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Justin Sykes

Sen. Inhofe’s EPA Employment Impact Analysis Act Holds the EPA Accountable

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Posted by Justin Sykes on Monday, April 7th, 2014, 12:30 PM PERMALINK


U.S. Senator Jim Inhofe (R-Okla.), a senior member of the Environment and Public Works (EPW) Committee, introduced SB 2161 last week to rein in the EPA and ensure future EPA regulations are enacted in a responsible manner.

The EPA Employment Impact Analysis Act would require the Environmental Protection Agency (EPA) to conduct an economic impact analysis on current air regulations before future ones may be enacted. An economic impact analysis is already required under the Clean Air Act; however the EPA has never once actually complied with the mandated procedure.

Pursuant to Section 321(a) of the Clean Air Act, the EPA is required to report how current air regulations are affecting job creation in the United States. “The EPA has not once abided by this provision and failed to complete a single analysis on its air rules to date."This fact is not only an egregious violation of the EPA’s own policy but is also concerning given the widespread impact EPA regulations have on the U.S. economy.

Senator Inhofe’s bill would simply require the EPA to follow its own procedures as outlined in the Clean Air Act. Specifically, the bill would prohibit the EPA from “finalizing any major regulation until the agency analyzes the economic impact of its current air regulations as required under Section 321(a) of the Clean Air Act.” Essentially the EPA would have to consider the effects current regulations are having on the economy before justifying the creation of future regulations.  

The problem is the Obama EPA has implemented costly regulations while failing to maintain research on any effects of such regulations on the U.S. economy. Inhofe cites a number of examples where “the EPA concluded that a regulation would result in the creation of jobs, yet the National Economic Research Associates (NERA) Economic Consulting firm…reported that the same regulation would result in thousands of job losses.” Senator Inhofe cites 3 specific examples in support of the bill:

  • Utility MACT rule (77 Fed. Reg. 9301): EPA's analysis of the Utility MACT rule estimated that implementation of the final rule would result in the creation of 46,000 temporary construction jobs and 8,000 net new permanent jobs. NERA's whole economy analysis found that the rule would have a negative impact on the income of workers in an amount equivalent to 180,000 to 215,000 lost jobs in 2014, and 50,000 to 85,000 lost jobs each year thereafter. 
  • Cross State Air Pollution rule (76 Fed. Reg. 48208): The EPA’s analysis of the Cross State Air Pollution rule estimated that implementation of the final rule would result in the creation of 700 jobs per year. NERA ‘s whole economy analysis found that the rule would result in the elimination of a total of 34,000 jobs from 2013 to 2037.
  • Boiler MACT rule (76 Fed. Reg. 15608): EPA’s analysis of the Boiler MACT rule estimated that implementation of the final rule would result in the creation of 2,200 jobs per year. NERA’s whole economy analysis found that the rule would result in the elimination of 28,000 jobs per year from 2013 to 2037. 


The discrepancies between the EPA’s projected effects of such regulations on the economy and the actual amount of jobs lost is mind boggling. All in all NERA’s analysis of the economic impact of the three regulations cited above found the regulations together would likely kill 2,876,000 million jobs by 2037. The almost three million job losses projected by NERA strongly contrasts the job creation numbers projected by the EPA. It must also be pointed out that the aforementioned examples are only three EPA regulations out of the multitude of EPA regulations currently in place.      

If the EPA had been adhering to its own procedures and analyzing the effects of regulations as required by the Clean Air Act hundreds of thousands of jobs as of 2014 could have been saved. Senator Inhofe’s bill would ensure that the EPA monitors and reports on the effects of its own regulations so failed regulations do not continue to have detrimental impacts on the American economy. 

Simply put, Senator Inhofe’s bill would save jobs, taxpayer dollars and ensure the EPA enacts responsible regulations.

Photo Credit: 
Moms Clean Air Force https://www.flickr.com/photos/momscleanairforce/

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Supreme Court's EPA Deference Could Kill the Pebble Mine

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Posted by Justin Sykes on Monday, March 24th, 2014, 3:08 PM PERMALINK


The U.S. Supreme Court has refused to hear an appeal of an Environmental Protection Agency (EPA) decision that revoked a 2007 mining permit issued for the Spruce Mine in West Virginia. The court’s failure to hear the case sets a dangerous precedent that may allow the EPA to preemptively kill future projects such as the proposed Pebble Mine project without formal justification. The refusal to rule on the EPA’s revocation of the Spruce Mine permit impliedly grants the EPA more control over the American economy and denies legal recourse.

The current state of the law in America is that for a mining operation to begin it must apply for a Section 404 permit as required under the Clean Water Act. Mining production cannot begin until the Section 404 permit is issued. The Section 404 permit process effectively gives the EPA ultimate veto authority over a proposed mining project. “Before developers can even begin mining, they must first identify economically viable resources…lease land from the government or private individuals, and then apply for drilling permits with a handful of different agencies.

The problem is that mining projects require years of preparation and millions of dollars of investment that could be wasted because the EPA can now kill such projects without any justification. The current state of the law will undoubtedly chill future investments thereby killing jobs and denying America the benefit of its domestic energy reserves. Based on the EPA’s unfounded and retroactive revocation of the Spruce Mine permit, it’s easy to predict the future for such projects such as Pebble Mine in Southwest Alaska.

The Pebble Mine project is a proposed mining operation that is now in danger of being preemptively denied by the EPA. The most troubling aspect of the EPA’s treatment of the Pebble Mine project is that Pebble Mine has yet to formally apply for any construction permits. In an act of defiance to any logical or fair interpretation of the law, the EPA issued a watershed assessment of the region before any formal application for permits were made. Furthermore, the EPA’s watershed assessment of the region was based on inaccurate science and methodology, and was simply a calculated effort to kill the project without fair consideration. 

It is clear the EPA is acting at the behest of radical environmental organizations to squash the Pebble Mine project. What the EPA failed to take into consideration is that the “Pebble Partnership has invested over $150 million in developing a safe, environmentally responsible way to mine the enormous copper reserves in Southwest Alaska.” The EPA also failed to consider that the Pebble Mine would:

  • Create 16,175 high-paying jobs per year throughout construction process and an additional 14,715 high-paying jobs per year during production; and
  • Contribute $1.6 billion to our nation’s GDP per year during the construction process and an additional $2.4 per year afterwards.
     

The EPA’s preemptive efforts to kill the Pebble Mine project through its watershed assessment are made worse by the recent precedent set by the Supreme Court. The Supreme Court’s denial of the Spruce Mine’s appeal of the EPA’s permit revocation means future projects could be killed by the EPA without proper justification. Essentially the Supreme Court is condoning the EPA’s abuse of the permitting process and offering little if any recourse for mining operations.

The EPA’s condoned abuse of the permitting process could allow the EPA to revoke the Pebble Mine permit at any time, irrespective of the project’s investments in safety, the thousands of potential jobs created and the billions in contributions to America’s GDP. The Supreme Court’s decision only reinforces an already growing view that the EPA is an agency “gunning for one industry” despite the obvious benefits that would be produced from projects such as the Pebble Mine. Thus the fate of projects such as Pebble Mine could be in the hands of an anti-mining EPA that can deny or revoke permits without any justification or legal recourse for mining operations.

Photo Credit: 
Thomas and Melody Banneck https://www.flickr.com/people/tbanneck/

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EPA's Biggest Con Artist Wrote Seminal EPA Regulation

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Posted by Justin Sykes on Thursday, March 20th, 2014, 11:40 AM PERMALINK


A report released this week by the Senate Committee on Environment and Public Works examined former EPA employee John Beale and his role in the creation of the 1997 National Ambient Air Quality Standard (NAAQS). The report revealed that at the time the NAAQS was being drafted by the EPA, “some officials making critical important policy decisions were not remotely qualified…and in at least one case – EPA decision making was delegated to a now convicted felon and con artist, John Beale.”

The National Ambient Air Quality Standard regulates the release of particulate matter into the air and is one of the most controversial regulations ever put forth by the EPA. The NAAQS allowed for a massive expansion of EPA control over the American economy.

The NAAQS was the brain child of Robert Brenner and convicted con artist Jon Beale, inherently raising questions as to the entire authenticity of the NAAQS. The report found multiple problems behind Beale’s pivotal role in the creation of the NAAQS. The report found evidence of:  (1) problems with the integrity of the research behind the NAAQS; (2) self-serving motivation behind its creation; and (3) an overall lack of legislative or scientific experience on the part of Beale – the primary figure behind the NAAQS’s creation. 


Beale’s Lack of Experience

It must first be understood that John Beale was at no point qualified to draft EPA regulations, especially regulations as far reaching as the NAAQS. The committee’s report found Beale came to work at the EPA through his best friend John Brenner who hired Beale.

Brenner hired Beale despite the fact that Beale had absolutely “no legislative or environmental policy experience and [previously] wandered between jobs at a small-town law firm, a political campaign, and an apple farm.” The report even found that “Beale himself admitted that he had no environmental experience.” Brenner hired Beale at a position commonly reserved to those with years of legislative and environmental experience. The position was also one of the highest paying positions for general service employees. Thanks to Brenner’s influence, Beale’s role in the EPA quickly grew to the point where he became the “lead EPA official for one of the most controversial and far reaching regulations ever issued” despite his complete lack of experience.


Beale’s Motivation Behind the Creation of the NAAQS

The committee’s report further found that Beale’s primary motivation behind the creation of the NAAQS was not the preservation of the environment, air quality or human health, but his own self-interest. 

“Evidence suggests that Beale used the NAAQS as a vehicle for his own self-aggrandizement and rose above reporting just to Brenner and began to work alongside Mary Nichols, the Assistant (AA) for OAR at the time, as well as then Administrator Carol Browner.” 

Once Beale had influence over Nichols (the Assistant Administrator) and Browner (the EPA Administrator), there was no stopping him from passing the NAAQS, not even a complete lack of scientific basis and support.


The NAAQS is Based on a Lack of Scientific Integrity and Understanding

The report further found that not only was the NAAQS developed by Beale whose only legislative qualification was an “unpaid undergraduate internship for Senator John Tunney,” but also that Beale based his creation of the NAAQS on “a distinct lack of scientific understanding of the integrity of the underlying data.”

The EPA relied on two studies presented by Beale in approving the NAAQS that remain controversial: The Harvard “Six Cities” and American Cancer Society (ACS II) studies. The EPA’s own scientific advisors warned EPA officials that the studies were “not in the peer-reviewed literature” and “emphasized that there were significant uncertainties with the data, meaning EPA’s decision to proceed with the standards was a pure ‘policy call.’” Subsequently, the EPA Administrator at the time Carol Browner and Assistant Administrator Mary Nichols both admitted “neither of them had actually read the studies.” The report found that instead of reading the studies, both Browner and Nichols deferred to the “expertise of EPA’s career staff – Beale and Brenner – to make [the] policy call.”


While the goal of the NAAQS appears noble, the creator, science and motivation behind the NAAQS is anything but. 

Photo Credit: 
Emydidae http://www.flickr.com/people/neoyogyrt/

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Ohio Should Follow Indiana’s Lead and End its Electricity Mandate

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Posted by Justin Sykes on Thursday, March 13th, 2014, 10:05 AM PERMALINK


The state of Ohio should take note of the recent legislative accomplishments in Indiana with regard to Indiana’s electricity reduction mandate.  Ohio currently has in place the Ohio Electricity Usage Reduction Mandate, which requires Ohio’s electricity distribution utilities (EDUs) to reduce their customer’s electricity usage in increasing amounts each year. Similar to the Ohio energy reduction mandate, the state of Indiana has an energy reduction mandate called the “Energizing Indiana” program. Unlike Ohio however, Indiana has realized that the costs of the reduction mandate greatly outweigh any potential benefits to rate payers and businesses.

Recently, Indiana State Senator Jim Merritt “authored a bill that would phase out the Energizing Indiana program by the end of the year.” As of Monday, Senator Merritt’s bill passed the Indiana General Assembly with a 37 to 8 vote.  Senator Merritt’s bill will now be presented to Governor Mike Pence for approval, and if approved Energizing Indiana would be phased out by December 2014. Gov. Pence, being the good conservative that he is, would do well to make this legislation law.

In support of the bill, Senator Merritt cited the fact that “since 2009, the Energizing Indiana program has cost rate payers $500 million and will cost as much as $1.9 billion more by 2019.” As a direct result of the Indiana mandate, residents were being charged $1.50 per month to fund Energizing Indiana.

Alternatively, Ohio residents are paying almost three times the amount of Indiana residents to fund the electricity reduction mandate. Currently Ohio rate payers are paying almost $4.00 a month for an energy reduction benefit of only $0.37 cents a month. The discrepancy between the cost and benefit of the Ohio mandate is blatantly obvious in that paying $4.00 for something worth only $0.37 cents is clearly illogical.

Additionally, the compliance burden under the Ohio electricity reduction mandate is so great that that Ohio EDUs will have spent over $1 billion in compliance costs by the end of this year.  Because the Ohio mandate increases each year, Ohio EDUs compliance budgets are increasing 12 percent each year in response. In turn, those compliance costs are passed onto Ohio rate payers. If the current 12 percent compliance budget growth rates continue, by 2020 “Ohio ratepayers will be paying over $500 million per year as a result of the Ohio mandate.

To show just how much of the cost of the Ohio electricity reduction mandate is passed on to Ohio residents, take a look at the Ohio EDU AEP-Ohio Columbus Southern (AEP-Ohio). AEP-Ohio began charging residential customers 0.289 cents per kWh ($0.00289) in September of 2012 to fund its energy use reduction mandate budget. A typical AEP-Ohio customer using 750 kWh per month would incur a charge of $2.17 per month to fund the energy reduction mandate. Thus, “the mandate cost paid by a typical AEP-Ohio Columbus Southern zone residential customer was at least seven times greater than the price suppression benefit.” Essentially, AEP-Ohio customers are required to pay one dollar for every 15 cents of claimed price suppression benefit they received. The results are the same compared to other Ohio EDUs. Dayton Power & Light residential customers were forced to pay $3.90 per month for a $0.37 cent benefit.

Just like Indiana’s Energizing Indiana program, the Ohio electricity reduction mandate is all cost and no benefit for consumers and businesses. Indiana Senator Merritt stated in support of his repeal bill that if “energy efficiency policies aren’t leading to cost savings, they aren’t doing their job.” Clearly, the Ohio electricity usage reduction mandate is an energy efficiency policy that isn’t doing its job. As such, Ohio should follow suit and take action to repeal the Ohio electricity reduction mandate before Ohio consumers and businesses further suffer. 

 

Photo Credit: Charles E. Carstensen (photo has been resized)

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EPA Bureaucrats Use Federal Charge Cards for Gym Memberships and Gift Cards

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Posted by Justin Sykes on Wednesday, March 12th, 2014, 8:56 AM PERMALINK


A report released by the Environmental Protection Agency’s Inspector General has found that EPA employees have improperly used federal charge cards to purchase everything from gym memberships to gift cards. The report indicated that over 90 percent of the sampled transactions were for prohibited, improper, or erroneous purchases, all paid for by American taxpayers. Ironically, Senate Democrats Monday night carried on an all-night filibuster in the hopes of generating even more power and funding for the EPA.

In order to compile the report, the Office of the Inspector General obtained a spreadsheet of 67,000 EPA transactions from Fiscal Year (FY) 2012, and randomly selected 69 transactions. They additionally selected 11 transactions that seemed inappropriate because of the name of the merchant involved. For instance, some transactions were with merchants listed as dance halls, child care organizations, music venues and theatres. Of the 80 transactions sampled, 75 were for prohibited, improper, or erroneous purchases. The 80 transactions sampled totaled $152,602 and $79,254 (52%) of which were for prohibited, improper, or erroneous purchases.

The report outlined nine specific internal control oversight issues, ranging from the approval of prohibited transactions by EPA officials to the outright failure to maintain transaction records. Of the primary internal control oversight issues, four were particularly outrageous, and the report found that of the transactions sampled:

  1. 35% of cardholders did not verify the receipt of purchases;
  2. 30% of cardholders did not obtain required approval prior for purchases;
  3. 25% of cardholders did not obtain funding prior to purchases; and
  4. 18% of approving officials never reviewed purchase logs.
     

Some specific instances of EPA employee misconduct were so egregious they are worth mentioning. In three instances, cardholders purchased gym memberships totaling $2,867. Two of those purchases were not even for EPA employees but for family members. Cardholders further violated EPA guidelines regarding inappropriate food purchases:

“Although light refreshments are defined as those that do not include portions of food typical of a meal, in one of our samples, light refreshments included all elements of a meal for an awards ceremony. Four different appetizers, chicken tenderloin, fresh fruit, pasta salad, large cookies, soft drinks and punch were purchased at a cost of $2,900. Meals are not an allowable expense for an awards recognition ceremony.”

The report also found that the purchase of gift cards by EPA cardholders was also a problem in seven transactions. For example, in one transaction 20 American Express gift cards were purchased totaling $1,588. Additionally, the report highlighted an instance where EPA employees blatantly violated records keeping requirements in that:

“Two transactions totaling $26,152 could not be located despite instructions to maintain supporting documentation. The EPA’s policy requires the retention of documentation for 3 years on a fiscal year basis. Cardholders were not attentive to this basic requirement. In two cases, the cardholders left their positions and no arrangements were made to retain the records. In another transaction the cardholder stated that records were not kept because of privacy concerns. This lack of documentation increases the risk that purchases could be fraudulent, improper or abusive.”

It must also be pointed out that the report focused on only 80 transactions out of 67,000, ninety-two percent of which turned out to be prohibited or improper. For FY 2012, the EPA had "1,370 active cardholders that transacted more than $29 million in purchases." The EPA also had "309 convenience check writers who wrote more than 1,000 checks totaling more than $500,000." It is very likely the 80 transactions sampled are just the tip of an iceberg characterized by improper and wasteful spending of federal funds.

The ultimate irony is that a similar report conducted in 2008 found the exact same internal control weaknesses as those found in the most recent report conducted by the Inspector General. Due to an obvious inability of EPA officials to correct these internal control weaknesses, there is no guarantee that any of the prohibited and improper conduct by EPA employees will change.

An obvious culture of improper spending has developed at the EPA with little to no oversight. Thus in years to come Americans could again find themselves paying for EPA employees’ gym memberships, gift cards, and whatever else may strike their fancy.

 

Photo credit:  Neon Tommy (Photo has been resized)

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New EPA Gasoline Regulation Will Cost $12 Billion

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Posted by Justin Sykes on Tuesday, March 11th, 2014, 11:54 AM PERMALINK


The Environmental Protection Agency (EPA) last week unleashed a new regulation on the amount of sulfur contained in gasoline. EPA Administrator Gina McCarthy praised the new regulation as a “benefit worth the burden” citing a projected one cent increase in gasoline prices to American consumers. However the one cent figure cited by McCarthy is far from accurate as evidenced by a recent study by Baker & O’Brien Incorporated. The study found not only would the cost of gasoline prices increase to potentially nine cent per gallon but that the new rule would require $10 billion in capital costs and an annual compliance cost of $2.4 billion. According to American Petroleum Institute (API) Director Bob Greco:

“This rule’s biggest impact is to increase the cost of delivering energy to Americans, making it a threat to consumers, jobs and the economy…it will provide negligible, if any, environmental benefits. In fact, air quality would continue to improve with the existing standard and without additional costs.”

The Baker & O’Brien study undertook a refinery-by-refinery approach and found that the new regulation on sulfur would have immediate and far reaching consequences for American refineries. Compliance costs alone would increase to $2.4 billion annually, which in turn will be passed to the consumer in the form of a 6-9 cent per gallon increase in the cost of gasoline. The effects of the new regulations on American refineries are listed below:

  • 24 refineries would be forced to install and upgrade new fluid catalytic cracker (FCC) feed hydroteaters;
  • 13 refineries would be forced to install new FCC gasoline hydroteaters; and
  • 33 refineries would be forced to expand and upgrade their existing FCC gasoline hydrotreaters.


The required capital investments referenced above are projected to costs American refineries upwards of $10 billion in capital costs. This $10 billion in capital investments costs is only complimented by the $2.4 billion in annual compliance costs American refineries will be subject to. Accordingly, domestic refineries will be required to shift the costs of compliance onto the shoulders of consumers who will undoubtedly see an increase in gasoline prices 6-9 times higher than the 1 cent projected by the EPA. Furthermore, some refineries may be forced to cut jobs due to these multi-billion dollar compliance and investment increases.

In addition to increased gasoline prices for consumers, the Baker & O’Brien study found that the new regulations would require an increase in hydrotreating operations. As evidenced above, the $10 billion in capital investment costs will be related to hydrotreater operations. This increase in hyrdotreating operations would contribute to a higher annual amount of greenhouse gas emissions compared to previous amounts due to the energy intense nature of such operations.

While the EPA has justified the new regulation on sulfur by citing increased air quality and a 1 cent increase on gasoline prices, both of these justifications are unfounded. The energy intensive hydrotreatment operations pursuant to the regulation will actually increase CO2 emissions and cost refineries $10 billion in capital investments. The regulation will also burden refineries with $2.4 billion in annual compliance costs which will be passed to the consumer as a 6-9 cent increase per gallon at the pump. All in all the new regulation on sulfur could increase the cost of energy to Americans and threaten consumers, jobs and the economy.

Photo Credit: Upupa4me

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Ohio’s Electricity Reduction Mandate Burdens Residents and Businesses

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Posted by Justin Sykes on Wednesday, March 5th, 2014, 5:47 PM PERMALINK


The Electricity Usage Reduction Mandate was passed in Ohio in 2008 and mandates that Ohio’s electric distribution utilities (EDUs) reduce their customers’ electricity usage. The mandate was introduced on the theory that it would produce a retail reduction benefit that would lead to lower electricity rates paid by Ohio consumers. However, the Ohio mandate has actually created a situation where residential consumers could pay close to $4.00 extra per month for a retail reduction benefit of only $0.37 cents per month.

The legislation mandates that Ohio’s EDUs increasingly reduce their customers’ electricity usage every year. The reduction requirement is projected to grow to 22% by the year 2025. In turn, Ohio’s EDUs are forced to take on a massive compliance burden that increases their compliance budgets by an estimated 12% each year. By the end of 2014, Ohio’s EDUs will have spent over $1 billion to comply with the mandate since 2009.  If the current 12% compliance budget growth rates continue, by 2020 “Ohio ratepayers will be paying over $500 million per year as a result of the Ohio mandate.”

A recent study released in February by Dr. Jonathan Lesser, President of Continental Economics, examined the substantial impact the Ohio electricity usage reduction mandate would have on Ohioans. Lesser’s study comes in stark contrast to claims made by supporters of the Ohio mandate who oppose reform. Supporters of the mandate assert that Ohio’s retail electric consumers will receive a “free lunch” based on their claims that:

  1. the mandate suppresses the wholesale electric price in a multi-state region;
  2. the amount of this suppression flows directly into the retail electric prices paid by Ohio’s retail electric customers; and
  3. the effect of the retail price reduction produces a direct Ohio retail benefit in excess of the cost of the mandate paid by these same retail consumers.
     

Lesser’s study determined that not only are reform opponent’s claims incorrect, but that the “retail benefits” created are actually substantial retail burdens. For instance, the cost "paid by EDU customers on their electric bills to fund the mandate appear to be at least five to thirteen times larger than the possible price suppression benefits these same customers are allegedly receiving.” The three primary claims of reform opponents were analyzed by Lesser and are summarized below.

  1. The Mandate Suppresses the Wholesale Electric Price in a Multi-State Region
     

To understand the inefficiency of the Ohio mandate, it must first be pointed out that Ohio is part of the PJM Interconnection, LLC (PJM) regional transmission organization. The PJM oversees a wholesale energy market which covers all or part of 13 surrounding states and Washington, DC. Because the PJM wholesale market is integrated, the effects of the Ohio mandate are spread through PJM. According to Lesser, the result of this is that 80% of the price suppression “benefits” flow to customers outside Ohio and customers of Ohio municipal utilities and cooperatives. Of course the Ohio municipal utilities and cooperatives receive a windfall benefit from this because they are exempt from the mandate. Essentially, Ohio businesses are forced to subsidize their out-of-state competitors and in-state competitors not subject to the mandate. If the wholesale price suppression claim is correct, “the biggest winners from the Ohio electricity usage reduction mandate are the consumers and market participants inside and outside Ohio who don’t pay the mandate cost.”

  1. Suppression Flows Directly into the Retail Electric Prices Paid by Ohio’s Retail Electric Customers
     

In determining the effect the mandate has on the average wholesale price of electricity, Lesser found that 19.9% of the total retail sales within the PJM region are attributable to Ohio retail consumers. Based on this figure, Ohio EDU retail consumers would have accounted for 19.9% of the total PJM price suppression of $333 million, which equals an Ohio share of just over $66 million. The “remaining $267 million of the reform opponents’ wholesale price suppression benefits would have gone to customers elsewhere within the PJM region at no cost to the recipients.” Spread out over the total Ohio EDU retail sales, the $66 million price suppression benefit would equate to an annual average price reduction of $0.00049/kWh of electricity sales. Typical residential customer bills in Ohio are based on an average consumption of 750kWh per month. “At that consumption level, the typical Ohio residential customer would have received…a flow-through price suppression benefit of just under $0.37 per month, or $4.38 for the entire year." Thus the “flow-through price suppression benefit” of the mandate advanced by reform opponents totals $0.37 per month which, compared to the cost of the mandate paid by the same retail consumers actually has Ohio consumers paying more under the mandate cost than the actual benefit received.

  1. The Effect of the Retail Price Reduction Produces a Direct Ohio Retail Benefit in Excess of the Cost of the Mandate
     

Lesser’s study further found that the mandate cost paid by Ohio retail consumers is actually five to thirteen times larger than the $0.37 price suppression benefit that is claimed by reform opponents. Lesser used the Ohio EDU AEP-Ohio Columbus Southern (AEP-Ohio) to exemplify this huge discrepancy between the claimed benefit and the actual cost. AEP-Ohio began charging residential customers 0.289 cents per kWh ($0.00289) in September of 2012 to fund its energy use reduction mandate budget. A typical AEP-Ohio customer using 750 kWh per month would incur a charge of $2.17 per month to fund the energy reduction mandate. Thus, “the mandate cost paid by a typical AEP-Ohio Columbus Southern zone residential customer was at least seven times greater than the price suppression benefit theorized by the reform opponents for 2012.” Essentially, AEP-Ohio customers were required to pay one dollar for every 15 cents of claimed price suppression benefit they received. The results are the same compared to other Ohio EDUs. Dayton Power & Light residential customers were forced to pay $3.90 per month for a $0.37 cent benefit.

Ohio’s electric usage reduction mandate not only burdens Ohio’s own electric distribution utilities and electric retail consumers but benefits out-of-state consumers and out-of-state market participants. The Ohio mandate forces residential customers in Ohio to pay up to $3.92 per month for a $0.37 cent benefit. One doesn’t have to be an economist to realize that this is not fare to Ohio consumers and businesses. The Ohio electric usage reduction mandate inherently burdens the citizens and market participants in Ohio, the very parties the mandate is supposed to protect and as such is a clear example of failed policy.

 

 Photo Credit: Ian Britton

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Sen. Cruz's Legislation Harnesses America's Energy Potential

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Posted by Justin Sykes on Wednesday, February 12th, 2014, 9:52 AM PERMALINK


This week Sen. Ted Cruz (R-TX) introduced the American Energy Renaissance Act (AERA), a plan to create new jobs and opportunities by harnessing our nation’s energy resources.  Speaking at the Heritage Action for America’s 2014 Conservative Policy Summit, Sen. Cruz stated that:

“The government will not solve our economic problems by controlling the economy or placing bureaucratic barriers to growth. The only thing that it must do is what it did in the Ronald Reagan era: get out of our way and let Americans do what they do best: dream, innovate, and prosper.”

Five key measures for economic growth in the American Energy Renaissance Act are: (1) passage of the REINS Act; (2) Empowering the states to regulate energy development; (3) Stopping the EPA’s regulatory overreach and the War on Coal; (4) Improving domestic energy prosperity and security; and (5) Reducing the national deficit. Specific measures under AERA are outlined below:

  1. REINS Act
    • The REINS Act is proposed legislation that would require Congress and the President to vote on any EPA regulation that will have a negative impact on jobs.
    • The REINS Act would allow for an open discussion on the potential impact on jobs of proposed EPA regulations prior to passage.
  2. Empowering the states to regulate energy production
    • Each state would be empowered to regulate and benefit from its own hydraulic fracturing – as opposed to the Federal government restricting a state’s ability to control its own resources and the resulting benefits.
    • Provide states the option of leasing, permitting and regulating energy resources on federal lands within their borders.
  3. Rein in out of control EPA
    • Exclude greenhouse gases from regulation by the EPA and other federal agencies
    • Repeal of the Renewable Fuel Standard
  4. Improving Domestic Energy Prosperity and Independence
    • Streamline the permitting process for upgrading and building new refineries
    • Approve and allow the private sector to build the Keystone pipeline
    • Remove barriers to developing and approving national pipelines and cross-border energy infrastructure
    • Increase energy development on federal land
    • Expand LNG exports by facilitating permits, ending the crude oil export ban, and preventing excessively broad environmental review of coal export terminals
  5. Reducing the national deficit
    • Creation of the “Debt Freedom Fund” – which would direct all additional revenues generated by exploration and drilling on federal lands (excluding the share allocated to the states) exclusively to national debt reduction
       

The AERA would not only create jobs, enhance American energy independence, reduce trade barriers, but would allow America to reach its full energy potential.  In stark contrast, the President and the EPA have consistently killed jobs through onerous EPA regulations and their continued opposition to the Keystone XL pipeline. Federal overregulation of the economy has stifled America’s quest for domestic energy independence by unnecessarily locking up key energy reserves.

Sen. Cruz’s American Renaissance Act would breathe new life into America’s economy and begin to undue the failed energy policies of the Obama Administration and the EPA.

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Achieve Olympic Glory - Now Pay the IRS


Posted by Justin Sykes on Friday, February 7th, 2014, 8:30 AM PERMALINK


As 230 U.S. Olympic athletes gear up to compete in the 2014 Winter Games, the only thing colder than the slopes at Sochi is the fact that any prizes awarded by the U.S. Olympic Commission (USOC) will be taxed by the IRS. Many Americans don't realize that the U.S. taxes income earned abroad, and as such even the winnings of Olympic athletes are subject to the reach of the IRS.
 
The USOC awards prizes to U.S. Olympic medal winners: $25,000 for gold, $15,000 for silver, and $10,000 for bronze. Relative to each athlete's income tax bracket, some top earners such as Shaun White could end up paying over a third (39.6 percent) of their winnings to the IRS. 

 

Additionally, because the U.S. is one of only a handful of developed countries that tax income earned abroad, it is likely America's competitors will not be subject to such a tax. Taken together - the tax on Olympic athletes and the tax on income earned abroad - it can be said the U.S. has officially "earned the Gold" for having one of the most backwards and illogical tax codes in the world. 

 

U.S. Tax Rates per Bracket

Max. Tax Liability on Gold Medal Prize of $25,000

Max. Tax Liability on Silver Medal Prize of $15,000

Max. Tax Liability on Bronze Medal Prize of $10,000

39.6%

$9,900

$5,940

$3,960

35%

$8,750

$5,250

$3,500

33%

$8,250

$4,950

$3,300

28%

$7,000

$4,200

$2,800

25%

$6,250

$3,750

$2,500

15%

$3,750

$2,250

$1,500

10%

$2,500

$1,500

$1,000

 

Americans for Tax Reform has calculated the federal income tax medal winners could potentially face.  It will vary depending on which marginal income tax bracket the athlete finds himself in for 2014. The amounts below represent only the federal income tax liability, and do not account for income taxes owed in most states.

 For gold medal winners, ATR believes applying the top marginal income tax bracket of 39.6 percent to gold medal winners is reasonable for the following reasons:

  • Gold medal winners (as opposed to silver and bronze medal winners) are likely to have marketing, endorsement, speaking, etc. deals in 2014, and should have higher-than-usual earnings
  • Because state income taxes are not being calculated, there is a margin of error built into the methodology

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Top 5 Obama SOTU Canards You'll Hear Tonight


Posted by Justin Sykes on Tuesday, January 28th, 2014, 5:12 PM PERMALINK


  1. Income Inequality – While you’re likely to hear the President speak on “income inequality” tonight and how "big business" prospers at the expense of ordinary Americans and the solution is more government regulation, the truth is the President has been one of big businesses most ardent supporters if and when some of them agreed to support his agenda. A prime example is the two bailout provisions for big insurance contained in Obamacare. Additionally, the New York Times recently found that growth in the income inequality rate has increased from .28 percent under President Bush to 1.14 percent under President Obama.
  2. “Corporate Tax Reform” aka Business Tax Hikes - President Obama will propose a net tax increase on American employers under the guise of “corporate tax reform.” If “corporate tax reform” language sounds familiar – that’s because it is. The President’s proposal is merely a repackaging of a 2012 re-election campaign plan to raise taxes on all employers while cutting rates for just a few of the largest companies. As found by ATR’s Tax Policy Director Ryan Ellis, fewer than two million out of the 32 million businesses that file tax returns in a given year are corporations, which tend to be the largest companies in the world. Although these corporate rates are too high, the overwhelming percentage of employers don’t pay the corporate income tax rate. The President has already raised the tax rate paid by small and medium-sized businesses via the fiscal cliff and Obamacare’s Medicare payroll tax rate hike. “Taken together, this means that most employers face a top rate of close to 44 percent, plus state taxes. This is even higher than the 39 percent corporate income tax rate faced by large corporate firms.” Thus the President’s proposed tax hike will cut rates for some multinational corporations, while raising taxes on Main Street businesses.
  3. The Actual Number of People Obamacare Expanded Coverage to – Okay, this isn’t something we’re actually likely to hear about. While it’s likely the President will cite to “6 million” people who have signed up for Obamacare, that figure is just not true. Surveys from insurers and other industry players indicate that “as few as 11 percent of those on Obamacare’s exchanges were previously uninsured.” Analysts at the Wall Street Journal found that roughly 65-89 percent of exchange enrollees were previously insured. If you assume around one third of exchange enrollees were previously uninsured, and 90 percent of those who have “selected a marketplace plan” will enroll in coverage, the Obamacare exchanges have thus only expanded coverage to 660,000 people.
  4. The Real Winners under Obama: Big Insurance and Multinational Corporations – The President will repeatedly make reference to “strengthening the middle class” and growing "small business" in tonight’s address, however the middle class and small businesses are not the real winners here. In addition to the tax cuts for multinational corporations discussed above, Obamacare also includes two bailout provisions for big insurance companies. The first provision bails out insurance companies for costs associated with individual patients when they exceed $45,000. According to National Review, Insurers will be able to push off 80 percent of costs between $45,000 and $250,000 onto a fund financed by a fee of $63 per head on insurance customers. The second provision ask the insurance companies to project their total costs and then picks up most of the difference if losses exceed those targets.
  5. Oil and Natural Gas Production – The President will likely tout oil and natural gas production in the U.S. under his administration, however nothing the federal government has done under Obama has helped to increase domestic oil and natural gas production. The total federal natural gas production is down 21% on federal lands since President Obama took office due to burdensome regulations and lengthy permitting times. The Obama administration’s proposed hydraulic fracturing regulations would make it worse. Meanwhile, energy development on state and private lands, not under federal regulations, has flourished. Currently, 93% of shale wells are located on state and private lands. Additionally, the president remains silent on the Keystone XL pipeline, a shovel-ready project that could propel the creation of thousands of American jobs and economic growth. The president has delayed action on this job project for years, bucking bipartisan support for the project among Congress and the American people. It has now been over 5 years since the pipeline application was submitted.

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