, as Curry mentions, “Much of this problem goes away if ECS is actually 1.5 to 2C.”

What about natural disasters? The University of Colorado’s Roger Pielke Jr., who specializes in analyzing extreme weather trends, emphasizes that “the IPCC once again reports that there is little basis for claiming that drought, floods, hurricanes [and] tornadoes have increased, much less increased due to [greenhouse gases].”

The Intergovernmental Panel on Climate Change’s politicization of policy actions presents another problem, and it is evident in the way the report treats nuclear energy.

Nuclear power provides nearly 60 percent of America’s carbon dioxide-free electricity, yet the climate panel engages in fearmongering about its expanded use. One would think that if climate change were an existential crisis, the world would need all the nuclear power it can get.

While the report acknowledges that any pathway to meeting carbon dioxide-reduction targets will include increased nuclear buildout, the report says more nuclear “can increase the risks of proliferation, have negative environmental effects (e.g., for water use), and have mixed effects for human health when replacing fossil fuels.”

Writing in Forbes, Michael Shellenberger documents the IPCC’s historic bias against nuclear power. Yet, the report unabashedly supports expanded wind and solar development and offers personal lifestyle changes to reduce the planet’s carbon footprint, such as air-drying laundry, eating less red meat, and biking to work.

Regardless of the cause, there are undoubted challenges from a changing climate.

Investing in coral reef protection or in preparation for extreme weather events can be worthwhile. However, the combination of fearmongering and offering solutions that would require a takeover of the global economy are unrealistic and counterproductive.

 

 

Commentary by Nicolas Loris. Originally published at The Daily Signal.

Why the BUILD Act Can’t and Won’t Achieve UN’s Sustainable Development Goals

As they continue to press for full Senate approval, proponents of a new U.S. International Development Finance Corporation, which would be established by the BUILD Act of 2018, assert that the new corporation would help the world realize the United Nations’ grand-scale “sustainable development goals.”

But seeking to gain support from conservatives for the International Development Finance Corporation—which would replace the Overseas Private Investment Corporation—by framing the sustainable development goals in a positive light is a dubious proposition at best.

Conservatives know that adoption by developing countries of policies promoting economic freedom is a far better approach than government spending on sustainable development goals programs, as The Heritage Foundation’s Index of Economic Freedom demonstrates year after year.

Perhaps BUILD Act promoters are not familiar with the spot-on critique of sustainable development goals by economics professor Bill Easterly of New York University. Parodying the U.N.’s “SDG” acronym, he rightly called them “senseless, dreamy, garbled” utopian goals.

Easterly noted that buried within the ponderous 35-page U.N. declaration of the 17 sustainable development goals, which was launched with great fanfare in 2015, are phrases such as “thematic reviews of progress,” “implement the 10-year framework of [programs],” and “accelerated modalities of action.”

The 17 goals, in turn, have 169 targets, a list that has both too many items and too little content for each entry, such as target 12.8: “By 2030, ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature.”

Proponents of the International Development Finance Corporation actually concede that even spending trillions of taxpayer dollars every year would not be enough to achieve the amorphous and poorly defined U.N. goals.

But then, that’s not surprising, given Easterly’s observation that “the [sustainable development goals] are so encyclopedic that everything is top priority, which means nothing is a priority.”

Easterly thus confirms our commonsense intuition that neither an International Development Finance Corporation, nor any other government foreign aid program, should be based on achieving the sustainable development goals.

A Heritage Foundation analysis in 2015 echoed this conclusion, finding that:

Taken in whole, the [sustainable development goals] are, quite simply, a mess—broadly unusable as a framework for development.

They do, however, hold great promise for fulfilling the real purpose of their drafters: to justify the inevitable calls of development professionals and developing countries for more funding.

Trying to implement the [sustainable development goals] will cost a fortune. According to U.N. estimates, meeting the [sustainable development goals] will require $3 trillion a year.

In an era of declining budgets for development assistance, expectations at the United Nations and in some developing countries of huge, new sustainable development goals programs that would be heavily funded by American taxpayers and those of other Organization of Economic Cooperation and Development nations fly in the face of budgetary realities.

As the 2015 Heritage analysis concluded: “No matter how generous Washington is and plans to be, at Turtle Bay [U.N. headquarters in New York], the answer will always be “not enough.”

The private sector-led investments that the International Development Finance Corporation would encourage are certainly the more realistic way forward for development policy. Indeed, private sector investment to developing countries has far outstripped foreign assistance in recent years.

However, the best way to encourage foreign investment is not to subsidize it in countries that have access to international financial markets, but to encourage policy changes to attract private investment.

BUILD Act proponents would be better advised to make further substantial changes to the bill to focus it on projects that either have a compelling foreign policy and national security justification, or provide a bridge for those countries that lack access to international capital markets while encouraging them to adopt pro-market policies.

Specifically, the BUILD Act should be amended to:

  • Reduce contingent liability to $30 billion to maintain the current level of the Overseas Private Investment Corporation. (As it stands now, the BUILD Act would double that cap to $60 billion.)
  • Eliminate automatic growth in contingent liability.
  • Make foreign policy/national security policy (e.g., countering China) a mandatory factor in project approval.
  • Require congressional approval—not just congressional notification—for projects in upper-middle income economies based on a foreign policy/national security policy justification.
  • Eliminate the Development Advisory Committee that was added to the Senate bill. That could increase the influence of Beltway insiders at a new International Development Finance Corporation.

Just another piecemeal fix, the BUILD Act would only further complicate America’s already unwieldy development assistance mechanisms.

Congress should consider the more ambitious and effective approach of overhauling and improving U.S. foreign aid that Heritage has proposed.

The reason why many of the foreign aid projects funded by trillions of tax dollars since World War II have failed to lift countries out of poverty is because that spending has not been tied to incentives to improve policies and the rule of law in developing countries.

Those are the incentives that any new International Development Finance Corporation should prioritize.

Commentary by James M. Roberts. Originally published at The Daily Signal.

Ratepayers Get Cold Shoulder as Green Energy Gets ‘Preferential Treatment’ in Delaware

Delaware residents are the victims of deceptive business practices associated with a green energy scheme resulting from elected officials’ sweetheart deal with a fuel cell company, policy analysts and academics argue.

Bloom Energy had pledged to create 900 full-time jobs in Delaware by Sept. 30, 2016, and to continue employing these workers for at least seven years.

But a filing with the U.S. Securities and Exchange Commission from Bloom Energy’s initial public offering in June shows that as of March, it had only 277 full-time employees.

“Bloom has been able to milk Delaware taxpayers and ratepayers for massive subsidies, gain preferential treatment on multiple fronts, and avoid rules that are rigorously applied to other industries,” energy researcher Paul Driessen said during an event Friday at The Heritage Foundation’s headquarters on Capitol Hill.

The Delaware General Assembly extended financial inducements to Bloom Energy through legislation in 2012, a major topic during the panel discussion at Heritage, as was what Driessen and other speakers called preferential treatment from state regulators and other government officials.

The Sunnyvale, California-based company manufactures solid oxide fuel cells that use an electrochemical reaction to transform natural gas into electricity.

Bloom Energy traces its roots to 2002, when a Silicon Valley venture firm, Kleiner Perkins Caufield and Byers, invested in the green energy company. (That firm is now known as Kleiner Perkins.)

In April 2012, Bloom Energy opened a manufacturing facility in Newark, Delaware, on a site owned by the University of Delaware that previously was occupied by a Chrysler assembly plant.

David Legates, a professor of climatology at the University of Delaware, told the Heritage audience that Bloom Energy isn’t a genuine green energy company because its fuel cells use fossil fuels and release more carbon dioxide than traditional natural gas plants.

Bloom Energy’s fuel cells also run on methane gas, which produces hazardous waste, he said.

Even so, the company qualifies for renewable energy credits under Delaware’sRenewable Energy Portfolio Standards Act, which calls on utilities to draw 25 percent of their energy from renewable sources by 2025. The company also is exempt from the state’s hazardous waste rules.

“Bloom Energy asserts that nothing on either side of the chemical equation is hazardous material, which technically is true,” Legates said. “However, no clean commercial source of methane exists. Thus, it contains many hazardous products that must be removed from the methane before it can be added to the fuel cell to avoid contamination … These compounds must be removed in sulfur canisters.”

A Sweetheart Deal

Legates’ slide presentation quoted Bloom Energy’s permit application as saying its manufacturing process “neither uses nor produces hazardous waste.”

The statement is misleading because it “ignores the presence of hazardous waste in the methane source,” he said.

But because Delaware officials accepted the company’s description of its manufacturing process, state rules governing hazardous waste aren’t applicable, he said.

In 2012 legislation amending Delaware’s Renewable Energy Portfolio Standards Act to allow fuel cells to be used as a renewable energy source, several provisions worked to the disadvantage of state residents, Legates said.

The law calls for a mandated surcharge, described as a tariff, on the bills of every Delmarva Power ratepayer that state lawmakers guaranteed to Bloom Energy for 21  years. The law also includes a clause that says Bloom Energy is entitled to all of the 21-year tariff if the law ever is repealed.

Legates described the arrangement between the state government and Bloom Energy as a sweetheart deal.

Delaware government officials charge Bloom Energy annual rent of $1 for its Newark manufacturing plant, and pledged to spend more than $16 million to upgrade the facility, he said.

“To date, Delmarva Power ratepayers have paid Bloom Energy approximately $200 million, and the total take by Bloom Energy from the state has been $300 million,” Legates said. “Moreover, the energy produced by Bloom Energy was more than three times as expensive [as traditional natural gas sources] in 2012, and now estimates place [it] as much as six times more expensive than traditional natural gas sources.”

Newark-based Delmarva Power, a subsidiary of Exelon Corp., provides electricity and natural gas to customers on portions of the Delmarva Peninsula in Delaware and Maryland.

The Daily Signal sought comment from Bloom Energy, but had not received a response by publication time.

Citizen Activist Denied Standing

John Nichols, a retired financial planner from Middletown, Delaware, who filed two lawsuits challenging Bloom Energy’s business practices and government policies that facilitate those practices, also spoke during the Heritage event.

In June 2012, Nichols sued then-Gov. Jack Markell, a Democrat, and members of the state Public Service Commission. Nichols argued that the state’s deal with Bloom Energy is unconstitutional.

In January 2013, Nichols appealed a decision by the state Coastal Zone Industrial Control Board that he didn’t have standing to challenge the permit issued to Bloom Energy by the state Department of Natural Resources and Environmental Control.

Nichols argued that the permit violated Delaware’s Coastal Zone Act, which regulates industrial activity in specific areas.

The courts ruled that he did not have standing in either his state or federal lawsuit.

“To violate both the spirit and intent of the Delaware Coastal Act took failure on a massive scale,” Nichols said during the Heritage event. “Ironically, these failures may serve a valuable public purpose.”

That’s because government agencies are responsible for  consequences to ratepayers and taxpayers that are beginning to gain attention, he said.

“The notion that all these failures are a coincidence strains credulity to the breaking point,” Nichols said. “These failures demand accountability for Delawareans, Delmarva ratepayers, taxpayers, Bloom investors, and everyone who values the beauty of the Delaware coastline.”

‘Duped Investors’

Although the state’s favoritism to Bloom Energy deserves further exposure and investigation, the company also benefits from “deep state” relationships at the national level with government and corporate figures, chemical engineer Lindsay Leveen told the Heritage audience by telephone.

Leveen, who is a consultant to corporations on energy deregulation and writes for the website Green Explored, reviewed the history of Bloom Energy and what he called its “collusion” with the internet company Google.

John Doerr, chairman of Kleiner Perkins in 1999, invested in Google and sits on the tech giant’s board. Doerr helped to organize financial support for Bloom Energy on behalf of Kleiner Perkins in 2002, Leveen said.

In July 2008, Google became Bloom Energy’s first commercial customer. Three months earlier, the American Society of Mechanical Engineers had released a report funded by the Department of Energy concluding that Bloom Energy “had by far the worst fuel cell on market,” Leveen said in his own slide presentation.

Bloom Energy installed four “Bloom Boxes”—devices used to convert natural gas to electricity—at Google headquarters, but only one of them had to operate at limited capacity for 30 days to be deemed a commercial success, Leveen said.

“The performance test at Google simply duped investors,” he said. “We also know from the S-1 [the Securities and Exchange Commission filing] that many of the Bloom Boxes failed and were decommissioned, and that Bloom took a major financial loss on the decommissioning of those boxes.”

Leveen called for executive branch agencies to investigate Bloom Energy, including the Federal Trade Commission, the Securities and Exchange Commission, and the Environmental Protection Agency.

Say the Magic Words, Answer No Questions

Despite financial setbacks, Bloom Energy remains afloat because it received government subsidies, tax breaks, and other favors from high-ranking government officials, Driessen, a senior fellow with the Washington-based Committee for a Constructive Tomorrow, said during his presentation. CFACT advocates free market solutions in energy policy.

“Bloom has been able to milk Delaware taxpayers and ratepayers for massive subsidies, gain preferential treatment on multiple fronts, and avoid rules that are rigorously applied to other industries,” Driessen said, adding:

The Delaware state legislature has allowed Bloom to operate under a unique definition of renewable energy that lets it qualify for special treatment and subsidies by claiming that its equipment could run on biofuels like methane from cows or landfills even if they never have done so, and even if they’ve always run solely on natural gas and even if they generate hazardous waste in the process.

Bloom Energy’s federal investment tax credit was eliminated in 2016, but Senate Minority Leader Chuck Schumer, D-N.Y., worked to restore the tax credit and make it retroactive to the date it ended, Driessen said. Sens. Tom Carper, D-Del., and Richard Blumenthal, D-Conn., helped Schumer revive the tax credit, he said.

Driessen cited figures showing state and federal officials have given fuel cell makers $3 billion in subsidies over the past decade, with $1.5 billion going to Bloom Energy. Even with this assistance, fuel cell companies lost $6 billion and Bloom lost $2.4 billion, he said.

“Bloom clearly appears to have made questionable statements and outright misrepresentations of material fact to legislatures, regulators, investors, and journalists,” he said, adding:

You might ask how do they get away with this? Actually, the formula for success is pretty simple. Invoke the magical, infinitely malleable terms climate change, renewable energy, sustainability, and environmental protection, and you can pretty much deceive, exaggerate, fabricate, and manipulate all you want. Few difficult questions will be raised, little transparency will be required, and no accountability demanded.

Report by Kevin Mooney. Originally published at The Daily Signal.

Time to Pull the Plug on Electric Vehicle Handouts for the Rich

Earlier this year, Congress passed an irresponsible budget bill that included handouts for electric vehicle owners and alternative fuels.

Eager to frivolously waste more taxpayer dollars, some legislators are now pushing to extend the electric vehicle tax credit and lift the cap on the number of vehicles that qualify for the credit by each manufacturer.

Doing so would reward special interests and only benefit the wealthiest Americans. Congress should instead eliminate the subsidies for electric vehicles.

Promoted as a way to wean Americans off their alleged addiction to oil, both federal and state governments have generous handouts for electric vehicles. Consumers can use up to $7,500 of other peoples’ money to buy an electric vehicle.

Add in-state and local incentives and that number can easily top $10,000. In Colorado, for instance, a buyer can use up to $12,500 in federal and state tax credits to buy an electric vehicle, not to mention enjoy other perks like subsidized charging stations, preferred parking, HOV lane access, and exemption from emissions testing.

The federal tax credit applies to the first 200,000 electric vehicles per manufacturer, and then a phaseout of the credit begins. Tesla is in the phaseout period now and General Motors Co. is close to hitting the 200,000 mark.

Both the House and Senate introduced legislation to lift the per manufacturer cap and extend the subsidy another decade. In a press release, sponsors of the Senate bill urged that “federal action is needed to ensure a competitive electric vehicle market that continues to provide the choice and ability for consumers to purchase electric vehicles.”

Competition is not built on the foundation of government dependence. If federal action is necessary to ensure competition, it is more indicative of how uncompetitive the technology is. Subsidies may increase electric vehicle purchases in the short-term, but they counterproductively stifle innovation by encouraging reliance on preferential treatment from Washington.

When subject to the marketplace, manufacturers will understand the true price point at which consumers value an electric vehicle. Without the government picking winners and losers, the companies would have properly aligned incentives to provide a better product at a competitive price.

This holds true for not only electric vehicle subsidies, but subsidies for all energy sources and technologies.

Importantly, the fuel for electric vehicles is not free. As demand for electric vehicles increases as a result of the lower up-front subsidized price, so does the demand for electricity.

New research from the National Economic Research Associates shows that American households would, in fact, be worse off both as taxpayers and electricity consumers. The study projects that between 2020 and 2035, the average U.S. household would lose about $610 in personal income if the subsidy cap is removed. Cumulatively, total personal income of all American households would decrease by more than $7 billion over the 2020-2035 time frame.

If market-driven forces drove electricity prices higher as demand for electric vehicles increased, that would be one thing. But this is a cost borne as a result of the government pulling policy levers.

The indirect costs are particularly burdensome on lower- and fixed-income families who can’t afford electric vehicles and take advantage of the subsidies. Instead, the benefits of these subsidies accrue to America’s wealthiest households, which can also afford an electric vehicle without the subsidy.

This is borne out by data. The Pacific Research Institute found that in 2014, 79 percent of electric vehicle tax credits went to households making over $100,000, while 99 percent of them went to households making at least $50,000.

For these reasons, Congress should reject all attempts to extend the federal electric vehicle tax credit, and seek to lift the per manufacturer cap. A coalition of free-market organizations, including Heritage Action for America, has already sent a letter to House Ways and Means Committee Chairman Rep. Kevin Brady, R-Texas, asking his committee to refrain from expanding the electric vehicle tax credit in any form.

Rather than picking favorites, policymakers should eliminate targeted tax credits for all transportation fuels and technologies. By eliminating the tax credit, the onus is on automotive companies to make electric vehicles competitive with gasoline-fueled cars.

By encouraging free and open competition in the electric vehicle industry, we will see companies bring innovations in their products and marketing that will make the electric vehicle market viable on its own—without the expensive, prohibitive, and stifling federal subsidies and mandates that exist today.

Commentary by Nicolas Loris. Originally published at The Daily Signal.