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George Will may have fallen for the sort of Internet harangue that wants us to “send it to everyone we know” when he wrote in his June 5 column, “Drilling is under way 60 miles off Florida…by China, in cooperation with Cuba, which is drilling closer to South Florida than U.S. companies are”. That Will focused on distance suggests he saw this map in the e-mail pass along; it compares distances from the U.S. to our Gulf drilling zone to the distance from Key West to Cuba's offshore:

    Revealing how our government gets its information, Vice President Cheney quoted Will in a speech, as did House Minority Leader John Boehner in an e-mail to a Politico.com reporter. An editorial in Investors’ Business Daily unsurprisingly went for it as well before Politico — staffed by seasoned reporters — debunked the story, as did others.
    "China is not drilling in Cuba's Gulf of Mexico waters, period," said Jorge Pinon, an fellow with the Center for Hemispheric Policy at the University of Miami and an expert in oil exploration in the Gulf.
    Nevertheless, China could be enlisted to drill in Cuban waters (assuming they know how). The map is useful for showing us the stretch of the Gulf that belongs to the island nation.

An old political adage, attributed by some to Bismarck, says that two things you don’t want to see made are laws and sausages. That’s been particularly true this year as the 110th Congress has gone at the energy issues on multiple, often conflicting fronts, and it is notably apt as work on the Farm Bill comes towards closure.
     As we have seen, Congress enacted a medium-sized Energy bill at the end of 2007, which was signed by the President. Still pending are a number of tax provisions which had to be stripped out of the Energy bill in order to pass the Senate, and that body is now seeking to revive them by amending the companion Energy tax bill that was sent forward by the House. A Senate Committee reported out the Warner-Lieberman Climate Change bill at the end of 2007, and it is likely that the Senate will take it up in the early weeks of this session. Its prospects are still unclear, as the House has not begun to develop its plan. The White House has been relatively silent on the prospects for this bill, although some Republican strategists are arguing that the President should support it, since all the viable Presidential candidates would favor an even tougher bill next year.
     Among the other pieces of legislation moving through the Congress is the massive reauthorization bill for all farm and rural related activities. This bill is typically considered only on a five-year cycle, and carries numerous subjects in a package totaling nearly $300 billion over its lifetime.
     Reconciling all of its interests—farm subsidies, nutrition programs, conservation, rural development, and now energy-related issues, is a difficult balancing act at any time, made more difficult in a climate of divided government. The Congress was unable to enact a bill in 2007 and had to provide for a temporary extension through March 15th of the programs in the 2002 measure. Since returning in January, the House and Senate are attempting to move to a formal conference, beginning with a series of general framework offers by the two Committee chairmen. Leadership of the agricultural issues rests with Congressman Collin Peterson (D-MN) in the House, a fairly conservative rural Democrat, and Senator Tom Harkin (D-IA) in the Senate, a liberal farm-state Senator. Their negotiations, which have included outreach to the White House on the fiscal parameters of a bill, are beginning to move more rapidly. Also, because there typically are tax provisions affecting farm programs, the respective chairmen of the House Ways and Means and Senate Finance Committees are also involved, while the White House is discouraging any tax elements of the bill for fear that they will open broad tax policy issues.
     As a side note in terms of legislative process, this bill is setting new standards of transparency, with both House and Senate making their working papers and positions available on the respective Committee websites.
Subsidies for Biofuels      Where is the Farm Bill likely to take us in terms of energy issues? Most particularly, what course will it set with respect to biofuels? While recent research findings have questioned the efficacy of biofuels in terms of greenhouse gas reduction, proponents still make the case that broader use of this energy source will provide some relief in our use of petroleum and will therefore help reduce oil dependency as a strategic issue. The Energy Bill enacted in 2007 sets relatively high targets for the production and use of biofuels, calling for at least 36 billion gallons of biofuels as part of our energy mix by 2022. The provisions of the Farm Bill can be seen as the tactical steps to achieve this strategic goal.
     As they move towards Conference agreement, the House and Senate are converging on a mix of subsidies and incentives to put reality behind the goal. On the incentive side, there are provisions in both bills to set federal procurement preferences for the purchase and use of bio-based products. Both bills provide for loan guarantees and grants to support the development of production facilities to process biofuels, with somewhere between $300 and $800 million set aside for this purpose. Research and development support in the range of $100 to $200 million a year would be provided for new fuels and products, with some emphasis on moving away from corn-based ethanol towards the cellulosic feedstocks that would involve wood or waste products. Some attention is paid as well to the issue of moving biofuels in the transport system. Their chemical nature and water content will not permit the use of convention pipelines, but the high volume movement on highway or rail facilities presents problems as well.
Incentives to Avoid Land Use Change      An interesting new program contained in each of the bills in somewhat different form would encourage farmers with subsidies to produce energy crops, particularly those of cellulosic material, but only where the land had been previously used for other farming, thus avoiding the issue of carbon release from land use conversion.
     The tax provisions under consideration, which are now all in the Senate bill, would also contribute to the policy goals. Special depreciation allowances would support investment in plants to produce cellulosic biomass ethanol, a stepped-up tax credit would encourage use of cellulosic product as opposed to current ethanol, and the current ethanol credit of 51 cents per gallon would be reduced to 46 cents once there is substantial production in place. At the same time, the current tariff provisions that discourage ethanol imports would be kept in place—a provision of greater benefit to producers than to consumers. Finally, the current 30 per cent tax credit in support of installing alternative fueling stations would be extended for another year.
     Resolution of all these energy issues and enactment of a final bill will, of course, be dependent on Congressional and Administration agreement on the broader issues, such as the level of crop subsidies made available to wealthy farmers. But looking at the progress to date, there seems to be some attention paid to critical points such as the need to move away from corn-based products which have marginal energy benefits at the cost of higher food prices, and to make the investments necessary to develop more environmentally-friendly biofuel sources. We shall see in the next few weeks if the parties can reach the necessary agreements.
      - MLD

Four years into a project to develop the technologies needed to arrive at “clean coal” designs for the nation's electricity plants, the Department of Energy has pulled the plug, blaming higher cost projections as the reason.
     The 275-megawatt prototype plant was designed to convert coal into gas, strip and bury the mineral's carbon dioxide content, and then burn the gas to produce electricity. Called the FutureGen Alliance, the DOE had signed on to pick up 74% of its tab, with a consortium of 13 private utilities funding the rest.
     Six weeks ago, Mattoon, a town in downstate Illinois, had been selected for the site, edging out three other finalists, two of them from Texas. Senator Richard Durbin (D, IL) called the rug-pull a “cruel deception”. Some Illinois congressmen, irate over the loss of jobs the project would bring to the state, expressed doubt that the plan would have been scrapped had Texas been chosen. As far as we know, none voiced concern for setbacks in developing ways to burn coal free of CO2 emissions.
     Cost estimates for the experimental plant had risen to $1.8 billion from $1 billion, but Michael Mudd, the head of the alliance, says all but $300 million is attributable to inflation. Moreover, the private utility consortium has said it would cover the non-inflation differential. And just two days before the cancellation, President Bush proposed a 25% budget increase for coal technology to $648 million in his State of the Union speech saying, “Let us find new technologies that can generate coal power while capturing carbon emissions”. Was Cost the Real Reason?      These seeming contradictions raise questions of whether cost is the real culprit. The first of any complex technology
U.S. Dept. of Energy
Rendering of the plant to have been built at Mattoon, IL.
will assuredly cost more than its replicas, and a prototype yields invaluable lessons, so cost should not usually be the primary concern. Perhaps the real reason for cancellation was that the DOE, which has taken four years only now to reach the point of putting shovel to ground, recognized that it had fallen badly behind, and cost was made the face-saving scapegoat. Administration officials argued that the project was badly flawed and that the "easy" thing to do would have been to let it run into the next administration, when its cancellation would have provided a chance for them to make political hay.
     Environmental groups that want to see an end to all coal-fired plants cheered the cancellation, in the belief that wind and solar can somehow provide for the nation's growing energy needs. We do not share that view. But if the U.S. is ever to reduce its oil addiction, it must explore every alternative, including how to make its inexhaustible coal reserves somehow usable.
Energy Shortages on the Way      Uncertainty over whether legislation regulating carbon emissions is likely and what form it may take has caused the utilities industry to forestall building some 50 plants in 20 states. Nationwide electricity shortages are just over  the horizon.
      Importantly, some recent developments offer hope that coal can be made into fuel without requiring complex and expensive "capture and sequestration" of CO2. The DoD, as earlier reported in our air force story, has a program, called CBTL, for taking coal to fuel, using biomass to absorb the CO2. It seems likely that if the “clean coal” question cannot be resolved — and soon — we can look forward to a nuclear future.
      - SCW

In the first instance of a government agency denying a permit on the grounds of CO2 emissions, Kansas has halted a utility’s plan to build two 700-megawatt coal-fired power plants.
     The action follows in the wake of an April U.S. Supreme Court decision that required the Environmental Protection Agency to treat carbon dioxide as a pollutant subject to regulation under the Clean Air Act.
     The ruling was imposed by the Kansas Department of Health and Environment, whose secretary, Roderick Bremby, said, “it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing." He had the support of Kansas governor Kathleen Sebelius, a renewable energy advocate who had said in her state of the state address earlier this year, "where we get our energy is...no longer just an economic issue, nor solely an issue of national security. Quite simply, we have a moral obligation to be good stewards of this state."
     Sunflower Electric Power was to have built the two plants at the lightly-populated western end of Kansas. They would have sent 11 million tons of carbon dioxide annually into the atmosphere, “nearly as much as a group of eight Northeastern states hope to save by 2020 through a mandatory cap-and-trade program they plan to impose”, reported the Washington Post.
     The decision was met with strong objections from unions more concerned about jobs that might have been, from state legislators who wanted the tax revenue, and from Sunflower, whose spokesman said the ruling “has no basis in law or regulation” and is a “horrible error”.       - SCW

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     "Law and Sausages" by our congressional correspondent forewarned us that watching legislation aborning would be as stomach-churning as watching sausages being made. Co-sponsor Joe Lieberman (I-CT) said it for us: "It is disappointing and frustrating that parliamentary maneuvers and concerns about something really totally irrelevant to this once-in-a- career-lifetime opportunity to do something" was being frittered away.
     Irrelevance had to do with Republican retaliation for Democrats
dragging their feet on a pledge to clear a number of Bush administration nominations for circuit and district court judgeships (Democrats were in turn retaliating against the same Republican tactics during the Clinton...never mind). As payback, Republicans called for a reading of the entire 492-page Boxer amendment on the floor. "Eight hours wasted," said a disgusted Majority Whip Richard Durbin (D-IL), with all debate halted. Entirely fitting, said Minority Leader Mitch McConnell (D-KY). Hadn't Senator Reid once spent nine hours reading his own book in the Senate to forestall legislation?
     The week had been set aside for debating the bill, but debate hardly got started until Thursday.
Emissions Are Good for Us      Thus did this monumental bill fall prey to the usual party squabbling that has, in the eyes of the American people, made the U.S. Congress the nation's lagging indicator, with approval ratings in the teens. Case in point: Sen. Lieberman put up then-and-now satellite photos of the diminished polar icecap to show what is happening to the planet. Because for some senators this will come as news?
     Apparently. "I am telling you that carbon emissions are a function of economic growth and technology. It means jobs, cars and energy", Kentucky's other senator, Jim Bunning (R), informed his colleagues.
Filling the Tree      Republicans hotly objected to Majority Leader Harry Reid's (D-NV) forcing a vote after only four days of debate, and worse, "filling the tree" -- a tactic of putting amendments everywhere in the bill where it could be amended, thus blocking any further amendments. What they found particularly offensive: the only amendments that might be considered would have to be approved personally by Reid.
     The amendments Republicans sought to propose typically provided that, if a certain cost (e.g., gasoline) crossed a certain threshold, or if jobs lost in the senator's state exceeded a certain number, then a particular provision of the bill would be suspended, or an industry would be granted more allowances to pollute, or offshore drilling would be permitted — a bloodletting that would threaten over time to leave the bill anemic if not a corpse. One after another senator used today's price of gasoline as somehow relevant to a bill that would not take effect for a couple of years and which spans 40 years.
     Each side had studies to contradict the other: the bill would create vast new industries retrofitting America; no it wouldn't, for James Inhode (R-OK) it would be "the killer for jobs for America", losing 9.5% of all manufacturing jobs to China and India, where the jobs will increase emissions, because those countries have no controls.
     Both Lieberman and Boxer cited economic models that delays would cost the nation far more in the future. Lieberman contended that "Each two year delay in starting emissions reductions doubles the annual rate at which we will need to reduce emissions by 2020 in order to ward off a global catastrophe."
It's Money That Matters      But to no avail. The costs to be incurred now, as outlined in the Boxer amendment, were what KO'd the bill (see tables in following story). Republican senators dubbed it "the mother of all earmarks", "a climate tax", "a tax and spend plan", "a massive tax increase on the American people". Using a colorful pie-chart, Sen. Boxer gamely insisted it was nothing of the kind, that no one would be taxed, that all the money would come from the auctioning of allowances to industry, that half the money raised from the auctioned-off carbon allowances would be returned to the public to offset pass-along cost increases, and the other half given to industry to assist in their conversions.
     But Ms. Boxer might have been better advised to have expressed those allocations as percentages of whatever monies the auctions would raise. The gargantuan size of the absolute dollar figures totaling $5 trillion were what fueled the Republican assault. That the costs would be spread across 40 tears was never emphasized.
     Better still, if this legislation is taken up again once President Bush has been sent to pasture, would be to omit costs and instead provide that Congress meet every few years to adjust allocations. Experience just past would give them a better reading of how much the auctions are likely to bring in over the years imediately following and where best to steer monies to consumers and industry. It was sheer folly of the Boxer amendment to attempt to forecast forty years.
     Beyond pure cost, more than one legislator quoted the Wall Street Journal's editorial page: "the most extensive reorganization of the American economy since the 1930s", effectively raising the specter of that bugbear, the New Deal. According to Jeff Sessions (R-AL), the bill has "35 direct requirements that various agencies of the U.S. government will issue regulations, and regulations are often far more detailed than the laws we pass". This in turn will lead to legions of bureaucrats to enforce the regulations, and require industry to hire accountants, technicians and economists to ensure compliance, adding a huge cost burden.
     "Instead of just letting cap-and-trade work", in freshman Senator Bob Corker's (R-TN) view, "the bill had to be turned into a huge spending bill", even giving money away to parties that have "nothing to do with emitting carbon".
     In a final lament, Sen. Boxer said, "If we do nothing we will be on the wrong side of history".
     At least with sausage, something tasty is the reward. But the extrusions of Lieberman, Warner and Boxer proved too much to swallow.      - SCW

When the U.S. Congress returns from its Memorial Day Recess, the subject of climate change will be on the Senate calendar for the first time in many years. Late last year, the Senate’s Environment and Public Works committee ordered the Warner-Lieberman bill (S.2191) reported, but that action was put in abeyance while behind-the-scenes negotiations were pursued in the hopes of finding a majority vote to support the bill.
     Now, Chairman Barbara Boxer (D-CA) feels she has the support necessary to proceed, and released a so-called Boxer Substitute just before the recess began. It is drafted in a way that promises a 66 percent reduction of U.S. greenhouse gas (GHG) emissions by 2050. That is less than the 80% reduction originally sought by Boxer and others, but fits with the idea of seeking broader support.
     The substitute amendment, worked out with all of the bill’s sponsors and supporters, will be offered in lieu of the original Warner-Lieberman text when the bill comes up on June 2nd. A number of changes have been made to the bill to try and garner support, including the following:

While still structured as a cap-and-trade measure in which upstream users of energy will need to obtain allocation permits from an ever-diminishing pool, the cap-and-trade mechanism will be managed through an auction process. Two outcomes of this approach are significant in terms of how the process will work. A greater move towards market pricing of the permits will set a level of cost for carbon emissions equivalent to what is needed to spur reductions. At the same time, the receipts from this auction create a massive pool of funding to cover consumer and industry impacts.

	While shifting to an auction system, the Boxer Substitute does recognize political impacts of these costs, and will include some form of “safety valve” process, under which additional permits will be released into the market to lower prices, made up by future reductions as technologies mature.

Many provisions have now been added or strengthened to provide assistance and support to affected individuals and industries. Expressed in billions of dollars over the next 40 years, the amounts sound impressive:   • Worker Impacts: $190 billion   • Carbon Intensive Industries: $213 billion   • Fossil Fuel Electric Generators: $307 billion   • Petroleum Refiners: $34 billion   • Natural Gas Processors: $20 billion And, capping off the support levels, an $800 billion tax relief fund to help consumers in a way that will be developed by the Senate Finance Committee.

Other provisions are designed to support a variety of state efforts in reducing impacts and supporting conservation through   • Consumer assistance: $911 billion   • Transition funds for industrial and coal producing states: $254 billion   • Mass Transit funding: $171 billion   • Energy efficiency grants: $702 billion   • Adaptation grants for climate change impacts: $253 billion   • Protection of Wildlife: $237 billion

Other initiatives within the bill will   • Reimburse firms who have already invested: $30.7 billion   • Support efficient and renewable energy in buildings, appliances, and industries: $303 billion   • Support research and development for improved generation of electricity, cleaner coal and carbon capture/sequestration(CCS), more efficient vehicles, and better fuels: $223 billion   • Protection of Federally managed natural resources: $288 billion

Totaling almost $5 trillion over the 40-year life of the bill, there is as yet no clear analysis of the expected economic impacts and climate change effectiveness of the efforts, but this will certainly be a point of debate. It’s likely that the Congress has never taken action on amounts this large in a single bill—committing an average of $110 billion annually over the life of the bill.
     Other aspects of the bill deal with the technical, managerial and governmental issues. It would permit a limited portion of the GHG reductions to be satisfied through domestic and international offsets. Independent oversight boards are created to oversee both the economic and technological aspects of the program.
     The President is directed to re-enter international negotiations to establish binding reductions, and requires allowance credits to cover imports from non-compliant countries. States are permitted to impose their own climate change measures so long as they are more stringent than the federal requirements, thus permitting the imposition, for example, of a California-based emissions standard. And, as expected, there are numerous studies and reports to be provided over the years.
     As a bill that seeks to deal with major issues in a comprehensive way, the test will be how individual interests and eventually the members of the Senate assess the costs, impacts and outcomes. Early reactions from affected parties were predictable. Environmental groups were supportive but said that the bill doesn’t go far enough. Business interests argued that the economic impact would be too great in comparison to the outcomes. Supporters of nuclear power generation note the absence of any supportive provisions for their technologies, although Senator Boxer has stated that she is willing to consider such provisions (which must come from another Senate Committee) while the bill is on the floor.
Enought to Defeat a Filibuster, but Not a Bush Veto      The White House has thus far been silent, but certainly will issue its pronouncements as the bill goes forward, and especially if it shows signs of moving forward. The major test for the bill comes when the Senate seeks to limit the inevitable filibuster, a step which takes 60 votes to overcome. Senator Boxer has expressed some optimism that the necessary votes will be there. When the Senate was considering the recent Budget Resolution, there was an effort to attach instructions to Congress prohibiting cap-and-trade legislation until China and India had acted to limit emissions. This provision, reminiscent of the amendment that killed U.S. endorsement of Kyoto, was tabled by agreement of 61 Senators, including 12 Republicans. Perhaps that group will permit debate and a vote on the Boxer Substitute. If there is such a group of Senators, there should be enough votes to pass a bill, but not likely the 67 votes needed to override a Presidential veto.
     In discussing her substitute, Senator Boxer is realistic about the prospects for even getting a bill through both Houses of Congress and to President Bush before this Congress adjourns. But with positive views about climate change from all three remaining Presidential candidates, she is very optimistic about prospects in 2009.
House Unpredictable     Should a bill pass the Senate, it’s not clear what may happen in the House. The House Energy and Commerce Committee, under Congressman John Dingell (D-MI) has held hearings and issued several white papers, but it is not clear what they ultimately might support. Democratic leadership has been supportive of action. And in a surprising development, an influential House Republican, Congressman Tom Davis (R-VA) recently issued a long memorandum criticizing his party’s leadership and performance, suggesting among other things that if the Republican program were a dog food, the groceries would take it off the shelves. While Davis has announced his retirement from a seat in an increasingly blue district, and also declined to seek the Senate seat opened up by Senator John Warner (R-VA)’s retirement, he is still thought of as one of the more politically astute Republicans, having chaired the Republican Congressional Campaign Committee through series of successful election cycles. In his memo, Davis suggests strongly that the Republican Party could improve its image with the voters by taking reasonable and proactive positions on issues like climate change.
     With only a few months remaining before the Congress goes home to campaign, the likelihood of action is probably limited, but what happens this year will set the stage for the debate after the new President and Congress take office next January.   - MLD