Is the era of full employment over?

Simply put, March was not a good month for job creation around the country. Numbers were down markedly from previous months while, as the Americans for Limited Government advocacy group pointed out, the labor participation rate tied a 37-year low.

The news was even worse in the manufacturing sector, where it contracted by 1,000 jobs. While Scott Paul of the Alliance for American Manufacturing blamed the strong dollar, calling it “a big loser for factory jobs in the United States,” it’s only a piece of the puzzle.

Paul would favor a more interventionist solution, adding:

There’s plenty that could be done to turn this around. The Treasury should crack down on currency manipulators, the Federal Reserve shouldn’t act prematurely, USTR should be assertive about enforcing our trade laws, and Congress must address currency and trade enforcement in the context of new trade legislation.

Based on Barack Obama’s promise to create a million manufacturing jobs in his second term, he needs to add 628,000 in the next 21 months – a Herculean task for any president, and almost impossible for this one. Let’s consider a few facts:

First of all, the continued low price of both oil and natural gas has tempered the energy boom to some extent. According to Energy Information Administration data, the number of oil and natural gas rigs in operation last week was 1,048. In terms of oil operations, the number is down 45% from last year and for gas it’s down almost 27%. While gasoline in the low $2 range is good for the overall economy, oil prices need to be between $60 and $80 a barrel for operators to break even, and the benchmark price has held lately in the high $40s.

As I noted, low energy prices are good for some aspects of job creation, but the energy boom is on a bit of a hiatus and that affects manufacturing with regard to that infrastructure. Throw in the unfair competition we’re receiving when it comes to OCTG pipe and it doesn’t appear this will be the cure to what ails us as far as job creation goes.

More important, though, is the financial aspect. Our corporate tax structure is among the most punitive in the developed world, which leads to capital flowing offshore despite the “economic patriotism” appeals of our government to demand it come back. Once you have the opportunity to take advantage of other countries’ willingness to charge 20% or even 15% tax, why should you willingly pay a 35% rate? Their slice of the pie may be less, but they get a lot more pies this way.

And then we have the aspect of regulations, particularly when it comes to the financial restrictions that Dodd-Frank places on the lending industry and the environmental mandates an overzealous EPA is putting on industry – look at coal as an example. If we went back to the conditions of 2006 the environment would likely not suffer serious harm and companies would have a much easier time with their accounting. I haven’t even touched on Obamacare, either.

Not all of this is Obama’s fault, but the majority of these problems can be laid at his feet. Alas, we have 21 months left in his term so many of these things will not change despite the presence of a Republican Congress which will be blamed for any setbacks.

So the question becomes one of just how many employers in general, not just in manufacturing, will be able to weather this storm. Even the recent news that both Walmart and McDonalds will be increasing their wages brought out the cynics and doubters. But it’s worth pointing out that both Walmart and McDonalds have stated they wouldn’t oppose a minimum wage hike. Such a move makes sense for them because their bottom lines can more easily manage a modest wage hike for their employees and they know their local competitors can’t. Both also have the flexibility to adopt more automation where they used to have a row of low-wage employees. As an example, most of the local Walmarts adopted a number of self-serve checkout lanes over the last year or so. If you hire a dozen fewer cashiers it’s easier to give the others another dollar an hour.

Change is a constant in the labor market, and we know this. But there are some circumstances under which businesses thrive and others where they struggle, and history has gone long enough to suggest the broad outlines we should follow. It’s unfortunate that some want to blaze a new trail when we know where the correct path is.

Informally making it formal?

When you stop laughing, hear me out.

It’s only been two months since he left office, but I think we can all agree our somewhat esteemed former governor is all but an official announcement away from throwing his hat into the 2016 Presidential ring. And when you consider that Hillary Clinton is continually being tarred by scandal after scandal (Benghazi and her e-mail questions) and blunder after blunder (the Russian “reset” button and discussing the “fun deficit”), Martin O’Malley almost looks sane. Come on, what else do you have on the Democratic side – the gaffe-prone Joe Biden? “Fauxcahonotas” Elizabeth Warren? One-term Senator Jim Webb of Virginia is the one who has the exploratory committee going, but the far left considers him a “Reagan Democrat” who they can’t support.

So when you see the above photo on the O’Malley Facebook page (which is where I got it) you have to ask if the “taking on powerful and wealthy special interests” message is meant for Hillary? After all, look how much the Clintons’ foundation has raked in over the years. And his message today about the presidency “not (being) some crown to be passed between two families,” would resonate with a lot of people who believed the propaganda about how disastrous the George W. Bush tenure was and are already tired of the constant turmoil surrounding the Clinton family.

Perhaps Delegate Herb McMillan put this best, noting, “Raising taxes on the poor and middle classes 83 times isn’t the same as taking on powerful wealthy special interests.” But it’s more than that.

Obviously the laughter among many who read this website comes from knowing how rapidly O’Malley would genuflect to particular special interests when it suited his purposes. Environmentalists got a lot of goodies during MOM’s reign: California rules on emissions, punitive restrictions on development in rural areas (via the “tier maps”), an ill-advised and job-killing moratorium on fracking, and of course the “rain tax.” Illegal immigrants, too, had a friend in O’Malley, but productive taxpayers – not so much. He also decided to work on legalizing gay marriage only after his electoral coast was clear in the state – if he had tried to run for re-election on the issue he would have lost the black vote in 2010. (Remember, that was before Barack Obama’s flip-flop on the issue.)

Say what you will about Martin O’Malley, but he is the lone Democrat openly considering the race who has executive experience – on the other hand, there are a number of GOP candidates who can boast the same thing: in alphabetical order there’s Jeb Bush, Chris Christie, Mike Huckabee, Bobby Jindal, John Kasich, George Pataki, Rick Perry, and Scott Walker. Depending on who the GOP puts up, the “experience” tag could apply to the Democrat. We’re not saying the experience would be a good one, but it is what it is.

Don’t be too shocked if the O’Malley’s March national tour makes a lot of stops in Iowa and New Hampshire. It’s his way of pandering to the special interests he cherishes the most, and if people are fooled by this sudden bout of populism it’s their own fault. Don’t say you weren’t warned.

Update: At Front Line State Jim Jamitis echoes these sentiments, with a great headline to boot.

O’Malley PMT regs pass legislative hurdle

An amended version of the O’Malley Phosphorus Management Tool regulations passed the Senate Education, Health, and Environmental Affairs Committee on a 7-4 party line vote, setting it up for review by the full Senate at an unspecified future date.

You may recall that one of Larry Hogan’s first actions as governor was to unceremoniously yank the PMT regulations hours before the deadline for publication in the Maryland Register, only to come back a few weeks later with retooled regulations of his own. However, those regulations weren’t good enough for environmental groups and they’re supporting the original version as it winds its way through the General Assembly.

So while Hogan’s Agriculture Phosphorus Initiative regulations have been proposed (but not yet placed in the Maryland Register), the Democratic counterpart has moved a step closer to passage. It’s worth noting that the Senate is still 33-14 Democrat, so even if the one Democrat representing an agricultural area (Jim Mathias) breaks with his party it’s still likely to pass with a vetoproof Senate majority.

One change from the last election is the wipeout of most of the moderate, centrist Democrats in the General Assembly to be replaced by conservative Republicans. This will be key if the O’Malley PMT regulations make it through the process, as it’s likely Governor Hogan would veto them. With 50 House Republicans, the chances of a veto override in the House are much slimmer as only a handful of Democrats need to back Hogan and the GOP to sustain the veto. With seven more Republicans in that body, presumably they’re more reliable administration supporters than the Democrats they replaced.

Yet this uncertainty places a number of farmers, particularly on the Lower Shore, in a sort of administrative limbo as they can’t predict how the 2015 growing season will shake out as far as the usage of manure on their fields. We’re only a few short weeks away from planting for many farmers who don’t have winter wheat in their fields. Lower Shore farmers are especially affected because about 1 in 5 would face an immediate ban on applying manure to their fields under the Hogan regulations. (Many have already started, though, as the first of March brought the end of the state’s winter prohibition on the practice.)

Of course the agricultural community, forced to pick its poison, would prefer the Agriculture Phosphorus Initiative to the bill going through the General Assembly. (One important caveat, though: SB257 was passed “with amendment” but the amendments weren’t available as I wrote this.) But the General Assembly bill would take precedence over any regulations Hogan writes, so it wouldn’t be surprising to hear that April 14 can’t come quickly enough for that community.

Jeb goes the wrong way on energy

The Washington Times headline said a lot: “Jeb Bush: Federal wind tax credit should be renewed for short period of time.” But there’s more to the story if you read between the lines Seth McLaughlin wrote.

Of course, I noticed this because I’ve written quite a bit about wind energy and its advocates the American Wind Energy Association of late. Fortunately, the weather has finally moderated so I’m not writing in the midst of a cold snap as I’d often done when writing about the AWEA and their single-minded approach to promoting wind energy with the federal Wind Production Tax Credit as a sweetener incentive.

In this instance, though, you need to know the situation: Jeb and others were speaking before the Iowa Agricultural Summit, which as the Times notes is “hosted by Bruce L. Rastetter, a major GOP donor.” And it can be argued that Iowa is to wind power what Texas, North Dakota, or Alaska are to oil: according to the AWEA, in 2013 Iowa ranked first in the nation in the amount of its electricity produced by wind power at 27.4%. It also has the third-most installed capacity in the country behind Texas and California, which are far larger states in both population and geography.

So you might get the idea that telling Rastetter and others that the Wind Production Tax Credit should be renewed is a way to meet with their approval, even though Jeb conceded it should only be a three- to five-year extension because wind is “now competitive.” Wait a minute – if it’s “now competitive” why is the tax incentive needed again?

Naturally, the bad news on energy didn’t stop there. Iowa is also ground zero for the Corn Belt, which means anyone who competes in that state either supports ethanol subsidies or risks the wrath of farmers who don’t care whether their crop goes in your gas tank or your stomach as long as the price stays profitable. And Jeb had good news for them too, noting, “So at some point we will see a reduction of the RFS need because ethanol will be such a valuable part of the energy feedstock for our country. Whether that is in 2022 or sometime in the future, I don’t know.”

Ethanol will be a valuable part of our energy feedstock? We are now the world’s top producer of oil and natural gas, and those who set ethanol policy based on a belief that we were past the point of “peak oil” have been thoroughly discredited. It’s a horrible case of pandering when the news to Rastetter and others should have been that it’s time for farmers to adjust to a post-ethanol world as that failed experiment of making food into fuel is coming to a close.

Fortunately, it’s possible to win the presidency without winning Iowa. But it’s a state with outsized importance in the electoral sweepstakes thanks to its early caucuses, so we have to pay attention to what they want. (To illustrate this point: if Maryland were first, people would be tripping all over themselves to make grandiose promises to clean up Chesapeake Bay whether they benefitted – or bankrupted – the rest of the country or not.)

For all the Left’s wailing about the Bushes being in the pocket of Big Oil, they certainly haven’t done any favors to our energy situation. Father George H.W. Bush increased the gas tax by a nickel a gallon (a healthy 56% increase) to balance the budget back in 1990 – breaking his “read my lips” vow - while George W. Bush signed the bill that put the Renewable Fuel Standard in place in 2005 and expanded it in 2007. It looks to me like Jeb is cut from the same cloth.

Democrats ignore voters, keep rain tax in place

According to published reports, Annapolis Democrats ignored the will of the voters and opted to maintain the state’s dreaded “rain tax.” More formally, the House Environment and Transportation Committee rejected HB481 by a 14-7 vote – all 14 Democrats on the committee voted to kill the bill, while all seven Republicans voted to send the bill to the floor.

Because it was a party line vote, it’s easy to note who voted for and against:

In favor of maintaining the rain tax were Delegates Barve, Beidle, Carr, Fraser-Hidalgo, Frush, Gilchrist, Healey, Holmes, Knotts, Lafferty, Lam, McCray, Shane Robinson, and Stein. Twelve of the fourteen represent some part of Baltimore, Montgomery, or Prince George’s counties, with one from Baltimore City and one from Anne Arundel County. Basically they represent the I-95 corridor.

Voting properly to kill it off were Delegates Anderton, Cassilly, Flanagan, Jacobs, O’Donnell, Otto, and Szeliga. Three of these represent the Eastern Shore, two have districts in Harford County, one comes from Howard County, and the other from southern Maryland. (Anderton and Otto represent portions of the Lower Shore.)

Governor Hogan is quoted in the WBAL story by Robert Lang as stating:

No issue resonates as strongly and no tax is as universally detested as the rain tax. Passing a law that forces only a handful of counties to raise taxes on their citizens – against their will – is wrong, unfair, and it needs to end.

Marylanders have spoken loudly and clearly on this issue. The overwhelming majority of voters across the state are strongly opposed to it, and some counties have already taken steps to repeal this burdensome tax. Considering the surge of opposition to the current law, I am confident that the General Assembly will still move forward with a repeal of the Rain Tax.

Apparently there is another measure in the General Assembly which will weaken the rain tax but not suspend it entirely. But this is a blow to a relatively robust Hogan agenda, and shows once again the entitlement mentality Democrats in the General Assembly have as none of them broke ranks to vote in favor of repeal. This despite the fact all fourteen Democrats represent counties which are forced to pay it.

On the other hand, just three of the seven Republicans represent “rain tax” counties, although two communities which have adopted a similar tax, Salisbury and Berlin, lie within the districts of Delegates Anderton and Otto, respectively.

While the Change Maryland group vows “the fight is not over,” it’s fairly likely that no bill repealing the rain tax will be passed this year. And now that we got yet another reminder of how bipartisanship works in Annapolis – it’s a one-way street because only Republicans are expected to be bipartisan, such as on the so-called “death with dignity” bill – perhaps it’s time for Republicans to consider Maryland’s answer to the “nuclear option” and begin to petition administration bills to the House floor.

You see, it’s only political junkies like me who pay much attention to committee votes, and chances are that most people have no idea which committees their particular member of the General Assembly sit on. In most cases, Democrats who control committees determine which bills will get votes and which ones will stay in their desk drawer after a hearing. The more damaging a bill could be to their special interests or to vulnerable members, the greater chance a bill never sees the light of day. Yes, fourteen Democrats had to take a hit on this one but being a Democrat on the Environment and Transportation Committee probably means approval from Radical Green groups like the Chesapeake Bay Foundation or League of Conservation Voters so they are probably safe from voter wrath in three years.

But if Republicans band together and use their power to petition bills to the floor, things get a little more uncomfortable for the Democrats because they can’t as easily control the process. Seeing this key piece of Hogan’s agenda being defeated, along with the bush-league antics surrounding the Democrats’ reaction to the State of the State address, tells me that it’s time to embarrass the other side into action. Don’t let Democrats get away with painting Larry Hogan as a do-nothing governor without putting them on the spot and making them go on the record.

MCAC and CBF to Hogan: drop dead

As I suspected, the slight bend toward agricultural interests that Governor Hogan made with the revised Phosphorus Management Tool regulations – now re-dubbed the Agriculture Phosphorus Initiative – was met with hostility from the environmental community. On Friday the Maryland Clean Agriculture Coalition and Chesapeake Bay Foundation released this joint statement:

We commend the Hogan Administration for taking the problem of phosphorus pollution seriously and are pleased that the Administration embraces the scientific evidence showing we must implement the Phosphorus Management Tool to better manage manure on oversaturated farm fields.

The environmental community was not involved in the drafting of Governor Hogan’s proposed regulations that were released on Tuesday, and we have gone over them carefully since. Unfortunately, the regulations do not provide the adequate protection or assurance we need, and as such, we must oppose them. Our concerns are detailed in the attached analysis.

The regulations include a significant loophole, referred to by the agricultural industry as a “safety net,” that makes it unclear if they would ever result in full implementation of this much-needed tool. We adamantly oppose this lack of a clear, enforceable end date for putting the Phosphorus Management Tool into place.

It is also unclear whether the proposed ban on phosphorus on fields with FIV over 500 would actually reduce the amount of manure being applied to farm fields or protect Maryland water quality. The Maryland Department of Agriculture has been unable to clarify this.

Additionally, the regulations add one more year of delay, and they include troublesome secrecy provisions.

We continue to whole-heartedly support legislation sponsored by Senator Pinsky and Delegate Lafferty (SB 257 / HB 381) to implement the Phosphorus Management Tool with a six-year phase-in. Given the difficulties we’ve had with the regulatory process over the past three years, we prefer having a strong statute in place.

Their statement is an expanded version of a statement I posted on Wednesday from the Maryland Clean Agriculture Coalition. The MCAC is an interesting group in that none of the 21 groups involved has a thing to do with farming; instead many of these are “riverkeeper” groups from around the state. These groups blame farmers for a disproportionate share of the problems with Chesapeake Bay, imagining they are just wantonly dumping manure into streams and creeks.

While the groups have done a comparison sheet (or “detailed analysis”) between the O’Malley and Hogan proposals, their chief complaint can be summed up in this paragraph:

The Hogan PMT provisions for an “evaluation” for assessing manure markets and transportation programs, available land acreage, etc., allow for this “evaluation” to stall movement of PMT implementation for a year while MDA conducts a re-evaluation. The result is the possibility of an endless year by year postponement and re-evaluation possibility. (Emphasis in original.)

The way I read this is that, whether the infrastructure is in place or not - and, to be honest, I’m dubious of whether it can be in place – the CBF wants to move ahead on the PMT issue. Even the large-scale concession of immediately stopping the application of manure to certain fields, which is a provision allegedly affecting 1 of every 5 farmers on the Lower Shore, isn’t satisfying to the environmental coalition. They demand the data on how this would affect farmers, but pooh-pooh the need for data on how these regulations might affect the rural Maryland economy through the actual on-site studies sought by the Hogan administration.

In short, the contempt for the agricultural community by these groups is palpable.

So Larry Hogan tried to walk the middle ground. In backing off his original dead-set opposition to the PMT as “mandating how (farmers) use their property” to implementing a slightly less onerous version he still alienated the environmental community as well as discouraging some of the farmers who will be most adversely affected.

This whole episode will hopefully be a lesson to the new administration: you won’t get the friendship or the votes of those who would just as soon see the Eastern Shore collapse economically thanks to the demise of the agricultural industry regardless of what you do. So stick to those issues you ran on: improving Maryland’s economy and lowering the tax and regulatory burden on its citizens. Remember, no amount of regulation is enough for liberals, so why cater to them in the first place?

The fallback position?

In the day since Governor Hogan announced his Phosphorus Management Tool regulations and I wrote my original take on them, I’ve had a chance to see what some of the involved players have to say.

I should preface this by noting I’m not a farmer; however, I have a rural background to the extent that I lived on acreage partially surrounded by woods and cornfields and went to school with kids who were honest-to-goodness members of the Future Farmers of America, complete with the blue corduroy jackets. And seeing that this is a predominantly rural area which depends on agriculture and my interest is in its economic success, I tend to favor the views of farmers over those who think that chicken comes from Whole Foods.

Anyway, the reaction I saw from the major agricultural players was somewhat disappointing, considering the dramatic effect those around here will feel from the PMT regulations. I begin with Delmarva Poultry Industry.

Statewide, the Maryland Farm Bureau echoed the inclusive approach.

To me, these farm groups are exhibiting the same attitude that’s expressed by the saying, “the beatings will continue until morale improves.” Perhaps I’m just wondering what happened to the Larry Hogan who promised the Maryland Farm Bureau back in December:

The first fight [when I take office] will be against these politically motivated, midnight-hour phosphorus management tool regulations that the outgoing administration is trying to force upon you in these closing days. We won’t allow them to put you out of business, destroy your way of life or decimate your entire industry.

The regulations are essentially unchanged in this rendition with the exception of promises of more resources for affected farmers and an extra year to deal with the mandates. But over 1 in 5 local farmers will have to stop their fertilizing practices immediately when the regulations take effect.

And the step toward environmentalists has apparently been met with defiance. Both the Maryland Clean Agriculture Coalition and Chesapeake Bay Foundation are skeptical. CBF’s Alison Prost notes:

We are pleased the governor recognizes that excess manure application on farm fields in Maryland is a serious issue, just as scientists have been noting for years.

(snip)

We learned general information about the proposal Monday afternoon, and are hoping to obtain a copy of the actual proposed regulation as soon as possible. Without such details, we are withholding judgment.  Once we are able to review the full proposal we hope that the Hogan Administration will allow the environmental community a chance to help shape this policy.  In the meantime, we fully support SB 257 and HB 381 which are intended to solve the manure crisis through legislation. (Emphasis mine.)

In other words: nice try, but we are still after the whole enchilada.

Honestly, I don’t know if this measure is an attempt to placate the center by throwing farmers under the bus or if it’s part of a grand gambit where concessions on this issue will be traded for relief from the “rain tax.” I don’t trust the Democrats to follow through on any such deal because they come with the attitude that their time out of power is a fleeting, temporary one. It worked in ousting Bob Ehrlich after one term.

Perhaps Larry Hogan doesn’t have it in him to be Maryland’s answer to Scott Walker. But this relatively rapid concession on an issue important to the rural voters who supported him by margins of 70-30 or better in many counties is troubling. Had he waited until we knew the fate of the General Assembly bills – which he could have chosen to veto and perhaps not have to deal with until next session – he could have positioned himself as more of the fighter we were looking for when we dispatched Martin O’Malley’s heir apparent and selected Larry to lead the state.

By their words today, the environmental lobby proved they have no intention of working with Larry Hogan – none whatsoever. There was enough of a broad outline presented yesterday that these groups could have embraced the Agriculture Phosphorus Initiative, but they did not.

Of course, I sort of figured it would be this way all along but people keep reaching across the aisle and keep getting their arms bitten off. The only solution is to make the statist side concede by having superior numbers, and we can’t finish that job until 2018.

PMT: not eliminated, just pushed back

Yesterday, Governor Hogan announced that some local farmers will have tough new phosphorus regulations placed on them this year. While it wasn’t his overall intent, the news could be devastating to any local farmers who have existing high phosphorus content in their fields as it will necessitate their relocation of any manure present and prevent them from utilizing that fertilizing technique until 2022.

For the rest of the agricultural community, the change is a simple one-year reprieve from the regulations taking effect. Overall, the regulations aren’t a whole lot different from previous proposals. Granted, the new regulations Hogan proposes set up an on-farm economic analysis, but that should have been the first step well before the regulations were published and affecting many Maryland farmers.

So while the state is putting together a pretty picture of the new regulations’ effects, it may simply be a capitulation by the Hogan Administration as they try and put their best face on a fait accompliSB257/HB381, which codify the PMT regulations slated for adoption before Hogan pulled them hours after taking office January 21, have hearings this week and both have a substantial number of co-sponsors.

For his part, Hogan bills it as a ”fair and balanced” proposal:

We have listened to the agricultural and environmental communities to find a fair and balanced plan for limiting phosphorus, and I am pleased to announce the details of that solution today. The enhanced phosphorus management tool regulations and the broader Agriculture Phosphorus Initiative will protect water quality in the Chesapeake Bay while still supporting a vibrant agriculture industry in Maryland. We are providing immediate action to limit pollution, investing in new technology, seeking alternative uses for manure, and improving on-farm management of animal manures – none of which were included in the previous proposals.

It seems to me the time to do the enhancements would have been before most farmers were affected. The excuse for an economic study produced by the previous administration noted the plan would cost farmers (and taxpayers) millions of dollars for comparatively little benefit to Chesapeake Bay. The impetus for the “Agriculture Phosphorus Initiative” should have been to study the effects on real farms first – which is part of this effort, but done simultaneously with the restrictions rather than in advance of them.

Moreover, we don’t know how quickly some of these waste conversion initiatives will get online despite the $2 million the state recently granted three such operations, including one in Worcester County and one in Dorchester County. How scalable these operations are is yet to be determined, but the need for their assistance in waste disposal will arise rather soon.

In short, there was a reason the Eastern Shore agricultural community was pleased about the demise of the PMT regulations – not that they want a clean Chesapeake Bay any less than anyone else, but because they can make a case that they have done their part yet still seem to be the target of more and more regulations. That month of triumph appears to be coming to a close, though, and while Hogan calls it a enhancement the end result will still likely be economic damage to Eastern Shore farmers.

The economic viability of producing poultry in Maryland may be a casualty of these new regulations as growers may find the market for their by-product suddenly diminished. Without the ready availability of chicken waste through the departure of the industry, the environmentalists may succeed in driving the soil phosphorus levels down, but there will be much less economic activity to speak of as well.

The gale force for renewed tax credits

February 14, 2015 · Posted in Business and industry, Delmarva items, National politics, Politics, Radical Green · Comments Off 

Somehow it always seems that I like to write about wind power on blustery nights, when the winds are howling with gale force. Tonight is such a night, and it coincides well with a new report done by the American Wind Energy Association. It’s a report which makes the claim that the reliability and scope of wind power nationwide has given that industry the potential to create nearly half our electricity by mid-century.

Something I noticed on this report, though, is a graphic I had previously seen but not been able to find again. It’s a graphic which showed how much of each state’s electricity load was created by wind power, and states in the southeast don’t get much help from it – on the other hand, those in the upper Midwest do quite well. I suppose one could liken this phenomenon to whether a state is fortunate enough to have oil or natural gas underneath it, as some states have plenty while others are barren.

Yet the production increases and success the wind energy market has had comes mainly from two elements, both controlled by government: the Wind Production Tax Credit (WPTC) and various state regulations which mandate a certain percentage of electricity come from “renewable” sources. (Maryland is a state which has the latter.) Here’s what AWEA said about the WPTC:

Policy certainty is needed so that the U.S. can continue rapidly scaling up wind power. The renewable energy Production Tax Credit has successfully helped the U.S. become the number one wind energy producer in the world. Congress must rapidly extend the PTC for the longest possible time to avoid pushing American wind power off a cliff. A loss of $23 billion to our economy and nearly 30,000 well-paying jobs resulted the last time wind was left without policy stability.

Their definition of policy stability is keeping the WPTC afloat for more than a year-to-year basis, and some in Congress have unsuccessfully tried to ratchet this credit up for five additional years. To me, there’s no better proof that wind hasn’t reached a share of viability in the market than the fact that thousands of projects stall when the tax credit expires. Without the WPTC, it may be assumed that the costs of bringing wind energy to market are otherwise far too high. (This doesn’t consider offshore wind like Martin O’Malley wanted Maryland ratepayers to subsidize.)

AWEA makes the case that wind’s inherent unpredictability isn’t as big a deal as it was before since the industry is so widespread around the country – there is redundancy in the system now, so while Ohio may not be getting much wind Iowa could be buffeted. But it’s their claim that the unpredictability of policy holds them back, and the fact they continue to seek this crutch of the WPTC leads me to believe their lobby is all about the money and not so much about energy independence.

 

A shift in the air currents

You probably recall that last month I detailed a study claiming that wind-created energy saved consumers $1 billion in last year’s “polar vortex.” Ironically enough, it was released on the anniversary of the 2014 polar vortex in the midst of more unusually cold weather at a time when the favored energy source of natural gas was serving the twin masters of electricity generation and home heating.

Yet a bone of contention for the wind industry has been the overdue renewal of a production credit of 2.3 cents per kilowatt hour, allowed over the first ten years of a qualifying project’s life. A five-year extension of this credit, sponsored by Senator Heidi Heitkamp of North Dakota, was included in an amendment to the Keystone XL authorization bill in the Senate, but the amendment lost 47-51. One opponent of the credit, Americans for Limited Government, called it:

(J)ust another example of the crony capitalism that runs rampant in Washington, D.C. distorting our nation’s energy markets while encouraging the non-economically sustainable wind farming of America.

Of course, the American Wind Energy Association, while touting the increased capacity put into place last year, lamented the lack of this tax incentive:

2014 saw the completion of 4,850 megawatts (MW) in generating capacity, with cumulative installed capacity increasing eight percent to a total of 65,875 MW. That current wind capacity will avoid over 130 million metric tons of CO2 emissions annually, equal to taking 28 million cars off the road, when the current wind capacity produces generation for a full year.

However, the amount installed in 2014 still falls far short of the record 13,000 MW that the U.S. wind energy industry was able to complete during 2012.

Industry leaders blamed uncertainty over federal policy. The renewable energy Production Tax Credit was only extended for two weeks at the end of last year, and has now expired again.

“Wind is gaining strength, but as recent history shows, we can do a whole lot more,” said AWEA CEO Tom Kiernan. “We’re looking forward to working with Members of Congress from both sides of the aisle so that a reasonable, responsible tax policy is in place that allows the wind industry to continue lowering costs and investing billions of dollars in U.S. communities.”

So is it a “reasonable, responsible tax policy,” or a boondoggle?

As noted above, the tax credit is equal to 2.3 cents per kilowatt hour. According to the Energy Information Administration, the average American home uses just over 900 kilowatt-hours of electricity per month. Rounding down to 900 for ease of math, it means that each month a wind-powered home creates a tax credit of $20.70 – over a year that adds up to $248.40.

In the same AWEA release, they claim that “U.S. wind farms now provide enough power for the equivalent of 18 million typical American homes.” If this is so, then the annual cost of this tax credit would be nearly $4.5 billion. Granted, this assumes that all wind capacity in the country would qualify for the credit, but stick with me.

Yesterday our not-so-illustrious former governor Martin O’Malley blustered in the New York Times that:

(R)enewable-energy businesses still aren’t even competing on a level playing field with fossil-fuel companies, which enjoy more than $4 billion in guaranteed federal subsidies each year.

Yet if you work out the wind power tax credit, that section of renewables could get a tax break exceeding $4 billion per year, not to mention the carve-outs states like Maryland provide for renewables at the expense of less expensive and more reliable fossil fuels. The benefit of having a share of a market worth tens of billions of dollars handed to renewable energy (or, as is more common, the treatment of this rent-seeking as a penalty paid by energy companies) is rarely factored into the equation, but stands as an advantage for the renewables side that traditional sources do not enjoy.

To really get a sense of where wind power can compete, not only should we permanently eliminate the Wind Production Tax Credit, but also do away with the market share requirements for renewables. Only then can we get a sense of where the market really is for that type of energy.

There’s a reason we have cars that run on gasoline, electrical plants which run on coal and natural gas, and fervent exploration for new sources of oil, just as there’s a reason wind turbine construction came to a near-halt in 2013. The market seeks its own level.

Differing transportation thoughts

January 24, 2015 · Posted in Business and industry, Delmarva items, Maryland Politics, National politics, Politics, Radical Green · Comments Off 

Last week at Blue Ridge Forum, regular author Richard Falknor stepped aside for a two-part series by writer Peter Samuel, a specialist in writing about toll roads. In part one, Samuel advocated for a reduction in tolls and license fees, which was good, but in return we would have to endure this:

Fairness and efficiency will be best served by moving toward transport systems that self-finance with user fees: more precisely, fees-for-use roads should finance themselves with fees based on the cost of providing road service, road use fees, or tolls based on the distance traveled, the scarcity of road space, and the costs the vehicles impose.

Unfortunately, this raises the prospect of abuse by the state. Imagine portions of U.S. 50 and Maryland Route 90 becoming toll roads from the Bay Bridge to Ocean City, such as the bypass around Salisbury and any future routes around Easton and Cambridge. Sure, you could avoid the tolls and go through town but the traffic would become the same issue it was before the current U.S. 50 portion of the Salisbury bypass opened a decade or so ago. This would also be discouraging for truck traffic.

Maybe the best example of the problem with this philosophy is the Inter-County Connector between Montgomery and Prince George’s counties. The ICC, as it’s called, was in the pipeline for decades before finally becoming a reality under Bob Ehrlich, with Martin O’Malley finishing it last year. But the ICC isn’t popular with drivers because of its lower speed limit and heavy enforcement of traffic laws, so it hasn’t met revenue projections.

It’s likely Samuel is thinking more of the urban areas with their existing HOT lanes and other means to divide express traffic heading to the suburbs and local traffic which may hop on the highway for a couple exits. But Samuel’s second part discusses the fate of the Red Line in Baltimore and Purple Line in the Washington suburbs.

In that case he is correctly diagnosing the problem with mass transit solutions such as these:

Project advocates list all the jobs created during construction, but this is only a measure of cost, and avoids the real question: what value are they creating?

In any enterprise there is positive net value if the users are paying sufficient user fees (fares) to both cover operating costs and provide a competitive return on capital (ROI).

To the extent fares won’t cover costs plus return on capital, we have a clear measure that the value to users falls short of costs, making the project a net loss to any operator.

Rail transit in Maryland presently collects in the ‘farebox’ less than 30 cents on the dollar spent on operating the system and, of course, makes no return on capital invested. Light rail is the very worst with lower farebox recovery (currently under 20 cents per dollar.)

Some of those results could be improved, but almost no rail system in America come close to the black (100 on the dollar + ROI).

If you read further, Samuel likes the concept of the Red Line but is concerned about the construction cost and likelihood of overruns. On the other hand, his thought on the Purple Line is that it should change its form and become a bus-only route. The construction would be far cheaper and the schedule could be more easily adjusted to suit the needs of consumers. That’s an approach which makes more sense, although one has to ask why automotive traffic couldn’t utilize the route then.

At the end of part two, Peter also adds a map of proposed changes, including a westward extension of the ICC which crosses over into Virginia and provides another Potomac crossing west of Washington, as well as an eastbound addition which connects to U.S. 50 near Bowie. Also noted is a “new span Bay Bridge.”

What I would propose, though, is a truly new span Bay Bridge that’s several dozen miles south and connects Dorchester County with Calvert County. There’s no question the environmentalists (and some of the locals) would scream bloody murder, but they would for any attempt at progress anyway.

I think this bridge would encourage more tourism from the Washington area and, if combined with an extension of I-97 to its original destination near Richmond, could open up the Eastern Shore as a new tourist destination as travelers seek an alternate route around the traffic presented in Baltimore and Washington. Adding a bypass around Easton and cutoff between U.S. 50 and U.S. 301 through Queen Anne’s County (paralleling or upgrading the existing Maryland Route 213) could make this route even more desirable. Samuel could even get the cutoff to be a toll route.

There is a lot which can be done in lieu of wasting money on the Red Line and Purple Line because both are destined to be money pits; on the other hand, investing in transportation alternatives which maximize options and freedom makes more sense. As Samuel writes:

Better mobility provides greater employment opportunities, better shopping choices, more specialized health and medical services, more social and family interaction, better education, sporting. and recreational opportunities.

Our travel is not frivolous. People don’t drive the Capital Beltway for the scenery. We travel because the trips provide value.

There would be value in having a second Bay Bridge as well as the other roads for which I advocated. People and goods could move more freely up and down the East Coast, avoiding the bottlenecks presented in northern Virginia and around Baltimore, while the Lower Shore would have more direct access to a route across Chesapeake Bay, allowing for easier movement west and south.

It’s time to think on a larger scale while accepting the reality that people want the freedom to be able to jump in their cars at a moment’s notice and go wherever they wish. Mass transit simply creates dependency on the provider and allows them some level of control of movement. That may be acceptable to some, but the rest of us want to get where we want to go as quickly as possible – on our terms – and this is where government can be of service to the public.

The wailing begins

I alluded to this the other day when Governor Hogan announced he was dropping the proposed PMT regulations, and almost as if on cue there was negative reaction from the Chesapeake Bay Foundation and the (so-called) Maryland Clean Agriculture Coalition – so-called because it has nary an agricultural group in it.

Allison Prost, the executive director of the CBF, called it “a sad day” for Maryland:

This is a sad day in the long fight to make Maryland waters clean enough for swimming and fishing. Governor Hogan’s decision has hurt the rivers and streams on Maryland’s Eastern Shore where 228,000 tons of excess manure will continue to be applied to farm fields each year, and to wash off into nearby creeks and river. The new governor rolled back 10 years of progress when he withdrew the Phosphorus Management Tool, a common sense, science-based solution to the manure crisis.

Agriculture is the largest source of pollution to the Chesapeake Bay, and is also the cheapest to reduce by far. Many farmers deserve credit for their efforts to stem pollution from their barn yards and fields. But just as those who live in our cities and suburbs are doing more to clean the Bay, so must farmers.

Businesses with technologies to help reduce phosphorus pollution from poultry manure are ready to come to Maryland and help ease the burden of excess manure. But these technologies will only have a significant impact if farmers are required to not apply excessive amounts of phosphorus to their crops. Regulations create demand for problem-solving technologies that otherwise would languish.

Additionally, by withdrawing regulations that would have reduced pollution from coal-fired power plants, Governor Hogan’s decision also has put corporate interests above the people of Greater Baltimore. Nitrogen oxides are linked to ozone which can be harmful to children and sensitive adults. As a greenhouse gas, nitrogen oxides are 300 times more powerful than carbon dioxide. Also, nitrogen from coal plants and vehicles adds millions of pounds of harmful pollution to the Bay each year. The power industry used the same hardship argument in 2006 when the legislature approved the Maryland Healthy Air Act. In the years afterwards, electricity prices dropped, and the industry prospered.

The Chesapeake Bay Foundation welcomes the opportunity to work with the Administration to ensure farmers have the resources they need to implement the PMT, and all residents see cleaner water. But we can’t compromise on science, or accept further delays on cleaning up Maryland’s rivers, streams, and the Chesapeake Bay. (Emphasis mine.)

I pointed out that one sentence in the CBF statement because it’s telling about their philosophy, If the market wouldn’t otherwise support these technologies, then they must not be that effective. Put another way: we know broccoli is relatively healthy for us, but not everyone likes broccoli. (Actually, I do when you cook it with a little butter like my mom used to.) It’s a market that languishes in comparison to, say, McDonalds. The CBF would have us compelled to eat broccoli every night because it’s good for us, not because we would want to.

It’s the same with the PMT as the process of spreading chicken manure on the fields supplements the soil. Otherwise, farmers would be forced to resort to artificial fertilizers which actually worsen the problem.

Dawn Stoltzfus, speaking for the Maryland Clean Agriculture Coalition, echoed the CBF sentiments:

We’re deeply disappointed about reports that Governor Hogan has blocked one of the biggest tools to clean up the Chesapeake Bay and local waters in more than 30 years.

Governor Hogan had the opportunity to move forward a long-delayed tool to reduce pollution from manure. Instead, he stopped the regulation to implement the Phosphorus Management Tool, adding another chapter to the history of ping-pong politics and capitulation to the agricultural industry.

Governor Hogan has sent a very worrisome signal indeed. Just hours after being sworn in as Maryland’s governor, reports say he has turned his back on clean water and sound science. He has ignored Maryland’s leading agriculture scientists, who have been working on updating this tool for more than ten years and who have repeatedly stated how its adoption is needed, now.

Phosphorus pollution from manure is getting worse, not better in the Chesapeake Bay and Maryland rivers. The Governor’s action is a threat to the health of Maryland families and to our economy that depends on clean water.

Now you would expect to hear these types of sentiments from Radical Green. But I wasn’t expecting this sort of reaction from Delmarva Poultry Industry:

Delmarva Poultry Industry, Inc. respects Maryland Governor Larry Hogan’s decision not to move forward, immediately, with the phosphorus management tool regulation. During the campaign, he pledged that it would not, in its present form, become state policy. His pledge to study the issue further to make sure it is scientifically and financially valid is a wise one that we endorse.

We have said all along that this risk management tool, even according to its developers, could not estimate how much less phosphorus might reach the Chesapeake Bay. It makes no sense to create costly regulations on all farmers throughout Maryland, not just Eastern Shore farmers who use chicken manure, without knowing what the environmental benefits might be.

We look forward to working with Governor Hogan and his team and members of the General Assembly to develop a regulation that will provide improved environmental stewardship by the agricultural community.

Why do we need a regulation? The very fact they are conceding a regulation is needed loses half the battle. I have heard some rumblings about the impotency of DPI, and this statement seems to confirm that sentiment. You would think DPI would be thrilled to have that weight removed from its chest.

Until someone can figure out a better use for chicken waste than utilizing it as the natural fertilizer – a purpose it has served for hundreds of years on Delmarva – the farmers will continue to take the blame. I can understand if a sludge pile is exposed to the elements that runoff water will carry the phosphorus directly to the nearest body of water, but if chicken waste is spread into the soil I can’t comprehend how it travels distances to the waterway. After all, the minimum distance between well and septic leach field is usually 100 to 150 feet, which is supposed to give a large enough buffer of soil to protect the water supply on a semi-permanent basis, yet we’re expected to believe manure spread across a 240 acre field is a threat to a body of water or a stream hundreds of feet away?

Honestly, I think the problem is that those who travel from the urban areas to the beach in the warm months don’t like that occasional reminder that they are out in the country thanks to the foul (or is that fowl) smell. But that’s the smell of the Eastern Shore, at least in one governor’s mind, and to many farmers it’s the smell of a better crop and more money. It’s hard enough coaxing a good harvest from the Eastern Shore in the best of times, so a little natural help is always appreciated.

Think of it as truly organic farming.

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