Fossil Fuels Get Huge Master Limited Partnership Tax Breaks – “Green” Energy Shut Out

Since 2008, investors have poured several hundred billion dollars into fossil fuel-related master limited partnerships that shield income from virtually all corporate taxation. The MLP tax loophole — a sort of reverse carbon tax — has heavily subsidized the nation’s ongoing oil and natural gas fracking boom.

Solar, wind and other renewable energy companies are not eligible for the MLP tax dodge. Although bipartisan support is building in Congress to extend the tax deductions to them, insiders say legislation to do so will most likely have to wait for and be a part of a comprehensive tax reform package, which has proven elusive.

Until then, existing incentives will serve as a drag on the U.S. economy’s transition from fossil fuels to renewable energy sources. As long as Congress fails to act, fossil fuels will continue to exploit their government-approved competitive advantage even as mounting evidence shows their use accelerates global warming and prompts calls to tax carbon. Continue reading Fossil Fuels Get Huge Master Limited Partnership Tax Breaks – “Green” Energy Shut Out

Climate Change – Human Certainty

On September 26, the Intergovernmental Panel on Climate Change (IPCC) released its much anticipated Fifth Assessment Report, a multi-year study of hundreds of the world’s top climate scientists. While there are no new shockers in the report, it stated with greater certainty man’s role in driving climate change. The IPCC stated that it is “extremely likely that human influence has been the dominant cause” of climate change over the last several decades, stronger language than was used in the group’s previous assessment in 2007.

On the same day, the U.S. government published its Climate Action Report (CAR), which details U.S. actions on climate change. The report, published by the State Department, trumpets the accomplishments by the Obama administration – such as nearly doubling fuel efficiency standards for cars, and doubling electricity generation from renewable energy – and how it plans on achieving the president’s goal of cutting U.S. greenhouse gas emissions by 17 percent by 2020.

Despite the paralysis of Congress – which has reached an absurd new level with the latest shutdown mess – the president retains quite a bit of leverage over the trajectory of U.S. emissions. The CAR puts a little more meat on the bones of the administration’s Climate Action Plan, which Obama outlined in a major speech in June 2013. The plan relies heavily on EPA regulations on power plants, which are designed to target coal pollution. EPA’s draft rule that sets strict limits on emissions from power plants was released on September 20, and this rule remains the biggest tool the administration can use to slash emissions. Beyond these actions, the details get murkier.

Obama speaks about climate change at Georgetown University on June 25, 2013

Several of the other steps included in the climate plan provide little insight into how they might be achieved. For example, it calls for increasing funding for clean energy across all agencies by 30 percent, but does not detail how the administration thinks it will be possible to get that through Congress.

The plan also commits to developing fuel economy standards for cars made later than 2018. Not only is it unclear how such an achievement would have any measureable impact before 2020, but vague language like “commits to” doing something does not really inspire confidence. And in order to sequester carbon, the plan calls for “preserving forests” by “identifying new approaches to protect and restore forests.” While this is an admiral goal, it is all but a throwaway line.

Still, other steps are also similarly undeveloped, but could have an enormous impact. The administration hopes to reduce carbon pollution by 3 billion metric tons by 2030 through efficiency standards for appliances. And tackling other greenhouse gases such as hydrofluorocarbons (HFCs) and methane emissions are rightly top priorities as well. These arcane and mundane steps won’t make front page headlines, but are hugely important. It will be up to the White House to vigorously pursue these initiatives further.

The CAR shows a dramatic reduction in greenhouse gas emissions since 2005. However, without further action, the U.S. will merely return to 2005 levels by 2020 (see chart). For all the hoopla over the shale gas bonanza and how it is cleaning up our air, there is simply no way the U.S. will meet its climate targets without much more aggressive government action. And with the landmark IPCC report once again warning countries around the world to take action on climate change, the administration’s plans to reduce emissions, though encouraging, look rather unambitious.

Fighting West Coast Coal Exports

“There’s no way they’re going to run coal trains through the city of Seattle. There aren’t enough police to keep those tracks cleared day after day after day.” As reported by The Seattle Times, environmental activist Bill McKibben headlined a protest in Seattle on September 21, 2013, vowing to block coal export terminals on the West Coast.

Coal mining companies have proposed to build several export terminals in Washington and Oregon to ship coal to energy hungry countries in Asia. However, the projects have run into fierce local opposition. Plans to build six terminals in the Pacific Northwest have been scaled back to only three.

Bill McKibben

Trains would carry coal from the Powder River Basin in Montana and Wyoming to the coast in Washington and Oregon. The trains would consist of 150 uncovered cars full of coal, stretching about 1.5 miles, with as many as nine trains making the trip each day. Two export facilities in Washington would ship a combined 90 million tons of coal each year, with an Oregon port shipping an additional 9 million tons annually. Local communities are concerned about increased traffic, accidents, and pollution blown off from the uncovered cars.

Facing an increasingly unprofitable market within the United States, coal companies are looking overseas, but would need new export terminals on the West Coast. Domestic demand for coal will likely undergo a long period of decline. The Environmental Protection Agency released its proposed greenhouse gas limits on new power plants on September 20. The proposed rules would effectively make building a new coal-fired power plant impossible, without costly carbon capture technology. The EPA is expected to come out with much more significant regulations on existing power plants next year.

Coal companies are trying to reach countries like China, which alone consumes almost as much coal as the rest of the world combined.

Yet, there are signs that even the rapidly growing Chinese market for coal may be plateauing. According to a July 2013 report from Goldman Sachs, coal consumption in China will only grow by one percent a year from 2013-2017. That is a significant decline from the seven percent annual growth rate over the last five years. The recent slowdown in the Chinese economy is partly to blame, however. China is also making large investments in renewable energy and even hopes to kick off a greenhouse gas emissions trading program in 2015. These trends are colluding to close the window on the profitability of coal exports, according to Goldman Sachs.

In Washington State, local opposition is the most immediate threat to the coal export terminals. Washington environmental groups and indigenous tribes have organized against the projects. Political leaders are also hardening against exports – the September 21 rally featured

Mayor Mike McGinn

, who has made his opposition to coal exports a central pillar of his reelection campaign.

Opponents of coal export terminals scored a significant victory in July when the Washington Department of Ecology issued a wide range of requirements for the environmental impact statement (EIS) for the projects. The EIS will include the impact of coal exports on global climate change, a higher level of scrutiny than the coal companies wanted. In June, the U.S. Army Corps of Engineers decided not to include climate change impacts.

The combination of environmental regulations, slowing demand for coal overseas, and strong opposition against coal exports in the Pacific Northwest have already scuttled half of the proposed six projects – and may yet kill off the remaining three.

Showdown in the Ohio Valley: War Veterans Prepare to Fight Fracking

Drilling-Rig,-Columbiana-County
(Photo: Ted Auch PhD, FracTracker, June 2013)

What could make a former Marine, retired cop, and self-described “ultra-conservative” oppose fracking in his home state of Ohio? At a diner off of Route 22 near Steubenville, OH, Ed Hashbarger had the answer. Dressed in a red polo shirt emblazoned with the U.S. Marine Corps logo and carrying a Marine Corps notebook, Hashbarger first described his bona fides.

He served three years in Panama. He recited half a dozen close relatives who served in World War II, the Vietnam War, Afghanistan, and Iraq. His son was badly injured from an improvised explosive device (IED) in Afghanistan and remains confined to a wheel chair as a result.

Hashbarger is also a lifelong Republican. He campaigned on behalf of numerous Republican politicians, including both Bush presidents and Ohio Governor John Kasich. “You can look me up. There is probably nobody more conservative than me. I could be Sean Hannity’s brother, that’s how conservative I am,” he said. He was initially excited when oil and gas companies approached him about leasing his land for drilling. “I was one of these ‘drill baby drill’ people. Couldn’t wait.” Continue reading Showdown in the Ohio Valley: War Veterans Prepare to Fight Fracking