Infrastructure, Deficits and Climate Change

Posted on March 28, 2018 by Mark R. Sussman

America’s infrastructure is deteriorating as the result of insufficient investment by federal, state and local governments.  In 2017, the American Society of Civil Engineers gave our Nation’s infrastructure a grade of D+, stating that “Deteriorating infrastructure is impeding our ability to compete in the thriving global economy, and improvements are necessary to ensure our country is built for the future.” The President and both the Republicans and Democrats in Congress seem to agree that we need to improve our Nation’s infrastructure.

The problem is “how do we pay for infrastructure improvements?”  In February, the President proposed a plan to invest $1.5 trillion in infrastructure improvements, but the plan relies mostly on privatization of government-owned infrastructure, and on state and local governments, whose resources are already stretched thin.  The federal government’s share of costs would be “only” $200 billion.  Congress is unlikely to agree to a significant investment in infrastructure given the massive deficits predicted to result from the recent Republican tax cuts and the bipartisan budget plan enacted in February.  The tax changes will reportedly increase the deficit by more than $1 trillion over the next ten years, and the bipartisan budget is expected to add at least $300 billion to the deficit.

Paying for the infrastructure improvements that almost everyone seems to agree upon will require either new sources of revenues, or enormous cuts in entitlements or other domestic programs.  Although Speaker Ryan and other proponents of smaller government might want to cut Social Security, Medicare and Medicaid, how likely are they to do so, especially in light of the huge tax give-away to our wealthiest citizens in the recent tax legislation?  Moreover, if they are successful in cutting the country’s safety net, what will that do to the tremendous income inequality that the United States is already experiencing?

One solution to this dilemma may be found in legislation optimistically called “America Wins Act” (H. R. 4209) proposed by Connecticut Congressman John Larson and 20 co-sponsors in November 2017. The bill, like the Carbon Dividends Plan offered by the Climate Leadership Council in February 2017, relies on a gradually increasing carbon tax of over $40 per ton, with some amount paid back to lower income Americans.  Our colleague and frequent blogger, Seth Jaffe, described the Carbon Dividend Plan in a post last year.  The main difference between the Carbon Dividend Plan, proposed by mainstream conservative Republicans, and the plan embodied by the America Wins Act, co-sponsored by Congressional Democrats, is that the former is specifically designed to be revenue neutral, while the later proposes to invest $1.8 trillion over ten years to fund infrastructure improvements.  Of course, since the Climate Leadership Council proposed its Carbon Dividends Plan, Congress blew a huge hole in the federal budget, so a completely revenue neutral plan no longer seems practical if we are to find revenues to support the rebuilding of our infrastructure.

The key elements of the “America Wins Act” include: (i) the imposition of a gradually increasing carbon tax imposed at the first point where fossil fuels enter the economy; (ii) a border adjustment fee on imports to maintain a level playing field with US producers; (iii) establishment of an infrastructure investment fund to finance highways, transit, airports, waterway and flood protection facilities, water pollution facilities, and broadband development; (iv) an energy refund program to provide “carbon dividends” to lower income households; and (v) a fund dedicated to supporting workers and communities heavily reliant on carbon-intensive industries, such as coal, to ease the transition to a new energy future. 

Unlike the Climate Leadership Council’s Carbon Dividend Plan, Congressman Larson’s proposal does not specifically include steps to reduce energy and climate change regulation that should not be needed if a market-based carbon fee program is adopted.  Nor does the “America Wins Act” contemplate the use of carbon offsets, like those suggested by our colleague, Jeffrey Fort, in his post of August 21, 2017.  These good ideas and others can certainly be incorporated into any legislation proposing to reduce carbon emissions, while simultaneously improving our Nation’s infrastructure without further exploding the deficit.  Such legislation offers a genuine opportunity for a true bipartisan approach to these critical issues facing the Nation.  Wouldn’t it be great if the President and our representatives in Congress actually worked in a bipartisan way to enact legislation that does not look to the past, but instead addresses policies that will strengthen our Nation’s economy and protect the World’s environment in the 21st Century and beyond?   Is it too much to ask our leaders to focus on implementing innovative, market-based solutions that can be supported by both conservatives and liberals, instead of spending all of their time trying to make partisan political points to be re-elected?

Comprehensive Study of Impacts of Shale Development Released

Posted on June 28, 2017 by Kinnan Golemon

A report, Environmental and Community Impacts of Shale Development in Texas was released by The Academy of Medicine, Engineering and Science of Texas (TAMEST) to the public on June 19, 2017 (1). TAMEST is a nonprofit and brain trust for Texas composed of Texas-based members of the National Academics of Sciences, Engineering and Medicines and the state’s Nobel Laureates.  This entity was the original idea of my law school classmate and friend, Honorable Senator Kay Bailey Hutchinson, in 2004. The recently released report is the product of the TAMEST Board decision in 2015 to organize a task force charged with writing a report to “collect the best science available and summarize what we do and do not know” about environmental and community impacts that are posed by new technologies for the extraction of hydrocarbons from shale and other tight rock formations.

Texas, although oil had already been produced at various locations within its boundaries, became a dominant entity in oil and gas production on January 10, 1901, when the Lucas Gusher at the Spindletop salt dome in Jefferson County, roared to the surface: soon producing 100,000 barrels of oil per day, more than all U.S. wells combined (2). Oil and Gas production for the next 100 years was driven by “conventional” vertical well technology seeking resources from porous formations. However, commencing in the late 1980s and through the 1990s, a company founded by an affable, brilliant, tenacious and innovative son of immigrant Greek parents, George Mitchell, undertook an extended effort to access organic resources trapped in shale and very tight rock formations. After many years of limited or no success, Mitchell Energy, by century end, had demonstrated that certain hydraulic fracturing strategies [i.e. well completion techniques similar to those used since the late 1940s] (3) could be deployed in organic rich formations to produce natural gas economically.

Mitchell Energy’s acquisition by Devon Energy in 2002 resulted in another known technology, horizontal well drilling, being deployed along with hydraulic fracturing to produce the basic technological template that is utilized for shale development of oil and gas throughout the U.S., and currently being deployed elsewhere in the world today (4). The production from shale has also resulted in the largest transformation of the U.S. petrochemical industry in a generation, with $185 billion in new U.S. petrochemical projects either under construction or in planning (5).

Those interested in current and future energy policy, as well as the economic, social and environmental impacts associated with modern-day fossil fuel extraction and production, will find this authoritative, comprehensive and well-written report, see http://www.tamest.org, to be far more enlightening than one gains from other current information sources.

Interestingly, a portion of the funding for the report was provided by the Cynthia and George Mitchell Foundation, a mission-driven grantmaking foundation that seeks innovative sustainable solutions for human and environmental problems that was established prior to his death (6).

 

  1. The Academy of Medicine, Engineering and Science of Texas, 2017, Environmental and Community Impacts of Shale Development in Texas. Austin, TX: The Academy of Medicine, Engineering and Science of Texas. Doi: 10.25238/TAMEST stf.6.2017
  2. www.history.com/topics/spindletop
  3. Society of Professional Engineers (SPE) CD ROM https://www.store.com/spe.org/Legend of-Hydraulic Fracturing-P.433.aspx
  4. https://assets.kpmg.com/content/dam/kpmg/pdf/2014/03/shale-development-global-update-v2.pdf
  5. Christopher M. Mathews. “Shale Boom’s Impact in One Word: Plastics”. Wall Street Journal, June 26, 2017, A1.
  6. http://cgmf.org/p/founders.html

Energy Policy Modernization Act of 2015 Passes Senate

Posted on May 17, 2016 by Chester Babst

On April 20, 2016, the U.S. Senate passed S.2012, the Energy Policy Modernization Act of 2015, by a vote of 85-12.  If enacted, S.2012 would be the first comprehensive energy legislation since the Energy Independence and Security Act of 2007.  This bipartisan bill is intended to expand domestic energy systems, facilitate investment into critical infrastructure and improve the performance of federal agencies while protecting the environment.

S.2012 contains two notable provisions that would impact domestic oil and natural gas production and infrastructure development.  First, the Act would designate the Federal Energy Regulatory Commission (“FERC”) as the lead agency responsible for coordinating all applicable federal authorizations and National Environmental Policy Act (“NEPA”) review for proposed natural gas projects and facilities.  According to the Act, once FERC determines that an application for a project or facility is complete, all required federal authorizations must be issued within the timeframe specified by FERC, which “should” not exceed 90 days.  The provision would likely speed the federal approval of interstate pipeline and liquefied natural gas (“LNG”) projects.

Second, the Act creates a Bureau of Land Management (“BLM”) pilot program that would allow operators to lease and develop certain mineral interests owned by the federal government without a federal drilling permit.  Specifically, the pilot program would include 2,000 spacing units in which the federal government owns 25% or less of the mineral interests and none of the surface estate.  BLM would be authorized to waive the requirement that operators obtain a federal drilling permit for the spacing units if BLM determines that the mineral interests are adequately protected by the lease terms or other laws and regulations.  The proposed pilot program may lead to permanent programs that ease the restrictions on exploration and production activities affecting mineral interests in which the federal government owns only a minority share.

The White House has previously threatened to veto legislation aimed at speeding the federal authorizations necessary to construct LNG facilities and pipelines.  However, no such veto statement has been issued with respect to S.2012.  This legislation may not face opposition from the White House because it was developed after numerous listening sessions were held with stakeholders across the country and after weeks of negotiations by many senators seeking common ground for modernizing energy policy.  Senator Murkowski (R-Alaska), Chairman of the U.S. Senate Committee on Energy and Natural Resources, stated that she expects a formal conference with the U.S. House Energy and Commerce Committee to merge the Senate and House bills, but no timeline for a meeting has been established.  

California Appellate Decision Could Impact Railroad–Underground Pipeline Relationships Nationwide

Posted on March 3, 2015 by Tom Sansonetti

On January 21, 2015 the California Supreme Court declined to hear an appeal from a lower appellate court, thus leaving in place a decision with the potential to impact the longstanding relationship between the nation’s railroads and pipeline companies concerning payment for use of congressionally granted right-of-ways that date from the 19th Century.

The momentous decision in Union Pacific Railroad vs. Santa Fe Pacific Pipeline, Inc. was announced by a unanimous three judge panel from the Court of Appeal of the State of California’s Second Appellate District on November 5, 2014.  The ruling overturned a Los Angeles County trial court judge’s award of $10 million for back rent, plus interest due to the Union Pacific Railroad from the Santa Fe Pacific Pipeline Company.

The pipeline company’s successful appeal centered on narrowing the scope of what pre-1871 grants from Congress to railroad companies included.  The appellate court agreed with the pipeline company that the proverbial “bundle of sticks” of property rights granted by Congress only included uses related to “railroad purposes.”  Oil and gas pipelines buried alongside the tracks were deemed not to be a railroad purpose, as petroleum pipelines were not even conceived of at the time the grants were issued, and had no link or relationship with the daily running of a railroad.

As a result of the appellate court’s holding, the true recipient of the pipeline rental payments was declared to be the United States government as represented by the Department of the Interior’s Bureau of Land Management.  The right-of-way at issue was 2014 miles in length, touched five states and was being renewed for a period of ten years.  Since the pipeline company had been making its rental payments to the railroad for several decades, the possibility looms of the United States, who was not a party to the lawsuit, seeking retroactive application of the ruling to the millions of dollars previously paid to the United Pacific Railroad.

It is anticipated that the railroad will file a petition to grant certiorari with the United States Supreme Court by its April 21, 2015 deadline.  If the Union Pacific Railroad is unsuccessful in either getting certiorari granted or in the subsequent appeal itself, then one could envision other pipeline companies, fiber optic companies and other non-railroad oriented users of the many railroad right-of-ways across the entire country seeking to suspend and not renew rent payments to railroads with pre-1871 grants.  Consequently, the United States government could end up with an unanticipated sizeable new income stream to help fill the nation’s coffers.

SHOULDN’T WE BE WATCHING AFRICA’S ENERGY CONSUMPTION?

Posted on March 13, 2013 by Eileen Millett

We’ve all seen the head shaking over how energy conservation efforts in the United States are dwarfed by energy consumption increases in India and China.  But, what about Africa? 
 
The African continent, with close to 600 million people, 15% of the world’s population, now consumes about 3% of world energy production.  However, Africa’s energy picture is changing rapidly due to growing investment, upgraded infrastructure, and success in tackling corruption.  Africa always rich in natural resources, is expected to replace more basic energy sources with more efficient and environmentally friendly sources like oil and gas. However, huge areas in Africa — the Sudan, Uganda and even Kenya lack national electricity grid systems.  But improving infrastructure and abundant energy resources hold promise for the future. 

Most of Africa is not flicking a switch for lights, but instead is using matches to light a kerosene lamp or igniting a charcoal stove for heating or cooking.  This will continue for the foreseeable future, which means more tree-cutting for fuel, more wood burning, and thus, more harmful air emissions.  Using kerosene lanterns and charcoal stoves correlates directly with increased respiratory disease.  Unfortunately, environmental health and safety will, in the short term, take a back seat to the need to rely on fossil fuels.

Renewables?  Why shouldn’t a continent known for its hot sun be a natural for solar power?  In Africa, questions about reliability and the lack of trained personnel are being taken seriously.  So for the foreseeable future, the more likely result is that fossil fuels will increase, and renewables will take aback seat.  The developing world views energy/environment trade-offs as part of the price for advancement, particularly in nations where energy resources and infrastructure is so underdeveloped.  Opportunities are enormous, but so are the challenges and risks.  Africa’s test will be how much financing, regulation and environmental mitigation is needed to propel the continent forward. 

PENNSYLVANIA CLEAN WATER AND BROWNFIELDS INVESTMENT OF STIMULUS FUNDS

Posted on February 27, 2009 by Joseph Manko

Among the priorities under the $787.5 billion American Recovery and Reinvestment Act of 2009 is repairing, rebuilding, and constructing the nation’s water infrastructure. Approximately $6 billion will augment the EPA’s clean water and drinking water state revolving funds, of which approximately $221 million will be disbursed to the Commonwealth of Pennsylvania’s Infrastructure Investment Authority (PennVest). The governing board of PennVest is appointed by Governor Rendell, and I have been serving as its chair for the past six years.

 

PennVest administers the approximately $300 million annual allotment of Clean Water and Drinking Water funds previously supplied by EPA on a matching basis with Pennsylvania. These funds will now be augmented by the $212 million in stimulus funds. The Clean Water Fund addresses waste water infrastructure. The fund also addresses brownfields (with its protection of water quality) and storm water, whereas the Drinking Water Fund is strictly for water supply and distribution. At least 50 percent of the funding must be in the form of grants.

 

With the current emphasis on sustainability, alternative energy, greenhouse gas emission reduction and the need for more stringent control over stormwater run-off, the allocation of stimulus funds by PennVest will focus on innovative green technology, including particularly, controlling stormwater and remediating brownfields (at least 20 percent of the stimulus funding must be used for “green infrastructure”.)

 

Although the final disbursement of the economic stimulus funding will be affected by various regulations, the awarding of grants and loans will likely be on the same timetable as in the past with an emphasis on “shovel ready” projects. Funding agreements must be entered into and contracts for the full amount signed within a year.  The ultimate goal is to immediately increase the amount of jobs needed to construct the infrastructural repair, rebuilding and construction. 

PENNSYLVANIA CLEAN WATER AND BROWNFIELDS INVESTMENT OF STIMULUS FUNDS

Posted on February 27, 2009 by Joseph Manko

Among the priorities under the $787.5 billion American Recovery and Reinvestment Act of 2009 is repairing, rebuilding, and constructing the nation’s water infrastructure. Approximately $6 billion will augment the EPA’s clean water and drinking water state revolving funds, of which approximately $221 million will be disbursed to the Commonwealth of Pennsylvania’s Infrastructure Investment Authority (PennVest). The governing board of PennVest is appointed by Governor Rendell, and I have been serving as its chair for the past six years.

 

PennVest administers the approximately $300 million annual allotment of Clean Water and Drinking Water funds previously supplied by EPA on a matching basis with Pennsylvania. These funds will now be augmented by the $212 million in stimulus funds. The Clean Water Fund addresses waste water infrastructure. The fund also addresses brownfields (with its protection of water quality) and storm water, whereas the Drinking Water Fund is strictly for water supply and distribution. At least 50 percent of the funding must be in the form of grants.

 

With the current emphasis on sustainability, alternative energy, greenhouse gas emission reduction and the need for more stringent control over stormwater run-off, the allocation of stimulus funds by PennVest will focus on innovative green technology, including particularly, controlling stormwater and remediating brownfields (at least 20 percent of the stimulus funding must be used for “green infrastructure”.)

 

Although the final disbursement of the economic stimulus funding will be affected by various regulations, the awarding of grants and loans will likely be on the same timetable as in the past with an emphasis on “shovel ready” projects. Funding agreements must be entered into and contracts for the full amount signed within a year.  The ultimate goal is to immediately increase the amount of jobs needed to construct the infrastructural repair, rebuilding and construction.