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.

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.

Newt Gingrich was right after all

I wrote a little bit about the 2012 contenders yesterday in a piece about 2016, but I’ve been seeing the evidence that Newt Gingrich’s thought and 2012 campaign plank that we could once again see gasoline at $2.50 a gallon (or less, as the recent photo above from my Missouri-based writer friend Melinda Musil demonstrates) has come true despite naysayers from just a short year or so ago. Yet despite experts who called the idea “absurd” and noted “the price of oil is set on a global market” and decreed “in the immediate term there is almost nothing you can do,” well, here we are. Musil reported yesterday her prices are now under $2 a gallon.

The reason prices are so much lower is pretty much what Gingrich proposed to do in the 2012 campaign: increased production. With fracking and other enhancements in technology allowing domestic output to increase, the benefits have been enormous. Considering that average prices going into the July 4 holiday hovered over $3.60 a gallon, the relief expressed by drivers may begin spilling over into the economy at-large. Now the average is about $2.54 a gallon, with this area’s prices relatively close to that point.

Over time, the benefits will be accruing to consumers – if an Eastern Shore driver goes 20,000 miles a year in a truck that gets 20 miles per gallon, spending $1 less a gallon for a year is equivalent to a $1,000 annual raise that’s tax free. On the other hand, this decline in prices is thwarting the state of Maryland’s scheme to take more out of our pockets by increasing the sales tax on gas, because as I noted a few days back their 8 cents per gallon projected revenue is sinking closer to a nickel. Luckily, the state government over the next four years will desperately try not to confiscate any more revenue from working folks like us thanks to the recent election, and this tailwind could help Governor-elect Hogan address the state’s structural deficit through a modest increase in economic activity.

It’s doubtful that our prices will stay quite this low, for oil at $60 a barrel means our extraction with its price point that’s a little bit higher isn’t sustainable in the long term. But there is the chance that more practice with these unconventional techniques could drive down production costs to a point where our producers could prosper at that price or even below – if we could match the Saudis’ lower extraction cost we could wipe out the OPEC cartel once and for all.

So enjoy these low prices while they last. Hopefully, this modest economic bump will kickstart other sectors and bring us prosperity despite the best efforts of some in Washington – you know, the ones who try to take credit for this energy boom despite having little to do with it.

The start of something good?

Last week, Mark Green at the Energy Tomorrow blog posted a critique of the proposed fracking regulations Maryland may adopt in the waning days of the O’Malley administration. In his piece, Green stressed that Maryland needed to adopt “sensible” restrictions but feared Maryland would go too far. It was echoed in the Washington Post story by John Wagner that Green cites.

But the money quote to me comes out of the Post:

“In the short term, as a practical matter, the industry will probably choose to frack in other states than Maryland where the standards are lower,” O’Malley said. But in the longer term, he said, “it could well be that responsible operations may well choose to come here.”

Or maybe not, which seems to have been the goal of O’Malley and Radical Green all along. It’s funny that they don’t seem to have the objections to wind turbines dotting the landscape despite their own health issues. Certainly no one studied them to death.

Being a representative of the energy industry, Green naturally argues that “sensible” regulations are similar to those already in place in states which already permit the practice. As he notes:

Hydraulic fracturing guidelines developed by industry – many of them incorporated into other states’ regulatory regimes – offer a sound approach proved by actual operations.

I can already hear the howling from Radical Green about the fox guarding the hen house, and so forth. But is it truly in the interest of industry to foul its own nest?

On the other hand, the success of fracking and other domestic exploration may create an interesting situation. Even back in October, when oil had declined to $90 a barrel from a June peak of nearly $115 a barrel, analysts were speculating on the effects the drop would have on the budgets of OPEC member nations. Now that oil in closing in on $60 a barrel, the economic effects on certain nations will be even more profound, and contrarian economic observers are already warning that the oil boom is rapidly turning into a bust with a ripple effect on our economy.

Even the revenue scheme by which Maryland would collect a sales tax on gasoline depended on gas prices staying somewhere over $3 a gallon. Assuming the price of gasoline stays at about $2.70 per gallon through the first of the year, the predicted 8-cent per-gallon rate will only be 5.4 cents. (The sales tax on gasoline is slated to increase to 2% on January 1.)

In any case, there is a price point at which non-traditional oil extraction such as fracking or extraction from tar sands – the impetus for the long-stalled Keystone XL pipeline – becomes economically non-viable. I had always heard that number was $75 per barrel, which was a number we had consistently hovered above for the last half-decade. Now that we are under that number, the question of exploration in Maryland may be moot for the short-term, although the price of natural gas is only slightly below where it was this time last year so that play is still feasible.

Whether the decline in oil prices is real or a manipulation of the market by a Saudi-led OPEC which is playing chicken with prices to try and restore its bargaining position by outlasting domestic producers, it may be yet another missed opportunity for Maryland as it could have cashed in during a difficult recession and recovery if not for an administration which believed the scare tactics and not what they saw with their own eyes as neighboring Pennsylvania thrived.

A lack of standards

In 2007, Congress passed (and President Bush regrettably signed) a bill which was, at the time, a sweeping reform of energy policy. As part of the Energy Independence and Security Act of 2007, the EPA was supposed to regulate the Renewable Fuel Standard on an annual basis, with the eventual goal of supplying 36 billion gallons of renewable fuel by 2022 – the 2014 standard was set at 18.15 billion gallons (page 31 here.) By the way, this is the same bill that did away with incandescent light bulbs.

Unfortunately, for the second straight year the EPA is late with its update and last month they decided to take a pass altogether on 2014. Mark Green at the Energy Tomorrow blog writes on this from the petroleum industry perspective, while the ethanol industry took the decision as news that the EPA was staving off a possible reduction in the RFS.

We all know hindsight is 20/20 but it should be noted that, at the time the EISA was written, the conventional wisdom was in the “peak oil” camp, reckoning that American production was in a terminal decline. Yet we’ve seen a renaissance in the domestic energy industry over the last half-decade despite government’s best attempts at keeping the genie in the bottle. So the question really should be asked: is the Renewable Fuel Standard worth keeping in this new energy era, or should the market be allowed to function more freely?

It goes to show just how well the government predicts activity sometimes. They assumed that the technology behind creating biofuels from agricultural waste would supplant the need for corn-based ethanol in time to maintain the amount required and also figured on gasoline usage continuing to increase. Wrong on both counts; instead, we are perhaps in a better position to invest in natural gas technology for commercial trucks as some fleet owners already have – although long-haul truckers remain skeptical based on better diesel engine fuel economy, which ironically came from government fiat - than to continue down an ethanol-based path.

But the larger benefit from removing ethanol-based standards would accrue to consumers, as corn prices would decline to a more realistic value. Obviously the initial plummet in the corn futures market would lead to farmers planting more acreage for other crops such as soybeans or wheat as well as maintaining virgin prairie or placing marginal farmland, such as thousands of acres previously reserved for conservation easements, back out of service.

Poultry growers in this region would love to see a drop in the price of corn as well, as it would improve their bottom line and slowly work its way into the overall food market by decreasing the price consumers pay for chicken.

I believe it’s time for Congress to address this issue by repealing the RFS. Unfortunately, it would take a lot to prevail on many of the majority Republicans in the Senate because they come from the major corn-growing states in the Midwest and agricultural subsidies of any sort are portrayed as vital to maintain the health of rural America. Yet the corn market would only be destabilized for a short time; once the roughly 30% share of the crop used to create ethanol (over 4.6 billion bushels) is absorbed by the simple method of planting a different crop or leaving marginal land fallow, the prices will rise again.

Until the common sense of not processing a vital edible product into fuel for transport prevails, though, we will likely be stuck with this ridiculous standard. Corn is far better on the cob than in the tank, and it’s high time the EPA is stripped of this market-bending authority.

A long, cold winter

I’ve referred to this writer recently, but energy maven Marita Noon had a piece at NetRightDaily today talking about the difficulties customers in the Northeast may have this winter with electricity. It got me to thinking about the local situation, as we had a rough winter last year and indications are we’ll have more of the same this year.

While the Eastern Shore of Maryland is situated in a slightly better place for solar electricity than the Northeast, the reality is that very little of our electricity comes from renewable sources. Instead, the two closest power plants in the Delmarva Power region where we live are in Vienna, Maryland and Millsboro, Delaware. Both of those plants were once owned by Delmarva Power, but were sold in 2001 to NRG. According to NRG, the Vienna plant is a 167 MW oil-burning plant while Indian River in Millsboro uses coal to create 410 MW (and has a 16 MW oil-burning unit as well.) Another plant under construction in Dover, owned by Calpine, will add 309 MW of natural gas-fired capacity once it comes online beginning next year. Calpine also owns a number of small, locally-based “just in case” plants in the region as well – two of these oil-burning facilities are in Crisfield, Maryland and Tasley, Virginia.

The other regional power supplier, Choptank Electric Cooperative, produces about 2/5 of its supply from plants in Cecil County, Maryland and Virginia with the remaining electricity being purchased from various regional suppliers.

Infrastructure is also a concern. Several years ago there were plans to create the Mid-Atlantic Power Pathway, a transmission line which would extend from Virginia to Delaware, connecting the Calvert Cliffs nuclear plant and others in that region with the aforementioned Vienna and Indian River plants. But those plans were scrapped a few years ago due to slowing demand, which is unfortunate because our transmission otherwise comes exclusively from the north through Delaware.

In order to create good jobs, we need reliable sources of energy. Unfortunately, regulations aren’t on the side of plants like Vienna or Indian River so it may be time to think about encouraging investment in another natural gas-based power plant on Delmarva, with the requisite infrastructure to ensure supply. According to Calpine, the Dover site can expand to double its capacity but that would only partially replace the Indian River plant if it is forced offline. Realistically, though, the new power plant would probably be best sited in Delaware as it’s closer to the main body of pipeline infrastructure for natural gas.

But the new power plant is good news for the region, particularly in light of the issues Noon points out in her piece on the Northeast. With thousands of consumers using electricity to heat their homes in one way or another – either directly through baseboard heating or with a furnace and blower or pump – reliability is key. And when solar panels are buried in snow or wind turbines are frozen in place, they’re not much use.

A sea change in Maryland too?

In the midst of what’s good news about energy production in America – despite the headwinds created by an administration that believes global warming is a large problem while spending millions to prop up failing green energy companies – the question can be asked whether Maryland has achieved its share. I want to quote writer Mark Green from the Energy Tomorrow blog, who writes that based on Energy Information Administration data that:

This is a snapshot of America’s energy revolution – the fundamental shift from energy scarcity to abundance that would have been unthinkable less than a decade ago. The shift is the result of surging oil and natural gas production using advanced hydraulic fracturing and horizontal drilling, harnessing oil and gas reserves in shale and other tight-rock formations. Safe, responsible energy development has made the United States the world’s No. 1 natural gas producer, and the U.S. could become the world’s top producer of crude oil related liquids before the year is out.

Larry Hogan has acknowledged that western Maryland has an “enormous” amount of natural gas and that he favors an “all of the above” energy policy. On the other hand, Anthony Brown is studying the issue to death. At the other end of the state and scale, Brown backs his boss’s offshore wind boondoggle while Hogan mentions that “proponents (of wind power) rarely mention the actual costs which include billions in state and federal subsidies.” In a separate statement, he also decries the potential for offshore wind’s “crony capitalism” under a Brown administration.

You know, there’s no question that the key issue in this gubernatorial race is the economy. Maryland is a state lagging behind its peers, and more and more people speak about pulling up stakes and relocating somewhere else: Delaware, Florida, Virginia, the Carolinas, Tennessee – name a state south of the Mason-Dixon Line and it’s likely someone you knew in Maryland moved there.

But one piece of the puzzle is energy, and those who toil in the oil and gas industry understand what the potential is. In his piece, Green closes by quoting American Petroleum Institute president and CEO Jack Gerard:

We need leaders who reject the outdated political ideology of the professional environmental fringe and the political dilettantes who advance the irresponsible and unrealistic “off fossil fuel” agenda. Because if we get our energy policy right today, we can be the generation that erases what for decades has been our country’s most potent and intractable economic vulnerability: dependence on energy resources from less stable regions and countries hostile to our goals, ideals and way of life.

Writer Rob Port at the Say Anything Blog also asks the pertinent question, and the answer on a state level can be found in Maryland.

I look at it this way. There was a governor and a majority in the General Assembly who were willing to risk over a billion dollars in ratepayer money on something which studies suggested might work but hadn’t been tried in Maryland before, offshore wind. Conversely, given the success of the Marcellus Shale formation in several surrounding states (most notably Pennsylvania), why not encourage the exploration of several other regions in the state which share many of the same characteristics? The worst that can happen is that we find these areas aren’t worthwhile for natural gas with current technology, but the rapidly evolving science of energy extraction means studies done even as recently as a few years ago may be rendered worthless.

Given the correct conditions for marketable extraction of coal and natural gas and an aggressive expansion of power plant capacity which uses those resources, it should be a goal to make Maryland self-sufficient in electricity by 2030. I don’t think offshore wind will get us there, but extracting those resources we have gives us a shot, and provides good-paying jobs for Maryland families who need them.

Another prediction of job creation

In the post I recently did about wind power, I pointed out that beginning in 2017 Maryland electric ratepayers will begin a 20-year process of chipping in $1.7 billion in subsidies to the developer of an offshore wind farm off the Ocean City or Assateague coast. Yet a new study claims that Maryland could reap far greater economic benefits over the next two decades if offshore drilling is allowed in the region, with even larger payoffs for Virginia and the Carolinas by virtue of their longer coastlines. Nearly as important are the thousands of jobs which could be created – something wind energy producers can’t match.

There’s no doubt that these rosy scenarios presented by Dr. Timothy J. Considine of the University of Wyoming and the Interstate Policy Alliance (which includes the Maryland Public Policy Institute) were made up to encourage the loosening of restrictions on offshore drilling. Yet they also take into account the cost of environmental factors in a reasonable way, which balances the picture. It turns out that Maryland is one of the better cost/benefit performers of the six states (Delaware, Georgia, Maryland, North Carolina, South Carolina, and Virginia) included in the study.

It also goes without saying that our Senate representatives are foolishly dead-set against the idea, signing onto an August letter which claimed detrimental effects on tourism in the highly unlikely event of an oil spill. (A few Maryland House members signed a similar letter.) While tourism is a good thing and we’d like to encourage more of it, the value which could be added to our economy from oil and natural gas is far greater.

At this early stage, the next move seems to be simply testing to update decades-old mapping which suggests there’s a potential for millions of barrels of oil offshore. Any actual drilling is probably years and several court battles away, as it’s almost a guarantee that Radical Green will throw the legal kitchen sink at any attempt to drill for oil in the Atlantic. May I kindly suggest they go pound sand.

But if they insist on building wind turbines offshore, it should be noted that oil rigs and wind turbines can coexist and once the oil is tapped out the platforms can be put to good use. These uses don’t have to be mutually exclusive, but in terms of current economics it’s difficult to match the high subsidies required to get companies to even consider offshore wind when compared to the clamor of energy producers to see just what’s underneath all that Atlantic coastline. If Larry Hogan really wants the “all of the above” energy approach, he should embrace the prospect of offshore oil exploration.

Reliable bogeymen

You know the other side has nothing in their bag of ideas when you see this recycled old chestnut of an appeal for cash:

This from the side with a President who regularly finds millionaires willing to fork over big bucks to get their slice of the government pie.

But I presume these guys are counting the Americans for Prosperity as part of the “hundreds of millions of dollars,” which is funny because while reports attempt to spin the news that the Koch brothers are raising up to $290 million to spend, it’s not like Democratic backers like Tom Steyer and the venerable George Soros are standing still.

Yet what do all these participants stand for? In the case of Soros, he’s donated millions over the years to reliably left-wing causes and opined after the 2010 election wipeout that Barack Obama didn’t fight hard enough for cherished progressive causes. Instead:

While Soros’s comment gave some attendees the impression that he’d cheer a primary challenge to the president, the point, sources say, was different. Rather, it is time to shuffle funds into a progressive infrastructure that will take on the tasks that the president can’t or won’t take on.

“People are determined to help build a progressive infrastructure and make sure it is there not just in the months ahead but one that will last in the long term,” said Anna Burger, the retired treasury secretary of SEIU. “Instead of being pushed over by this election it has empowered people to stand up in a bigger way.”

“There was frustration,” said one Democratic operative who attended the meetings. The main concern was about messaging. I think they are frustrated that the president isn’t being more direct. But I did not get the sense that anyone’s commitment to the progressive movement was wavering… The general consensus is that support has to move beyond being about one person and more about a movement. I don’t know if we’ve moved beyond there.”

One of those “movement” ventures is an outside-government arm to match conservatives in the 2012 elections. For several weeks, discussions have been led by Media Matters for America founder David Brock about the need to create a group that will run advertisements, conduct opposition research and perform rapid response functions. (Emphasis mine.)

As an example of this concept, just look at the movement to increase the minimum wage. I don’t think the SEIU is doing this by themselves.

In Steyer’s case, he’s out pushing for the extinction of fossil fuels, despite being a major benefactor from them over the years. (This would be a fun debate to watch.) Imagine the increase in costs and decrease in living standards a wholesale overnight embrace of renewables would cause. Until we can make the sun shine and the wind blow steadily 24 hours a day, we have a problem. (In terms of naturally occurring energy gathering, it would seem hydroelectric would be the best choice, but that’s also climate-dependent: a drought would dry up supply.)

So consider what the Koch brothers have helped to create: the Cato Institute, a libertarian, small-government think tank and Americans for Prosperity (who would be against prosperity?) They also built up the family business and became billionaires in the process – isn’t that the American Dream writ large? (They also support other causes, as this tongue-in-cheek post notes.)

If the Democrats have to use the Koch brothers – who built a successful life for themselves with a minimum of government assistance and would like others to follow in their footsteps – as an example of evil because they support Republicans, we know they have nothing.

Border security, VA among chief concerns at Harris Salisbury townhall

It was a fairly packed house at the Veterans of Foreign Wars Post 194 in Salisbury as Congressman Andy Harris held the second of four proposed town hall meetings in the district. After speaking in Easton on Wednesday, many of those same topics came up last night.

But the first order of business was recognition. After pointing out that unemployment among veterans was higher than the average – “I can’t figure that out,” Harris said – Andy presented a Congressional Citation to Chris Eccleston, who operates Delmarva Veteran Builders, a local construction firm which specializes in giving veterans job opportunities upon return to civilian life.

Once that presentation was out of the way, Harris introduced his “three things of great concern.”

As opposed to past negativity about the situation, Andy considered the declining deficit as a piece of good news, noting that federal spending had been fairly level for the last three years. The annual deficit is down $550 billion from its peak, although the aim of the House is to eventually bring the budget back to balance. Andy, however, conceded that the “House’s goal is to balance the budget in ten years.” So while it was still important, Andy wasn’t as concerned about this as he was the following three.

He also said there was “good news on the energy side,” pointing out we now produce more oil than we import and should be the leading world producer of both oil and natural gas by year’s end. The oil production was helped by technology which allowed what he called secondary and tertiary production from existing wells, as opposed to the primary production from new drilling.

On the other hand, Harris believed that, “in terms of immigration, the system is broken.”

“The border is just not being enforced,” he added, noting that Texas Governor Rick Perry has called out his state’s National Guard to assist with border security. In legislation recently passed by the House, added Harris, funding was included for governors who, like Perry, decide to call up their National Guard to address the situation.

“We can’t afford to have a border that’s not secure,” explained Harris.

The news was equally troubling on the foreign policy front. “The world is more dangerous now than it was six years ago (before Obama took office),” said Harris. It wasn’t just the Middle East, either – Andy touched upon the Chinese carriers now patrolling the South China Sea, well outside their territorial waters.

And while we were reaping the effects of our decrease in defense spending, Andy continued, we were also suffering from a lack of trust. Our allies could now doubt our sincerity based on recent actions.

After expressing his main concerns, Andy took questions from the audience. As my editorial license, I’m going to cluster them into areas of concern – on top of the list was our most recent crisis.

Immigration. Many of the questions dealt with various aspects and concerns from those attending about the situation on our southern border and the resettlement of “unaccompanied children.”

Much of the problem could be traced to the passage of a 2008 bill intended to counter human trafficking. Andy noted that the law as written provided the assumption that children from certain Central American countries were being brought for the sex trade, which was a problem at the time. It was estimated that perhaps 2,000 children a year would be affected, with the idea being that these children would get a hearing to ascertain their status.

Unfortunately, the crush of those claiming status under this law and the DACA order signed by Barack Obama in 2012 means that the waiting period for these hearings is anywhere from 18-60 months – and only 46% of those called show up, Andy said. One third of them are “granted status,” he added.

“We should close the loophole,” said Harris. “I don’t see how you get out of the problem without changing the law.” We also needed more judges on a temporary basis to expedite the hearing schedule.

A solution the House could offer to rescind Obama’s order would be that of defunding the executive action, for which there was a bill. And while some were pessimistic about such action given the Senate, Harris stated that the Senate could agree to “a compromise deal over a much larger package.” My concern would be what we would have to trade away.

Andy also pointed out that the resettlement of these children was more or less being done without telling local officials, noting when the Westminster facility was being considered the word came down late on a Thursday afternoon in a week the House wasn’t in session on Friday. It eventually led to the question about those being placed in Maryland.

When asked how many were in the First District, Harris conceded he had “no idea…nobody’s telling us.”  But he continued by saying, “your school system will be affected,” adding that many of these children can’t read or write in Spanish, let alone English.

And the fact that these children aren’t necessarily being screened, vaccinated, or quarantined if necessary was also troubling to Harris. “The CDC is cognizant of it,” said Harris, who had spoken himself with the CDC head. Of course, the children are but a small portion of those crossing – perhaps 10 percent, said Harris.

“The real solution is you have to secure the American border,” concluded Harris. Rapid hearing and swift repatriation would send the message to parents in the host countries that it’s not worth the expense and risk to send children northward to America.

The VA situation. Given that the town hall meeting was being held in a VFW hall, there were concerns aplenty about the state of the Veterans Administration and its health care.

As part of a VA reform bill which recently passed and the VA has 90 days to implement, veterans who live over 40 miles from a VA facility are supposed to have the option of a private physician to address their needs. But Harris pointed out there was some interpretation involved based on whether the VA would extend that standard to an appropriate facility for the type of care needed – for example, something only handled in Baltimore. Harris hoped the interpretation would allow veterans on the Lower Shore to use closer local facilities, for which our local regional medical center could be a substitute provider, rather than make them travel to Baltimore because there was a VA clinic inside the 40-mile range but it couldn’t address the need. “They regulate, and we have to watch them,” said Andy.

The ultimate goal was “to make the VA system compete,” said Harris.

Entitlements. On a related note, one questioner asked about protecting Social Security and Medicare.

Andy believed that “you can’t change the law retroactively,” meaning that the status quo should prevail for those 55 and older. On the other hand, those in the younger generation “don’t expect all of it,” so the time was now to begin the discussion on preserving what benefits we can. The question was no longer if we got to zero in Social Security and Medicare, but when – Social Security tax receipts peaked two years ago and were now slowly declining . “We know the figures,” added Andy.

The system is “not sustainable…shame on us” in Congress for not addressing it.

Foreign policy. There were a couple questions which dealt with this topic, one on Ukraine and one on defunding Hamas.

Regarding Ukraine, one piece of “bad news” which could affect us locally was Russia’s decision to halt chicken imports from America. Their preference for dark meat nicely complemented our love of white meat, so while it wasn’t a large market it was an important one.

But in the geopolitical sense, Harris was relatively blunt. “We let it all go too far (and) should have put a stop to this in Crimea.” Andy pointed out that Ukraine gave up its nuclear weapons in the Budapest Memorandum, which we were a party to along with Great Britain, Russia, and Ukraine. As expected, Russia violated its end of the deal, but Harris noted “I don’t know where it ends.”

As for defunding Hamas, the House did so in its FY2015 budget. In it is a provision that states if Hamas is included in a Palestinian Authority government, we would withhold funding from them.

Andy added that he was “disappointed” in the administration’s lack of Israel support, and blasted Hamas for “purposefully aiming (their rockets) into civilian areas – that’s terrorism.” He added, “The war was started by Hamas…Israel has to end it.”

Impeachment/lawsuit vs. Obama. It actually started as a comment from the audience while Harris was explaining his answer to the immigration issue and Westminster situation.

“I think Obama is an enemy of the country,” it was said. And when Andy pointed out he was duly elected as President, stating, “nobody is claiming (Obama) wasn’t elected fair and square,” the audible murmur in the audience indicated otherwise.

But Andy believed suing Obama over his lack of adherence to the Constitution was the best choice. “Let the Supreme Court decide,” he said, as the proper procedure for changing law was supposed to lead through Congress. He would not vote for impeachment, but would rather the lawsuit run its course. I don’t think that was the popular sentiment of those assembled.

Term limits. This was actually the first question out of the chute, and Andy was clear about the questioner’s desire to see them enacted: “I couldn’t agree with you more,” said Harris. He bemoaned the lack of co-sponsors to a Joint Resolution he introduced last year holding both Senators and members of Congress to 12-year limits. “Part of the problem is that people view it as a lifetime job,” said Andy. Most agree term limits are necessary, so Andy held out hope that the 2014 campaign will bring out a new “Contract With America” promising a vote on the issue.

Common Core: It was actually asked as an awareness question regarding the new AP history framework, to which Harris could only promise to “look into this.” But there was language being considered for the appropriations bills which stated the federal government couldn’t provide incentives to adopt Common Core, as they did for Race to the Top federal funding.

Transportation/energy. Answering a question about bringing light rail to this area, Harris opined it was “some of the least efficient ways to transport people.”  He preferred a surface transportation system, such as busses, because they’re more flexible – if the development doesn’t follow the rail system, there’s no chance of adjusting it to suit.

On the related subject of energy, Harris believed it was easier to produce fossil fuels while researching the next generation of energy harnessing, such as fusion or hydrogen cells. At this point, “fossil fuels are the coin of the realm,” Harris said.

Maximizing our resources also provides us an opportunity to counter Russia’s “ability to use energy for bad ends.” He also warned that Canada would either send its crude to us through the Keystone XL pipeline or ship it to China.

Manufacturing. Finally, we’ll get to the question I asked about making things in Maryland and America.

Andy began his answer by referring to the practice of tax inversion, which has made news lately. He blamed our “horrendous” corporate tax rates for being an incentive for companies to stray offshore, or even just across the border to Canada (which has a 15% corporate tax rate compared to our 35%.) “We live in a global environment,” said Andy, so the obvious solution was to cut our corporate tax rates.

Rather, Washington was thinking about trying to make the practice more difficult. Harris feared it would encourage more inversions.

Other steps to getting things made in America were to continue promoting cheap energy – as methane is the basis for many plastic products, having an abundant supply would be crucial in that area of production. We could also work on scrapping some of the over-regulation plaguing our job creators.

After the hourlong forum, Andy stayed around for more questions and answers. I thought the give-and-take was excellent, and it’s a shame more local media wasn’t there.

The bad news for good performance

If you go to the gas pump, you’ve probably noticed the little sign that says the blend is “10% ethanol.” For several years, the EPA has mandated a certain amount of ethanol be used to slake America’s thirst for gasoline, with a 10% blend of ethanol being just enough to cover the mandate. Unfortunately, with less gasoline being necessary to meet demand thanks to both a stagnant economy and more fuel-efficient cars, the mandated amount of ethanol isn’t being used anymore. I noted the other day that the oil companies were calling on the EPA to scrap the proposed mandate increase this year.

When I wrote that I wasn’t aware that a movement is out there to not just stop at E-15 but go all the way to E-30. Oddly enough, I saw a piece from Rick Weiland, who I referred to in my dark money post, which brought it to my attention. (Damn, that dude has made it on here twice in one week. After he loses that race, he’ll probably move to Maryland and run with his newfound name recognition here.) So I did a quick bit of research and found there is a movement out there which believes E-30 is actually the optimum amount of ethanol to take best advantage of its attributes. Weiland is obviously driving a vehicle tuned to that specification and there are actual service stations which have the blend in his region – in both cases, the average motorist isn’t usually going to have that condition. A check of this site revealed no such stations around Delmarva, so it wouldn’t do us much good.

Needless to say, what the market won’t do government will force. So Senate Democrats are pushing the EPA to increase the mandate, meaning that they’ll artificially create a market for higher ethanol blends. (Flex-fuel cars are supposed to be able to handle E-15, but they’ve never been a popular option because they’re not as fuel-efficient running an E-15 blend. It’s telling that you see a lot of government cars with that option, but not a lot of private cars.)

But let’s say the mandated number of gallons increases. The scarcity will be in the E-10 or straight gasoline which smaller motors need to run properly; in addition, the cost of anything which consumes or has corn as an ingredient will rise. It’s why so many different groups advocated for a smaller ethanol mandate.

If we really wanted to do something to use less gasoline, it makes more sense to me to impose part of the Pickens Plan. Now I don’t think wind power is the way to go because it’s not as reliable as fossil fuels, but I think running fleets on natural gas is a fairly good idea for the reasons they state. To me, using food as fuel for automobiles doesn’t make a whole lot of sense – and yes, I know Brazil uses sugar cane for their ethanol. Brazil can use all the sugar cane it wants.

But I look closer to home, and our chicken farmers want their feed to be as inexpensive as possible. Corn growers already have plenty of mouths to feed, so they really don’t need to fill our gas tanks, too.

The quest for energy security – and sanity

It’s been awhile since I wrote about the energy industry but things are always happening there and I decided to take a peek because of some items I’ve spied in daily updates I receive from the American Petroleum Institute. I like to know what’s going on in important growth industries which profoundly affect our daily lives.

As one might expect, API CEO Jack Gerard is a leading spokesperson against what he calls Barack Obama’s “irrational” energy policy. It makes sense when you consider that the United States is now the world’s leading producer of both natural gas and oil, thanks in large part to recent advancements in fracking technology which have revitalized the once-moribund American energy industry. Speaking before an audience in New Orleans, Gerard noted:

The choice before us is whether we pursue an American future of energy abundance, self-sufficiency and global leadership or take a step back to the era of American energy scarcity, dependence and economic uncertainty.

It is that simple.

There’s a clear benefit to having the abundant resources we do. I was only nine years old when the first oil crisis hit in 1973, but I remember the long gas lines and jump in prices. If you consider the long-term effects in policy and marketing, such as the adoption of fuel economy standards and the push toward smaller cars, ask yourself what may have happened if we hadn’t become so dependent on Middle Eastern oil. Would we have had the resulting mid-1970s recession?

Obviously we have recessionary conditions now in spite of the current oil boom, but there’s a valid argument that opening up the spigots (so to speak) and allowing more extraction would push the economy into more consistent growth.

Another example of an irrational energy policy is our continued ethanol mandate, about which API is asking for another cutout of a mandated increase. The EPA decided not to change the allotment for this year, but needs to finalize the rule.

To me, there are two telling facts about this story: one is that API has given up on legislative relief from Congress and appealed directly to the EPA, which speaks volumes about the transition of our supposedly limited government into a fiefdom unto itself.

The second is the sheer volume of interests on the side of eliminating the mandates entirely – everyone from motorcyclists who complain about ethanol’s deleterious effects on their engines (as is the case for other small engines from boating to lawn equipment) to the poultry producers who have seen corn prices artificially propped up due to the amount of corn necessary for creating ethanol and even environmental groups who fret that the corn-based product is actually worse for the environment. Obviously the corn growers love the price support, though, and farmers have their own determined lobbyists who would love to see an even higher ethanol blend called E-15 allowed.

API and other ethanol opponents are hinging their future hopes on a more business-friendly Congress in the next term, though.

Irrational energy policy on the state level may occur after this fall in Colorado, a state which has taken advantage of the energy boom but may fall prey to the scare tactics environmentalists use to portray fracking in a negative light. There Governor John Hickenlooper, a Democrat, sees his state’s energy success being threatened by a petition drive to place further restrictions on fracking on their November ballot. Hickenlooper is quoted in Bloomberg as pointing out, “(t)hese measures risk thousands and thousands of jobs and billions in investment and hundreds of millions of dollars in state tax revenue.”

I found this interesting because the proposed restrictions would prohibit drilling within 2,000 feet of structures, a change which energy companies complain would “effectively ban” fracking in the state. Their current restriction is 500 feet.

Now something which came out the other day to little fanfare was a draft report outlining some of Maryland’s proposed fracking regulations. The original recommendation, based on other states’ best practices by the University of Maryland Center for Environmental Science, Appalachian Laboratory, was for a 500-foot setback from wells. That guidance was expanded by the Department of Natural Resources and Maryland Department of the Environment to – you guessed it – 2,000 feet. (Page 18-20 here shows the recommended DNR/MDE changes.) In short, these regulations are intended to “effectively ban” fracking in Maryland to the detriment of not just our far western counties, but any of the regions of the state (including the Eastern Shore) that have shale deposits underneath. Talk about an “irrational” energy policy!

So here’s the deal: Maryland wants to depend more and more on methods of generating electricity which lack reliability and increase cost to consumers. Yes, that’s sounds like “smart, green, and growing” to me – not too bright, costing more green, and growing the desire of businesses to leave the state to find a place where energy exploration and extraction is encouraged and rates therefore are cheaper.

I know the Hogan administration would want a “balanced approach” to energy in the state, but I would have to hope part of that balance is returning to the best practices suggested by UMCES and not the onerous restrictions which would effectively ban fracking in the state.

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