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Federal EV tax credit: unnecessary, inefficient, unpopular, costly, and unfair

October 9, 2019 by Alexander Stevens 19 Comments

In April, Senator Debbie Stabenow (D-MI) introduced the Drive America Forward Act, a bill that would expand the tax credit for new plug-in electric vehicles (EVs) by allowing an additional 400,000 vehicles per manufacturer to be eligible for a credit of up to $7,000. Currently, the tax credit is worth up to$7,500 until a manufacturer sells more than 200,000 vehicles. In late September, groups that stand to benefit from the extension of the federal tax credits wrote to Senator McConnell and other leaders in Congress, encouraging them to support on the Drive America Forward Act. As IER has documented in the past, lawmakers should not extend the EV tax credit as the policy is unnecessary, inefficient, unpopular, costly, and unfair.

Unnecessary and inefficient

The EV tax credit is not necessary to support an electric vehicle market in the U.S. as one group estimates that 70 percent of EV owners would have purchased their vehicle without receiving a subsidy, which is reasonable seeing as 78 percent of credits go to households making more than $100,000 a year. Furthermore, the federal tax credit overlaps with a number of other government privileges for EVs, including:

State rebates and/or other favors (reduced registration fees, carpool-lane access, etc.) in California, as well as in 44 other states and the District of Columbia.
Tax credits for infrastructure investment, a federal program that began in 2005 and, after six extensions, expired in 2017.
Federal R&D for “sustainable transportation,” mainly to reduce battery costs, averaging almost $700 million per year.
Credit for EV sales for automakers to meet their corporate fuel economy (CAFE) obligations.
Mandates in California and a dozen other states for automakers to sell Zero-Emission Vehicles—a quota in addition to subsidies.

Even if the federal tax credits were needed to support demand for EVs, the extension of the tax credit would be an absurdly inefficient means of achieving the stated goal of the policy, which is ostensibly to lower carbon emissions. The Manhattan Institute found that electric vehicles will reduce energy-related U.S. carbon dioxide emissions by less than 1 percent by 2050.

Unpopular

Lawmakers should be aware that the vast majority of people do not support subsidizing electric vehicle purchases. The American Energy Alliance recently released the results of surveys that examine the sentiments of likely voters about tax credits for electric vehicles. The surveys were administered to 800 likely voters statewide in each of three states (ME, MI and ND). The margin of error for the results in each state is 3.5 percent.

The findings include:

Voters don’t think they should pay for other people’s car purchases. In every state, overwhelming majorities (70 percent or more) said that while electric cars might be a good choice for some, those purchases should not be paid for by other consumers.
As always, few voters (less than 1/5 in all three states) trust the federal government to make decisions about what kinds of cars should be subsidized or mandated.
Voters’ sentiments about paying for others’ electric vehicles are especially sharp when they learn that those who purchase electric vehicles are, for the most part, wealthy and/or from California.
There is almost no willingness to pay for electric vehicle car purchases. When asked how much they would be willing to pay each year to support the purchase of electric vehicles by other consumers, the most popular answer in each state (by 70 percent or more) was “nothing.”

The full details of the survey can be found here.

Costly and unfair

Most importantly, an extension of the federal EV tax credit is unfair as the policy concentrates and directs benefits to wealthy individuals that are predominantly located in one geographic area, namely California. A breakdown of each state’s share of the EV tax credit is displayed in the map below:

In 2018, over 46 percent of new electric vehicle sales were made in California alone. Given that California represents only about 12 percent of the U.S. car market, this disparity means that the other 49 states are subsidizing expensive cars for Californians. However, in order to understand the full extent of the benefits that people in California are receiving, some further explanation is in order.

When governments enact tax credit programs that favor special businesses without reducing spending, the overall impact is parallel to a direct subsidy as the costs of covering the tax liability shift to the American taxpayer or are subsumed in the national debt (future taxpayers). California offers a number of additional incentives on top of the federal tax credit for electric vehicles that are also driving demand for EVs in the state. These incentives include an additional purchase rebate of up to $7,000 through the Clean Vehicle Rebate Project, privileged access to high-occupancy vehicle lanes, and significant public spending on the infrastructure needed to support EVs. Therefore, the additional incentives that California (and other states) offer to promote EVs have broader impacts as these policies incentivize more people to make use of the federal tax credit, passing their costs on to American taxpayers. In other words, you’re not avoiding the costs of California’s EV policies by not living in California.

This problem is made even worse when we consider the impact of zero-emission vehicle (ZEV) regulations, which require manufacturers to offer for sale specific numbers of zero-emission vehicles. As recently as 2017, auto producers have been producing EVs at a loss in order to meet these standards, and they have been passing the costs on to their other consumers. This was made apparent in 2015 by Bob Lutz, the former Executive Vice President of Chrysler and former Vice-Chairman of GM, said:

“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65,000 now. Yukons are in the $70,000. The Escalade comfortably hits $100,000. Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Fiat Chrysler paid $600 million for ZEV compliance credits in 2015 (plus an unknown amount of losses on their EV sales), and sold 2.2 million vehicles, indicating Fiat Chrysler internal combustion engine (ICE) buyers paid a hidden tax of approximately $272 per vehicle to subsidize wealthy EV byers. ICE buyers were 99.3 percent of U.S. vehicle purchases in 2015. So, even if half the credits purchased were for hybrids, each EV sold in 2015 was subsidized by more than $13,000 in ZEV credit sales, in addition to all of the other federal, state, and local subsidies.

As is typical with most policies that benefit a politically privileged group, the plan to extend the federal tax credit program comes with tremendous costs, which are likely being compounded by people abusing the policy. One estimate found that the overall costs of the Drive America Forward Act would be roughly $15.7 billion over 10 years and would range from $23,000 to $33,900 for each additional EV purchase under the expanded tax credit. Seeing as the costs of monitoring and enforcing the eligibility requirements of the EV tax credit program are not zero, it should surprise no one that the program has been abused as it has recently come to light that thousands of auto buyers may have improperly claimed more than $70 million in tax credits for purchases of new plug-in EVs. Finally, additional concerns arise over the equity of the federal EV tax credit due to the fact that half of EV tax credits are claimed by corporations, not individuals.

End this charade

When the tax credit was first adopted, politicians assured us that the purpose of the program was to help launch the EV market in the U.S. and that the tax credit would remain capped at the current limit of 200,000 vehicles. At that time, we warned that once this program was in place, politicians would continue to extend the cap in order to appease the demands of manufacturers and other political constituencies that were created by the program. A decade later, we find ourselves in that exact situation. At this point, it should be clear that Congress should not expand the federal EV tax credit as the program is nothing more than an extension of special privileges to wealthy individuals and corporations that are mostly located in California. If Congress can’t find the courage to put an end to such an unfair and inefficient policy, President Trump should not hesitate to veto any legislation that extends the federal EV tax credit, as doing so would be consistent with his approach to other energy issues such as CAFE reform.

Filed Under: Blog, Electric Vehicles Tagged With: California, Debbie Stabenow, Drive America Forward Act, electric vehicles, EV tax credit, EVs, Mitch McConnell, survey, tax credit

AEA to Senate: Highway Bill is Highway Robbery

July 30, 2019 by AEA Leave a Comment

WASHINGTON DC (July 30, 2019) – Today, Thomas Pyle, President of the American Energy Alliance, issued a letter to Senate Environment and Public Works Committee Chairman John Barrasso highlighting concerns about the recently introduced America’s Transportation Infrastructure Act. Included in the legislation is an unjustified, $1 billion handout to special interests in the form of charging stations for electric vehicles. AEA maintains that provisions like this are nearly impossible to reverse in the future and create a regressive, unnecessary, and duplicative giveaway program to the wealthiest vehicle owners in the United States.

Read the text of the letter below:

Chairman Barrasso,

The Senate Committee on Environment and Public Works is scheduled to consider the reauthorization of the highway bill and the Highway Trust Fund today. At least some part of this consideration will include provisions that provide for $1 billion in federal grants for electric vehicle charging infrastructure. This is among $10 billion in new spending included in a “climate change” subtitle. All of this new spending is to be siphoned away from the Highway Trust Fund (HTF), meant to provide funding for the construction and maintenance of our nation’s roads and bridges. The HTF already consistently runs out of money, a situation that will only be exacerbated by these new spending programs.

We oppose this new federal program for EV infrastructure for a number of reasons, including, but not limited to the following:

The grant program, once established in the HTF, will never be removed. Our experience with other, non-highway spending in the trust fund (transit, bicycles, etc.) is that once it is given access to the trust fund, the access is never revoked. Our nation’s highway infrastructure already rates poorly in significant part due to the diversion of highway funds to non-highway spending.
As we have noted elsewhere, federal support for electric vehicles provides economic advantages to upper income individuals at the expense of those in middle and lower income quintiles. This grant program would exacerbate that problem.
This program will result in taxpayers in States with few electric vehicles or little desire for electric vehicles having their tax dollars redirected from the roads they actually use to subsidize electric vehicle owners in States like California and New York.
This program is duplicative. There is already a loan program within DOE that allows companies and States to get taxpayer dollars to subsidize wealthy electric vehicle owners.

For these and other reasons, we oppose the provisions that would create a regressive, unnecessary, and duplicative giveaway program to wealthy, mostly coastal electric vehicle owners. This giveaway not only redirects taxpayer money from the many States to the few, in looting the Highway Trust Fund it also leaves those many States, including Wyoming, with less money to maintain their own extensive road networks.

Sincerely,

Thomas J. Pyle

Filed Under: Press Releases Tagged With: electric vehicles, Environment and Public Works, highway trust fund, infrastructure, Senate, subsidies, transportation, transportation bill

Trump’s DOE Pick, Chris Wright, On Hydrocarbons And Human Flourishing

November 18, 2024 by AEA Leave a Comment

President-elect Donald Trump recently named Chris Wright, CEO of Liberty Energy and founder of the Bettering Human Lives Foundation, as his choice for head of the Department of Energy. Chris Wright sat down for a discussion on the role of energy production in lifting humans out of poverty with the policy team at our sister organization, the Institute for Energy Research on the Plugged In Podcast.* The full episode is available below.

Links:

Institute for Energy Research · #115: Re-release — Chris Wright on how energy lifts people out of poverty (11/18/24)

*The episode was originally released on February 6, 2019.

Filed Under: Blog, Podcast Tagged With: Chris Wright, department of energy, Dominican Republic, Donald Trump, Energy Poverty, energy production, Energy Prouction, Hati, Podcast, poverty

Biden-Harris Impose New Tax On American Oil & Gas

November 15, 2024 by AEA Leave a Comment

The Biden-Harris administration’s Environmental Protection Agency (EPA) has finalized a federal methane tax for oil and gas drilling operations, set to take effect next year. This rule is part of the broader Inflation Reduction Act, which was passed by Democrats and saw Vice President Harris casting the decisive vote. The new regulation imposes a fee on oil and gas producers who exceed a certain methane emission threshold by venting or flaring the gas rather than capturing it. While the industry would prefer to capture the methane, they are often hindered by infrastructure limitations, such as insufficient pipeline capacity. This shortage is primarily due to the challenges of securing federal permits, which forces companies to flare the methane. If the necessary permits were granted and pipelines built, this issue could be resolved, potentially preventing any increase in consumer costs.

According to the EPA, methane emissions exceeding the threshold in 2024 could trigger a federal fee of $900 per ton, with the fee rising to $1,200 per ton in 2025 and $1,500 per ton by 2026. The rule applies to oil and gas facilities reporting annual methane emissions greater than 25,000 metric tons of CO2 equivalent. Industry organizations are expected to challenge the rule, especially any attempt to impose retroactive fees.

EPA Administrator Michael Regan has stated that the new fee, formally called the Waste Emissions Charge, will complement a separate methane rule introduced earlier this year. The goal of this fee is to encourage the early adoption of technologies that can reduce methane emissions. However, industry groups and some states have contested the earlier methane regulations in court, arguing that the EPA overstepped its authority and set unattainably high standards. These challenges were rejected by the Supreme Court, which refused to block the rule while the case continues in lower courts. According to the American Petroleum Institute, the fee “hampers our ability to meet the growing energy needs of American families and businesses and fails to advance meaningful emissions reduction.” Fees incurred by the industry will be passed on to consumers, who will pay more for energy through this backdoor tax.

Many large oil and gas companies already meet or exceed methane-performance levels set by Congress under the Inflation Reduction Act, so they are unlikely to be assessed the new fee. Despite that, the Biden-Harris EPA estimates that the rule will result in cumulative emissions reductions of 1.2 million metric tons of methane (34 million metric tons of carbon dioxide equivalent) through 2035.

The incoming Trump administration will likely want to weaken or eliminate the fees as the regulation adds a burden on American families by increasing energy costs. An option for changing the methane fee regulation might be through the Congressional Review Act, which allows lawmakers to overturn a regulation or rule within 60 days of it being finalized. With the regulation repealed, the Trump administration would not be required to collect the fee. Congress could then work to repeal the law as the Inflation Reduction Act would still require specific fees and fines to be imposed on companies that emit methane above the threshold.

There may be other reasons, however, to limit methane releases. During the UN’s COP 28, more than 150 countries pledged to reduce methane pollution by at least 30% by the end of the decade. As such, the European Union, the world’s largest gas importer, established methane import standards. The Biden-Harris administration expects the United States to begin a program that would use satellite data and other tools to spot large leaks of methane and alert companies. Methane is not only emitted via operations of the oil and gas industry. It is also emitted from livestock and landfills, and a large portion occurs naturally in wetlands.

Conclusion

The Biden-Harris EPA finalized a rule that imposes a fee on oil and gas producers that exceed thresholds for venting or flaring methane rather than capturing the gas. Companies violating the new rule will start paying penalties next year based on methane emissions reported in the calendar year 2024. The tax will increase in 2026. The regulation can be overturned by the Congressional Review Act, but legislation would be required to overturn the requirement as the rule is part of the Democrat-passed Inflation Reduction Act. Oil and gas operators would prefer to sell their excess methane but are often hampered by other federal regulations that limit their ability to get the gas to market, such as pipeline availability.

*This article was adapted from content originally published by the Institute for Energy Research.

Filed Under: Blog Tagged With: energy tax, EPA, Joe Biden, Kamala Harris, methane, methane emissions, methane regulations, oil and gas development

The Unregulated Podcast #207: How Awkward Was That?

November 15, 2024 by AEA Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the priorities of Team Biden during their waning days in the White House and a few issues that remain outstanding after the election.

Links:

American Energy Alliance · #207: How Awkward Was That? (11/15/24)

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Filed Under: Podcast Tagged With: 2024 Election, California, Inflation Reduction Act, IRA, Joe Biden, Kamala Harris, Podcast

Biden Blames Birds For Backhanded Drilling Ban

November 13, 2024 by IER Leave a Comment

The Biden-Harris administration has proposed tighter restrictions on oil and gas drilling on federal land across more than 6,500 square miles in the West to supposedly protect a declining bird species—the Greater Sage Grouse—chicken-sized birds known for an elaborate mating ritual. The Biden-Harris Interior Department aims to strengthen protections for the sage grouse beyond the 2015 measures set by the Obama-Biden administration. Those earlier protections limited development across 226,000 square miles of sage grouse habitat in 11 states. The new Biden-Harris proposal seeks to close additional “loopholes” that currently allow oil and gas development in areas they deem critical for the bird’s survival. Under the new plan, energy activities would only be permitted on drilling sites located outside designated protected zones. Specifically, it would require that four million acres remain off-limits to oil and gas extraction to safeguard the sage grouse, which is hunted in seven states.

While the majority of the affected land is in Nevada and California, the proposal also impacts parcels in Wyoming, Oregon, Idaho, Colorado, Montana, and the Dakotas. Wyoming Governor Mark Gordon has expressed concerns, arguing that the plan would impose additional layers of federal regulation and limit practical solutions for managing sage grouse populations. Environmental groups, however, argue that the plan remains inadequate, as “loopholes” persist that still allow development across about 50,000 square miles of crucial sage grouse habitat. American Clean Power, a renewables industry lobbying group, said it had supported an earlier version of the proposal but not the final details because the proposal “unnecessarily restricts the development of wind, solar, battery storage and transmission, undermining the ability to deploy much needed clean energy infrastructure.” The Biden-Harris administration predicts minimal economic impacts, as energy companies stay away from sage grouse habitat where there are limits on when and where work can be done near breeding areas.

The Interior Department’s Bureau of Land Management (BLM) manages the largest single share of greater sage grouse habitat in the United States—nearly 65 million acres of 145 million total acres. According to BLM, Sagebrush is crucial for the sage grouse, providing both food and a place for reproduction, with a single local population potentially requiring up to 40 square miles of habitat to thrive. Protecting sagebrush ecosystems not only benefits the sage grouse but also supports around 350 other wildlife species, including mule deer and pygmy rabbits, according to the Bureau of Land Management (BLM). This interconnected habitat is essential for maintaining biodiversity and the health of many species. The agency received about 38,000 comments from the public on the draft environmental analysis released earlier this year and obtained information from state, local, Tribal, and federal partners during more than 100 meetings held over two years. BLM will accept protests on this proposal until December 9 at the BLM Filing a Plan Protest page, after which final decisions will be made during the Biden-Harris lame-duck session.

The situation with the sage grouse mirrors that of the spotted owl from a generation ago when the bird was used as a justification to halt logging. At the time, timber mills and local communities were hit hard by policies aimed at preserving the spotted owl’s habitat. Today, however, biologists argue that the real threat to the spotted owl isn’t habitat loss, but competition from barred owls, which now rival them for food. This shift in understanding highlights the complexity of conservation efforts and the unintended consequences they can sometimes have. The federal government now wants to shoot 450,000 Barred Owls over the next couple of decades to save the Spotted Owls.

A related proposal out of the Biden-Harris administration would block new mining projects on more than 15,625 square miles in Idaho, Montana, Nevada, Oregon, Utah, and Wyoming for 20 years, which was part of the 2015 Obama-Biden protection that was canceled under President Trump and restored by a court. The Biden-Harris administration claims to want mining for critical minerals needed for “green” technologies but continues to block, or at least delay, that mining whenever it can. The administration has revoked leases, withheld permits, and added fauna and flora to the endangered species list to block or stall mine development despite the need for the minerals and the jobs that would be obtained from their development. The Biden-Harris Interior Department intends to publish an analysis of its mining ban by the end of the year, which would continue its anti-American energy policy in favor of China, which dominates the supply chains for these elements and the processing of the minerals using cheap coal.

Conclusion

The Biden-Harris administration has decided to restrict energy development in the West in favor of protecting the greater sage grouse habitat, which will continue the administration’s anti-American energy policy. It is expected that the Trump-Vance administration will reverse this decision after inauguration day as the new administration favors an American-first policy for energy. The Trump administration reversed a similar anti-American energy policy of the Obama-Biden administration in its previous term, which a court overturned. The Biden-Harris administration predicts minimal economic impacts from its decision, which raises the issue of why government resources were spent on it. Species are often used by opponents of domestic energy production or resource extraction to justify stopping their development in the United States.

*This article was adapted from content originally published by the Institute for Energy Research.

Filed Under: Blog Tagged With: Domestic Energy Production, drilling, Joe Biden, Sage Grouse

AEA’s Statement On Finalized Biden-Harris Methane Tax

November 12, 2024 by AEA Press Office Leave a Comment

WASHINGTON DC (11/12/24) – The Biden-Harris administration is poised to finalize a new methane emissions tax for U.S. oil and gas producers today.

The tax, mandated by President Joe Biden’s 2022 Inflation Reduction Act, was originally outlined but left to the Environmental Protection Agency to finalize. The finalized rule will impose a penalty of $900 per metric ton on methane emissions that exceed a government-set threshold.

AEA President Thomas Pyle issued the following statement in response:

“Reliable and affordable energy is critical for American households, businesses, and manufacturers to thrive. Having decisively lost an election where energy policy was a key issue, the Biden administration is using its final days to impose taxes that will raise energy costs for Americans. Repealing this tax on natural gas should be a top priority for Republican leaders in the new Congress.”

AEA Experts Available For Interview On This Topic:

Additional Background Resources From AEA:

IER Submits Comments on EPA’s Proposed Methane Rule

For media inquiries please contact:

[email protected]

Filed Under: Press Releases Tagged With: energy tax, Inflation, Inflation Reduction Act, IRA, Joe Biden, Kamala Harris, methane, methane emissions, methane rule

New Mexico’s Critical Role in U.S. Energy Production: Innovation, Regulation, and Threats to Growth

November 12, 2024 by AEA Leave a Comment

New Mexico plays a vital role in American energy production, providing a substantial amount of oil and gas from a comparatively smaller population than its neighbor, the number one oil-producing state, Texas. Accounting for an astounding 13.3% of all U.S. crude oil production in 2022, and increasing to an even 14% in 2023, due to further innovation in fracking, New Mexico consistently plays a key role in American oil and gas production holding about 13% of proved crude oil reserves in the U.S. In addition to playing such an important role in the American crude oil market, New Mexico also is in the top ten gas-producing states accounting for 7% of U.S. natural gas withdrawals and proved natural gas reserves. Furthermore, New Mexico also has approximately 3% of U.S. recoverable coal reserves, although only accounts for 1% of national production.

Production and heavy regulation constantly are at odds due to the state having a predominantly left-leaning legislature while having to rely on oil and gas production for 25% – 30% of the state’s general fund. This has made industry and government relations difficult, especially compared to their neighbor Texas, where the balance between private and public influence is far more balanced. Fossil fuel production plays an important role in both the overall health of the American economy, but also, for the over 2 million residents of New Mexico, many of whom rely on fossil fuels for their energy at home, their jobs, and their communities’ well-being.

Sharing the Permian Basin

The Permian Basin is the largest producing oil field in the United States, encompassing an area 250 miles wide and 300 miles long in mostly west Texas and southeast New Mexico. Four counties in New Mexico are a part of the Permian, including Chaves, Roosevelt, Lea, and Eddy – there are 66 total counties in the Permian Basin with the remainder being located in Texas.

Of the four New Mexican counties in the Permian Basin, Lea, and Eddy account for not only the majority of production within New Mexico, but in 2023, they were responsible for 29% of all Permian Basin crude oil production in the first quarter of that year. Additionally, with 40% of total U.S. crude oil production coming from the Permian Basin, the importance of continued exploration of the region, and innovation within the industry to extract more crude oil, cannot be understated both for economic and geopolitical reasons.

San Juan Basin

Located mostly in the Northwest corner of New Mexico, with smaller parts spilling into Southwest Colorado, the San Juan Basin produces 67% of New Mexican natural gas, and, although it has been on the rise, the Basin produces a mere 5% of the state’s crude oil. Not getting nearly as much notoriety as the Permian Basin, the San Juan Basin still plays an important role in the New Mexican economy, and in the fulfillment of American energy needs. The New Mexican portion of the San Juan Basin encompasses the four counties of McKinley, Rio Arriba, San Juan, and Sandoval.

In addition to significant reserves of natural gas and some oil, the majority of New Mexico’s recoverable coal reserves are in the San Juan Basin – there are some, but not as much in the Raton Basin. Not only is the San Juan Basin the largest coal-producing region in New Mexico, but it is the only area currently actively being mined. The coal mined in the San Juan Basin remains mostly at home where it is used for power generation in the state, or, for power generation in parts of Arizona whom New Mexico shares a border with.

Revenues and Regulation

As a major producer of oil and gas, fossil fuels are a critical economic driver of the New Mexican economy for both the state’s GDP and the employment of thousands of residents. The state generates significant revenues from oil and gas in a variety of ways, including severance, a tax put on the extraction of non-renewable natural resources, gross receipts, corporate and personal income taxes, and royalties. New Mexico generally receives 4$ billion in direct revenue from the oil and gas industry, and the combination of direct and indirect revenue regularly accounts for 25% to 30% of the state’s general fund. Additionally, revenues from the production of oil and gas directly contribute to the state’s early childhood care and education funds.

Oversight of oil and gas extraction and transportation is done by both state and federal agencies and the control of the oversight depends on whether or not the land is federal, state, or private property. Any drilling and production activities on New Mexico State Trust Lands or private property are regulated primarily by the New Mexico Oil Conservation Division. In contrast, if production takes place on federal land, regulation comes primarily from the U.S. Bureau of Land Management and or the U.S. Forest Service.

New Mexico’s Energy Export Markets

Mexico’s proximity to New Mexico and Texas has helped establish it as one of America’s top export markets. For example, in 2023, Mexico received the most exported petroleum products from the U.S., such as gasoline, diesel, and propane, which is highly beneficial to both parties due to the ease and relatively low cost of transportation, and because Mexico has an outdated refinery system that cannot keep up with output demand. Furthermore, Mexico imports a significant amount of natural gas annually, primarily through pipelines, which accounted for 13% of all energy exports from the U.S. to Mexico in 2023.

However, production in New Mexico and its export market are currently under threat from multiple political campaigns. Although efforts by organizations such as Greenpeace to stop production in the Permian seem unrealistic, their campaigns should not be underestimated as they potentially present a major obstacle to growth in the region. Greenpeace’s revenue for the fiscal year 2022 was $32,508,926. The organization has a long track record of using those resources to block energy development in the U.S. and around the world. Greenpeace has placed pressure on both the U.S. and Mexico to “defuse” Permian production and has led political efforts to block energy infrastructure that is necessary to facilitate trade between the U.S. and Mexico. Eliminating the Permian Basin as an oil producer, as well as restricting the construction of pipelines to transport oil along with natural gas, would have catastrophic consequences for both the American and Mexican economies.

Conclusion

By regularly providing the second largest amount of oil to the American economy, 14% in 2023, and standing in the top 10 natural gas-producing states, New Mexico plays a significant role in American energy production. Residents of New Mexico use revenues generated from oil and gas production to fund a significant portion of the public budget and include important funds for early childcare and education. Aggressive overregulation and the prevention of production by environmental groups stand to impact not only national production but also the overall well-being of the New Mexican economy, economic relations with Mexico, and the global oil and gas market.

Filed Under: Blog Tagged With: crude oil, Mexico, natural gas, New Mexico, Permian Basin, Texas

The Unregulated Podcast #206: Mediocrely

November 12, 2024 by AEA Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss Trump’s ascendency to the White House, what his victory means for the future of American energy, and the reactions his triumph has solicited from the usual suspects.

Links:

American Energy Alliance · #206: Mediocrely (11/9/24)

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Filed Under: Podcast Tagged With: 2024 Election, Donald Trump, Podcast

Biden Takes Parting Shot At Alaska

November 8, 2024 by IER Leave a Comment

Despite Donald Trump’s victory in the 2016 election and his campaign slogan “drill, baby, drill,” the Biden-Harris administration quickly acted to limit the scope of an oil-and-gas lease sale in Alaska’s Arctic National Wildlife Refuge (ANWR), which had been mandated under Trump’s leadership. In 2017, Trump signed the Tax Cuts and Jobs Act, which required at least two lease sales in ANWR’s 1.6 million-acre coastal plain by the end of 2024. The first of these lease sales took place in 2021 under his administration. However, after taking office, the Biden-Harris team canceled these leases, citing “insufficient analysis” of the potential environmental impact of drilling.

Now, with the legal requirement to hold a second lease sale before the year’s end, the Biden administration has reduced the scope of that sale in alignment with its climate policies. The lease will go forward on a much smaller area — 400,000 acres, the minimum allowed by law — and will be subject to new environmental regulations. These changes are designed to make the lease sale less economically viable, limiting the number of bids from companies, much as the Biden administration did in its 2021 ANWR lease sale. This move provides ammunition for environmental groups, who argue that there’s little interest in resources that could rival the vast oil fields of Prudhoe Bay.

Under the new Biden-Harris plan, the lease sale would focus on tracts in the northern and western regions of the coastal plain, while excluding the eastern and southern areas, supposedly to protect the Porcupine Caribou Herd that migrates through these parts. Alaska is home to 32 caribou herds, but none are negatively impacted by oil development. Furthermore, the new plan reduces the allowed surface disturbance from 2,000 acres to just 995 acres and restricts seismic exploration to only the leased tracts — a shift from the previous plan, under which seismic exploration was permitted across the entire coastal plain, although it was never actually conducted. Seismic exploration uses sound waves to map underground structures and identify potential oil and gas reserves.

The first lease sale in 2021, which auctioned off 11 tracts covering more than 550,000 acres, generated $14.4 million in revenue. The Alaska Industrial Development and Export Authority (AIDEA), which was the largest bidder, secured 370,000 acres in the sale. AIDEA has already pledged to participate in the upcoming ANWR lease sale, with its board unanimously approving up to $20 million to prepare for potential bids. Many Alaskans and oil industry leaders continue to support drilling in the refuge, pointing to the vital revenue that taxes on oil production bring to local governments, as well as the need to ensure the continued operation of the Trans Alaska Pipeline System. The North Slope’s Inupiat Eskimo population, in particular, supports drilling due to its significant economic benefits. These communities, which face harsh winters with extended periods of sub-zero temperatures and darkness, rely on the revenue to fund infrastructure and services, including the provision of firewood, as trees do not grow in the area. However, environmental activists have pressured major banks in the U.S. and Canada to stop financing oil projects in ANWR, including the five largest U.S. banks — Chase, Citibank, Goldman Sachs, Morgan Stanley, and Wells Fargo.

“It seems that once again the people of the North Slope are being told that our voices and lived experience are insufficient and that federal laws passed by Congress mean little in the eyes of the Biden administration’s Department of the Interior (DOI),” North Slope Borough Mayor Josiah Patkotak said in a press release by the Voice of the Arctic Inupiat, a regional group advocating for oil development on the North Slope. “The federal government’s latest actions are shameful and will have serious consequences for Kaktovik and the North Slope. With this latest development, DOI has soundly rejected the opportunity to partner in our effort to aptly balance development and preservation in our region.”

According to Doreen Leavitt, tribal secretary and director of natural resources for the Inupiat Community of the Arctic Slope, “This development is a desperate Hail-Mary from a soundly defeated Biden administration that is more intent on advancing its policy agenda and ramming through flawed policies than working with Alaska Native communities to create balanced, lasting policies that advance our self-determination.”

Senator Lisa Murkowski of Alaska was the lead author of the legislative language that requires the lease sale. She fears that the Biden-Harris plan “effectively crippled and made it not viable for anybody to bid on with the conditions that they have put in place,” indicating that potential bidders may look elsewhere as President-Elect Trump opens up federal land where development is less costly. The North Slope is a challenging environment because of severe weather conditions, permafrost to depths of up to 1700 feet, and logistical challenges in an area with few roads.

The exact date of the lease sale is yet to be determined, but the law requires it must be held by December 22. The final environmental review for the sale will be followed by a final decision from the Biden administration choosing a leasing alternative–a formal document called a “record of decision” that makes the choice final. The record of the decision is to come no earlier than 30 days after the notice of the supplemental environmental impact statement, which is expected to be published in the Federal Register scheduled for Friday, November 8.

Conclusion

President-Elect Trump has vowed to boost oil drilling in ANWR, as part of a broader plan to expand fossil fuel production on public lands across the country. In the 2017 tax bill, Congress required two ANWR lease sales before the end of 2022, the first having occurred during Trump’s first term. While the Biden-Harris administration must offer one more before the end of the year, it has limited the acreage to the fewest possible and has applied other restrictions to how drilling is to be conducted. Many Alaskans are truly upset by the intrusion from the federal government to limit the ability of the local population to obtain good jobs and to provide for a better economy for Alaskans. This is consistent with Biden’s campaign promise to end fossil fuels and the 250 actions taken to make oil and gas more difficult to produce. Despite the landslide victory of President-elect Trump, who has pledged to work with the Native people to develop their rightful lands, President Biden is placing impediments to their future to please environmental activists who oppose all oil and gas development in the United States.

*This article was adapted from content originally published by the Institute for Energy Research.

Filed Under: Blog Tagged With: Alaska, ANWR, Domestic Oil Production, Joe Biden, leases

Governor Gavin Plays Blame Game For California’s Energy Nightmare

November 7, 2024 by IER Leave a Comment

California has the highest gasoline prices and one of the highest residential electricity prices in the nation due to its climate and energy policies. However, rather than own up to the real causes, California Governor Newsom is looking to camouflage the reality of his state’s policies, at least in the short term. Newsom wants to up the ethanol share in a gallon of gasoline from 10% to 15% to lower the gas price in order to compensate for future price increases from tightening the state’s low carbon fuel standard. And, Newsom has also directed his regulators “to pursue any federal funding available to help lower electricity costs for Californians.” For example, the federal government has provided the Diablo Canyon nuclear plant with $1.1 billion to keep it operating, despite the state originally wanting to close it. The plant provides the state with 9% of its electricity and is its largest source. With this guidance, taxpayers across the nation will be paying for Newsom’s climate and energy policies that include a renewable mandate, a carbon tax via a cap-and-trade system, and net metering for rooftop solar.

Policies that Affect Gasoline Prices

California is set to strengthen its low carbon fuel standard, which mandates an annual reduction in the carbon intensity of transportation fuels sold in the state. This will require refineries to blend more renewable fuels into gasoline and diesel. As a result, gas prices could rise by 8 to 10 cents per gallon, depending on the outcome of a vote on the standard scheduled for November 8. This potential price hike comes on the heels of a new California law that mandates refiners to maintain larger fuel inventories than the current two-week minimum, intending to prevent supply shortages and price fluctuations. To comply, refiners will need to make significant investments in infrastructure to store and regularly replenish this inventory, as gasoline has a limited shelf life. These regulatory changes have already led to the announced closure of a major Phillips 66 refinery in Los Angeles, which accounted for 8% of the state’s refining capacity. The shutdown will reduce fuel availability, contributing to higher prices. Additionally, California may face further supply challenges as Valero may close two more major refineries, which produce 14% of the state’s gasoline, according to Just The News.

California’s geographic isolation from the U.S. refining centers in the Gulf Coast and Midwest forces the state to either produce all its motor fuels locally or import them. This, combined with its unique environmental regulations and higher taxes, has made California home to the highest gasoline prices in the country, due to its specialized “boutique” fuel. As of November 4, the average price for gasoline in California was $4.55 per gallon—roughly 50% higher than the national average and comparable to Hawaii. One potential solution to ease the price pressure is increasing the ethanol blend from 10% to 15%, which could boost the state’s gasoline supply by 5% to 10%, thereby lowering prices.

Once a leading oil producer, California’s output has dropped by about 35% since Governor Gavin Newsom took office in January 2019, while other oil-producing states have seen increases. Newsom has also signed legislation allowing local governments to block new oil wells and has effectively halted the issuance of new drilling permits, further curbing oil production in the state.

Policies Affecting Electric Rates

According to the Energy Information Administration, California’s residential electricity prices are the second highest in the nation after Hawaii. At 32.56 cents per kilowatt hour, California’s average residential electricity price is almost double the national average of 16.62 cents per kilowatt hour. As mentioned above, California has several policies that result in higher electricity prices than in other states.

California has set ambitious renewable energy goals under its renewable portfolio standard, which mandates that 60% of the state’s electricity come from renewable sources—primarily intermittent wind and solar—by 2030. By 2045, the state aims to achieve 100% renewable energy, with interim targets of 90% by 2035 and 95% by 2040. These goals are becoming increasingly difficult to meet, particularly as the state introduces additional mandates for electric vehicles (EVs) and appliances, and even plans to replace diesel-powered trains with battery-electric ones. Starting in 2026, state regulations require that 35% of all new cars sold in California be zero-emission, with that figure rising to 100% by 2035. Achieving these ambitious targets and electrifying other sectors of the economy will demand that California nearly triple its electricity generation capacity. To do so, the state must accelerate the deployment of solar and wind energy at a rate nearly five times faster than in the past decade—despite the intermittent nature of these power sources. In addition, California has set its sights on generating 13% of its electricity by 2045 from floating offshore wind platforms, which are expected to be extremely costly, running into billions of dollars.

To help mitigate the risk of power shortages, California’s utilities have invested heavily in expensive battery storage systems. These batteries are designed to store excess energy produced by solar and wind power when supply exceeds demand and then discharge the stored energy when renewable sources are unavailable. State lawmakers have instructed utilities to add more of these costly batteries and also to provide subsidies for homeowners to install them, which is expected to raise electricity prices for consumers. Moreover, as China controls a significant portion of the global battery market, this means that an increasing share of California’s electricity grid will depend on foreign supply chains, particularly from China.

California’s “net metering” program for rooftop solar forces utility customers to subsidize the electric bills of homeowners who have solar panels, as they sell their excess electricity to the grid at retail rates, 2 to 3 times as high as wholesale rates, thereby avoiding paying for transmission and distribution services. According to the Wall Street Journal, about 10% to 20% of the electric bill of the average utility customer without rooftop solar subsidizes homeowners who can afford rooftop solar systems. The California Public Utility Commission’s Public Advocates Office estimates that net metering will cost customers without solar panels $8.5 billion this year, up from $3.4 billion in 2021. California also has “public benefit” programs to subsidize lower rates, electric appliances, and vehicles for lower-income households.

California operates a cap-and-trade program that requires its natural gas-fired power plants—responsible for 36% of the state’s electricity generation—to purchase emissions permits, which allow them to release carbon dioxide into the atmosphere. The cost of these emissions permits is passed on to consumers in the form of higher electricity rates. To help offset some of these increased costs, the California Public Utilities Commission provides customers with biannual “climate credits” on their bills, distributed in April and October. The primary goal of the cap-and-trade system is to raise energy prices, incentivizing consumers to reduce their energy consumption.

While California’s mild climate along the Pacific coast may make it easier for many residents to conserve energy without sacrificing comfort or productivity, this does not hold true for inland areas. In these regions, where temperatures can soar and incomes tend to be lower, the pressure to cut back on energy use may be much harder to manage. For residents in these areas, higher electricity prices can place a significant strain on their finances, exacerbating economic challenges.

Conclusion

California Governor Newsom’s climate and energy policies are causing its energy prices to be some of the highest in the country. And, unfortunately, he is continuing his climate programs and creating new ones that will result in even higher energy prices. Rather than admit that he wants higher prices so that Californians will use less energy, he has directed his regulators “to pursue any federal funding available to help lower electricity costs for Californians.” That is, he wants the rest of the country to subsidize his energy program, which the Biden-Harris administration is doing through the Democrat-passed Inflation Reduction Act that is costing taxpayers trillions in green subsidies. Vice President Kamala Harris broke the tie in the Senate that passed the bill and she is likely to pursue California’s energy programs and may even appoint Governor Newsom to an important Cabinet position if elected to the U.S. Presidency.

Policies that Affect Gasoline Prices

Policies Affecting Electric Rates

Conclusion

*This article was adapted from content originally published by the Institute for Energy Research.

Filed Under: Blog Tagged With: California, Energy prices, Gavin Newsom

Election 2024: Voters Become American Energy Champions

November 6, 2024 by Kenny Stein Leave a Comment

Last night’s election results sent a clear message to our elected officials – the American people want a return to economic growth driven by the affordable and reliable energy that powers every sector of our economy. In a clean sweep across the country, Americans affirmed their support for President Trump’s commitment to reversing the harmful regulations and subsidy programs that have stifled American energy production and served as obstacles to economic opportunity.

In the 2024 elections, energy policy was very much on the ballot. Throughout their campaign, the Biden-Harris administration proudly touted its aggressive energy and environmental policies as among its leading accomplishments. At the presidential and congressional levels, energy policy served as key messaging in speeches and debates. While it may sometimes be difficult to tell the two parties apart, there is a distinct divide in philosophy and priorities when it comes to energy policy. Because of the change of control in the White House and Senate, there will be a significant alteration in the direction of energy policy in the United States over the next four years.

President Trump Wins

President-elect Donald Trump won resoundingly. Despite expectations that results might take days, or even weeks, his victory was easily confirmed by early this morning. Though the final popular vote count will not be known for some time, it looks increasingly like he will take that as well. As we have seen before, a Trump administration will have a massive impact on energy and environmental policy. The Biden administration has been the most left-wing administration in history regarding energy policy. The Harris campaign quickly and rhetorically moved to the middle on many energy issues (for example, reversing her support of a ban on hydraulic fracturing and on the Green New Deal), but in reality, a Harris administration would probably have continued down the same destructive path.

Trump’s victory provides an opportunity to reverse much of the Biden administration’s executive overreach. Regulations such as those effectively mandating electric vehicles, suppressing oil and gas development on federal lands, and trying to close reliable coal and natural gas electricity generation will all be subject to review and reversal. Policy actions like participating in the Paris Agreement international climate change accord, favoring wind and solar developers, or handing out subsidies for so-called environmental justice groups should also be reversed. Because the Biden administration has gone so far with executive action without the input of Congress, there is a large body of policy change that the Trump administration will be able to modify or reverse in short order.

Senate

In the Senate, as of this writing, Republicans have added three seats (Ohio, West Virginia, and Montana) for a total of 52, with four more races still uncalled. With 52 seats, Republicans will take back control of the chamber in the 119^th Congress, but the outcomes of the remaining seats are important for energy policy in particular. Right now, the Senate majority rests on moderates like Sen. Susan Collins (R-ME) and Senator-elect John Curtis (R-UT), neither of whom is a reliable vote for good energy policy. Adding one or two more senators from the remaining races could thus make a significant difference for the chamber’s energy and environmental policy outcomes.

In the new Senate, the two central energy policy committees will likely be led by strong energy advocates Sen. Mike Lee (R-UT) chairing the Energy and Natural Resources Committee and Sen. Shelley Moore Capito (R-WV) chairing the Environment and Public Works Committee. The Senate Commerce Committee, which also has some energy-related jurisdiction, will likely be chaired by another strong energy advocate, Sen. Ted Cruz (R-TX). These new leaders will make a difference in the kinds of hearings that are held and the formation of energy legislation, as well as approving nominees for the incoming Trump administration.

Speaking of nominees, this will be another area where the margin of Republican control will make a large difference. With 52 votes, nominees are potentially held hostage to several unreliable senators. A few more seats would ensure that the Trump administration would be able to confirm the strongest energy policy nominees.

House of Representatives

Control of the House of Representatives remains outstanding, with numerous races too close to call. Even if Republicans retain control of the chamber, it will only be by a couple of seats. This narrow majority naturally limits the scope of legislative possibilities. Congressional Review Act (CRA) disapprovals of Biden administration regulations, while requiring a majority, will be more difficult because only a handful of votes will decide the outcome. Thus, the only CRA votes we can probably expect to pass are repeals of the most egregious administration overreach. The narrow majority similarly would limit the content of any potential reconciliation legislation packages, or any other legislation. Democrats used reconciliation (which allows the passage of spending legislation with simple majorities in both chambers) to force through a large percentage of their Green New Deal spending priorities. Limiting or repealing those distortions and subsidies will be more challenging, though not impossible, with a tiny majority.

Control of the chamber does matter, though, in selecting committee chairs. As those in the majority chair committees, they control what hearings are held and what investigations and oversight happen. The outcome of control does matter, even if significant legislation movement is unlikely in the next two years.

Ballot Measures

In addition to these races, two ballot measures are worth noting. In Berkeley, California, Measure GG sought to impose a special tax on all buildings 15,000 square feet or larger that use natural gas. The tax rate would rise 6% above inflation each year and expire in 2050. The ballot measure would have effectively phased out natural gas in the city; however, 68.7% of voters opposed it, defeating it.

In Washington State, Measure 2066 was on the ballot. This measure would repeal parts of the Washington Decarbonization Act that deter the use of natural gas and require local governments and utilities to provide natural gas to eligible customers. It appears to be on track to pass, as 51.2% of voters have voted in favor of it, with 62% of the vote total reported.

In recent years, natural gas bans have been a flashpoint in energy policy, highlighting the gap between the policy preferences of individuals working in the administrative state and the public. These ballot initiatives demonstrate what happens when the public has an opportunity to weigh in on natural gas bans. In each instance, voters rejected the idea that politicians and bureaucrats are more capable than individuals of determining what sort of fuel sources best suit their needs.

Conclusion

This election reflects the American people’s recognition of the vital role affordable energy plays in every aspect of our lives. As demand for energy and electricity continues to grow, it’s essential to establish a policy framework that allows energy producers to meet this need. We are eager to work with President Trump to unlock America’s full energy potential, safeguard Americans’ right to choose the vehicles that best suit their needs, and prioritize American energy, jobs, and families.

Filed Under: Blog Tagged With: 2024 Election, American Energy, CRA, Kamala Harris, President Trump