California Energy Policy: Elitist, Import-dependent, and a Tax on the Rest of Us

By Paul Driessen -- May 1, 2014

“Can we really afford to adopt California’s policies, laws and regulations in the rest of America, and then throughout the world? For that matter, how much longer can the once Golden State afford to inflict those policies on its own citizens?”

When George Washington was stricken with malaria and a throat infection in 1799, his physicians used leaches to bleed a quart of blood and remove “morbid matter” from his weakened body. Next they administered laxatives and emetics. A few hours later, Washington died.

This cure worse than the disease finds close parallels in California’s energy and environmental policy. This is the state that leaches energy from its neighbors, and that President Obama and his Environmental Protection Agency often view as their public policy standard bearer. But these energy “physicians” are threatening our nation’s lifeblood.

Governor Jerry Brown has pointed out that 30 million vehicles in California translate into “a lot of oil.” The day when its residents “can get around without using any gasoline” will be “the time for no more oil drilling,” he suggested, adding that offshore oil production has put “hundreds of millions of dollars” into Cal State University and other facilities. Onshore oil production has done likewise.

Energy Importers

That sensible message has not reached the state’s legislators, regulators or environmental activists, however. They strongly oppose any drilling or hydraulic fracturing – and leading state Democrats are campaigning hard for at least a long temporary ban, trotting out long discredited claims that fracking causes groundwater contamination and even earthquakes. To that they have added the even more ludicrous assertion that this half-century-old technology results in birth defects!

Meanwhile, California produces just 38% of its oil needs – and production is falling steadily, as the state ignores its vast onshore and offshore deposits, which are fully accessible via conventional and hydraulic fracturing technologies. Instead, the state imports 12% of its oil from Alaska and another 50% from foreign nations, especially Canada, notes Sacramento area energy consultant Tom Tanton.

Its record on electricity is even worse. California imports about 29% of its total electricity from out of state, getting it from the Palo Verde nuclear power plant in Phoenix, coal-fired generators in the Four Corners area, and hydroelectric dams in the Southwest and Pacific Northwest, Tanton says.

Another 50% of its electricity is generated using natural gas that is also brought in from sources outside California, while the state blockades its own enormous gas potential. Its gas is imported via pipelines from Canada, the Rockies and the American Southwest, to power its gas-fired turbines. Those turbines and out-of-state sources also back up its numerous unreliable, bird-killing wind turbines.

Retiring Nuclear

California has felt secure enough in its hypocrisy to prematurely retire the San Onofre nuclear power plant. Heat exchanger tubes had sprung leaks, because they rubbed against each other due to harmonic oscillation during long periods of peak power.

But instead of simply backing off its power generation to no more than 75 or 80% of peak load, activists and legislators demanded that the plant be shut down – and blamed potential earthquake risks, instead of acknowledging the real reason, Tanton explains.

All this amounts to leaching off its neighbors for 62% of California’s gasoline and 79% of its electricity, letting other states do the heavy lifting and get blamed for emitting greenhouse gases – and then asserting that anti-hydrocarbon regulations have made the state “clean and green.” It’s quite a con job.

Gasoline Woes

These foreign fuels power the state’s profitable Silicon Valley and entertainment industries – as well as the heavily subsidized electric and hybrid vehicles that wealthy drivers love for their exaggerated ecological bragging rights, $7,500 tax credits, and automatic entry into fast-moving HOV lanes.

Meanwhile, California’s poor white, black, Hispanic and other families pay $4.23 per gallon for regular gasoline, the second highest price in America. They also pay 16.2 cents per kWh for residential electricity, double that in most states, and behind only New York, New England, Alaska and Hawaii.

Now the state’s regulators want to apply their costly carbon dioxide cap-and-trade regulations to gasoline and diesel fuels. The rules have already affected large industrial facilities and driven numerous jobs out of the state.

But on January 1, 2015, they will add at least 12 cents more per gallon of gasoline, with the price escalating over the coming years. If there are insufficient “carbon allowances” – or if traders buy large quantities of allowances, and then withhold them from the market – the resultant volatility could cause price spikes of $1 or more per gallon, say experts.

From Cap-and-Trade to Carbon Tax?

One leading Democratic legislator, California State Senator Darrell Steinberg, thus wants to replace the cap-and-trade program with a carbon tax, which he claims will be more transparent and predictable. However, he still wants the price of gasoline to skyrocket. “Higher prices discourage demand,” he says. “If carbon pricing doesn’t sting, we won’t change our habits.”

One wonders what he means by “we.” Poor families will be glad to hear the government ruling elites are carefully weighing choices: hidden taxes versus transparent taxes, while ensuring that their cost of living will soar. It’s akin to offering the choice of having a finger chopped off the right hand, or the left hand.

“Carbon Intensity” Politics

California Save-the-Earth teams are also preparing tough new “low-carbon fuel standards,” requiring that transportation fuels reduce their total “carbon intensity” (CI) or “life-cycle” CO2 emissions by 10% below 2010 levels. This will be accomplished by requiring that refiners and retailers provide more corn-based ethanol, biodiesel and still essentially nonexistent cellulosic biofuel.

This time they want to let the oil companies decide which expensive “qualifying fuel” they will offer consumers. But all of them are much more expensive than even cap-tax-and-trade gasoline – which means poor families will be forced to pay still more to drive their cars and trucks. In fact, the economic forecasting firm Charles River Associates estimates that the LCFS will raise the cost of gasoline and diesel by up to 170% over the next ten years, on top of all the other price hikes.

What’s truly amazing is the smoke and mirrors and doubletalk that the state’s political classes use to calculate carbon intensity for various fuels. As the Wall Street Journal observed, because heavy crude extracted via CO2-intensive “thermally enhanced” techniques is important for jobs in inland areas, California’s Air Resources Board (CARB) arbitrarily gave this “older” oil the same CI score as Alaskan crude, even though an honest scoring system would rank the Alaskan oil four times “cleaner.”

And of course, Canadian oil sands crude gets a much lower score, since environmentalists hate that oil.

If these LCFS standards were applied nationally, Charles River concluded, they would destroy between 2.5 million and 4.5 million American jobs – on top of what Dodd-Frank, EPA and countless other federal regulations have already killed.

In fact, the official national unemployment rate is stuck at 6.7% – but the true rate (counting those who have given up looking) is closer to 9.6% — and the jobless rate is much higher for blacks and Hispanics. On top of that, measured by gross national product, our economy is growing at an abysmal 1.5% or even 1.0% annual rate. $1.8 trillion in annual regulatory costs will do that.

Joblessness

Meanwhile, California’s jobless rate is higher than in all but three other states: 8.1% – and with rates as high as 15% for blacks, Hispanics and inland communities. Commuters who cannot afford the soaring gasoline prices will have little choice but to park their cars and add hours to their daily treks, taking multiple buses to work, school and other activities. This the nation as a whole is supposed to emulate?

Even the CARB admits that the LCFS “does not result in reductions in greenhouse gas emissions on a global scale,” because the more “carbon-intense” fuels will be sold somewhere other than California anyway.

But California wants to corner the market for “advanced” biofuels like soybean diesel when EPA implements a tougher national Renewable Fuel Standard, says the Journal. (Moreover, soy diesel uses an unsustainable 14,000 to 75,000 gallons of water per million Btu of energy created, according to the Department of Energy, compared to just 6 gallons of water per million Btu for oil produced via fracking.)

Climate Alarmism: The Ultimate Rationale

Of course, all these expensive, job-destroying regulations are being concocted and imposed to prevent what Secretary of State John Kerry described as a “weapon of mass destruction” – dangerous manmade climate change.

Extensive evidence – presented convincingly in Climate Change Reconsidered and other reports by the Non-governmental International Panel on Climate Change – strongly suggests that the looming cataclysms exist only in computer models, IPCC “summaries for policy makers,” White House press releases, and pseudo-documentaries like “Years of Living Dangerously.”

Meanwhile, China, India, Brazil, Indonesia, Germany and numerous other countries are burning more coal, driving more cars and emitting vastly more carbon dioxide. So the alleged benefits to global atmospheric CO2 levels and climate change, from California clamping down on fossil fuel use and greenhouse gas emissions, are illusory or fabricated.

Human Ingenuity Still Reigns

When innovators like Harold Hamm and George Mitchell – using what Julian Simon called our “ultimate resource,” our creative intellect – launched the hydraulic fracturing revolution, Holdren, Obama and their army of like-minded arch environmentalists viciously attack the new technologies.

Citigroup’s Energy 2020: North America report may estimate that the United States, Canada and Mexico could make North America almost energy independent in six years, simply by tapping their vast recoverable oil and natural gas reserves. Citigroup, IHS Global Insights and other analysts may conclude that “fracking” technology contributed 2.1 million jobs and $285 billion to the U.S. economy in 2013, while adding $62 billion to local, state and federal treasuries – and slashing America’s oil imports from 60% of its total needs in 2005 to just 28% (and by $100 billion) in 2013.

They may conclude that, by 2035, U.S. oil and natural gas operations could inject over $5 trillion in cumulative capital expenditures into the economy, while contributing $300 billion a year to GDP and generating over $2.5 trillion in cumulative additional government revenues.

A Yale University study may calculate that the drop in natural gas prices (from $8 per thousand cubic feet or million Btu in 2008, and much more on the spot market, to $4.00 or so now) is saving businesses and families over $125 billion a year in heating, electricity, fertilizer and raw material feed stock costs.

Technically recoverable energy resources on federal-government-controlled onshore and offshore lands may total 1,194 billion barrels of oil and 2,150 trillion cubic feet of natural gas, as Institute for Energy Research analyst Daniel Simmons noted in 2013 congressional testimony. At $100 per barrel of oil and $4 per thousand cubic feet of gas, those resources may be worth $128 trillion! Developing them might be able to generate some $150 billion in bonuses, rents and royalties over the next ten years alone – plus billions more in local, state and federal tax revenues, according to the Congressional Budget Office.

The IER might conclude that making more of these areas available for exploration and production would increase America’s GDP by $127 billion annually for the next seven years, and $450 billion annually in the long term – while creating 552,000 jobs annually over the next seven years, with annual wage increases of up to $32 billion, hugely benefitting workers’ and families’ health and welfare.

Conclusion

The path to hell is paved with good intentions – and Alice in Wonderland worldviews, counter-productive policies, arrogantly dismissive attitudes about fellow human beings, and rampant hypocrisy. California, Holdren, Obama and their allies believe they are trendsetters on energy and environmental policies – and that they alone know what is best for us and the world.

Can we really afford to adopt California’s policies, laws and regulations in the rest of America, and then throughout the world? For that matter, how much longer can the once Golden State afford to inflict those policies on its own citizens?  One can only hope for reason over green religion and lower prices over higher prices in the energy state of half-salve, half-free.

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Paul Driessen is senior policy analyst for the Committee For A Constructive Tomorrow and author of Eco-Imperialism: Green power – Black death.