By Kevin Mooney on August 12, 2011 8:21 am
Oil drilling moratorium, union favoritism, ObamaCare mandates undercut business
Louisiana is beset with some of the most economically damaging regulations that flow out of Washington D.C, according to industry representatives and public policy analysts. Moreover, some small business owners view local level licensing practices within their own municipalities as being overly costly and redundant.
Anti-Energy Policies Remain in Effect
For starters, there is the moratorium on deepwater oil and gas drilling that the Obama Administration imposed in May 2010 in response to the British Petroleum oil well explosion. Although the moratorium was official lifted in October of last year, a “de-facto” moratorium remains in place, officials with the Louisiana Oil and Gas Association (LOGA), have argued.
The “political uncertainty” surrounding the Gulf region has discouraged companies from making investments that could help spur economic growth, Don Briggs, the LOGA president, has observed. As was previously reported, ten oil rigs have left the Gulf of Mexico since the moratorium went into effect and eight others that were heading into the region have been detoured away.
“When you have companies that would be spending hundreds of millions of dollars, or some cases, billions of dollars, they need certainty,” Briggs explained. “We don’t have that now and I don’t expect that we will anytime soon. We will be in a deteriorating position until this changes.”
Sen. David Vitter (R-La.) has announced that he will block the nomination of Rebecca Wodder to serve as Assistant Secretary for Fish and Wildlife Parks for the Department of Interior unless expiring Gulf drilling leases are extended for another year.
“Since the moratorium, oil and gas exploration in the Gulf of Mexico has been dramatically curtailed,” Vitter said. “In 2011 alone, more than 300 offshore drilling leases in the Gulf of Mexico are due to expire. If these leases are allowed to expire, they will revert to the federal government, killing jobs and cutting off potential revenue from exploration and production. The U.S. economy will greatly benefit by allowing the offshore energy industry to get to work and stay working.”
Earlier this year, Vitter also blocked the nomination of Dan Ashe to the Interior Department, but lifted it after new deepwater exploratory permits were issued. In addition, Vitter has successfully opposed an almost $20,000 pay raise for Interior Secretary Ken Salazar.
While Vitter’s actions have been effective, states like Louisiana that rely on cheap, affordable energy for their livelihood will most likely remain back on their heels for some time, Bonner Cohen, a senior fellow with the National Center for Public Policy Research (NCPPR), said.
“What you are seeing in Louisiana is only a small piece of larger mosaic being put together by the Obama Administration to make affordable energy as inaccessible as possible,” he observed. “From the administration’s war on coal to the serious consideration it is giving to imposing a nationwide regulation of hydraulic fracturing, to its shut down of deepwater drilling in the Gulf of Mexico, to its `endangerment finding” from the EPA [Environmental Protection Agency], the administration is practicing its own form of selected industrial sabotage.”
Although the Obama Administration failed to pass the Waxman-Markey “cap and trade” bill, it continues to pursue the same regulatory goals through the EPA and other federal agencies, Marlo Lewis, a senior fellow with the Competitive Enterprise Institute (CEI), has warned. As an alternative to pricing the carbon dioxide emissions from coal as part of a cap and trade program, the idea now is to simply prevent “conventional coal” from entering into competition with other energy sources, Lewis points out in “Green Watch,” a publication of the Capital Research Center (CRC.)
“Obama’s target is virtually identical to the mix of electricity fuels that would develop under Waxman-Markey,” Lewis explains. “Under Obama’s proposal, 80% of U.S. electricity would come from nuclear, natural gas, CCS, and renewable energy by 2035. Under Waxman-Markey, an estimated 81% would come from the same sources by 2030, according to the U.S. Energy Information Administration (EIA).”
The EPA also issued an “Endangerment Rule” back in Dec. 2009 that could have far reaching consequences for Louisiana businesses and average citizens. The rule claims that the “elevated concentration” of GHG (Greenhouse) emissions in the atmosphere “endangers public health and welfare.” This could create an enormous opening for additional regulatory mischief by misapplying and misusing the Clean Air Act (CAA), which makes no mention of “greenhouse gas” or the “greenhouse effect,” Lewis notes.
“If the Obama Administration is really were to impose the EPA’s Endangerment Rule on the nation, than the Clean Air Act could be transformed into a law that requires the United States to de-industrialize itself,” Lewis laments.
But the EPA insists it has the authority to implement new regulatory rules under the CAA under the U.S. Supreme Court’s Massachusetts v. EPA ruling in 2007. The court concluded that carbon dioxide (CO2) was an air pollutant as the term is defined within the parameters of the CAA.
Team Obama Advances Big Labor Agenda
The EPA has a long track record of anti-business activity that is well documented and not likely to change anytime soon Mike Mitternight, the president of the Factory Service Agency, an air conditioning service and installation company based in Jefferson Parish, observed. But he is equally concerned with the “pro-union” leanings of the National Labor Relations Board (NLRB).
“We always need to be concerned about the EPA,” he said. “Businesses have historically done battle with the EPA. But right now I’m looking over my shoulder at what the NLRB is doing. The pro-unionization rulings are something we need to keep our eye on.”
Mitternight is particularly concerned about a proposal to curtain the amount of time set aside for unionization elections involving private companies. If the rule change goes into effect, the NLRB would set elections from a current median time of 37 days to as little as 10 days from the filing of an election petition. They would also set pre-election hearings for 7 days after a petition is filed; the rules would also require the employer to respond to a pre-hearing questionnaire raising any legal issues or waive its right to do so. And finally, the new rules would defer a decision on the issues raised at the hearing till after the election, putting an employer at risk if the decision is challenged.
“From the point of view of small business, this is very problematic,” Mitternight said. “It means a union could break our employees out into small groups and attempt to unionize in a piecemeal fashion.”
Mitternight also expressed concern over the “repetitive nature” of the licensing policies in Louisiana municipalities that translate into multiple fees and taxes. The total sales tax is 9 percent in Orleans Parish and 8.75 percent in Jefferson. Therefore, if he makes a purchase in Jefferson Parish and pays the 8.75% and then subsequently installs equipment in New Orleans Parish, he must then pay the 1/4 percent difference as a use tax for installation in Orleans.
Mitternight holds an occupational license in Jefferson Parish but must also maintain an occupational license in Orleans Parish, which is used to collect the additional ¼ percent tax. In addition, he holds a statewide Mechanical Contractors license, but is also required to have both a mechanical and a gas fitters license in Jefferson, Orleans, Kenner, Plaquemines, St. Tammany, Slidell, Mandeville, St. Bernard, and any other similar municipality or Parish where he operates.
“I have to fill out the tax report form on a monthly basis and indicate where I made an installation in New Orleans and pay them the extra tax,” he said. “It can be an expensive proposition to be an air conditioning manufacturer because you have this multi-layered licensing and I see it as an over-regulation.”
ObamaCare Could Force New Bureaucracies, Higher Costs
Unless the U.S. Supreme Court intervenes and rules in favor of the lawsuits that challenge the constitutionally of President Obama’s new health care law, Louisiana and other states will be forced to accommodate new layers of bureaucracy and higher costs, a report from the American Legislative Exchange Council shows.
“ObamaCare’s Medicaid mandates will bring significant fiscal damage to already strained state budgets, especially when taking into consideration the amount states currently spend on Medicaid” the report warns. Louisiana’s own Department of Health and Hospitals has produced a study that shows implementation of ObamaCare will cost the state in excess of $7 billion over a 10 year period.
Rep. John Fleming (R-La.), who is also a medical doctor, points out that the “governmentalization” of health care has been in motion since the 1960s. The Patient Protection and Affordable Care Act (PPCA), the official title of ObamaCare, accelerates a harmful trend that must be reversed, he said.
“These policies are separating the patient from the private sector by inserting government with all its bureaucracy, additional costs and regulations,” he observed. “ObamaCare just makes this worse.”
Rep. Fleming has offered up two proposals, which would help to expand choice, lower costs and expand the influence of the private sector. Policymakers should “open up state lines” so that insurance companies must compete with one another and consumers can choose the best plan for their needs, he said. Fleming also supports the expansion of Health Savings Accounts (HSAs). They come with higher deductibles, but this also creates an incentive to save and to make “wise purchases,” he said.
“This is about putting consumers back in charge. Often times, we see them saving over and above what their deductible is in their Health Savings Accounts. ”
Louisiana is a plaintiff in the multi-state lawsuit that has been filed against ObamaCare.
Published on May 11, 2011 by Nicolas Loris
The bipartisan New Alternative Transportation to Give Americans Solutions (NATGAS) Act provides preferential tax treatment to subsidize the production, use, and purchase of natural gas vehicles (NGVs). Supporters argue that it promotes transportation fuel competition and reduces foreign oil dependence and greenhouse gas emissions.
In reality, the NATGAS Act simply transfers a portion of the actual costs of using and producing NGVs to taxpayers. Special tax credits create the perception that NGVs are more competitive than they actually are by artificially reducing their price for consumers. Rather than increase competition, this artificial market distortion gives NGVs an unfair price advantage over other technologies.
Unfortunately, this shortcut to market viability does not work. Indeed, Washington has an abysmal record of picking energy winners and losers. Instead of adding more market distortions to the energy sector, Congress should remove energy subsidies and increase access to America’s resources.
The Market Is Already Working
The legislation creates, expands, or extends tax credits that subsidize NGVs. Supporters argue that the legislation would help NGV vehicle and infrastructure producers overcome investment obstacles and begin introducing new technologies to the marketplace. The truth, however, is that NGVs are already available, and nothing is stopping the market from expanding. The notion that no alternative fuels compete with gasoline is just not true. Consumers can choose vehicles that are powered by electricity, natural gas, or biofuels, as well as hybrid vehicles.
In fact, the trade group Natural Gas Vehicles for America claims that the United States has 110,000 NGVs and that more than 12 million NGVs are on the roads worldwide. Billionaire investor T. Boone Pickens, a supporter of the bill, boasted in a recent speech that he owns a Honda Civic GX that he fuels with natural gas for less than $1 per gallon. At a UPS facility, President Obama challenged transportation fleets to switch their vehicles to natural gas because it would be good for their bottom lines. But if natural gas vehicles are economically competitive, vehicle manufacturers will make them and consumers will switch over without market manipulation from Washington.
A full-fledged competitive NGV fleet may eventually emerge. Rising gas prices make alternatives like NGVs more economically inviting, which should move investment to those technologies. That happens most efficiently when it is the result of a market-based response as opposed to government intervention. Indeed, government intervention to promote one technology over another only interferes in the process and creates another set of government-picked, taxpayer-funded winners and losers.
Reducing Foreign Dependence No Excuse for Bad Policy
The focus on decreasing energy dependence through government intervention and market distortion is folly. Policies that maximize access to a broad array of energy sources, domestic and foreign, will best serve Americans. A market-based approach would ensure that every American has access to affordable energy by putting a premium on sound economics through competition and choice.
This is not the approach of the NATGAS Act, which would make America economically weaker. When the government artificially lowers the cost of production, manufacturers must forgo the value of the goods they might have produced had they allocated their time, effort, and other resources in alternative ways. In this case, the NATGAS Act uses tax credits to create the perception of lower costs. This will fool consumers into purchasing more of these vehicles. Further, those hidden costs now have to be paid by someone else—the taxpayer. This leaves fewer resources for more productive activities.
A better approach to decreasing energy dependence is for the federal government to remove unnecessary rules and regulations that restrict access to all types of energy sources.
Reducing Greenhouse Gas Emissions No Excuse for Bad Policy
Reducing greenhouse gas (GHG) emissions is another dubious policy goal. Years of pressure from political leaders has forced significant changes in much of the business community. Energy producers became vested stakeholders and lobbied for handouts to produce what Congress determined to be cleaner energy. If these sources can compete without help from the government, the consumer will benefit through increased competition and lower costs. But creating an artificial market to reduce GHG emissions ignores both consumer preferences and economic fundamentals.
Moreover, Congress continues to ignore the vigorous disagreement within the scientific community concerning the effects of anthropogenic global warming. Policy should never rest on a shaky set of assumptions, particularly when it can have far-reaching implications for American businesses and everyday Americans and could therefore fundamentally alter decisions in ways that harm America’s productive system of free enterprise.
Subsidies Do Not Work
Proponents of NGVs argue that because other alternative transportation technologies receive preferential treatment, so should natural gas. The problem is that government subsidies have a proven track record of not working. Congress should therefore remove subsidies from the transportation fuel market, not increase them.
Subsidies centralize power in Washington and allow lobbyists and politicians to decide which companies will produce. The more concentrated the subsidy or preferential treatment, the worse the policy is because the crowding-out effect is larger.
The NATGAS Act is a perfect example. Soon after its introduction, the National Propane Gas Association understandably voiced its opposition to the bill because the tax credits do not include propane gas. And that is just one problem with such bills: They distort the competitive process that so capably yields affordable and viable products, moving the decision-making process from the marketplace to Washington. Consumers, not Washington, should decide whether NGVs are better than propane.
Furthermore, subsidies funnel money toward projects that have little market support and offset the private-sector costs for investment that would have been made either way. This creates industry complacency and perpetuates economic inefficiency by disconnecting market success from production costs. By artificially lowering the cost of investment, subsidies take resources away from more competitive projects. The fact that other transportation fuels receive government support is not a good reason to continue or expand special treatment for natural gas. It is a good reason to remove those subsidies.
More Handouts, No Solutions
Pieces of legislation like the NATGAS Act will not be a quick fix for high gas prices and are not the way to reduce either America’s dependence on foreign oil or GHG emissions. They provide special benefits to one industry, distorting the market and misallocating resources away from potentially more economically viable alternatives.
If Congress truly wants to promote NGVs, it should eliminate subsidies in the transportation industry and consider other market-oriented policies—such as full expensing, lowering corporate tax rates, and removing barriers to drilling—that would incentivize the production of profitable endeavors and ultimately lower prices through competition.
Nicolas D. Loris is a Policy Analyst in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
Ex-Im Bank Financing for Papua New Guinea LNG Project to Generate Significant Revenue for Island Nation, While Employing Workers at Dozens of American Companies
December 14, 2009
WASHINGTON, D.C. – The Export-Import Bank of the United States (Ex-Im Bank) has approved the largest financing transaction in its 75-year history — $3 billion to support U.S. exports for a liquefied natural gas (LNG) project in Papua New Guinea. Workers at over 55 U.S. companies will provide goods and services for the project.
Ex-Im Bank, the official export credit agency of the United States (ECA), five other ECAs and 17 commercial banks will provide financing for the project. Total project costs are estimated to be $18.3 billion.
The project has the potential to double the gross domestic product of Papua New Guinea.
“Our approval of this project is yet another demonstration of how Ex-Im Bank is achieving its mission to provide financing for U.S. exports, and supporting U.S. export-related jobs, by supplementing what commercial lenders are able or willing to provide” said Ex-Im Bank Chairman and President Fred P. Hochberg.
The ECAs and commercial lenders involved in financing the project conducted extensive research into the potential impacts of the project. The resulting study found that the production and export of LNG from this project will represent a net reduction in global greenhouse gas emissions compared to the case where customers were to meet their energy requirements by coal, fuel oil or diesel commonly used in the regional market, even though the project will add to Papua New Guinea’s total emissions of greenhouse gasses.
At the ceremony announcing the investment, Papua New Guinea Prime Minister Sir Michael Somare said, “ExxonMobil and our other private sector development partners have shown significant confidence in our nation. Cooperation between the public and private sectors will create value for the Papua New Guinea society as a whole and grow our economy in the future.”
The project will involve development of upstream natural gas fields, a 692-kilometer onshore and offshore pipeline, a 6.3 million metric-tons-per-year liquefaction plant near Port Moresby, the capital of Papua New Guinea, and marine facilities from which the LNG will be shipped to foreign buyers. The project will sell the LNG in the large Asia-Pacific market.
In fiscal year 2009, Ex-Im Bank authorized more than $21 billion in support of U.S. exports overall, the highest level in the Bank’s 75-year history, to help ease tightened liquidity during the economic crisis. Ex-Im Bank also set a record for financing of small business exports at $4.36 billion in fiscal 2009.
The Bank, an independent, self-sustaining federal agency, helps to create and maintain U.S. jobs by financing the sale of U.S. exports, primarily to emerging markets throughout the world, by providing loan guarantees, export-credit insurance and direct loans. More information is available on the Bank’s web site at www.exim.gov.