Archive for the ‘Development’ Category

GAO Grapples With Climate Change’s Impact on Infrastructure

Photo by Wikimedia Commons

Photo by Wikimedia Commons

While the extractive industries and their political handmaidens continue to press the notion that climate change is nothing but a hoax, the actual scientific evidence that it is real continues to mount as inexorably as arctic ice melts and temperatures rise around the globe. Those greedy scientists who invented The Great Climate Change Hoax to get rich off grant money are now telling us that even the ice on Mount Everest which provides a water basin for more 1.5 billion people is melting.

As the “controversy” grinds on, the General Accounting Office and the National Research Council are not sitting idly by, waiting for the last skeptic to be won over. According to a newly released GAO report,  the U.S. already spends billions of dollars every year on infrastructure, but much of that infrastructure, such as roads and bridges, wastewater systems, even NASA centers are vulnerable to climate change. By way of example, the GAO points out that within 15 years segments of Louisiana State Highway 1—providing the only road access to a port servicing 18 percent of the nation’s oil supply – will be inundated by tides an average of 30 times annually due to sea level rise, effectively the port.

The report criticizes national and state decision makers for failing to systematically consider climate change in infrastructure planning. Replacing aging bridges and highways is an expensive and time-consuming task made no easier by piling climate change on top. But such planning is both essential and doable.  The GAO points by way of example to Milwaukee’s efforts to manage the risk of greatly increased rainfall by enhancing its natural systems’ abilities (including local wetlands) to absorb runoff.

The GAO report makes numerous recommendations, including the establishment of an executive agency to work with other state and federal agencies to identify and mitigate future disruptions and provided guidance on how agencies should address such disruption. Amidst all the hand-wringing and sleight-of-hand political distractions surrounding climate change, the report makes for refreshingly direct and level-headed reading. You can find the whole thing here.

The Challenges to Offshore Wind

Photo by Rob Farrow, some rights reserved.

Mother Jones has a succinct piece on the challenges facing offshore wind projects, challenges that explain why the U.S. still doesn’t have a single offshore wind turbine. The UK has 870, and Germany has 416, for comparison. Now that has Congress extended the wind Production Tax Credit (after a long battle detailed here and here) and outgoing Interior Secretary Ken Salazar said he is optimistic that the Cape Wind project in Nantucket Sound will begin construction in 2013, it is a good time to look at the roadblocks that remain.

Though offshore projects benefit from the Production Tax Credit, worth $1 billion a year, and the Incentive Tax Credit, which pays 30% of wind projects’ constructions, higher construction and transmission costs make electricity from offshore turbines twice the price of electricity from more traditional sources. While in the U.S., states and utilities are understandably hesitant to embrace it, Germany, for example, fully subsidizes the offshore wind system.

The opponents of offshore wind that have gotten the most press are “stakeholders” in areas near potential projects, those who organize groups like the Alliance for Nantucket Sound in opposition to the Cape Wind project, which to date has fought a dozen lawsuits over the turbines’ effect on interfering with boat traffic, desecrating sacred sites, and harming avian and marine life (the GM has covered this here and here). Not surprisingly, these wildlife worries have been hijacked by waterfront homeowners; meanwhile, the National Wildlife Federation, Greenpeace, and the Sierra Club are all in favor of the project.

The strangest problem offshore wind is facing is a 1920 law requiring ships sailing between ports in the U.S. to be U.S.-flagged. This is apparently a problem because the small fleet of ships capable of installing a 400-foot turbine in the ocean floor is based mostly in Europe – and once one of those ships installs the foundation for a turbine, it qualifies as a ‘port,’ and cannot proceed to dock in the U.S. A shipbuilder in New Jersey is building a turbine-installation ship, but until its completion at earliest in 2014, the cost of bringing in ships from abroad can be prohibitive.

Finally, our beloved federal system of government means that states award utility contracts, while the Interior Department manages the deep water where wind turbines can be built. Developers worry that even if they get a contract with a state to buy their power, Interior could award the ‘land’ rights to someone else.

Is U.S. Natural Gas Boom Due to Good Government?

Photo by Dru Bloomfield, some rights reserved.

The economics of the energy industry are perennially unstable due to resource availability and regulatory uncertainty, and we are barraged with data about the latest developments every week. Haynes and Boone just released a memo detailing that oil and gas companies paid landowners $21 billion in 2010, and we have written about the average cost of producing oil in the Arctic versus in the Gulf of Mexico and West Africa. Often it is useful to look at all these developments with a different perspective in mind.

Today’s post looks further at the reasons for the U.S.-led surge in shale drilling, considering the arguments of BP’s chief economist that stable property rights in addition to “open access and sound government” – as opposed to dumb luck and fortunate geology – unleashed the recent boom in natural gas extraction. Evidence he offers to support this claim is that natural gas drilling has not taken off outside North America. India and parts of Latin America and Africa also have generous supplies of accessible shale gas, but the market pricing of energy and private-sector drive in the U.S. have enabled natural gas development to become a natural gas boom unlikely to be copied elsewhere anytime soon.

The answers to the questions these politically-driven tidbits touch on will require some serious economic analysis, but still they are a useful reminder that geology is not the only factor in the cost of energy extraction. While production costs in the Arctic may be so much higher than in West Africa for reasons of the physical difficulty of drilling, Canadian and American market pricing, infrastructure, and private property rights certainly drive some of the natural gas industry’s ability to expand so quickly.

Salazar Departs Interior, Remembered for Advancing Renewables

Photo by Bob Johnson, USFWS Mountain Prairie, some rights reserved.

Photo by Bob Johnson, USFWS Mountain Prairie, some rights reserved.

One of the stars of the Green Mien since its inception has been Ken Salazar, Obama’s Secretary of the Interior, who announced he would be leaving Washington to return to his home in Colorado in March. He focused Interior on renewable energy and reorganized the formerly scandal-ridden agency into three agencies with clear and separate functions. We have written about his hand in the Extractive Industries Transparency Initiative, in developing oil drilling plans in Alaska, in offshore oil and gas oversight, and much more.

The White House has given no indication as to who might succeed him, and combined with the departure of EPA’s administrator Lisa Jackson and DOE’s Steven Chu, continuity of the Obama Administration’s policies toward energy development and climate change is in question. As these vacancies are filled, expect to read about expectations for the new administrators’ goals and policies here.

Salazar has broadened the scope of Interior’s activities from its traditional focus on mining, forestry, and oil and gas development to an emphasis on renewable energy. Since 2009, the department has authorized 34 solar, wind, and geothermal energy projects, settled a 15-year legal battle with American Indian tribes, and established seven new national parks. His handling of contentious oil and gas issues, like the Deepwater Horizon spill and allowing Shell begin exploration for oil in the Arctic, drew the most headlines.

President Obama once rebuked the famously blunt former lawyer for using cowboy language. “We have our boot on their neck to make sure they got the job done,” Salazar explained, referring to Interior’s oversight of BP officials in the Deepwater Horizon spill cleanup. Hopefully we’ll be able to find another character to replace him.

Where the Deer and the Drilling Rigs Play

Yesterday, Secretary of the Interior Ken Salazar announced an ambitious plan for both the development and protection of the National Petroleum Reserve in Alaska (aka NPR-A). Released as the Final Integrated Activity Plan/Environmental Impact Statement, the plan covers both the development of oil drilling and pipelines in the reserve and protection for caribou, migratory birds, and other wildlife in the area. The plan is notable in that “[t]he Final IAP/EIS is the first management plan that covers the entire Reserve, including 9.2 million acres in the southwest area. Previous plans covered the northeast and northwest planning areas only. The comprehensive blueprint will allow for access to oil and gas resources on 11.8 million acres, which are estimated to hold 549 million barrels of economically recoverable oil and 8.7 trillion cubic feet of economically recoverable natural gas.”

Not everyone is on board – a few politicians claim the measures regarding pipeline construction aren’t detailed enough – but some environmental groups have expressed satisfaction with the final plan.

The full list of documents comprising the Final Integrated Activity Plan/Environmental Impact Statement can be found on the Bureau of Land Management website. (Scroll down to the heading “National Petroleum Reserve-Alaska Final Integrated Activity Plan/Environmental Impact Statement”.) The draft version of the plan, released back in March, is still available on the same webpage.

National Flood Insurance and Jersey Shore Demographics

Photo by U.S. Fish & Wildlife Service, some rights reserved.

Back in 1968, Congress stepped into the flood insurance market to provide coverage where private insurers would not. Today, taxpayers back $527 billion of assets in coastal flood plains insured by the National Flood Insurance Program. Run by the Federal Emergency Agency, the program paid out $16 billion of claims for Katrina; Sandy-related claims could reach $12 billion. The program is already $18 billion in debt, as sum the government acknowledges will probably never be covered by higher premiums.

Besides the program’s cost, what is the issue? In New York alone, 200,000 people live less than four feet above the high tide level. Nationwide, the number of people living in flood-prone areas has been increasing, so each natural disaster damages more property and displaces more people than the last. An op-ed in Thursday’s New York Times opines that the time for the federal government to subsidize the insuring of homes and businesses in high-risk flood zones is long past. If property owners cannot find flood insurance on the private market, which in many cases they cannot, they should bear that risk instead of transferring it to the federal government.

One of the implications of changing federal flood insurance would be increased cost of living in coastal areas. Another Times article covers how Sandy and the coming National Flood Insurance Program rate hikes will make “seaside living, once and for all, a luxury only the wealthy can afford.” Building requirements for homes in newly mapped flood hazard zones could effect a demographic shift in the northeast, because much of the development encouraged by subsidized insurance would only be affordable to wealthy buyers.

The wisdom of subsidizing status quo demographics on the Jersey Shore to the tune of $18 billion aside, the point of reducing or eliminating federal flood insurance would be to end the cycle of natural disaster and expensive rebuilding without internalizing the risks of development in flood-prone coastal areas, which in light of recent events are certainly expanding. This is a step toward affordable environmental risk-management most people can back in good conscience.

Local Zoning and Natural Gas in Pennsylvania: Court Rules on Act 13

Klingerstown, Pennsylvania. Photo by Scott Bauer, U.S. Department of Agriculture. Some rights reserved.

In February, the Pennsylvania General Assembly passed the Oil and Gas Act, revising the state’s regulation of oil and gas operations. Among other changes, “Act 13” required uniformity of local ordinances and granted the Pennsylvania Department of Environmental Protection the right to use its discretion in granting variances for distance restrictions from water and wetlands. The natural gas industry saw the legislation as a vital antidote to the maze of constantly changing local zoning ordinances in the gas-rich Marcellus region that leads to expensive litigation and increased production and development costs, but not everyone was cheering for Act 13.

Six townships, several individuals, and an environmental group joined Robinson Township in challenging the Act, and the Commonwealth Court issued their decision declaring the sections described above unconstitutional. The Court’s rationale for overturning the uniform zoning provision was that zoning is a police power of local districts and allowing nonconforming use in zoning districts violates substantive due process. In addition, the provision allowing Pennsylvania’s DEP to grant waivers for setback requirements from water and wetlands was declared null because the law offered insufficient guidance to the DEP regarding waiver standards.

Local zoning and setback issues affect the cost, timing, and even feasibility of natural gas production, so the day after the Court’s decision, Pennsylvania Governor Tom Corbett announced an appeal directly to the Pennsylvania Supreme Court. The dissenting opinion, which according to Reed Smith’s Alert  on the ruling could offer suggestions for the appeal, argued that “incompatible uses” can be allowed in a comprehensive zoning framework, and attacked the majority’s attempt to call on substantive due process protections. It noted that most substantive due process cases regarding zoning challenge the ordinances as too restrictive, while the petitioners in this case do the opposite, which is inconsistent with constitutional zoning precedent. Furthermore, the shortcoming the Court sees in DEP guidance regarding setback waivers appears to be something the legislature could rectify easily, according to a Buchanan, Ingersoll & Rooney memo. Finally, the natural gas industry – barred from intervening in the case at the lower level – will be able to participate in the Supreme Court appeal process by filing amicus briefs.

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