Justin Sykes

New EPA Gasoline Regulation Will Cost $12 Billion

Share on Facebook
Tweet this Story
Pin this Image

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

Top Comments

Ohio’s Electricity Reduction Mandate Burdens Residents and Businesses

Share on Facebook
Tweet this Story
Pin this Image

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

Top Comments

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

Share on Facebook
Tweet this Story
Pin this Image

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.

Enhanced by Zemanta

More from Americans for Tax Reform

Top Comments

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






























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

More from Americans for Tax Reform

Top Comments

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.

More from Americans for Tax Reform

Top Comments

E&C Poised to Rebut the EPA's War on Affordable Energy

Posted by Justin Sykes on Monday, January 27th, 2014, 10:46 AM PERMALINK

Today, the House Energy and Commerce Committee will be voting on the Electricity Security and Affordability Act, or H.R. 3826.

The Electricity Security and Affordability Act is bipartisan legislation introduced by Rep. Ed Whitfield (R-KY) and Sen. Joe Manchin (D-WV).  The Act would create guidelines for the EPA to set standards for new power plants that are actually feasible and will put the final authority for any guidelines affecting existing power plants in the hands of Congress and thus the people.

The issue is that the EPA has proposed regulations that would mandate any new coal-fired power plants to use technologies that are not commercially feasible. The required technologies under the EPA regulations are not yet commercially or economically viable and would basically impose standards that are impossible to meet. These costly regulations could put an end to the promise of a true “all-of-the-above” energy strategy. If the EPA’s rule for new plants is allowed to move forward, American consumers and businesses will be denied "the benefits afforded by coal, which provide nearly 40 percent of the nation with affordable and reliable electricity.”

However the EPA is not stopping at new plants and is also set to propose regulations for existing power plants in June 2014. New regulations imposed on existing power plants could be the most damaging and could lead to higher energy prices, the closing of existing plants and loss of jobs.

The Electricity Security and Affordability Act is the solution to help “rein in” the EPA’s proposed flood of costly regulations. By supporting Rep. Whitfield and Sen. Manchins’ bipartisan legislation, Americans can ensure that we “take full advantage of all of our domestic resources and pursue innovative opportunities to expand access to energy, while keeping prices affordable and helping American businesses to compete.”

Expected to pass out of the Energy and Commerce next Tuesday, Americans for Tax Reform President Grover Norquist had this to say about the Electricity Security and Affordability Act:

“The Electricity Security and Affordability Act is necessary legislation that repeals the EPA’s misguided greenhouse gas standards for new power plants and guides the EPA towards creating new, achievable standards. If this legislation is not adopted, it is possible that a new coal-fired power plant will never be built in the United States again. Congress never intended for the EPA to unilaterally determine what source of energy Americans consume. The Electricity Security and Affordability Act also reaffirms Congress's legislative duties by enacting numerous safeguards against EPA partisan overreach. In sum, this is essential legislation intended to rebut the Obama Administration’s war on affordable energy. I urge every Member of Congress to support the Electricity Security and Affordability Act.”


More from Americans for Tax Reform

Top Comments

Yankees Pitcher To Lose Over Half of $155 Million Contract to Taxes

Posted by Justin Sykes on Thursday, January 23rd, 2014, 1:42 PM PERMALINK

As reported by ESPN, the New York Yankees have signed Masahiro Tanaka to a 7-year contract worth $155 million, earning an estimated $22.1 million per year. According to ESPN, Tanaka's contract is the largest ever for an international free agent and the fifth-largest deal for a pitcher. However sweet this $155 million dollar deal seems, the reality is that Tanaka will lose almost $90 million over the 7-year life of his contract with the Yankees.

In addition to the Yankees, Tanaka was also being courted by the Arizona Diamondbacks and the Chicago Cubs. Unlike New York City, the cities of Phoenix and Chicago do not impose a city income tax. Had Tanaka chosen a similar contract with the Diamondbacks or the Cubs, he would have saved almost $12 million over the life of his contract. Instead, Tanaka chose New York, where the state and local rates are some of the highest in the country. By choosing to sign with the Yankees, Tanaka automatically forfeited almost $12 million in taxes that would have been saved had he signed with the Cubs or Diamondbacks.

Tanaka will pay a combined marginal income tax rate of 56.1 percent - over half of his contract. For New York state and local taxes alone he will lose an estimated $2,811,257 a year. The combined marginal income tax rate Tanaka will pay is comprised of the federal, state and local tax rates, plus the Medicare payroll tax. The chart below shows Tanaka’s tax burdens as compared between the differing franchises.



Est. Federal Tax Burden

Est. State Tax Burden

Est. City Tax Burden

Total Tax Liability

New York


$67,270,000 million

$13,671,000 million

$6,007,800 million

$86,948,800 million



$67,270,000 million

$7,750,000 million


$75,020,000 million



$67,270,000 million

$7,037,000 million


$74,307,000 million

The Federal Income Tax Burden listed above is comprised of the 39.6 percent tax bracket and 3.8 percent Medicare Tax. For illustrative purposes, the marginal combined tax rate of 56.1 percent (which includes Federal, State, Medicare, and Local tax rates) is applied only to his contract salary and does not take into account his bonuses, endorsement, and other sources of viable income.

While Tanaka is not your average employee, the real lesson to be learned here, one you won’t see in the headlines is that higher federal and state tax burdens can have a huge impact on employees and employment in a state. The sweetness of signing a $155 million contract to play baseball for one of the leagues most renowned teams, the New York Yankees, is only made bitter by the fact Tanaka will have to settle for receiving only $68 million (less than half) of the $155 million contract due to the heavy federal and state tax burdens.


More from Americans for Tax Reform

Top Comments

The Top 10 Pitfalls of the Ethanol Mandate

Posted by Justin Sykes on Thursday, January 23rd, 2014, 1:04 PM PERMALINK

The Ethanol Mandate, maintained by the EPA under the Renewable Fuel Standard Program, requires renewable fuel to be blended into motor-vehicle fuels and fuels for non-road, locomotive, and marine engines in increasing amounts each year.

With a new year ahead, it's time to end the Ethanol Mandate and look to more sustainable options. By going to www.EndTheEthanolMandate.com you can voice your concern to Congress that the mandate is failed policy. Listed below are the 10 biggest pitfalls caused by the introduction of the Ethanol Mandate.

  1. Lower Fuel Efficiency
  2. Damage to Vehicle Engines
    • Increased percentages of Ethanol are likely to create erosion and cause long term damage to your engine.
  3. Increased Gas Prices
  4. Higher Corn Prices
    • Since the regulations took effect in 2010, corn prices have surpassed the EPA's long term estimate of $3.22 a bushel, and as of 2014 have risen to almost $7.00.
    • From 2005-2012, annual corn ethanol production grew from less than 4 billion to almost 14 billion. As of 2014, "40% of the U.S.. corn crop goes to ethanol."
    • Consumers are being hit by higher corn prices - especially low-income consumers who spend most of their disposable income on food.
    • A CBO study found - ethanol production "has exerted upward pressure on the price of corn, and ultimately, on the retail price of food, affecting both individual consumers and federal expenditures on nutritional support programs."
    • The CBO also found ethanol production drove up federal spending on nutritional programs by $900 million.
  5. Harm to Livestock Producers
    • The increase in corn prices due to the Ethanol Mandate has dramatically increased the price of animal feed and forced some livestock operators out of business.
    • In 2010, for the first time in U.S.. history, fuel was the No. 1 use for U.S.. corn.
    • Expanding corn productions have only partially offset the rapid growth in demand, resulting in higher corn prices for feed.
  6. Compliance Burden
    • Under the RFS, refiners must annually purchase a set amount of renewable fuels each year. The refiners are required to submit renewable fuel credits to the EPA, to show that they have covered their annual obligations.
    • These credits, known as Renewable Identification Numbers, or RINs, are generated by the production of biofuels and can be bought and sold by refiners, as well as banked for future use.
    • RIN credits cost 7 cents at the beginning of 2013 and could rise if the RFS is not mitigated or repealed.
    • In 2012, large refiners spent between $100-$300 million each for credits when prices were about 4 cents. "At $1 a gallon levels, the numbers become astronomical very quickly."
  7. The "Blend Wall"
    • Currently, corn ethanol refiners in the U.S. have the capacity to produce over 14.9 billion gallons, gasoline refiners can only blend 13.3 billion gallons into the fuel supply, which leads to the "Blend Wall" - the point at which the maximum amount of gasoline has been blended with 10% ethanol as required by law.
    • The declining demand for gasoline and increased fuel efficiency mean the "blend wall" will be reached this year, and some refiners have already reached it.
    • Fears they will hit the blend wall have made refiners more eager to buy credits on the open market, pushing RIN prices higher.
  8. Current and Future Ethanol Mandates are out of step with the Market
  9. Environmental Concerns
  10. Effects on the "Conservation Reserve Program"

More from Americans for Tax Reform

Top Comments

Environmental Destruction Proves RFS is a Handout to Big Agriculture

Posted by Justin Sykes on Thursday, January 16th, 2014, 11:54 AM PERMALINK

With the start of the New Year, the Renewable Fuel Standard's Ethanol Mandate is poised once again to be one of the most discussed pieces of legislation in 2014. Touted by the Obama Administration and those on the far left as a way to curb emissions and encourage environmental preservation, the only thing the Ethanol Mandate has encouraged is environmental harm. New studies show that the Ethanol Mandate has contributed to increased pollution and the destruction of millions of acres of conservation lands. It is time for Americans to voice their concern by going to www.endtheEthanolMandate.com and demanding Congress end this failed legislation.

In recent testimony before the EPA, the Environmental Working Group (EWG) outlined their findings on the effects of the Ethanol Mandate. The EWG is one of the far left's most revered interest groups as well as a strong Obama supporter. The main points of the EWG's testimony are highlighted below:

  1. From 2008-2011, the corn ethanol mandate contributed to the loss of 23 million acres of wetlands and grasslands - an area the size of Indiana.
  2. In places where the loss of wetlands has been greatest, corn accounts for most of this conversion - 68%, or more than 236,000 acres.
  3. Farmers have increased nitrogen fertilizer use, which washes off fields, contributes to poor water quality, and increases water treatment costs creating low-oxygen or "dead zones."
  4. Increased fertilizer use has caused contamination of surface and ground water, which causes "hypoxia, algal blooms, eutrophication" and depletion of aquifers and streams.
  5. On a well-to-wheel basis, "producing a gallon of gasoline consumes far less water than producing a gallon of corn ethanol."

The EWG's findings are only affirmed by a report released last month by the Associated Press. The AP found that the Ethanol Mandate had destroyed millions of acres  of conservation land and increased pollution from nitrogen fertilizers by the billions. The main findings of the AP's study are outlined below:

  1. 5 million acres of conservation land - "more than Yellowstone, Everglades and Yosemite National Parks combined" - have vanished under Obama's watch.
  2. In the first year after the ethanol mandate, more than 2 million acres disappeared.
  3. Between 2005-2010, "corn farmers increased their use of nitrogen fertilizer by more than 1 billion pounds." Since 2010, nitrogen fertilizer use is projected to increase another 1-billion pounds.
  4. Increased spraying has pumped out billions of pounds of fertilizers, some of which seep into drinking water, contaminate rivers and worsen the huge dead zone in the Gulf of Mexico.
  5. Nitrates from the Midwest travel down river to the Gulf of Mexico, contributing to the "Dead Zone" that now covers more than 5,800 square miles.
  6. Studies by Texas A&M University officials found the "ethanol mandate has worsened the dead zone" each year since its inception.

The findings above show that the Ethanol Mandate of the RFS has exacerbated pollution and destruction of conservation lands. Typically environmental policy is created to protect the environment. Let Congress know the Ethanol Mandate is not working by going to www.endtheEthanolMandate.com. As long as the Ethanol Mandate remains good policy, the environment will continue to suffer.

More from Americans for Tax Reform

Top Comments

The Future of Shale Gas is Bright in the U.S.

Posted by Justin Sykes on Wednesday, January 8th, 2014, 3:18 PM PERMALINK

In a report completed last month by IHS Global titled “Oil and Natural Gas Transportation & Storage Infrastructure”, IHS found that the future of unconventional oil and gas production in the U.S. is bright. Not only did the report find that the U.S. is the world’s largest natural gas producer but that the U.S. is now the “global growth leader in crude oil production capacity."The report focused on the growth in investment in oil and gas transportation and storage infrastructure and the resulting economic impacts in terms of associated employment growth, contribution to GDP and tax revenue.

IHS estimates that in 2014 “$85-$90 billion of direct capital will be allocated toward oil and gas infrastructure” in the U.S. IHS further estimates that more than “$80 billion will be invested annually in U.S. midstream and downstream petroleum infrastructure.” While the IHS's projections are impressive, the report highlights a bourgeoning interest in the U.S. in shale gas production.

This most recent IHS report comes on the heels of another IHS study which looked specifically at shale gas production and the impact it would have on the U.S. economy over the next few decades. Specifically the development of shale gas production is projected to – create jobs, reduce consumer costs of natural gas and electricity, stimulate economic growth and bolster federal, state and local tax revenue.

Job Creation

Reduction in Consumer Costs

Economic Growth Stimulation

  • $1.9 trillion in cumulative capital investments are expected to be made between 2010 and 2035
  • Annual capital expenditures will grow to $48.1 billion in 2015
  • Shale gas contribution to the U.S. GDP was more than $76.9 billion in 2010 and will rise to $118.2 billion by 2015 before tripling to $231.1 billion in 2035

Tax Revenue

  • Over the next 25 years, the shale gas industry will generate more than $933 billion in tax revenues for local, state and the federal governments

A specific case example of the economic potential of shale gas comes from Pennsylvania and the Marcellus shale formation. The Marcellus shale is a geological formation which contains huge reserves of natural gas. “Wells in the Pennsylvania part of the Marcellus produced 895 billion cubic feet (bcf) of gas in the first half of 2012, up from 435bcf in the same period in 2011 and almost nothing as recent as 2008." The most recent estimates indicate that the Marcellus maintains over 100,000 jobs in Pennsylvania, a figure that is expected to grow to 220,000 by 2020. Shale gas production gave the local Pennsylvania economy a $14 billion boost last year and is projected to rise to $27 billion by 2020. This $14 billion boost generated nearly $3 billion in tax revenue for the State of Pennsylvania.

Along with these results in Pennsylvania, states such as Arkansas, Louisiana, Oklahoma and Texas have all had comparable results from shale gas production.  As capital investments in unconventional oil and gas production in the U.S. grow in the New Year, American consumers can expect job creation, reduced consumer costs, a burst of economic growth and increased tax revenue. 

More from Americans for Tax Reform

Top Comments