Voice For Liberty

Tag: Subsidy

  • Kerr’s attacks on Pompeo’s energy policies fall short

    We often see criticism of politicians for sensing “which way the wind blows,” that is, shifting their policies to pander to the prevailing interests of important special interest groups. The associated negative connotation is that politicians do this without regard to whether these policies are wise and beneficial for everyone.

    So when a Member of Congress takes a position that is literally going against the wind in the home district and state, we ought to take notice. Someone has some strong convictions.

    This is the case with U.S. Representative Mike Pompeo, a Republican representing the Kansas fourth district (Wichita metropolitan area and surrounding counties.)

    The issue is the production tax credit (PTC) paid to wind power companies. For each kilowatt-hour of electricity produced, the United States government pays 2.2 cents. Wind power advocates contend the PTC is necessary for wind to compete with other forms of electricity generation. Without the PTC, it is said that no new wind farms would be built.

    The PTC is an important issue in Kansas not only because of the many wind farms located there, but also because of wind power equipment manufacturers that have located in Kansas. An example is Siemens. That company, lured by millions in local incentives, built a plant in Hutchinson. Employment was around 400. But now the PTC is set to expire on December 31, and it’s uncertain whether Congress will extend the program. As a result, Siemens has laid off employees. Soon only 152 will be at work in Hutchinson, and similar reductions in employment have happened at other Siemens wind power equipment plants.

    Rep. Pompeo is opposed to all tax credits for energy production, and has authored legislation to eliminate them. As the wind PTC is the largest energy tax credit program, Pompeo and others have written extensively of the market distortions and resultant economic harm caused by the PTC. A recent example is Puff, the Magic Drag on the Economy: Time to let the pernicious production tax credit for wind power blow away, which appeared in the Wall Street Journal.

    The special interests that benefit from the PTC are striking back. An example comes from Dave Kerr, who as former president of the Hutchinson/Reno County Chamber of Commerce played a role in luring Siemens to Hutchinson. Kerr’s recent op-ed in the Hutchinson News is notable not only for its several attempts to deflect attention away from the true nature of the PTC, but for its personal attacks on Pompeo.

    There’s no doubt that the Hutchinson economy was dealt a setback with the announcement of layoffs at the Siemens plant that manufactures wind power equipment. Considered in a vacuum, these jobs were good for Hutchinson. But we shouldn’t make our nation’s policy in a vacuum, that is, bowing to the needs of special interest groups — sensing “which way the wind blows.” When considering everything and everyone, the PTC paid to producers of power generated from wind is a bad policy. We ought to respect Pompeo for taking a principled stand on this issue, instead of pandering to the folks back home.

    Kerr is right about one claim made in his op-ed: The PTC for wind power is not quite like the Solyndra debacle. Solyndra received a loan from the Federal Financing Bank, part of the Treasury Department. Had Solyndra been successful as a company, it would likely have paid back the government loan. This is not to say that these loans are a good thing, but there was the possibility that the money would have been repaid.

    But with the PTC, taxpayers spend with nothing to show in return except for expensive electricity. And spend taxpayers do.

    Kerr, in an attempt to distinguish the PTC from wasteful government spending programs, writes the PTC is “actually an income tax credit.” The use of the adverb “actually” is supposed to alert readers that they’re about to be told the truth. But truth is not forthcoming from Kerr — there’s no difference. Tax credits are government spending. They have the same economic effect as “regular” government spending. To the company that receives them, they can be used — just like cash — to pay their tax bill. Or, the company can sell them to others for cash, although usually at a discounted value.

    From government’s perspective, tax credits reduce revenue by the amount of credits issued. Instead of receiving tax payments in cash, government receives payments in the form of tax credits — which are slips of paper it created at no cost and which have no value to government. Created, by the way, outside the usual appropriations process. That’s the beauty of tax credits for big-government spenders: Once the program is created, money is spent without the burden of passing legislation.

    If we needed any more evidence that PTC payments are just like cash grants: As part of Obama’s ARRA stimulus bill, for tax years 2009 and 2010, there was in effect a temporary option to take the federal PTC as a cash grant. The paper PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States explains.

    Astonishingly, the wind PTC is so valuable that wind power companies actually pay customers to take their electricity. It’s called “negative pricing,” as explained in Negative Electricity Prices and the Production Tax Credit:

    As a matter of both economics and public policy, no government production tax subsidy should ever be so large that it creates an incentive for a business to actually pay customers to take its product. Yet, the federal Production Tax Credit (“PTC”) for wind generation is doing just that with increasing frequency in electricity markets across the United States. In some “wind-rich” regions of the country, wind producers are paying grid operators to take their generation during periods of surplus supply. But wind producers more than make up the cost of the “negative price” payment, because they receive a $22/MWH federal production tax credit for every MWH generated.

    In western Texas since 2008, wind power generators paid the electrical grid to take their electricity ten percent of the hours of each day.

    Once we recognize that tax credits are the same as government spending, we can see the error in Kerr’s argument that if the PTC is ended, it is the same as “a tax increase on utilities, which, because they are regulated, will pass on to consumers.” Well, government passes along the cost of the PTC to taxpayers, illustrating that there really is no free lunch.

    Kerr attacks Pompeo for failing to “crusade” against two subsidies that some oil companies receive: Intangible Drilling Costs and the Percentage Depletion Allowance. These programs are deductions, not credits. They do provide an economic benefit to the oil companies that can use them (“big oil” can’t use percentage depletion at all), but not to the extent that tax credits do.

    Regarding these deductions, last year Pompeo introduced H. Res 267, titled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.”

    In the resolution, Pompeo recognized the difference between deductions and credits, the latter, as we’ve seen, being direct subsidies: “Whereas deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies; [and] Whereas a deduction of costs and cost recovery with respect to timing is not a subsidy.”

    Part of what the resolution calls for is to “begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.”

    Kerr wants to deflect attention away from the cost and harm of the PTC. Haranguing Pompeo for failing to attack percentage depletion and IDC with the same fervor as tax credits is only an attempt to muddy the waters so we can’t see what’s happening right in front of us. It’s not, as Kerr alleges, “playing Clintonesque games of semantics with us.” As we’ve seen, Pompeo has called for the end of these two tax deductions.

    If we want to criticize anyone for inconsistency, try this: Kerr criticizes Pompeo for ignoring the oil and gas deductions, “which creates a glut in natural gas that drives down the price to the lowest levels in a decade.” These low energy prices should be a blessing to our economy. Kerr, however, demands taxpayers pay to subsidize expensive wind power so that it can compete with inexpensive gas. In the end, the benefit of inexpensive gas is canceled. Who benefits from that, except for the wind power industry? The oil and gas targeted deductions also create market distortions, and therefore should be eliminated. But at least they work to reduce prices, not increase them.

    By the way, Pompeo has been busy with legislation targeted at ending other harmful subsidies: H.R. 3090: EDA Elimination Act of 2011, H.R. 3994: Grant Return for Deficit Reduction Act, H.R. 3308: Energy Freedom and Economic Prosperity Act, and the above-mentioned resolution.

    I did notice, however, that Pompeo hasn’t called for the end to the mohair subsidy. Will Kerr attack him for this oversight?

    Finally, Kerr invokes the usual argument of government spenders: Cut the budget somewhere else. That’s what everyone says.

    Creating entire industries that exist only by being propped up by government subsidy means that we all pay more to support special interest groups. A prosperous future is best built by relying on free enterprise and free markets in energy, not on programs motivated by the wants of politicians and special interests. Kerr’s attacks on Pompeo illustrate how difficult it is to replace cronyism with economic freedom.

  • Wichita economic development, two stories

    Two items on the agenda for the Wichita City Council give an insight into the nature and efficacy of economic development efforts in Wichita.

    First, a local company will come to the Wichita City Council asking for a property tax exemption. This is not unusual, as it happens almost every week, and multiple times at some meetings. In this case, we learn that estimates of job creation used to support an economic development incentive weren’t realistic.

    The company, MoJack, had received a forgivable loan from Wichita and Sedgwick County based on promises to create a certain number of jobs. The loan amount was $35,000 from each, for a total of $70,000. If MoJack meets the job and payroll targets, the loan will be forgiven.

    But we learn in city materials this week that there’s been a change: “As a result of this expansion, Mojack plans to add at least 26 new employees to its workforce at a starting average wage of $44,000. In June 2012, Mojack repaid the forgivable loan because it had been based on an earlier estimate that 53 new jobs would be created, which was not realistic.” (The agenda report may be read at Public Hearing and Tax Exemption Request (Mojack Holdings, LLC/Mojack Distributors, LLC).)

    In June, MoJack repaid its forgivable loan to Sedgwick County, presumably for the same reasons.

    While city officials say they conduct due diligence before granting economic development incentives, the reality is that economic development officials have to work with whatever figures the applicant companies provide. How can the city verify the projected growth of a company? We wouldn’t want to even give that a try.

    What’s important is this: Greater Wichita Economic Development Coalition is our economic development agency. In their annual report of their activities, they took credit for the MoJack jobs. Now that the number of jobs to be created is expected to be smaller, will GWEDC update its job creation figures?

    Also, MoJack participated in several economic development incentives from the state of Kansas. Hopefully the Kansas Department of Commerce will consider the new, revised employment projects with managing its incentive awards, and will also update its claims of job creation accordingly.

    We also learned this week that Hawker Beechcraft may not be meeting its agreed-upon employment levels required to continue to receive incentives from the state, Sedgwick County, and City of Wichita.

    In Wichita Business Journal reporting we learn the numbers:

    Hawker Beechcraft Corp. appears to be close to violating an agreement with state and local governments to maintain employment of at least 4,000 workers in Wichita.

    The company has declined to discuss its employment level in detail and as recently as last week told the Wichita Business Journal that it had employment of 4,500 workers, the same number it reported to the WBJ in March.

    However, according to a database of mass layoffs maintained by the Kansas Department of Commerce, from March to June this year Hawker issued 885 60-day layoff notices to Wichita employees. And since late July it has filed layoff notices for 56 more Wichita workers.

    All told, that’s 941 layoff notices since March. If all those job cuts have taken place, and the 4,500 number was accurate in March, that would suggest a current employment level of 3,559 in Wichita, based solely on layoffs and not assuming any potential attrition or, on the other hand, new hires.

    The article explains that while the official job count for agreement compliance purposes is taken at the end of the year, Hawker is not forthcoming with information about its employment levels. While it is not required to answer WBJ’s questions about its job count, we should remember that we have a public-private partnership with Hawker, under which taxpayers will be investing millions in the company. Wichita economic development leaders tout the public-private partnership as a powerful tool.

    By taking our money and entering in a partnership, Hawker ought to be more forthcoming with legitimate information requests. Failure to do so is not polite, even if it is not required.

    There’s also this question: When Hawker releases its employment figures, will GWEDC adjust its success story to reflect the likely lower number of jobs? If we’re to have an economic development effort that’s based on factual information, GWEDC should. But based on past history, I doubt it will. Therefore, we continue to make decisions based on incomplete data and facts.

    By the way, the Hawker Beechcraft campus is outside the city limits of Wichita. By what authority does the city give it Wichita taxpayers’ money?

  • Government interventionism ensnares us all

    Are those who call for an end to government subsidy programs hypocrites for accepting those same subsidies? This is a common criticism, said to undermine the argument for ending government subsidy programs.

    Rather, the existence of this debate is evidence of the growing pervasiveness of government involvement not only in business, but in our personal lives as well.

    Recently the Wichita Eagle printed an op-ed critical of Charles G. Koch, chairman of the board and CEO of Wichita-based Koch Industries. The target of the criticism was Koch’s recent article in the Wall Street Journal titled “Corporate Cronyism Harms America” with the subtitle “When businesses feed at the federal trough, they threaten public support for business and free markets.”

    Koch stated one of the problems as this: “Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    Even those who are opposed to government interventions in markets find themselves forced to participate in government subsidy programs. Referring to a recent Wichita incentive program for commercial real estate, Wichita developer Steve Clark said: “Once you condition the market to accept these incentives, there’s nothing someone else can do to remain competitive but accept them yourself. Like the things we’re working on with the city, now we have to accept incentives or we’re out of business.”

    Koch Industries, as a refiner of oil, blends ethanol with the gasoline it produces in order to meet federal mandates that require ethanol usage. Even though Koch opposes subsidies for ethanol — as it opposes all subsidies — Koch accepted the subsidies. A company newsletter explained “Once a law is enacted, we are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors.” (The tax credit subsidy program for ethanol has ended, but there is still the mandate for its use.)

    Walter Williams, as he often does, recognizes the core of the problem: “Once legalized theft begins, it pays for everybody to participate.” The swelling ranks of bureaucrats preside over this.

    So should people who have built businesses — large or small — sit idle as government props up a competitor that could put them out of business?

    While Williams says not only does it pay to participate, the reality is that it is often necessary to participate in order to stay in business. This is part of the insidious nature of government interventionism: A business can be humming along, earning a profit by meeting the needs of its customers, when a government-backed competitor enters the market. What is the existing business to do? Consent to be driven out of business, just to prove a point?

    So existing firms are often compelled to participate in the government program, accepting not only subsidy but the strings that accompany. This creates an environment where government intervention spirals, feeding on itself. It’s what we have today.

    Not only does this happen in business, it also happens in personal life. I am opposed to the existence of the Social Security Administration and being forced to participate in a government retirement plan. Will I, then, forgo my social security payments when I become eligible to receive them?

    If the government hadn’t been taking a large share of my earnings for many years, I’d be in a better position to provide for my own retirement. So as a practical matter, many people need their benefits, and rightly are entitled to them as a way to get back at least some of what they paid. The harmful effect is that government, by taking away some of our capacity — and reducing the initiative — to save for ourselves, creates more dependents.

    (It might be a little different if our FICA contributions were in individual “lock boxes,” invested on our behalf. But that isn’t the case.)

    Often those who advocate for reduced government spending are criticized when they may be awarded government contracts. But if the contracts are awarded competitively and not based on cronyism, the winning company is saving taxpayer money by providing products or services inexpensively. This is true even when the government spending is ill-advised or wasteful: If government is going to waste money, it should waste it efficiently, I suppose.

    Contrast this behavior with that of some Wichita businesses and politicians. They make generous campaign contributions to city council members, and then receive millions in subsidy and overpriced no-bid contracts that bleed taxpayers. In Wichita this is called “economic development.”

    As Koch Industries’ Melissa Cohlmia notes in a letter to the Wichita Eagle, Charles Koch, along with David Koch, are examples of an unfortunately small group of businessmen and women who are willing to stand up and fight for capitalism and economic freedom. It’s an important fight. As Charles Koch wrote in his recent article: “This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.” The danger, he writes, is “Put simply, cronyism is remaking American business to be more like government. It is taking our most productive sectors and making them some of our least.”

    Koch favors ending all subsidies

    By Melissa Cohlmia, Corporate communication director, Koch Companies Public Sector

    Kevin Horrigan’s commentary was misleading and a disservice to readers (“GOP acts as bellhop for corporations, Kochs,” Sept. 21 Opinion).

    Yes, Koch Industries benefits from subsidies — a fact Charles Koch stated in his Wall Street Journal commentary. This is not hypocrisy, as Horrigan claimed. Rather, where subsidies exist, any company that opts out will be at a disadvantage and often driven out of business by competitors with the artificial advantage. This perverse incentive drives out companies that are in favor of sound fiscal policy and opposed to subsidies, and favors inefficient companies that are dependent on subsidies.

    Koch’s long-standing position is to end to all subsidies, which distort the market and ultimately cost taxpayers billions of dollars.

    Horrigan faulted Koch for not mentioning the company’s lawful contributions to “conservative politicians and causes.” Charles Koch has publicly advocated for and supported free-market causes for decades. This is a First Amendment right that people and groups across the political spectrum also exercise.

    The columnist falsely claimed that Koch has funded anti-labor organizations. About 15,000 of our 50,000 U.S employees are represented by labor unions. We have long-standing, mutually beneficial relationships with these unions.

    In this time when far too few speak up for economic freedom, Charles Koch challenges out-of-control government spending and rampant cronyism that undermines our economy, political system and culture. For this, he should be lauded, not vilified.

  • Pompeo: Wind production tax credit should expire

    U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, and U.S. Senator Lamar Alexander contribute the following article on the harm of the wind power production tax credit (PTC). The NorthBridge Group report referenced in the article is available at Negative electricity prices and the production tax credit.

    Puff, the Magic Drag on the Economy
    Time to let the pernicious production tax credit for wind power blow away

    By Lamar Alexander And Mike Pompeo

    As Congress works to reduce spending and avert a debt crisis, lawmakers will have to decide which government projects are truly national priorities, and which are wasteful. A prime example of the latter is the production tax credit for wind power. It is set to expire on Dec. 31 — but may be extended yet again, for the seventh time.

    This special provision in the tax code was first enacted in 1992 as a temporary subsidy to enable a struggling industry to become competitive. Today the provision provides a credit against taxes of $22 per megawatt hour of wind energy generated.

    From 2009 to 2013, federal revenues lost to wind-power developers are estimated to be $14 billion — $6 billion from the production tax credit, plus $8 billion courtesy of an alternative-energy subsidy in the stimulus package — according to the Joint Committee on Taxation and the Treasury Department. If Congress were to extend the production tax credit, it would mean an additional $12 billion cost to taxpayers over the next 10 years.

    There are many reasons to let this giveaway expire, including wind energy’s inherent unreliability and its inability to stand on its own two feet after 20 years. But one of the most compelling reasons is provided in a study released Sept. 14 by the NorthBridge Group, an energy consultancy. The study discusses a government-created economic distortion called “negative pricing.”

    This is how it works. Coal- and nuclear-fired plants provide a reliable supply of electricity when the demand is high, as on a hot summer day. They generate at lower levels when the demand is low, such as at night.

    But wind producers collect a tax credit for every kilowatt hour they generate, whether utilities need the electricity or not. If the wind is blowing, they keep cranking the windmills.

    Why? The NorthBridge Group’s report (“Negative Electricity Prices and the Production Tax Credit”) finds that government largess is so great that wind producers can actually pay the electrical grid to take their power when demand is low and still turn a profit by collecting the credit — and they are increasingly doing so. The wind pretax subsidy is actually higher than the average price for electricity in many of the wholesale markets tracked by the Energy Information Administration.

    This practice drives the price of electricity down in the short run. Wind-energy supporters say that’s a good thing. But it is hazardous to the economy’s health in the long run.

    Temporarily lower energy prices driven by wind-power’s negative pricing will cripple clean-coal and nuclear-power companies. But running coal and nuclear out of business is not good for the U.S. economy. There is no way a country like this one — which uses 20% to 25% of all the electricity in the world — can operate with generators that turn only when the wind blows.

    The Obama administration and other advocates of wind power argue that the subsidy provided by the tax credit allows the wind industry to sustain American jobs. But they are jobs that exist only because of the subsidy. Keeping a weak technology alive that can’t make it on its own won’t create nearly as many jobs as the private sector could create if it had the kind of low-cost, reliable, clean electricity that wind power simply can’t generate.

    While the cost of renewable energy has declined over the years, it is still far more expensive than conventional sources. And even the administration’s secretary of energy, Steven Chu, calls wind “a mature technology,” which should mean it is sufficiently advanced to compete in a free market without government subsidies. If wind power cannot compete on its own after 20 years without costly special privileges, it never will.

  • Wichita Mayor Carl Brewer on role of government

    When President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.

    Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?

    Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”

    But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.

    But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.

    Mayor Carl Brewer made these claims in a 2008 meeting of the Wichita City Council.

    In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”

    When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

    Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.

    Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

    This tradition of entrepreneurship is disappearing, replaced by the public-private partnership and programs like Visioneering Wichita, sustainable communities, Greater Wichita Economic Development Coalition, Regional Economic Area Partnership (REAP), and rampant cronyism. Although when given a chance, voters are rejecting cronyism.

    We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?

    Wichita Mayor Carl Brewer, August 12, 2008: You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

    I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

    Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

    Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

    But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

    This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

    But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

    But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

    So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

    So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

    And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

    So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.

  • Pickens changes his mind, again

    Energy investor T. Boone Pickens has changed his mind about government subsidy of energy markets — again.

    Until recently Pickens has been promoting federal legislation titled H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The goal is to promote the use of natural gas for a transportation fuel, particularly for long-haul trucks.

    Now, according to reporting in Politico, Pickens said about the transition to natural gas “It’s going to happen, and you don’t have to have Washington do it, thank God.”

    Later in the article Pickens is quoted as saying “You don’t have to have a tax credit; it’s going to happen.”

    Before promoting subsidies for natural gas as a transportation fuel, Pickens actively promoted wind power, another form of energy production that receives government subsidy. In 2008 Pickens ordered 667 wind turbines worth $2 billion from General Electric. Now, in the Politico article, he concedes he lost a lot of money on this venture.

    His plan, at that time, was to use wind power to generate electricity, and the natural gas saved would be used to power transportation. But there’s another relationship between wind power and gas, and it stems from the unreliability and variability of wind power. It’s difficult to quickly adjust the output of most power plants. But natural gas turbine plants are an exception. Kansas recently saw one of its major electric utilities complete a new natural gas power plant. The need for the plant was at least partly created by its investment in wind: A document produced by Westar titled The Greenhouse Gas Challenge noted the “Construction of the 665 MW natural gas-fired Emporia Energy Center, providing the ability to efficiently follow the variability of wind generation.” In another document announcing a request for a rate increase it stated “Our Emporia Energy Center is excellent for following the variability of wind production.”

    At the time of these investments by Pickens and Westar, the price of natural gas was high. Now it is low — so low, and the prospects for future low prices certain enough — that Pickens has abandoned his wind farm projects. Even with all the subsidy granted to wind power, it’s cheaper to generate electricity with gas.

    Let’s hope this is the last time Pickens develops a plan to tap the federal taxpayer to pay for his plans.

  • Crony Chronicles: I Want To Be A Crony

    Cronyism? “It’s like having a best friend who gives you other peoples’ stuff,” says the young girl to the approval of her friend.

    We in Wichita know just how this works, and when given a chance, voters reject it.

    The video is a project of Crony Chronicles, which has developed into a top-notch resource for information on this harmful disease.

  • Governor Romney is right: End the wind production tax credit

    U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, contributes the following article on the harm of government involvement in energy markets, wind power specifically. Pompeo has written extensively on energy; see Pompeo on energy tax simplification, Era of energy subsidies is over, and Free market energy solutions don’t jeopardize national security. He has also introduced legislation to end all tax credits for energy, H.R. 3308: Energy Freedom and Economic Prosperity Act.

    There’s been a steady drumbeat from those seeking an extension of the wind production tax credit. For many reasons, including some that former Massachusetts Gov. Mitt Romney has carefully highlighted in his opposition, this is a bad idea.

    First, an extension continues this unsettling policy trend in which citizens are asked to bear all the risks and gain none of the rewards. This socialization of risks and privatization of profits guarantees disasters, for corporate boards and even their federal overseers can become careless and, in some instances, reckless. This fact was clearly demonstrated by the Solyndra debacle — when a company with close ties to the Obama administration lost more than a half billion dollars of taxpayers’ money. At the heart of that fiasco was both the company and the administration’s indifference to the taxpayers.

    Solyndra also revealed something else damaging about federal involvement in markets: the potential for political corruption. It’s clear that the Obama administration became emotionally, and inappropriately, invested in the fortunes of one company and one sector. When that happens, the system is compromised, cronyism flourishes and corruption is inevitable.

    President Barack Obama talks about the need to “invest” in alternative energy sources. But the reality is that he is not investing his money — he’s spending yours. I’m not sure that too many Americans would choose the president to manage their retirement accounts. His record — a jobless and exceedingly shallow recovery — is not good.

    With this production tax credit extension, the wisdom of the investment is especially dubious. Wind companies and their lobbyists have, for the last year, been telling all who would listen that the expiration of the tax credit could spell doom for their industry. Obama repeats this claim regularly on the campaign trail.

    But what does that say about the industry? If you need a tax credit to compete, you are probably not that competitive.

    Moreover, the tax credit is not de minimis for either taxpayers or companies that are lobbying for it. It will cost the taxpayers more than 12 billion dollars inside the budget window. Worse, the credit is set at 2.2 cents per kilowatt hour. Just to compare, the national average for produced power is around 6 cents per kilowatt hour. That means that the wind industry gets an almost 40 percent subsidy for each unit it produces. How many companies would like that?

    You also have to remember that wind power enjoys a mandate in more than 30 states. That is, regardless of cost — or price to ratepayers — utilities must use wind or other renewables for specific amounts of power generation. So, the wind companies enjoy not only a tax credit, but a must-use mandate as well — regardless of cost.

    It would be one thing if we were running out of natural gas and confronted a real national requirement to use alternative energy. But it’s the reverse. The United States has more traditional energy resources than anywhere else on Earth, according to the Congressional Research Service. With the surge in production from the shale formations, a new Barclays report just concluded, natural gas will likely dominate wind in the marketplace for the foreseeable future.

    Even now, in places like Williston, N.D., companies are hiring everyone who can get there to work on rigs or in ancillary jobs. If the president is genuinely worried about jobs, maybe he should visit the Bakken in North Dakota, or the Marcellus in Pennsylvania or the Eagle Ford in Texas.

    Using wind power to generate electricity is not a new idea. The first windmills used to generate electricity went up in the 19th Century. The production tax credit is also not a new idea. It is now about 20 years old.

    Romney’s opposition to continuing the wind subsidy is absolutely correct. At some point, an industry has to either succeed or fail on its own merits.

    For wind companies, we are at that point now.

  • Renewable Portfolio Standard costly for Kansas

    A policy promoted by Kansas Governor Sam Brownback will result in higher electricity costs, fewer jobs, and less investment in Kansas.

    This is the conclusion of a new study by Kansas Policy Institute and Beacon Hill Institute. The policy is Renewable Portfolio Standard, or RPS, which mandates that a minimum amount of a state’s electricity be produced by renewable sources. In Kansas, the primary renewable source of electricity is wind.

    In a press release accompanying the report, KPI said “Renewable energy is more expensive than conventional energy, so government mandates are necessary to ensure that more renewable energy is purchased. However, the unseen consequences of well-intended efforts to increase energy independence are rarely considered. The authors estimate that by 2020, the average household’s electricity bill will increase by $660, approximately 12,000 fewer jobs will have been created, and business investment in the state will be $191 million less than without the mandate.” The press release and summary is at The Economic Impact of the Kansas Renewable Portfolio Standard, and the full report is here.

    Brownback has supported, first as U.S. Senator and now Kansas Governor, renewable portfolio standards, mandating the production of wind power. U.S. Senator Jerry Moran favors the production tax credit that makes wind feasible, but forces taxpayers to subsidize an expensive form of energy. Together they penned an op-ed that tortures logic to defend the tax credits. Each has spoken out on his own on the national stage. See Brownback on wind, again and Wind energy split in Kansas.

    Driving through western Kansas and marveling at all the wind farms might lead one to conclude that the efforts of Brownback and Moran are a success. Viewing the spinning turbines — when they are in fact spinning — is just the start of understanding the impact of wind power, mandates for its use, and taxpayer subsidy for its production. The KPI report is an important document that lets us understand more of the full effect of renewable portfolio standards.