The Case Against Energy Subsidies in Florida

State Rep. Scott Plankton

State Representative Scott Plankton and Agricultural Commissioner Adam Putnam have been pushing for government subsidies to grow Florida’s economy. According to James M. Taylor, J.D., from Florida Political Press, reports, “Digital Domain Media Group Inc. closed its taxpayer-subsidized film studio Tuesday and filed for bankruptcy protection, just a few short months after State Rep. Scott Plakon (R-Longwood) told skeptical Tea Party leaders that the Florida film industry provides a sterling example of why government officials should hand over taxpayer dollars to politically connected renewable energy companies.”

According to Taylor, “Between 2009 and 2012, Florida’s Republican-dominated legislature and various local governments handed over $135 million in taxpayer subsidies to Digital Domain. Those subsidies included prime real estate and a lavish headquarters building in addition to direct cash payments.

“$135 Million Wasted,” notes Taylor.

“In an April conversation with Tea Party leaders unhappy about legislation giving renewable energy companies $100 million in taxpayer subsidies, Plakon said state subsidies for film companies such as Digital Domain demonstrate why it is good for government to generously subsidize politically connected companies and industries,” writes Taylor.

Another effort to use government money to subsidize energy in Florida is the Energy Economic Zone (EEZ). There are two EEZ pilot projects currently underway, one in Sarasota County and another in the City of Miami, Florida.

Why an Energy Economic Zone, why now and for what purpose?

Dennis Cauchon, writer for USA Today, in his column “Household electricity bills skyrocket” points out, “Electricity is consuming a greater share of Americans’ after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated, a USA TODAY analysis of Bureau of Economic Analysis data found. Greater electricity use at home and higher prices per kilowatt hour are both driving the higher costs, in roughly equal measure. . .”

It makes sense for households, businesses and government to find ways to save on their electric bills. But is the creation of a government subsidized EEZ the way to do that?

One of the driving forces behind the creation of an EEZ in Sarasota County is the building of a methane power plant at the county landfill. According to Gary Bennett from Sarasota County, “County staff will be recommending that a private developer be allowed to design/build/operate a landfill gas to energy facility at the Central County Landfill in Nokomis. Staff believes the project is feasible. The estimated cost would be roughly $5-6 million dollars for a 3.2 megawatt facility based on cost estimates we have seen. Permitting is extensive. Includes both state and local. [The] Developer would pay the cost. Power would be fed to the power grid so no back up needed. This project once approved takes roughly 18 months to permit and complete.”

County staff was asked if a feasibility study was conducted.

According to Gary Bennett, “We did look at costs if the County would build a facility but it was looked at in a very simplistic manner. It was not feasible for the County when the price of renewable energy that would be paid the County dropped from about 7 cents a kilowatt hour to around 5 cents a kilowatt hour. Since this would be a developer driven project with all the financial risk on the developer, they will determine whether the project is feasible. The County would be looking for the developer to pay the County revenue for the landfill gas supplied to their facility.” Floridians currently pay 11.44 cents per kilowatt hour.

The two developers involved in the pilot EEZ are Hugh Culverhouse and Henry Rodriguez.

There is a key problem. EPA studies show a landfill must have trash rates over 1 million cubic feet/year minimum to produce enough methane for a plant. Sarasota County falls well below this level of trash rate per year. What will determine whether a generation unit can be successful are the percent of methane (usually 35-50 %) and the cubic feet per minute for each well. As the methane is collected it is sent thru scrubbers to clean and purify the gas prior to burning it to produce steam for a turbine or used in modified vehicles like buses or trash trucks as fuel. If not enough is available at a high enough concentration or pressure it is unlikely that Sarasota County landfill is a good candidate. Additionally, being a public/private utility it could be tax exempt and thus its inclusion in the EEZ is not needed.

The EEZ pilot projects are the first step in a process to create energy subsidies in all 67 of Florida’s counties and many cities for an questionable return on the taxpayers investment. After all saving energy is in everyone’s best interest. Do Floridians really need government stepping in to help?

Will the EEZ become Florida’s version of Solyndra?

Danger: Energy Economic Zone Ahead

Government is famous for wasting time and money all at the expense of taxpayers. The greatest waste has been attributed to the “green movement” and its efforts to save the planet by controlling human activities, such as emissions of CO2. This political and uniquely unscientific movement has led the Florida legislature to create comprehensive planning legislation, implement caps on carbon emissions and most recently create an Energy Economic Zone (EEZ) pilot project.

Sarasota County has established by ordinance an Energy Economic Zone. The first public hearings on the EEZ pilot project in Sarasota County are being held in September. Citizens and business will learn what the EEZ is all about. But what is end purpose of an EEZ? What will be accomplished by establishing an EEZ in Sarasota County?

My answer: The greatest expansion of local government power over your and my pursuit of happiness.

Here are ten reasons why I believe the Sarasota County EEZ will fail:

1. Any governmental expansion of power always meets with stiff public resistance and the EEZ is meeting stiff resistance. The EEZ has been denounced with bi-partisan support in Sarasota County. Neighborhood associations, anti-growth proponents and Democrats are standing shoulder to shoulder with TEA Party groups, 912 Project members and the Republican Party of Sarasota Executive Committee to denounce this project and its attempt to control the lives of citizens.

2. Economic zones do not work. County Commissioner Nora Patterson in an e-mail to an opponent of the EEZ states, “Our existing enterprise zone [in Newtown] is truly a depressed area and I can tell you in advance that the overall situation has not improved, in fact quite the opposite given the economic downturn.” So Commissioners know that enterprise zones do not work from the Newtown failure. Why throw good money after bad? Because it feels good to do so. The EEZ is being driven by ideology, not by any proven method to create jobs or expand the economy in Florida.

3. One of the purposes of the EEZ is to create energy efficiencies and thereby reduce energy usage. This is a FALSE premise as greater efficiency leads inextricably to greater energy usage. This phenomenon is called the “rebound effect”. Increasing the efficiency of lighting encourages us to illuminate more. This means that we need more energy, not less to meet future demand, expected to increase by 30% over the next decade. The EEZ concept is a fallacy, even if the five sitting County Commissioners believe in this fallacy, it is still a fallacy.

4. The incentives provided in the ordinance as currently written are not defined. This makes the ordinance open to broad interpretation by staff in its implementation. We have experienced what happens when bureaucrats are given the leeway to implement policy in Florida. This has happened with numeric water standards being imposed on the state by the Environmental Protection Agency. Placing Draconian standards on water quality to save us from ourselves. Standards that cannot be met!

5. The incentives are front loaded without regard to clearly defined end results. Under the current proposed ordinance businesses would be awarded incentive grants in addition to tax abatements for job creation. The business would promise to create new “green jobs”. This is a failed model, see reason #2 above. You and I do not pay a business until the job is done. In this case County government is so trusting that they will pay upfront for a promise of future job creation. The County has tried this recently with Sanborn studios. Sanborn Studios closed its Lakewood Ranch facility in December 2011 after just one year in operation. The company that promised to produce Hollywood movies, TV shows and create more than 100 jobs in Sarasota got a $650,000 grant from Sarasota County. It is good to learn from experience right?

6. The EEZ is “crony capitalism” writ large. Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth. The proposed ordinance establishing an EEZ is the ultimate example of crony capitalism. Government picks the winners and losers, not the free markets. This always leads to corruption and political favoritism.

7. Government does not create jobs! The great myth is that government can via incentives create something from nothing. Jobs are created only when a business cannot meet the market demand for its products or services. That is an economic fact. What can government do to help create a market for a product or service? Nothing, absolutely nothing. What government can do best is to do the least. That is to say government is best that governs least. Protecting property rights is the role of government.

8. All of the County Commissioners are Republicans dedicated to limited government and the U.S. Constitution. The Republican Party of Sarasota Executive Committee passed a resolution condemning “local ‘sustainable development’ policies such as Smart Growth, Wildlands Project, Resilient Cities, Regional Visioning Projects, and other ‘Green’ or ‘Alternative’ projects.” The EEZ falls squarely into all of these categories! A copy of the full resolution was presented to each Commissioner.

9. The County’s attempt to establish an EEZ has led to at least one law suit. According to Kathy Attunes, “The EEZ and attached Enterprise Zone incentives are separate statutes. It can be argued that the Enterprise Zone statutes exist independently of the EEZ statute (377.809), and these state Enterprise Zone statutes apply independent of any local eligibility requirements and a $300,000 cap. The EEZ green standards and $300,000 cap are not outlined in the Enterprise Zone statutes; the statutes do not mirror each other. We are concerned that the EEZ statute and linked Enterprise Zone incentives are in conflict, which potentially sets the County up for litigation brought by businesses who have met Enterprise Zone criteria but not County EEZ standards. We do not want the BCC to proceed with a program that opens the door to a flood of untargeted Enterprise Zone tax breaks, and the possibility of having local control negated by state statute.” I agree more litigation will follow.

10. Finally, this is just bad public policy and a waste of taxpayer money.

There are many other reasons why the EEZ is bad policy for Sarasota County but in the interest of brevity I have listed only my top ten.

I do not need nor want government telling me how to save energy. I am perfectly able doing that on my own. If I wish to waste energy then I will pay an economic price for that behavior. That is how personal freedom and free markets work. Government forcing choices upon me is morally wrong. The EEZ is morally wrong!

Higher Gas Prices Add to Economic Slump

Courtesy of the Heritage Foundation:

Unemployment is at 8.3 percent. The economy is sputtering at 1.5 percent growth. Food prices are rising due to drought conditions across the country. And gas prices are up again, pinching Americans’ summer budgets. It is past time for the President and Congress to pursue smart policies that would put us on a path to relief.

According to AAA’s Fuel Gauge Report, the current national average for regular is $3.66 per gallon. That’s up 28 cents per gallon from a month ago, and July had its biggest price jump since AAA started tracking prices in 2000. To see the average for Florida click here.

There are many factors affecting prices that we cannot control—worldwide tensions, especially in the Middle East, can drive up oil prices. Global demand, especially from China and India’s rapidly growing economies, continues upward.

But after three years of adding regulatory hurdles and blocking exploratory access and development, President Obama’s policies are helping keep prices higher than necessary.

If the President truly wanted to lower gas prices, he would work to increase supply. But when given the opportunity, he has done the opposite. He turned down the Keystone XL pipeline, which would bring up to 830,000 barrels of oil per day from Canada. His Administration has made it even harder for companies to explore and extract domestic energy resources by canceling, delaying, or withdrawing a number of lease sales for exploration and development. Meanwhile, huge swaths of federal lands have been put off limits for energy exploration.

Domestic refinery outages have had a recent impact on gas prices. Two of the factors holding back domestic energy production are regulatory red tape and litigation—and these, we can do something about. As Heritage’s Nicolas Loris notes:

Environmental activists delay new energy projects by filing endless administrative appeals and lawsuits. Creating a manageable time frame for permitting and for groups or individuals to contest energy plans would keep potentially cost-effective ventures from being tied up for years in litigation while allowing the public and interested parties to voice opposition or support for these projects.

We don’t have to stand still. Congress could alleviate the energy crunch in 10 different ways by taking action on things we can control, like restrictions on oil shale development and offshore drilling.

One of the most common objections is that increasing domestic oil production takes too long and would not impact the market for at least a decade. The longer people make this argument, however, the longer it will take. The sooner we make investments in domestic energy, the sooner those benefits will be realized. And with some serious reforms, some of this oil can reach the market in much less than a decade.

Gas prices aren’t under the control of any one President. But Americans shouldn’t settle for policies that restrict oil exploration, refining, and production and artificially drive prices higher.

MORE FROM THE HERITAGE FOUNDATION:

High Gas Prices: Obama’s Half-Truths vs. Reality

President Obama’s 10 Worst Energy Policies

Republicans and Democrats Alike Want Higher Food, Fuel and Energy Prices

Gallup Politics recently did an Environmental poll (see the below chart). The results shows that a majority of Republicans and super majority of Democrats favor actions that will lead to higher food, fuel and energy prices. While there are more Republicans that favor opening public lands to exploration and drilling the end results of their support for policies like increasing regulations to reduce “emissions and pollution standards for businesses” means higher costs for all consumers.

Americans polled may not understand the difference between “emissions” and “pollution”.

Emissions/greenhouse gasses, e.g. CO2, primarily occur due to water evaporation from the earth’s oceans and seas. When 50% of Republicans want government to “impose mandatory controls on carbon dioxide emissions” many consumers wonder if they understand that we cannot control water evaporation from happening. The EPA recently issued a CO2 emissions ruling that impacts all of U.S. coal fired plants and will cause many to shut down because they cannot meet the new standards. This will drive up energy costs and thereby food costs.

Government spending on solar and wind power has been a disaster with many of the companies failing to produce a cost effective product, moving their operations to China or going bankrupt. All of these companies are a further drain on our economy because they are not producing cheap and reliable power, they are producing just the opposite, which drives up energy costs and thereby food costs.

While Republicans generally favor opening public lands to oil, natural gas and oil shale exploration and production, nearly half want stronger enforcement of environmental regulations and higher emission standards for automobiles. One negates the other.

The environmentalists are licking their lips at these numbers.

The pollster’s state:

Gallup has tracked seven of the eight proposals periodically since 2001. Support for all but nuclear energy has declined since last measured in 2007, with the largest drops seen for spending government money to develop alternative sources of fuel for automobiles, strengthening enforcement of environmental regulations, and setting higher auto emissions standards.

These declines could be due to Americans’ reduced priority in the last several years for preserving the environment at the expense of economic growth, an outgrowth of the economic downturn. However, they are also likely to stem from heightened public concern about government spending and regulations specifically, particularly among Republicans.

Some do not find these numbers low enough to keep Republicans, in an election year, from stopping the power grab by the EPA. If this is a campaign issue then the consumer loses. As food, fuel and energy prices rise so will inflation. The column “Our Bubble Government” notes that inflation will burst both the dollar and debt bubbles. The higher the cost of goods and borrowing the more likely the current recession will last or deepen.

From this Gallup Environment poll some see trouble brewing on the horizon and its name is – inflation.

RELATED COLUMNS:

Global Warnings Reckless Rhetoric

Overthrowing Environmentalism

Obama’s Eco Lies

The Fallacy of Energy Efficiency

Across the world there is a concerted effort to reduce the use of energy via efficiency. This has grown into a political ideology dedicated to saving the planet by reducing each of our carbon footprints. For example, governments mandate CAFÉ standards to increase fuel efficiency. But what have been the actual results of these efforts?

Today we build engines that propel our aircraft, ships, trains and cars using much less fuel. However, to the chagrin of many who want to save the planet, as efficiency has increased so has the demand for more energy, particularly fossil fuels.

For example in Florida the state legislature has gone so far as to create a pilot program to create two Energy Economic Zones, one in the City of Miami and the other in Sarasota County, Florida. But to what avail? History tells us as we create greater efficiencies we then consume even more. But why does this happen?

In 2003 the Norwegian Institute for Consumer Research did a study titled The Fallacies of Energy Efficiency: The Rebound Effect? The study reports, “It has been observed that energy efficiency measures result in less than expected energy savings. This is usually ascribed to the so-called rebound effect . . . If you buy an appliance that is twice as efficient as your old one, the effective price of fuel is reduced to a half. As long as the elasticity of energy demand with respect to energy price is not zero, as would be quite unreasonable, there will be a pressure on energy demand.”

Remember: The elasticity of energy demand will never be zero.

In his Wall Street Journal column It’s Too Easy Being Green, David Owen laments, “A favorite trick of people who consider themselves friends of the environment is reframing luxury consumption preferences as gifts to humanity . . . Our capacity for self-deception can be breathtaking.”

Owen, as an environmentalist, notes, “Even when we act with what we believe to be the best intentions, our efforts are often at cross-purposes with our goals. Increasing the efficiency of lighting encourages us to illuminate more.” David is describing the Rebound Effect.
Efficiency is good. Efficiency makes available more goods and services to more people. As more people can afford an automobile because of manufacturing efficiencies the better for us all. That is what David realizes as he concludes his column. David states, “Relieving traffic congestion reduces the appeal of public transportation and fuels the growth of suburban sprawl. A robust market for ethanol exacerbates global hunger by diverting cropland from the production of food.”

Energy efficiencies lead to greater energy demand. Concepts like Economic Energy Zones, locavorism (only eating food that is produced locally), sustainable communities, electric cars, high speed rail, public transportation, green buildings, CAFÉ standards and alternative fuels are “breathtaking self-deceptions”.

As mankind finds better and cheaper ways to make things and provide services the broader will be the market as consumers like saving a buck. That is what drives us all. Getting more for less and as we can do we do more for less.

Man works in his own self-interests. That is called individualism. That will never change.

As Ronald Reagan once said, “Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, prosperous, progressive and free.”

Attached file:

Fallacy of Energy Efficiency