We previously wrote about the fact that Connecticut closed out 2012 with the dubious distinction of having the highest average electricity price in the continental United States. These high prices were driven, in part, by a 2011 electricity production tax that was imposed as a temporary, two-year budget gap solution by Governor Dan Malloy, with the promise that it would sunset in 2013.
Unfortunately, Governor Malloy’s 2013 budget proposal reinstated this tax, understandably angering local officials. Since that time, the Connecticut General Assembly’s budget writing committees proposed to eliminate the 2011 electric generator tax, consistent with Governor Malloy’s 2011 promise. However, there now appears to be a “compromise” between the legislature’s proposal and the Governor’s request to bring the tax back, albeit at a lower rate.
First of all, any tax at all represents a broken promise, which could have implications for the Governor. Of more importance to us, however, it will also have implications to the entire New England electricity market.
Because New England’s electricity market is shared, an electricity production tax will result in higher rates for every other state. In fact, the New England ISO, the grid operator which administers that market, estimated that the Connecticut generator tax would cost customers $58 million. Therefore, the Attorney Generals of Rhode Island and Massachusetts have weighed in to urge Connecticut to not punish them for their own budget problems. The New England Council, a non-partisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England, has also weighed in. Legislation has even been introduced in the Massachusetts House that would prohibit the Commonwealth from purchasing energy on a joint basis with Connecticut.
Even at a reduced rate, the “compromise” tax will still cost consumer millions of dollars. Connecticut should think twice about using the electricity production its citizens need to live and work as a cash cow to pay for unrelated spending.
North Dakota, Texas, and Pennsylvania have been darlings of the shale boom. By using hydraulic fracturing, oil and natural gas development in these states have created jobs and generated economic growth. Other states see this and are deciding if they should embrace the energy abundance beneath them.
California is an interesting case. Josie Garthwaite for National Geographic points out that the Monterey formation running beneath the state “holds more than half of the undeveloped, technically recoverable shale oil resources believed to exist in the continental United States.” It's more than North Dakota’s Bakken formation and Texas’ Eagle Ford Shale combined. In March, Governor Jerry Brown said, “The fossil fuel deposits in California are incredible, the potential is extraordinary.”
Garthwaite describes the geologic area:
Spanning some 1,750 square miles of central and southern California, the Monterey formation is a jumble of rocks broken, fractured, wrinkled, and folded by tectonic shifts over millions of years. Trapped between and within these rocks are the remnants of ancient marine life: organic matter from the Miocene epoch, rendered into oil through heat and pressure.
Hydraulic fracturing has been used in California for decades and could be well suited for reaching pockets of oil and natural gas in the Monterey formation. The economic potential is tremendous as Politico reported:
A recent study by the University of Southern California and the Los Angeles think tank Communications Institute concluded that developing the Monterey Shale could create 500,000 jobs in the next two years and 2.8 million by 2020. The development could net California $4.5 billion in tax revenue over the next two years and $24.6 billion by 2020.
However, the California State Legislature is thinking about blocking hydraulic fracturing. Garthwaite writes:
[A]t least seven bills to rein in fracking have been introduced in the state legislature. Three bills that advanced in the assembly in recent weeks would place a moratorium on hydraulic fracturing pending study of its environmental and health effects. A state senate bill would allow fracking to continue for now but would clamp down unless a comprehensive review is conducted by the end of next year.
The Los Angeles Times backs these efforts and calls for a moratorium on fracturing until more studies are done. These unnecessary studies of a process that's been widely and safely used for decades would only hold off the economic opportunity awaiting the state.
The Washington Times reports that Illinois is taking a different path. It’s about to take the shale energy plunge:
The state House could vote as early as this week on legislation to regulate the drilling process that is also being hotly debated in New York, California and elsewhere. A key House committee unanimously approved the bill earlier this month, and the state Senate also appears ready to clear it.
Gov. Pat Quinn, a Democrat, has indicated he’ll sign the measure. He’s the latest high-profile governor in his party to embrace fracking, taking a page from the playbook of former Pennsylvania Gov. Edward G. Rendell, Colorado Gov. John Hickenlooper and others.
After seeing what’s happening in Texas you can't blame Illinois for moving ahead. The Dallas Federal Reserve bank published a chart in 2012 showing the employment and wage increases in counties where development has been taking place since the Eagle Ford Shale was discovered in South Texas in 2008.
Also in West Texas there's Midland, which sits on top of the Permian Basin. American Enterprise Institute’s Mark Perry points out that the area has only 3% unemployment, the lowest in the nation, because of shale energy development. The Dallas Federal Reserve bank sees increased energy production as one reason for the state’s soaring confidence.
Illinois could use a jolt to its economy. It ranks near the bottom in job and economic growth according to the U.S. Chamber of Commerce Foundation’s 2013 Enterprising States study. The study also shows that California could use a boost to its long-term job growth prospects.
California should look at what’s happening in other states and look at what Illinois is about to do before putting up barriers to energy development.
Trade supports jobs. It’s not just a slogan and the name of an info-packed website; it’s a fact. In the case of coal, a new study by accounting firm Ernst and Young found that exports support tens of thousands of jobs and contribute billions of dollars to the economy.
The report prepared for the National Mining Association found that in 2011 (the most-recent year with complete data available) 18% (25,130) of the jobs in the American coal mining industry were supported by coal exports. Coal exports produced $2.6 billion in labor income and $5.4 billion in economic activity.
The report looks beyond the coal industry. By broadening the analysis to economic activity "generated by purchases from domestic suppliers" and spending from employees in the coal, transportation, exports, and supplier industries, Ernst and Young found that coal exports “contributed 141,270 total direct, indirect, and induced jobs to the U.S. economy” and $16.6 billion to the economy in 2011.
Other highlights from the study include:
Given this evidence of the economic benefits of selling coal to foreign markets, what do opponents of new export facilities in the Pacific Northwest do? They asked the Army Corps of Engineers to combine a number of environmental studies being done on proposed export facilities and broaden their scope to include possible environmental effects in neighboring states and wherever exported coal would be sold—the entire planet. It's a stall tactic. Chip Yost at Shopfloor put it well, “Their message was clear, we don’t want you to do anything that involves fossil fuels.”
Opponents continue to allow their anti-energy ideology to get in the way of the facts. Coal exports support tens of thousands of jobs and add considerable value to the economy. We should embrace our energy abundance, not stop ourselves from using it wisely.
Tomorrow, the House of Representatives is expected to vote on a bill to approve construction of the Keystone XL pipeline. Like previous bills, it’s likely to pass with bipartisan support, and like previous bills, the President threatens to veto it if it reaches his desk.
In a key vote letter to House Members, Bruce Josten, the U.S. Chamber’s Executive Vice President for Government Affairs, reminds House Members that:
The Keystone XL permit request has been under consideration by the Administration since 2008. The proposal has undergone considerable examination and a thorough and lengthy environmental review. The Chamber has long been on record in support of this project because it produces good, high paying jobs, increases supplies of Canadian and American crude to refiners, and therefore further bolsters American economic and energy security.
However, opponents of the pipeline aren't giving up. In Politico, Representatives John Conyers (D-MI) and Lennox Yearwood, Jr. think it’s “common sense for the president to prevent this pipeline from being built.” Let me refute one of their arguments.
The Congressmen claim that only a few dozen jobs will be created by the pipeline. However, they ignore the State Department’s economic analysis [page 13, emphasis mine]:
Including direct, indirect, and induced effects, the proposed Project would potentially support approximately 42,100 average annual jobs across the United States over a 1-to 2-year construction period.
And yet they accuse pipeline proponents of peddling “willful misinformation.”
For an idea of what some of Keystone XL's economic benefits will be, watch the video above on how construction of the Gulf Coast leg of the pipeline is helping the Cushing, OK community.
Like I said, there’s bipartisan support for Keystone XL. With a supermajority, the Senate backed construction of the pipeline in March. In addition, labor unions, small businesses, and the general public approve the pipeline. [H/t Energy Tomorrow]
The vote in the House will again show the wide-ranging support for a project that will create jobs and improve America’s energy security.
“One word: plastics.”
Mr. McGuire from The Graduate might be on to something again. Because of America’s natural gas boom, plastics and chemical companies plan to build new plants and create new jobs.
A report from the American Chemistry Council (ACC) looked at 97 proposed chemical and plastics projects that will use natural gas as an input and calculated their economic benefits. By 2020, these investments valued at $71.7 billion are expected to offer some impressive results.
Here are four important numbers:
We know natural gas produced from shale has been an impressive job-creator in the energy industry in Pennsylvania, Ohio, and elsewhere. Last year, Moody’s Analytics determined that since 2002, the oil and gas boom created more than 1 million jobs.
From this report, we see the downstream benefits will also be substantial.
The U.S. Chamber's Institute for 21st Century Energy has been studying the positive economic effects of shale energy and released a series of studies. The first focuses on the benefits just from the energy industry. The second looks at the positive impacts on individual states--check out the interactive map. The final installment, coming later this year, will look at the entire economic impact of shale energy, including effects on the manufacturing and chemical sectors.