Scott Sklar

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Burning The Future: Coal in America
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American Petroleum Institute vs. the American People
Written by Scott Sklar   
November 26, 2007
A recent study by Charles River Associates International – commissioned by the American Petroleum Institute – found that the economic impacts of major energy legislative provisions being considered by Congress could cause job loss, a drop in purchasing power of American households, reduction in business investment, drop in GDP and doubling of cost of petroleum products by 2030.

Now isn’t that surprising these consultants-for-hire would conclude that reducing petroleum imports through higher vehicle mileage standards and a Renewable Fuel Standard, reducing natural gas imports through a Renewable Energy Portfolio Standard, and reducing combined imports through renewable energy and energy efficiency tax incentives would indeed cause economic catastrophe.

The problem has been that these for-hire policy gunslingers weren’t asked if the pro-fossil, status quo policies of the past - haven’t caused disasterous economic, national security and environmental consequences now – probably with more dire consequences than the scenario API/CRA lay on the impending Energy bill.

For those of you that have not been exposed to the sticker shock over the past decade, oil went from $20 a barrel oil in 1999 to $40 in 2003 over $70 in 2006 to shy of $100 in 2007. According to the Summer 2007 advisory of Ferguson: Energy Matters
(www.ceert.org/section_02/documents/Jul13.2007.pdf) “Over the last decade, gas. prices have increased about 300 percent when adjusted for inflation.” And don’t think these increases are just tied to petroleum. For instance, one of the nation’s largest electric utilities, Dominion Virginia Power has asked the Virginia State Corporation Commission for permission to boost rates July 1, 2007. The company says the reason for the proposed increase is an escalation in fuel prices. Since the last increase in January 2004, the price of natural gas has increased by 90 percent, crude oil by 143 percent, coal by 25 percent and nuclear fuel by 8 percent, according to the company quoted in an April 11th 2007 Washington Post article. (“Rate Increase Due to Coal, Nuclear, Oil and Natural Gas Increases” by Amy Gardner  Washington Post Staff Writer_Wednesday, April 11, 2007; Page B01    http://www.washingtonpost.com/wp

Has the increase in oil prices affected the U.S. trade deficit? According to analysis in 2006 by The Federal Reserve Bank of San Fransisco (9\22\06http://www.frbsf.org/publications/economics/letter/2006/el2006-24.html) plotted monthly data from January 2002 to July 2006 for both the overall trade balance and the petroleum-related trade balance and they conclude that higher oil prices and the resulting higher cost of petroleum imports have accounted for over 50% of the deterioration in the overall U.S. trade deficit during this period. Indeed, looking at only the last two years of data, “from August 2004 to July 2006, the overall trade deficit grew from $54 billion to $68 billion and the petroleum-related trade deficit rose from $14 billion to $26 billion, indicating that the deterioration in the petroleum-related trade deficit accounts for 80% of the worsening in the overall trade deficit”.

Now the Energy Policy Act of 2005 (EPACT 05) included investment tax credits totaling $1.3 billion of taxpayer support and the wind and biomass production tax credit extensions and alternative fueled vehicles credits total $2.7 billion and $1.2 billion respectively. This $5.2 billion investment is borne by the American taxpayer presumably to drive emerging technologies into the marketplace and clearly cut down energy imports and harmful pollution - and they do. But the remaining approximately $6 billion in subsidies to the oil and natural gas industries and another $2.6 billion to the electric utilities and including nuclear subsidies of $3.1 billion are another story. But here’s the clincher, while the renewable energy credits are all set to expire after two years, the nuclear credits run to 2020, clean coal to 2015, natural gas pipelines to 2010, and coke gas incentives to 2009. Not only are these incentives given to mature (and very profitable companies) in mature markets with reasonably mature technologies - but in many cases they actually encourage energy imports.

Our government has directed billions of dollars of subsidies to the traditional energy industries, compiled by US General Accounting Office September 25, 2000 to The Honorable Tom Harkin Ranking Minority Member: Tax Incentives for Petroleum and Ethanol Fuels:  Estimates of Revenue Losses Over Time Dollars in millions Tax incentive Summed over years Adjusted to year 2000 dollars Petroleum industry Excess of percentage over cost depletion a 1968-2000 $81,679-$82,085 billion. Expensing of exploration and development costs a 1968-2000 42,855-54,580 billion.  Alternative (nonconventional) fuel production credit 1980-2000 8,411-10,542 billion.  Oil and gas exception from passive loss limitation 1988-2000 1,065 billion. Credit for enhanced oil recovery costs 1994-2000 482-1,002 billion. Expensing of tertiary injectants 1980-2000 330 million.

In October of 2007 , the General Accounting Office (GAO) released “Federal Electricity Subsidies” which detailed Electricity (appropriations) 2002-7 - of total $11.5 billion - $6.2 billion went to nuclear representing the largest portion, with fossil fuels receiving $3.1 billion followed distantly by renewable energy at $1.4 billion.. Electricity (tax expenditures - revenue loss) 2002 - 2007 - of the total $18.2 billion -  fossil fuels received $13.7 billion, renewable energy $2.8 billion, and the remaining approximately $2 billion was infrastructure (utilities - wires and pipelines).

According to a 2003 US Public Interest research Institute (USPIRG) study on appropriations, federal government energy supply R&D expenditures from 1948-1998 in federal appropriation for research and development expressed in 2003 dollars were: Nuclear energy $74 billion, Fossil fuels $30.9 billion,  Renewables $14.6 billion, and Energy efficiency $11.7 billion.

Between tax incentives, below-market fees for drilling on public lands, research and development subsidies and accounting gimmicks, these companies will receive more than $31.6 billion from the federal government over the next five years.

Specifically, these handouts break down as follows: 1) tax breaks: $16 billion, 2) research and development subsidies: $1.8 billion, 3) below-market fees for drilling on public lands: $9.5 billion, 4) accounting gimmicks: $4.3 billion; all which total: $31.6 billion.

But the biggest indictment was delivered by conservative, national security expert Milton Copulos who authored “The Hidden Cost of Oil” by the Set America Free Coalition. He concluded,  “US 2006 oil imports of $306.4 billion were three times the 2001 level. Copulous calculated the cost of oil-related defense expenditures as $137 billion in 2006 coupled with a $117 billion loss of current economic activity outflow in 2006 and $43 billion in loss of local, state and federal tax revenues depriving the US econony in 2003 of 828,400 jobs, which all totals to over $8 per gallon of gasoline, if explicitly paid for by American consumers rather than hidden in their taxes.

And in March 2005 article by former CIA Director James Woolsey, titled “Shaping the Debate” references RMI’s “Winning the Oil Endgame” and the National Commission on Energy Policy funded chiefly by the Hewlett Foundation, “Ending the Energy Stalemate” calling for enhanced mileage standards for vehicles and advanced vehicle incentives” – just what the Energy Bill does try to do.

It’s no surprise that consultants for the oil industry and the American Petroleum Institute want to keep the status quo. They receive funds from consumers for the petroleum and natural gas at the fuel pump  and via utility bills at their homes and businesses - and then out of your yearly tax bill for their billions of subsidies - while they pay Washington lobbyists to protect their incentives while issuing reports and public relations against renewable energy and energy efficiency options. So I hope you read the API-sponsored report, either for a good laugh or cry, at the public’s expense.

Last Updated ( December 20, 2007 )
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