The Coming Green Sprawl

A research paper published by the Nature Conservancy is warning of expanded reliance renewable energy leading to a new phenomenon called “green sprawl”. While not critical of renewable energy development the paper’s authors point out that there is another side of the coin to consider as these less efficient means of producing energy resources requires devoting more physical space to accomplish it in.

The stated shift in U.S. energy policies, and the pending Waxman-Markey cap-and-trade bill,  will require changes in regulatory regimes for land use, and will also likely accompany a shift in power from state and local regulatory agencies to the Federal level. This is inevitable as the reliance on domestically produced renewable energy will demand Federal government oversight at the expense of states rights.

Another policy consequence of renewable energy development is going to be agriculture policy as it is unlikely that corn and soybean lobbies will back off political pressure to develop ethanol and biodiesel mandates as part of our evolving energy policy. With a finite amount of sustainable farm land and the economics of fuel crops over food crops will pull farm land away from food production to fuel production, leading to greater frequency and amplitude of price swings in the commodity markets.

The impact on agriculture policy is particularly interesting to consider when the substantial economic subsidies provided by the Federal government to farmers are taken into account. Will the shift from food crops to fuel crops drive Congress to pump more taxpayer dollars to farmers as an incentive for maintaining food crop production for domestic use and for export? Not only is this plausible, it’s entirely likely as a reduction in food exports would drive up the trade deficit, because the stated goal of domestic renewable energy production is to fuel domestic use.

green sprawl

This study points out what is widely known, ethanol, biodiesel, and burning of biomass for electricity are the most intense land users of all the available options. Essentially the problem is that if energy crop production occurs in land previously devoted to food crops, the resulting distortion of global commodity markets may drive less efficient agricultural expansion in far away places.

Habitat and wildlife disruption is also a consideration here as this report points out that the clearing of land represents only 3-5% of the total disruption imposed by wind turbine farms, with 95-97% of the disruption to wildlife occurring from habitat disruption, pattern avoidance and bird mortality from continuing operation of these turbine farms.

A perfect example of the tension that exists between renewable energy construction and environmental advocates is the recent bill proposed by Senator Feinstein that would create two national monuments in California’s Mojave Desert, which would have the effect of stopping development of 13 large solar and wind turbine projects currently under development. I ask you, if we can’t put a solar farm in the middle of the desert where can we put it?

This habitat disruption is not limited to wildlife either, here in California a landmark bill was signed into law that requires utilities to buy excess electricity generated by solar arrays installed on homes. It is projected that this law will generate a 3x expansion of solar in California.

Consider the implication of a dramatic expansion of solar arrays that reflect sunlight as much as consume it. Homeowners in the many hills of the Bay Area and Southern California could be faced with blinding reflected light as a result. In all major urban areas planning commissions require homeowners and commercial developers to take into account the immediate environmental impacts of their construction, which means that if my downhill neighbor want to a put a bleached white roof and a massive solar array on his roof and the result is a sustained intense glare reflected into my house, there is a process by which I can object and slow down the project with the strong potential for ultimately stopping it.

The report authors were diligent in pointing out that in any of the scenarios they studied, the actual increase in energy requirements by 2030 could be significantly mitigated by conservation measures. Related to that, improvements in efficiency of the full range of renewable energy solutions will also bring improvements.

Under every scenario the Nature Conservancy report considered the land use requirements were eye popping with at least 79.5 thousand square miles of area required by 2030, an area slightly larger than the entire state of Nebraska. Taking into account the transmission grid and supply chain contingencies for committing this large of an area, it is unconceivable that we would develop it as a single or even regional dense energy zone. What is more likely is that energy production would be broadly distributed in areas not accustomed to having these resources located close by.

As the U.S. moves to energy policy that emphasizes renewable energy development, we would be wise to consider the impacts on land use and agriculture policy as well as recognize that the relationship between state and federal governments cannot and should not be trampled in process.

UPDATE: As if on cue the Merc runs a story this afternoon basically reinforcing my post:

“But critics — including some environmentalists — say green energy isn’t always green. In a refrain being heard increasingly across California, they contend the plan to cover this ranch land with a huge solar project would harm a unique landscape and its wildlife.”

Government Efficiency in Action

Redwood City put out a press release touting their efforts to pare down a budget deficit through greater efficiencies in government services.

Redwood City, CA – April 24 , 2009 – As the economic downturn continues to take an increasingly severe toll on local government revenues, Redwood City workers are pulling together to reduce costs in order to maintain crucial City services for the community. Through a combination of programmatic reductions, salary freezes, and use of reserves, the entire City organization is working diligently toward a workable solution to the ongoing structural deficit.

[From Redwood City | Council Gives Budget Direction]

None of this explains why 4 men in 3 separate trucks were necessary to weed and trim this small patch of median strip I saw this morning. It is this kind of action not matching rhetoric that drives average citizens crazy with frustration toward government, big government and small government, because civil servants and elected officials are always talking about grand gestures rather than examining every action, no matter how small. This is perfect example that encapsulates why the public does not trust government to use taxpayer monies efficiently.

IMG_0797.JPG IMG_0799.JPG

Yet Another Attempt to Overturn Prop 13

Get ready for opportunistic attempts to link the overwhelmingly approved Proposition 13 with the California budget disaster. Prop 13 opponents never miss an opportunity to throw rocks at the 1978 law which limited the state government’s ability to tax property owners.

As banks feverishly dump foreclosed homes at cut-rate prices, and as neighboring homes change hands at similar bargain-basement rates, those amounts are enshrined as the new basis for determining property tax until the homes are sold again. Under Prop. 13, that basis can rise a maximum of just 2 percent a year, even if the home is worth significantly more. The consequence is likely to be a revenue crunch for the public services funded by property tax revenues.

[From Property tax revenue plummets with home values]

Prop 13 critics believe that if they say often enough that the measure is bankrupting the state then people will eventually believe them. However, taxpayers and more importantly, the subset of taxpayers who vote are smart enough to understand 3 essential data points that completely discredit Prop 13 critics.

1) The state of California continues to collect massive tax revenues largely on the backs of property owners and sales taxes. The fact remains that California has for all of this decade overspent their revenues, despite revenues increasing by eye popping numbers, as the graph below illustrates (note: these numbers are general fund plus all the extras that the state spends money, your money, on).

200901101359.jpg

2) Critics say that Prop 13 dis-incentivizes people from selling their homes… seriously, how many people in California have lived in their homes for 30 years? It is impossible to get around the fact that home building in California has been an overwhelming growth driver for the state until this year, and what that means is all those new homes added to the previously owned homes that are involved in a sale transaction (which triggers a new tax assessment) are new revenues for the state, in spite of Prop 13.

3) The state’s population is not static, in spite of an exodus of people from the state that is resulting in a loss of people, the state continues to grow in population because of births and illegal immigration. On that latter group, the state has gone out of it’s way to enable illegal immigrants to buy homes, which is one reason why no-doc loans were so popular in the state. First time homebuyers represent new tax revenues for the state.

The housing meltdown will be a major problem for the state this year and likely for the next 3 years as a result of declining values and applications for re-assessments by people who have seen the value of their homes plummet. None of this is the fault of Prop 13, the failure lays at the feet of Sacramento politicians who have completely failed with regard to adhering any semblance of fiscal discipline, and also because the states revenue structure is built on a shaky foundation that is overly dependent on a small number of income taxpayers (fewer than 5% of state income tax payers generate over 50% of the state’s income tax, mostly from capital gains), an already high consumption sales tax that substitutes as an income tax for people on the low end of the spectrum, and lastly, property taxes which then get distributed disproportionately from property wealthy counties in the state to those that are not.

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Liveblogging the California State of the State Speech

This should actually be called the State of Disrepair of the State speech.

Schwarzenegger is being introduced by Karen Bass, Speaker of the Assembly, by saying that the Governor described their negotiations as “we’re all in this together” and left it at that. Darrell Steinberg, President Pro Tem of the State Senate, is not talking about bridges and dikes to prevent the flood of despair… moves on to Lt. Gov. Garamendi, who never misses an opportunity to remind everyone that he would like to be governor too.

Schwarzenegger is up now, frown and all. Thank you and sunshine blowing ensue. He’s going on about a Martin Luther King Jr. holiday and thank you to sundry other people.

C’mon, let’s just get to the budget and save the applause… nobody deserves it right now.

He’s sucking up to the Pres. Elect, Schwarzenegger is already angling to get Federal money.

The state faces insolvency in weeks, is in 3rd special session of the legislature, and people are asking if California is governable, Schwarzenegger says. “I will not give the usual state of the state because California is in a state of emergency”.

It looks like the Governor is going to devote the entire state of the state to the budget and skip all the other stuff that is usually talked about.

“Conan’s sword could not have cleaved our political system in two more than the two parties have.”

Schwarzenegger is right about something, people don’t expect great things from government, they expect the basics like public safety and utility infrastructure, and they expect financial management.

He is now drawing the connection between the halt of infrastructure projects across the state and rising unemployment.

Now he is saying that when the budget crisis is solved that he will send a big list of plans and priorities that include economic issues, healthcare, and environment issues.

He is proposing that the legislature and governor lose their salaries and expenses for eveyr day the budget is late. No applause, lot’s of frowns.

He jumps over to the wildfires of last year. He says we had 2,000 wild fires last year and each one was put out because “we have the best trained firefighters who act selflessly” but I have to wonder what the heck he is trying to say… and then he is done. State of the state is over, 10 minutes in length.

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Vote No on California Bond Measures

Every election cycle I post my voter guide, which not only covers candidates but also the bond measures that California voters have to decide on. This year I am not going to do that and instead urge all California voters to vote NO on every bond measure on the ballot.

The proposition process has gone from being a tool the citizenry could use to redress wrongs and set priorities in the absence of leadership from Sacramento. Instead of the proposition process being the voice of last resort for the People, it is now a tool for politicians and interests groups who cannot get what they want through the legislative process.

Propositions are regularly loaded up with loophole language that is the ballot equivalent of Congressional pork, carve-outs that apply to specific organizations or interests and serve to pervert the original purpose of the measure behind the bond. The backers of these propositions count on voters not reading the lengthy and often complex voter guide that is mailed to every registered voter, and by attaching a lofty title to the proposition and some flowery introductory language, along with an avalanche of television and mailer advertising, well most of these measure end up passing.

Yet both expenditures are perfectly legal, local twists in California’s high-stakes bond-measure game. Fred Silva, an expert on bond measures and a senior fellow at California Forward, a nonpartisan group trying to improve state governance, says the loopholes are always spelled out in the fine print — 61 pages of which are jammed in back of California’s November 4, 2008, Official Voter Information Guide. “It’s really a buyer-beware situation,” Silva says.

[From Reading the Fine Print: How to Spot the Loopholes, Legal Doozies and Loose Phrasing in California's Ballot Initiatives - News - LA Weeklypage 1 - LA Weekly]

California is already on the hook for over $100 billion of debt (aka “bonds”) and the ultimate cost to taxpayers when including interest is typically 2x the face value of the bond. We have something like $51b in bonds already sold and another $54b in authorized bonds that have yet to be sold, meaning the interest rate for the authorized but unsold bonds has yet to be set. A recent bond auction, recent as in recent weeks, was oversubscribed only after the State increased the interest rate to 4.25% (versus Fed Funds Rate of 1.5%) and keep in mind that there is a tax advantage for buyers of state bonds and on top of all that, these are short term bonds. The conclusion is that the cost of borrowing is skyrocketing and this will affect every bond measure that is on the ballot.

There is another way to look at the bond issues. If the cost to taxpayers is 2x the face value, what that means is that the taxpayer sees only 50% of his/her tax dollar going to the issue they are voting in favor of.

If I told you that Prop 1A for high speed rail between Los Angeles and San Francisco will cost $20 billion and $10 billion of that will be for interest and another $1b will go to things that are not part of the construction process like “environmental studies, planning, and preliminary engineering activities,” and another $1b will go to regional transit authorities for intercity rail projects, and $250 million will go to “administrative costs,” would you be quick to vote in favor of that proposition? This is exactly what the Prop 1A high speed rail measure provides for, it’s all right there in the 7 point italic font of the voter guide.

You can be in favor of high speed rail and be against this bond measure knowing that of $20 billion of California taxpayer money, only $7.75b will go to building a high speed rail system… do you really believe that a high speed rail system linking 400 miles between 2 major cities in the state can be built for $7.75 billion (btw, rebuilding 1/2 of the San Francisco Bay Bridge will cost $6.5 billion)?

It is long overdue that voters exhibit some fiscal discipline in the face of a lack of it coming from government. When asked to vote on a measure that will result in your tax dollars being spent, ask yourself what you are buying and do the research rather than just taking your education from a 15 second tv spot.

More on this topic (What's this?) Read more on Bond Investing at Wikinvest

Just Get This Election Over With So Things Can Go On As Usual

I am dismayed with Washington D.C. to the point of not even wanting to vote next month. Why? The so-called bailout plan that Congress passed last week, a plan which is nothing more than a standard issue pork laden oinker of a bill that will do little to improve the financial markets that could not have been accomplished by the Fed, Treasury, and Congress without a massive taxpayer funded porkfest.

Both presidential candidates had a chance to make a stand for change, instead they shrugged their shoulders and said, in effect, “yeah, this bill isn’t perfect but we have to do it” and signed on. What they signed on for is not change but rather business as usual Washington politics where individual Senators and Representatives load up a controversial bill with their pet projects and screw the citizens they are supposed to represent.

You be the judge, is the recision of a tax on a single company that makes wooden arrows for children important, or a tax break for makers for auto racing tracks, or television and movie producers, or a tax credit for plug in hybrids that manufacturers won’t have any problem selling without a tax credit important to financial recovery? This is a bad bill and reflects yet more government interference for problems they themselves helped create. There were ample mechanisms for dealing with this crisis, none of which required a trillion dollar spending bill, like pumping the system with money (happening anyways), raising the FDIC insurance limit (which the FDIC could have done on it’s own without Congress), and capital forbearance.

There are three ways for policymakers to address this problem. The most risky and least effective approach is the Paulson plan, as modified by Congress. The idea to assemble a pool of funds with which to bid up the prices of mortgage securities. The U.S. Treasury would take hundreds of billions of dollars of public funds in order to join the table at Liar’s Poker.

Another approach, which would work more quickly, would be to suspend the rules that require banks to mark securities to market values on their balance sheets. The problem with this approach is that it puts a blindfold over the eyes of regulators. The agencies that oversee banks lose the ability to recognize when a bank is in trouble and needs to be shut down.

A third approach is called capital forbearance. Regulatory agencies would issue new capital rules that would permit banks to make good loans without having the required capital. There is still some risk to taxpayers, because banks would have a lesser capital cushion. However, this is by far less risky than having the government play Liar’s Poker with mortgage securities.

Why do the bailout plans focus on the riskiest, least effective approach for avoiding a credit crunch? Because Wall Street firms like Goldman Sachs get huge fees and trading profits from Liar’s Poker, and they make very large campaign contributions to key Congressmen and Senators.

[From The Lamps Are Going Out, Arnold Kling | EconLog | Library of Economics and Liberty]

A Rasmussen poll came out over the weekend and had some startling results. Fewer than 1 in 2 people surveyed think that selecting people at random from the phone book would result in a worse Congress, 1 in 3 actually think that people selected at random would make a BETTER Congress and 1 in 3 simply are not sure. This same survey found that only 1 in 4 people think members of Congress actually understand the bills they are voting on and only 23% have “even a little confidence” that Congress will be able to do something constructive to help.

Despite just 11% of people surveyed by Rasmussen thinking Congress is doing an acceptable job, 90% of the members will be re-elected because of gerrymandering. Obama and McCain both had an equal opportunity to use this crisis as an opportunity to put the rubber to the pavement for the “change you can believe in” message and both failed. They bellied up to the bar like everyone else and said “yeah this think is a porker but that’s what it takes to get things done”. What makes me or you believe that a McCain or Obama administration would be any more credible at changing the way government works to improve the real crisis in Washington, a crisis in confidence that these people actually care more about the country than they do themselves?

In the last 3 decades we have been primary witness to the consequences of government driving policies that end up having disastrous consequences. The first is energy policy and the second is home ownership, both of which were the result of protracted and deliberate patterns of obstacles and obfuscation by both parties over successive administrations.

Lowering the Drinking Age

UPDATE: I forgot to post this link to a post on PETA that I really liked, sent by a frequent commenter who shares my head shaking disbelief at PETA’s tactics.

At first my reflexive response was against the idea of lowering the drinking age to 18 but after some thought I think I can support this initiative. Consider the facts, we treat 18-20 year olds as adults in every other capacity, why not on this point as well? Prohibition of alcohol for 18-20 year olds hasn’t worked any better than for the broader population in the 1920’s and it may well be resulting in unintended consequences like binge drinking.

Unfortunately, MADD appears to be taking a dogmatic scorched earth approach to this idea instead of engaging in objective debate, reinforcing the notion that these groups are not simply in favor of beneficial social change but are simply put, anti-alcohol in any form. PETA is simply about better treatment for animals, they are hostile to anyone who likes to eat meat, and a wide range of environmental groups are not simply for enhancing the environment, they are anti-human contact with environment. The Brady Campaign also comes to mind, having strayed from simply preventing gun violence to being completely anti-gun.

Ultimately these groups become their own worst enemies because their anti-fill-in-the-blank approach results in their political currency being depleted. Witness the Brady Campaign, despite two decades of work they have little to show for it and this generation of politicians don’t even want to talk about gun control, especially following the Heller decision. MADD risks being ejected into the same political wilderness by taking on the opponents that they have.

What happens when presidents from more than 100 of the nation’s best-known colleges call on lawmakers to consider lowering the drinking age from 21 to 18? Well, a brigade of hyperbolic mommies start screaming at them, that’s what.

[From Let's chuck the drinking age - The Denver Post]

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T. Boone Pickens

I’ve been watching Pickens with a high degree of curiosity as he pitches his energy plan. On one hand I see a guy worth $4b that isn’t in this for the money, yet I haven’t seen too many billionaires that were not always looking for a 45 degree angle on a deal. I was therefore somewhat disappointed to realize that the core of Pickens plan is not just wind but natural gas, to which he has substantial financial incentives in the form of Clean Energy Fuels.

I’m not casting a judgement on the Pickens plan, mostly because very little of it is described in detail. The plan is essentially a 3 page brochure that says we need more wind power and natural gas for transportation. No word on vehicle conversion, gas pipeline development, electrical grid impact, taxes, distribution of costs as they span state boundaries, exploration for natural gas, etc.

Then there is Nancy “trying to save the planet” Pelosi and Pickens making strange bedfellows indeed with the Speaker’s investment in CLNE, even if it is a relatively small one. Nonetheless, these perceptions of conflicts lead to actual conflicts that fuel the “business as usual” sentiment among the public that results in voter disgust and disenchantment.

We don’t doubt that T. Boone Pickens will eventually make substantial earnings off of his green kick — including the world’s largest wind farm, and the proliferation of natural gas to power our vehicles. But Clean Energy Fuels, Pickens’ natural gas distribution company, reported earnings yesterday and, yep, it’s still losing money. The company reported a loss of $2.41 million for the quarter, though that was narrowed from a loss of $3.56 million for the same quarter a year ago.

[From Wasn’t T. Boone Supposed to Be Earning Money Off Green? « Earth2Tech]

THE Legal Decision of Our Generation

I’ve been watching the D.C. vs. Heller case that the SCOTUS handed down the decision on this morning with a sense of fascination about the historical aspect of what happened today. Whether you agree with the decision or not, your opinion will not change as a result of this ruling but you should not overlook the moment in history that we have just experienced.

Yet I don’t think most casual observers recognize what happened today. For the first time in over a century a question about the Bill of Rights itself was resolved. The Heller decision today was ultimately not about the Washington D.C. gun ban, this decision was about something much bigger, what the framers intended when they put pen to parchment and the Heller decision further resolved an obscure debate about the grammatical differences between what was passed by the House and Senate and what was later ratified by the states in 1789-1791. This is gripping stuff, not the dusty remnants of history!

We enjoy a society that is a product of some of the greatest minds that history has ever seen, men who argued extensively, and in written word through the Federalist Papers, about every detail that would come together to form the United States of America. Indeed Hamilton himself argued that the Bill of Rights itself was unnecessary because the People were not surrendering anything therefore no rights needed to be protected, an insight to a powerful intellect who appreciated the immense reality of what they had fought a revolution for, not for the defiance of a monarchy but for ideals.

The brilliance of the U.S. Constitution is not what it says but what doesn’t say. Rather than establish a rigid piece of government machinery, it establishes a framework bound by irrefutable rights and a form of government that serves the People and not the other way around. What has been accomplished with ten amendments, 7 articles, and 27 additional amendments is truly extraordinary, but it all started with the notion that men are endowed with 10 unalienable rights that begin with religion, speech and assembly, and end with a boundary put around federal power.

On this day in history it will be noted that the Supreme Court handed down a decision that laid to rest one of the great legal arguments about what the Founding Fathers meant when they wrote the Second Amendment. Simply put this is the most significant legal decision of our generation, probably a great many generations. This is a once in a lifetime event; what the Court decided is the very meaning of one of the Rights we are endowed with not by a government but by a higher power and carry with us.

The opinions that were rendered on the majority and dissenting sides reflect amazingly well reasoned and scholarly insights and the references in the opinions are extraordinary, it’s not often that the 1689 English Bill of Rights is included in a SCOTUS opinion!

In reading Justice Scalia’s opinion, there is an overwhelming theme that to interpret the Second Amendment as not protecting an individual right would gut the amendment of meaning and defy logic. It is, after all, the Second Amendment, not the two hundredth. This is not an obscure line buried among thousands of pages of text. It is inconceivable that the framers would have given it the priority they did, placing it ahead of so many other critical rights, if they only meant it to apply to militias as the dissenting justices suggest.

[From SCOTUSblog ]

Windfall Profits Tax

UPDATE: I forgot to include the link to the CRS report on the Crude Oil Windfall Profits Tax, here it is. Also, I was thinking a little more about this, what Obama is proposing is essentially a price control because for every $1 above a specific threshold he is saying there will be a proportional rebate back to consumers. This subsidation of oil prices is much in debate around the world right now with national oil companies in Indonesia, Malaysia, China, Mexico, etc. unable to sustain the below market prices for gasoline and raising prices to much protest. In fact there has been armed protests in India and Malaysia in recent weeks because of this. That Obama would propose such a policy is in fact stunning considering that subsidized gas has in fact contributed to increased global demand for oil, while liberals consistently beat the higher taxes on consumers drum in order to dampen demand and drive up efficiency. This goes to a point I made a few weeks ago about the paradoxical positions on this, liberals say only high gas prices will drive down demand, but then the most liberal candidate for president wants to subsidize gas prices which will have the effect of increasing demand and he is complaining that oil companies are not doing their part to maintain fair prices (whatever they are) and at the same time obstructing every possible effort to use domestic oil and build nuclear power, the one clean energy source we know exists in enough quantity to make a difference. To add insult to injury, Obama rails against CEO pay while himself earning $4.2m last year for writing a book. 

Windfall profits taxes are a stupid idea, make that insanely stupid idea, and not only do they fail to generate the promised revenue proponents say will be generated, but they do substantive long term economic damage. In many regards, the decline of U.S. oil company investment in exploration can be traced to the windfall profits taxes that America’s worst ex-president, Jimmy Carter, tacked on them with the Crude Oil Windfall Profits Tax of 1980, which according to the Congressional Research Office resulted in a 3-6% decline in domestic oil production and a 8-16% rise in foreign oil imports.

More to the point, windfall profits suggests that the rate of profitability for publicly traded oil companies is excessive but a simple analysis shows that while the raw numbers are eye popping the profit rates at under 10% and return on invested capital are actually below the U.S. industrial average.

What’s to stop Congress from suggesting that Google makes too much and slapping a windfall profits tax on them to help offset broadband infrastructure development? Seriously, you can’t really buy into the notion that is providing societal good so why not tax them for the bulging profit margins they enjoy, which far exceed any oil company results.

Redistribution of wealth may offer a good populist soundbite but socialism has completely failed as an economic system throughout the world and I don’t see any compelling reason to suggest that we should be seriously considering adopting policies that destroy economies.

“I’ll make oil companies like Exxon pay a tax on their windfall profits, and we’ll use the money to help families pay for their skyrocketing energy costs and other bills,” the Illinois senator said.

[From Obama backs oil profits tax, attacks McCain - Yahoo! News]

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