Subsidy Briefs, April 1, 2015

1)  Corporate happy talk 1:  Hamming it up with frack water and earthquakes

Tracking and quantifying the side-effects of particular energy fuel cycles is always challenging.  If you do it wrong, or ignore the external costs entirely, particular fuels get a free ride.  Other forms of energy, most often renewables or energy efficiency, get hurt.  Bloomberg Business has been busy filing freedom of information requests in the state of Oklahoma to map out meetings between oil industry representatives, including Harold Hamm, and state regulators and researchers examining the relationship between disposal of fracking wastewater and more earthquakes. 

The e-mails suggest a steady stream of industry pressure on scientists at the state office. But oil companies say there's nothing wrong with contact between executives and scientists. "The insinuation that there was something untoward that occurred in those meetings is both offensive and inaccurate," says Continental Resources spokeswoman Kristin Thomas. "Upon its founding, the Oklahoma Geological Survey had a solid reputation of an agency that was accessible and of service to the community and industry in Oklahoma. We hope that the agency can continue the legacy to provide this service."

2)  Corporate happy talk 2:  Too Soon to tell

Willie Soon, of Harvard-Smithsonian Center for Astrophysics, has every right to challenge climate science or any other science he wants, so long as he does so objectively and rigorously.  He's been portrayed as a lone and resolute defender of right against the supposedly "junk" science of the masses of researchers who find convincing and growing evidence that not only is our climate changing, but humans are playing a big role.

Alas, his stature began to crumble when it was discovered that nearly all of his work has been funded by fossil fuel interests; and, of particular importance, Soon had not disclosed his source of funding. 

Look, in the real world, dollars naturally chase viewpoints most likely to align with the funders -- so it is not surprising that anybody doing work that challenges climate change will attract funding from the parties with the most to lose from carbon constraints.  This is no different from how groups on the other side get funded -- though are frequently attacked for bias even though they forthrightly declare their funding sources. 

Ineed, it is Soon's lack of transparency that is most inexecusable, and that should result in discliniplinary action against him.  His lack of disclosure is far from the norm, as this review of published papers indicates. Peter Dykstra has a nice summary of the situation, and of Soon's disclaimers and defenders, in a post in the Desmogblog.

The whole thing brought back memories of this encounter with another climate change skeptic at Harvard.

3) Subsidy stacking, Georgia style

Different government agencies and different levels of government often have overlapping incentives for similar activities.  When a single person, corporation, or product can dip into multiple programs at multiple levels of government, this is called "subsidy stacking."  Many small subsidies can coalesce into an big pile of political pork.  This may induce more development or consumption of the subsidized product.  Alternatively, where federal subsidies drive overall production, the state and local largesse may end up simply directing more of that production towards specific geographic areas which little incremental boost to the market development of the subsidized activity. 

The proliferation of all-electric vehicles in Georgia may be an example of this, according to The Economist.  The state has more electric vehicles (total, not per capita) than any other state but California. The magazine notes that "..savvy Georgians are driving all the way to the bank in nearly-free electric cars.  Nissan sells more of its Leaf models in Atlanta than in any other city..."

Maybe it's just part of a broader strategy by the state to boost demand for the too-cheap-to meter nuclear-fueled electricity from the under-construction Vogtle reactors that will someday grace Georgia's electric grid.  That project, Vogtle 3 and 4, is now estimated to cost $17 billion to build. 

Oh, and for fun -- and to provide a bit more of a feel for just how much money $17 billion really is -- here is a sampling of but a few of the companies you could buy at today's market capitalization for less than the cost of Vogtle's two new reactors:  Continentental Resources, Ryanair, Alcoa, Whirlpool, ConAgra Foods, Nordstrom, Dr. Pepper Snapple Group, First Energy Corp, Wynn Resources, Harley-Davidson, Burger King Worldwide, Japan Airlines, and Ralph Lauren.

Maybe those electric cars won't be so cheap to refuel in Georgia after all...

4)  Corporate happy talk 3:  Arctic drilling needed now because fracking won't last

The National Petroleum Council, an advisory body to the US Secretary of Energy that is comprised primarily of energy company representatives, reached the highly surprising conclusion that that

To remain globally competitive and to be positioned to provide global leadership and influence in the Arctic, the U.S. should facilitate exploration in the offshore Alaskan Arctic now.

Who could have guessed?  The study was requested by Secretary of Energy Ernest Moniz.

In related news:

• Arctic drilling moving ahead.  The Obama administration approved drilling in Arctic waters and Shell prepares to resume drilling.
• Regulations might be tightened.  Regulatory proposals that would make requirements for drilling in the region by US-licensed firms somewhat more stringent have been proposed; chance of passage is not known.
• Subsidies to Arctic oil operations remain poorly characterized; receive support from surprising quarters.  The Center for America Progress advocates socializing one of the key infrastructure costs of Arctic drilling -- an ice breaker fleet.  They list a litany of reasons and justifications (including a graphic showing that Russia already has far more ice breakers than we do), but the bottom line is that any cost to police, manage, or oversee Arctic drilling operations needs to be paid by the beneficiary companies and not by taxpayers.  And regulations aside, liability and insurance requirements for operators in difficult and environmentally-sensitive regions need to be cranked way up.  If making these firms fiscally responsible for the costs and risks of their operations happens to slow development, boost the sophistication of operators able to succeed, or increase the breakeven on development, isn't that what markets are supposed to do?  CAP is on the wrong side of this one.  Rather than advocating for subsidizing ice breaking to Arctic oil operations, maybe we ought to be filing trade cases against other countries that are providing subsidized ice breaking services to their own domestic natural resource champions. 

5)  French model of nuclear not looking so good

Large losses and a continued bleak market prospect is leading France's energy minister to push for a broad overhaul and restructuring of state-controlled nuclear firms.  Areva, in particular, was reporting losses in excess of its market value, "suggesting that the troubled company, plagued by cost overruns and write-downs, may need new funds to continue operating." Translation?  "Give us more state subsidies."

Of course, the problems with the French model of nuclear development aren't really that new.  They just keep taking slightly different forms.