Watch the GOP destroy Ohio’s clean energy industry with this one weird trick

ohio statehouse
ohio statehouse

The Ohio Statehouse (courtesy of Wikimedia Commons)

Tom Knox at Columbus Business First just outlined a little-known but incredibly significant part of SB 310 that will have wide-ranging implications for the future of Ohio’s clean energy industry.

From the post:

The bill would allow utilities under a renewable-energy contract to be released from the agreement “if there is a change in the renewable energy resources requirements,” according to the latest version of Senate Bill 310, passed by the Ohio Senate last week and being heard Tuesday in the House Public Utilities Committee.

If American Electric Power Company Inc. (NYSE:AEP), for example, signed a 20-year purchase agreement with a wind turbine company to provide some power for its customers, any future change in renewable energy requirements would allow AEP to void its contract.

While it would not affect existing renewable energy contracts, such as FirstEnergy Solutions’ deal to purchase power from the Blue Creek Wind Farm, it would apply to any new renewable energy contracts signed by one of the four investor-owned utilities after SB 310 becomes law. As Knox notes,

Without a two-decade guarantee of revenue, financial backers of wind projects would be hard-pressed to put up money.

“That is the ultimate done deal, it’s over, kiss all wind renewables gone,” said Jereme Kent, general manager of Findlay-based wind company One Energy LLC. “Even if wind was half the price, you could not sign a contract with that provision.”

With all of the attention surrounding the other God awful provisions in SB 310, including the two-year freeze and the elimination of the requirement that 50% of renewable energy is produced in Ohio, this small clause, buried on line 950 of the legislation (PDF), has been overlooked. Here’s the actual text in question:

Sec. 4928.642.  Every contract to procure renewable energy resources or renewable energy credits entered into by an electric distribution utility or an electric services company on or after the effective date of S.B. 310 of the 130th general assembly shall contain a change-of-law provision. Such a provision shall provide that the parties to the contract are released from their obligations under the contract if there is a change in the renewable energy resource requirements, governed by section 4928.64 of the Revised Code.

Without question, these 80 words inject so much uncertainty and chaos into Ohio’s burgeoning renewable energy industry that they may effectively strangle it in its crib. It’s hard to see any utility-scale renewable energy project getting financing when the utility can simply renege on its deal if any changes are made to SB 310 going forward.

Interestingly, this section was not included in the original form of SB 310 (PDF), as it was introduced to the Senate in March. Rather, someone slipped it in behind closed doors when the GOP leadership rewrote the bill last week.

Given the hands on-role that Governor Kasich played in changing the bill, I can’t help but wonder whether or not he was involved in inserting this section or was aware of it before the bill reached the Senate floor. Either way, the existing of this provision and the Governor’s apparent indifference (if not approval) for it clearly belies his supposed support for the 25,000 clean energy jobs in this state.

In his official statement with Senate President Faber last Thursday, the Governor claimed that SB 221’s standards “are now emerging as a challenge to job creation and Ohio’s economic recovery.” That could not be farther from the truth. The real challenge to job creation and economic growth is SB 310 itself.

The stakes just got even higher in this fight. You can no longer pretend to back clean energy and the jobs and economic development it creates if you support SB 310.

Conservative Ohio group uses push poll to attack clean energy, fails miserably

blue creek wind farm
blue creek wind farm

The Blue Creek Wind Farm in western Ohio (courtesy of Business Wire).

Over at Columbus Business First, energy reporter Tom Knox posted a piece yesterday afternoon titled “Business group poll says Ohio voters want energy efficiency mandates changed.” According to the post, a coalition of Ohio business groups conducted a poll of 800 registered Ohio voters, in which 72% of respondents indicated they wanted the state to revise the energy efficiency and renewable energy standards set by SB 221.

This poll seems extremely bewildering, particularly considering the fact that Ohioans have repeatedly expressed overwhelming support for the clean energy standards on multiple occasions. Just two weeks ago, an identical 72% of Ohioans stated just the opposite, indicating they support the standards in their current form and would oppose revising them.

Moreover, recent nationwide polls find similar results. In a Gallup poll, Americans preferred renewable energy to fossil fuels by a 2-to-1 margin, wanted the government to invest in ramping up renewable energy production 67% to 32%, and supported implementing mandatory caps on greenhouse gas emissions 63% to 35%. Another poll from the Yale Project on Climate Change Communication validates this latter result, finding that Americans support forthcoming EPA regulations on greenhouse gas emissions from coal plants by a nearly identical 64% to 35% mark.

So what’s going on here? Perhaps this is just another example of Americans not truly understanding policies or being inclined to support something when it’s phrased one way but not another? We know, for instance, that even as most Americans generally oppose Obamacare, they continually support the actual provisions of the Affordable Care Act.

Then I actually looked into the details of the poll. It was conducted by a coalition of business and fossil fuel interests, including the Ohio Chamber of Commerce, the Greater Cleveland Partnership, and Industrial Energy Users-Ohio. All of these groups have close ties to the fossil fuel industry, particularly FirstEnergy. The group, which is so fly by night that it doesn’t even have a website or bring up anything on Google, has chosen the particularly Orwellian name “Ohioans for Sustainable Jobs.” Apparently fossil fuel industry jobs are sustainable, but Ohio’s 25,000 clean energy jobs are not.

According to Knox’s post, here is the actual text of the question that garnered the headline result, a blatantly transparent example of push polling:

Six years ago, when the Ohio legislature passed the law mandating reductions in electricity consumed, certain assumptions were used to justify the law, many of which were wrong. For example, legislators assumed electricity would be in short supply and new electric generation would be expensive. But today, there’s ample low-cost electricity and will be for years to come. Knowing this … should the Ohio state legislature, taking into account the new information, go back and change the law?

If a college freshman tried to use that question in Statistics 101, s/he’s probably fail the class. The poll was also conducted by The Tarrance Group, a high-price DC polling firm, which brags it “is one of the most widely respected and successful Republican strategic research and polling firms in the nation.”

FirstEnergy and its friends can continue to shell out thousands of dollars to buy the poll results they want, but it won’t change the fact that the people of this state have, do, and will continue to support clean energy But all that coal money can, and has, bought much of Ohio’s legislature. The utility companies gave more than $1.3 million to legislators (PDF) from 2008-2013, and they expect something for their investment.

We need to keep the heat on our elected representatives in Columbus as they finish debate on SB 310. Otherwise, we risk letting their fossil fuel benefactors keep turning the heat up on our planet.

Update (4/30/2014 9:16am): Tom Knox provided me with the full press release and set of survey results. Taken in full, the poll seems a bit more credible than the one question would have it seem out of context. That said, there are still several methodological issues with it.

In the first question, where 56% of Ohioans seem to come out against SB 221, the question does not actually ask whether respondents oppose the law on its merits; it simply asks if they agree that “the government should mandate reductions in
electricity use by Ohio’s residential and businesses users.” That is exactly the type of wording that garners opposition to policies in the abstract, such as Obamacare.

Secondly, the poll continually asserts that Ohioans will pay more on their electricity bills – $45 this year – to meet the energy efficiency mandates. Nowhere does it mention the fact that customers can opt into rebate programs financed by these surcharges, nor does it mention the fact that energy efficiency programs have saved Ohio ratepayers more than $2 for every $1 invested, according to the electric utilities themselves. Moreover, Ohioans have already indicated (PDF), in multiple polls, that they are willing to pay more for energy efficiency and renewable energy. Fortunately, they don’t have to.

Thirdly, the poll asks two questions about whether or not ratepayers should have the option to opt out of paying the costs of the clean energy mandates. This is exactly the type of question that sounds wonderful in theory, but the Devil is in the details. Allowing ratepayers to opt out of paying into these programs would render them completely ineffective; it would be a de facto repeal in all but the name.

Enabling customers to take advantage of utility rebate programs without paying into them would allow them to become free riders, who would enjoy the benefits of energy efficiency (e.g. lower wholesale electricity costs) without having to bear any of the costs. It’s interesting how conservatives suddenly support subsidies and “picking winners and losers” when the winners are their industry friends. A voluntary opt-out provision would simply drive up the costs of compliance to the point where the programs were completely suspended. We know that the members of “Ohioans for Sustainable Jobs” would like to see SB 221 repealed in its entirety. But because that would never fly – see SB 58 – they want to hide behind semantics and do it under the cover of night instead.

I will continue to say this over and over and over and over again: Existing Ohio law requires all energy efficiency programs to save ratepayers more than they cost. If they do not pass this total resource cost test – which they have, by the way – the Public Utilities Commission is legally obligated to reject them.

The entire foundation of this poll is based on the phony premise that energy efficiency programs cost Ohioans more than they save. That’s completely unfounded, and, as a result, this poll is nothing more than a house of cards. The Supreme Court may claim that money equals speech, but it doesn’t enable you to buy your own facts.

Ohio lawmaker compares clean energy to the Bataan death march

Senator Bill Seitz
Senator Bill Seitz

Ohio State Senator Bill Seitz of Cincinnati (courtesy of The Columbus Dispatch)

When the Ohio GOP leadership introduced SB 310 last month, they intentionally tried to sideline Senator Bill Seitz (R-Cincinnati) from the process. We know that Sen. Seitz has a tendency to put his foot in his mouth. He has previously likened the clean energy standards to “Joseph Stalin’s five-year plan,” and he routinely labels his opponents as “enviro-socialist rent-seekers.” But this time he outdid even himself.

Last Wednesday, April 9, Sen. Seitz turned a Senate Public Utilities Committee hearing on SB 310 into a three-ring circus. First, during the middle of testimony from Aaron Jewell, a US Army veteran who fought in Iraq, Sen. Seitz reportedly got up, pulled out a pack of cigarettes, and walked out of the room to take a smoke break.

He came back into the session halfway through the testimony of Dan Sawmiller, a Senior Campaign Representative for the Ohio Beyond Coal Campaign with the Sierra Club. Mr. Sawmiller also served with the Ohio National Guard from 2000-2008, during which time he worked as a combat engineer in Iraq.

Mr. Sawmiller served with 485 other guardsmen and women to clear some of the most dangerous parts of Baghdad of improvised explosive devices, in order to make way for the movement of additional troops and supplies. At least one of his fellow servicemen did not make it home.

During his testimony, he detailed the work he did in Iraq. “I explained how my combat experiences drove my passion to work on energy efficiency and national security issues,” he said. “This drove me to work with the Sierra Club.”

But rather than showing respect and gratitude for his service and simply debating the facts of the clean energy law, Mr. Sawmiller explained that Sen. Seitz made outlandish comments that are offensive to those who have served in our military.

“The Senator referred to the current law as being on the Bataan death march for clean energy,'” he explained. “The more I think about what was said, the more offended I get as a combat veteran.”

Let that sink in for a minute. According to an elected representative of the people of Ohio, a policy that has lowered electricity bills, stimulated economic growth, reduced greenhouse gas emissions, and helped spark a clean energy sector that employs more than 25,000 people is on par with an internationally recognized war crime that killed 10,000 American and Filipino soldiers. Not only is such a statement utterly absurd, it insults the memory of the men who died (and those who survived) either on that march from Bataan or in the nightmarish prison camps that followed.

Did I mention that April 9 marked the 72nd anniversary of the surrender at the Bataan Peninsula and the first day of this horrific six-day march.

While Sen. Seitz may dismiss the connection, there is a reason why the United States military has invested hundreds of millions of dollars into renewable energy and energy efficiency – it saves money and, more importantly, lives.

Fossil fuel boosters love to claim that hydraulic fracturing will allow the US to drill its way to energy independence. But, as Brad Plumer explains,

Even if, one day, the United States produces enough oil to satisfy its own needs, it still won’t be entirely “independent” from the rest of the world. That is, the US economy will still be vulnerable to supply shortages or turmoil in the Middle East (for instance). There’s a reason for that. Oil is relatively easy to trade on the global markets.

Because oil is fungible international commodity, the US military will continue to maintain a vital interest in it. In a 2010 article, Roger J. Stern estimated that the US spent at least $6.8 trillion to secure oil reserves from 1976-2007. He calculated that the military costs of securing oil supplies from the Persian Gulf “exceeds the value of Gulf petroleum exports in all years except 1990 and the value of US petroleum imports from the region by roughly an order of magnitude.”

In other words, the US government is spending substantially more money to secure Middle Eastern oil reserves than the oil itself is worth. Stern concluded that, rather than trying to increase the supply of oil, we should curb demand by investing in energy efficiency, as this strategy “would address the core problem.”

Our reliance on fossil fuels has a direct impact upon the performance and flexibility of the armed forces. At least 70% of all tonnage on the battlefield is fuel, leaving the military highly vulnerable to energy market volatility. According to the Department of Defense, the military spent $13.2 billion on fuel for its operations in 2010. Due to the difficulty of delivering fuel to forward operating bases, fuel costs can often exceed $400 per gallon.

This dependence on fossil fuels also creates operational challenges. Infantry soldiers in Afghanistan carry 26 pounds of batteries on missions to power their equipment. This weight hinders their mobility and increases the physical strain on their bodies. That’s why Tremont Electric, a Cleveland-based clean energy company, is working with military contractors to integrate their kinetic energy device, the nPower Peg, into body armor.

And just as Napoleon once said that an army marches on its stomach, today’s military runs on its fuel and water convoys. These convoys are highly vulnerable, however, and became a favorite target for militants in Afghanistan and Iraq. The DoD reports that at least 3,000 US soldiers and military contractors were wounded or killed in raids on such convoys from 2003-2007. This breaks down to roughly one casualty for every 24 convoy trips.

Veterans like Dan Sawmiller and Aaron Jewell are well aware of this intimate connection between energy security and national security, as they saw it every day on the streets of Baghdad. But Sen. Seitz has chosen to demean their service and ignore their voices, because he serves the interests of ALEC and its funders in the fossil fuel industry.

“Clean energy has proven to be a great deal for Ohio’s homeowners and businesses,” Mr. Sawmiller said. In a letter sent yesterday to Senate President Keith Faber (R-Celina), he called on the GOP leadership “to demand respect for the sacrifices that Ohio’s soldiers have made for generations” asking for a more dignified way to debate legislation.

If you are also tired of the Bill Seitz’s continued insults and bloviating, take a stand. Call Sen. Seitz’s office at (614) 466-8068 or send him an email demanding that he apologize to our veterans and stop his mindless attacks on Ohio’s clean energy standards.

GOP beware: Ohio overwhelmingly supports clean energy

ohio statehouse
ohio statehouse

The Ohio Statehouse (courtesy of Wikimedia Commons).

Well, the Ohio GOP is at it again. After Senator Bill Seitz (R-Cincinnati) failed to even get the support of his own caucus for SB 58, his bill to mangle Ohio’s renewable energy and energy efficiency standards, the GOP leadership has decided to pursue a new course – just letting FirstEnergy decide what to do.

On Friday, Senator Troy Balderson (R-Zainesville) introduced SB 310, a bill to immediately and indefinitely freeze the efficiency and renewables standards at 2014 levels, which would cap them at roughly one-tenth and one-fifth of the final numbers, respectively. The bill looks an awful lot like one that FirstEnergy tried to sneak through the lame-duck legislature under the cover of night in November 2012.

I won’t dive too deeply into the details of the bill or the parade of horribles it will unleash on Ohio, as it has been covered pretty effectively by other outlets; I want to focus on a different perspective, instead. Midwest Energy News has a thorough, useful primer, and the PD was actually ahead of the game by denouncing the bill as “misbegotten” and noting it would take Ohio backwards into the dark, coal-stained days of its past.

Plunderbund goes into great detail on the history and benefits of SB 221, the bill that established the state’s energy standards in 2008, and the likely consequences of SB 310 – higher energy bills, billions in lost economic activity, thousands of jobs foregone, air and water pollution, etc. As the post rightly notes,

Senator Faber made it clear that he hopes to rush this bill through the legislature and have it on the Governor’s desk before the May recess. The GOP is counting on the idea that you aren’t paying attention to this issue or that you will buy into the misinformation they are spreading. The opponents of SB 221 are not looking out for the interests of Ohioans. They are simply defending the economic interests of the fossil fuel industry and electric utilities…

The Ohio GOP is not targeting SB 221 because it has failed to work; they’re targeting it precisely because it has worked so well. In order to defend the well-being of economy, environment, and the people of our state, Ohioans need to protect SB 221.

As the French say, précisément.

But as I said, I wanted to focus on a different angle to this story. Proponents of SB 221, including Senators Seitz and Faber, continue to claim that they are standing up for the interests of ordinary Ohioans, not just their utility company benefactors. Sen. Faber claimed this bill is “based on evidence and science,” while Sen. Seitz, who loves to call his opponents “enviro-socialist rent-seekers,” repeatedly argues that the existing standards “constitute a hidden electricity tax on consumers.”

One would assume that if the standards were truly nothing more than a hidden green tax to benefit a bunch of socialist treehuggers, ordinary Ohioans would be universally opposed to it and happy to call for its appeal. Not quite.

In a poll conducted during February 2013, Ohioans demonstrated their support for the state’s energy mandates. Almost 80% of respondents expressed support for existing policies to require that at least a portion of electricity be generated from clean energy sources, while 65% indicated that they specifically support increasing renewable energy generation as a replacement for coal and natural gas.

Last November, Small Business Majority surveyed Ohio’s small businesses to get their views on the subject. They found that 53% of the state’s small businesses support SB 221 in its current form, while just 43% stood opposed. Moreover, 65% of those surveyed said that renewable energy “can have economic benefits for small business owners, such as lowering utility bills and providing new business opportunities for entrepreneurs.” Ohio’s small businesses know that the mandates have helped drive the development of a vibrant clean energy sector in the state, which already employs more than 25,000 people.

But even more surprising were the results of a survey last July from the Yale Project on Climate Communications. While the main headlines included the fact that 70% of Ohioans believe climate change and occurring, and 49% believe it is manmade, there was some information buried in the report that is germane to this debate. According to the study,

A majority (59%) supports requiring electric utilities to produce at least 20% of their electricity from wind, solar, or other renewable energy sources—even if it costs the average household an extra $100 a year. Comparatively few (35%) would oppose this policy.

Rather than fearing the potential economic impacts of SB 221, Ohioans have embraced them with open arms. That’s because they know that the benefits of the state’s energy mandates far exceed any potential costs. In the same survey, 43% of respondents felt that switching from fossil fuels to clean energy would increase employment and economic growth. And Ohioans want their leaders to act now. Majorities – 54% and 56%, respectively – want Governor Kasich and the state legislature to do more to address climate change, including ramp up clean energy generation.

So the Ohio GOP and their friends at the big utility companies can continue to delude themselves that writing love letters to coal-fired power plants is a winning campaign strategy. But if they sow these seeds of discontent this spring, they’re going to have to reap them in November.

If you care about water, you need to worry about energy production

lakeshore power plant
lakeshore power plant

FirstEnergy’s Lake Shore power plant, which is slated to close this fall, sits along the shore of Lake Erie on Cleveland’s east side. Thermal pollution from the plant has historically prevented the waters near the site from freezing over in winter (courtesy of WKSU.org).

This article is cross-posted from Drink Local. Drink Tap., Inc.

Saturday was World Water Day 2014. This year’s theme centered on the water-energy nexus, a topic which has become increasingly important in recent years.

According to the United Nations, energy production currently accounts for 15% of global water use, a number which is projected to grow to 20% within the next two decades. In the US, this number is significantly higher; the US Geological Survey estimates that electricity production alone makes up 49% of all water use.

Unfortunately, people tend too often to overlook the water-energy nexus until a catastrophic event happens. Water plays a vital role in the entire lifecycle of energy production, and it remains extremely vulnerable to the deleterious consequences that may arise from each step in the process – from extraction to refining to generation to distribution and beyond.

We know, for instance, than at least 20% of streams in West Virginia are heavily degraded due to mountaintop removal mining, an incredibly destructive form of coal extraction. In addition, we have seen several recent mishaps at other stages the process, whether it was the massive Freedom Industries chemical spill on the Elk River (refining), Saturday’s oil tanker spill outside of Houston (distribution), or the major coal ash spill on the Dan River.

Thermal pollution and water quality

But there exists another, less understood impact of energy production on freshwater resources – thermal pollution. The US gets 91% of its electricity from thermoelectric power plants; this category largely includes nuclear power plants and plants that run on fossil fuels. Thermoelectric plants generate massive amounts of heat during electricity generation process. This heat builds up within the plant and forces plant operators to draw in huge amounts of freshwater to cool the generators.

water withdrawals for power production

Daily water withdrawals for power production by state. As the map shows, water use is particularly high in the Great Lakes region (courtesy of the US Geological Survey).

Once-through cooling systems, which take in water once for cooling and then discharge it back into waterways, make up 31% of the US’s power plant fleet. These systems require 20,000-60,000 gallons of freshwater for cooling per megawatt hour (MWh) of energy produced. As a result, the Sierra Club estimates that power plants suck up more than 135 trillion gallons of water (PDF) each year for cooling alone.

This staggering total exacts a serious toll upon aquatic environments. Dicharged water temperatures are, on average, 8-12ºC warmer than the intake temperatures. As Madden, Lewis, and Davis noted in a 2013 study,

Aquatic organisms are highly dependent on specific thermal conditions in aquatic environments; water temperatures above or below optimal thermal regimes can cause stress or even death.

Such thermal pollution can negatively alter aquatic ecosystems in a number of ways. It can reduce the solubility of oxygen, stymie animal growth rates, change nutrient cycling processes, and increase the toxicity of chemicals like heavy metals and pesticides. Accordingly to Madden, Lewis, and Davis, increasing water temperatures by 7ºC has been shown to halve key biological processes, such as growth and reproduction. It’s no surprise, then, that power plants are responsible for the deaths of trillions of fish each year.

How water quality affects energy production

Interestingly enough, however, elevated water temperatures can also harm the efficiency of thermoelectric power plants. As water temperatures increase and stream levels drop, both the suitability and availability of cooling water decreases. During the severe heat wave that struck Western Europe in the summer of 2003, France saw its nuclear energy capacity fall by 7-15% for five consecutive weeks. This event marks a harbinger for our future in a warming world.

Climate change will reduce thermoelectric power production

According to a 2013 article in the journal Global Environmental Change (paywall), climate change will ensure that river temperatures increase significantly for a large swathe of the planet, while low river flows (lowest 10th percentile) will decrease for one-quarter of the global land surface area. Throughout much of the US, mean river temperatures are projected to increase by at least 2ºC, while high water temperatures will climb by 2.6-2.8ºC.

This spike in high water temperatures will be particularly critical for power plants, as they will occur during the period at which both water temperatures and energy demand are highest – the peak of summer. The Clean Water Act sets restrictions on the maximum temperature of water withdrawn and discharged by power plants; while the specific thresholds may vary by state, the temperature is commonly set between 27ºC and 32ºC. Research shows that more than half of all power plants with once-through cooling systems already exceed these numbers, demonstrating the vulnerability of the electricity system to global warming.

Using these numbers, van Vliet et al projected the impact that climate change will have on thermoelectric power plants (paywall) due to the combination of higher water temperatures and decreased river flows. They found that summer capacity for these plants will fall by 4.4-16% from 2031-2060. Moreover, these plants appear extremely sensitive to major reductions (greater than a 90% drop) in output as a result of global warming; the same study concludes that these events will increase nearly three-fold.

The Great Lakes region appears particularly vulnerable to falling electric output in a greenhouse world due to its heavy reliance on an aging fleet of coal-fired power plants. The National Climate Assessment notes that 95% of the Midwest’s electricity generating infrastructure (PDF) will likely see declines in output due to higher temperatures. As climate change increases stress simultaneously on aquatic ecosystems, drinking water supplies, and electricity production, potential conflicts over water uses will almost certainly increase among stakeholders.

Those of us who wish to protect our vital freshwater resources, like the Great Lakes, cannot afford to focus solely upon this sector, given its inextricable links to other areas. We need to worry as well about the stability of our climate and the makeup of our energy system. Renewable energy technologies use substantially less water than fossil fuel plants and will help shift us away from carbon-intensive energy sources. A 2012 study shows that if the US invests heavily in energy efficiency and renewable energy production, by 2050, water withdrawals and water consumption for energy production would fall by 97% and 85.2%, respectively. This shift would save 39.8 trillion gallons of water.

If we want to truly be stewards of our freshwater resources, we need to act as stewards for our climate.

Major questions remain over ‘FrackGate’ scandal after Kasich’s reversal

john kasich

This piece was written by Brian Kunkemoeller of the Sierra Club Ohio Chapter and cross-posted from Ecowatch

john kasich

Governor Kasich may have come out against fracking in Ohio’s state parks, but his actions have done little to qualm concerns about the state of environmental oversight in the state (courtesy of The Toledo Blade).

Ohio’s Gov. John Kasich reversed his position on fracking public lands in response to public outcry about the events surrounding recently released information about the state’s collusion with the oil and gas industry to conduct a shady pro-fracking PR campaign. Last week, Gov. Kasich announced that he is opposed to drilling in state parks, but the biggest concerns are still unanswered as a cloud of controversy still lingers.

“FrackGate”

In 2011, we watched as a state legislature seemingly smitten by the industry passed legislation opening public lands to fracking with handshakes and applause, despite polls showing that 70 percent of Ohioans were opposed. Ohio Sierra Club members and others had risen to the occasion by writing letters and giving testimony, but the Governor signed the bill into law, which at that time seemed to seal the fate for Ohio’s public lands.

In 2012, the Ohio Sierra Club filed the first of many open records requests to the Ohio Department of Natural Resources (ODNR) looking for e-mails between the agency and the industry and how the language of the public lands fracking bill was written. The agency didn’t respond, forcing our first lawsuit (and not our last) simply to obtain public records from the ODNR. One of the things we discovered in those e-mails was that the Ohio Oil and Gas Association had been one of a select few invited to make edits to the legislation as the bill was making its way into state law.

Late last year, amid silence from the administration on the status of opening public lands to horizontal fracking, Ohio Sierra Club filed another public request under Ohio records law. It was this request that yielded the now-famous collusion document as well as the e-mail invite from the Governor’s office that named several targets, including Robert F. Hagan (D-Youngstown), in what the state representative has since coined “frackgate.”

Stories about this will be written and re-written, as the depth of this story is only beginning to be seen. How far down the rabbit-hole the state administration has gone will always be a topic of speculation. Unless, of course, there is an investigation.

Ohio’s PR agenda

There is no question that ODNR is actively silencing and opposing Ohioans concerned about fracking. This is the same agency who recently ignored repeated requests by the citizens of Athens and county commissioners alike who were simply asking for a public hearing about proposed fracking waste disposal wells. The ODNR met citizens in Portage County with armed guards and dogs, giving a brief lecture about the history of oil and gas in Ohio and refusing to answer questions about the wells in question.

Most disturbing, citizens in Darke County (hometown of Director James Zehringer) held expert panel events about fracking, only to have handouts made by ODNR staff discrediting their information delivered to and distributed by the County Commissioners office. Ohio Rep. Jim Buchy (R-Greenville) even made a website that features videos of the ODNR staff discrediting the citizens’ concerns alongside Energy In Depth—the industry’s new pet PR firm.

How are public funds being used for these purposes? How much state officials’ staff time is being used to do PR, and by whom? What is the agency’s relationship with Halliburton, America’s Natural Gas Association and JobsOhio? When did the ODNR start working with Energy In Depth and what is their relationship?

Where does our state regulatory agency end, and the fracking industry they regulate begin?

State Reps. Hagan and Nickie J. Antonio (D-Lakewood) submitted a letter to Ohio House Speaker William Batchelder requesting legislative hearings and an investigation in to the ODNR’s agenda. If House Speaker Batchelder denies these requests, Ohioans will be forced to draw their own conclusions about whether or not the oil and gas industry has infiltrated the public process.

In fact, if there is no investigation, the public has every right to draw some very serious conclusions.

Kasich’s conundrum

The governor made stunning comments when he announced his reversal. First, that he didn’t believe that the “regulatory framework was mature enough” for fracking in parks. Second, this is why he never appointed the five-member Oil and Gas Leasing Commission before the deadline to approve public lands leases. (About that public lands leasing commission—the nominations were made by the Ohio Oil and Gas Association themselves during an e-mail exchange with the ODNR)

These are two very interesting statements.

One: if the regulatory framework is in fact not mature enough, then he apparently perceives that fracking isn’t safe enough for our public lands. The obvious question is: if it’s not safe enough for our public lands, is it safe enough for our communities? Does the governor agree that the ODNR seems incapable of regulating fracking and knows all too well about their sweetheart relationship with industry? Here’s the take from Sierra Club President David Scott:

“It seems Governor Kasich is coming to his senses after being caught up in the ongoing ‘FrackGate’ scandal. The governor now admits that the ‘regulatory structure’ is not ‘mature’ enough to allow fracking in Ohio’s parks. We agree. But the Sierra Club and our 2.4 million members and supporters understand that what is too dangerous for our parks is too dangerous for other public lands or our backyards. And everyone will agree that public officials shouldn’t be colluding with the oil and gas industry to force fracking down our throats.”

Two: is this actually about the severance tax? A Columbus Dispatch article earlier this week quotes Tom Stewart vice president of the Ohio Oil and Gas Association, “We would never compromise our position on the severance tax to get concessions on state land.” So, what Stewart is saying is that he’s not going to sue the governor for not making the appointments he wanted for the Ohio Oil and Gas leasing commission because he would rather pass a tax bill that the Ohio Oil and Gas Association admittedly wrote.

This is the real crux of the governor’s position. It explains why he’s holding off on making appointments to the leasing commission. It also explains why he left himself an out when he said he “holds the right to revisit” his opposition to fracking public lands. He’s using Ohio’s public lands as a bargaining chip.

Yes, it’s indeed a dubious business to dance with the fracking industry. Disclaimer: severance taxes on extractive industries aren’t necessarily a good thing.

So, what’s all of this severance tax business about anyway? Well, it’s actually really important and it’s become a very serious problem for the governor, though no one seems to be talking about how FrackGate and the severance tax are very much connected (except for Tim Kovach).

While already fighting an uphill battle to show job growth from fracking is anywhere near par with projections—Kasich is being outright stifled in his efforts to draw even a modest tax on the industry and follow through on his promises for Ohioans to actually benefit from fracking. Disaster struck for Kasich when Speaker of the House William Batchelder soundly defeated the Governor’s severance tax proposal that would have lowered income taxes for Ohioans and at least partially resolved significant questions about Ohio’s budget. All of that despite the fact that the Governor’s bill would have kept Ohio’s fracking tax among the lowest in the nation.

Batchelder immediately came back with Ohio Oil and Gas Association’s own Trojan horse severance tax, that marginally increased the tax from 2 percent to 2.25 percent, but grants other tax subsidies which the Ohio Legislative Service Commission shows would amount to an $8.5 million dollar loss for the General Revenue Fund [annually], including a $1.1 million dollar loss to the School District Property Tax Replacement Fund. If passed, Ohioans would lose out on any actual benefit from fracking, period. Kasich is being just plain out-dueled by his radical counterparts in the statehouse and their friends at the Ohio Oil and Gas Association.

Oddly, the governor might be in a ripe position to fight back. A moratorium on drilling and a full investigation of ODNR’s relationship with industry would certainly get their attention.

One thing is for certain—FrackGate has Ohio on notice, and the people are watching.

6 takeaways from the ODNR fracking memo scandal

fracking well
fracking well

A fracking well looms large above eastern Ohio’s rolling hills (courtesy of Inhabitat).

The Ohio Department of Natural Resources (ODNR) has found itself in hot water after the Ohio Sierra Club obtained a document that showed the agency planned to actively promote oil and gas drilling in Ohio’s state parks. The memo details ODNR’s plans to actively counter opposition from environmental groups, which it labels as “eco-left pressure groups” and “skilled propagandists,” by collaborating with industry allies and like-minded third parties, including the Ohio Oil and Gas Alliance, Halliburton, and the US Chamber of Congress.

I don’t feel like spending an entire post responding to the document; there are plenty of stories about it already. Plunderbund has an excellent piece on the scandal, which is well worth reading in full:

While the document displays a startling collusion between the fossil fuel industry and the agency that’s supposed to regulate it, one should expect little more from the Kasich administration and its allies in the Statehouse. The Ohio GOP has devolved into little more than a mouthpiece for the industry at this point.

Just last month, Tony Stewart, the president of the Ohio Oil & Gas Association, told the Dispatch that it “came up with the methodology” behind HB 375, the GOP bill to rewrite Ohio’s tax laws for the industry. The bill, which makes Gov. Kasich’s original proposal look downright progressive, guarantees that Ohio would continue to give away its natural resources for pennies on the dollar.

Despite the inherent risks associated with fracking, the Ohio GOP seems far more interested in colluding with the industry that protecting the health and well-being of its constituents and the environment of our state. The state has bent over backwards to import fracking wastewater from Pennsylvania – trucking in more than 100 million gallons in 2011 alone – despite the fact that injection wells have caused more than 100 earthquakes near Youngstown. ODNR also allows fracking companies to dispose their waste, which can contain the radioactive element radium, in municipal dumps; the Ohio Environmental Council has labeled this practice “dump and glow.”

I just have a few additional thoughts to share on this story:

  1. This story does not reflect well on John Kasich, who has consistently tried to position himself as a “compassionate conservative” and seems to fancy himself a Republican leader in the model of Ronald Reagan. Having your administration actually develop a list that demonizes environmental groups and Democratic State Senators as “adversaries” who are attempting to “create public panic” and must be taken down comes off as a hell of a lot more Nixonian than Reaganesque.
  2. Memo to Kasich spokesman Rob Nichols, part 1: If you are trying to distance yourself from a politically damaging story by claiming that the Governor’s office was unaware of what ODNR was up to, maybe it’s a bad idea to call the environmentalists who raised this issue “extremist groups.” It’s tough to distance yourself from a document by parroting its language and implicitly endorsing it.
  3. Memo to Rob Nichols, part 2: Oh, and you’re probably going to need to do a better job explaining why 8 members of the administration were invited to a meeting to discuss the strategy that exact same day that the document was drafted. I’m sure there’s a logical explanation.
  4. If the Ohio GOP honestly believes that moderate environmental groups like the Ohio Environmental Council and NRDC are “extremists” and “propagandists,” they really need to get their heads checked. I guess when you’re that far to the right, all center-left environmentalists look like “enviro-socialist rent seekers,” to quote Senator Bill Seitz.
  5. I have my doubts that administration is only pushing drilling in state parks “to ensure a balance between wise use and protection of our natural resources for the benefit of all,” as the memo claims. It’s hard to believe that the same elected officials who are going out of their way to keep Ohio’s oil and gas severance taxes substantially lower than any other drilling state – willingly forgoing at least $800 million in tax revenues – are pushing fracking because “it will provide millions of dollars to restore deteriorating park and forest infrastructure.” It’s all about better bathrooms, folks.
  6. Lastly, it’s laughable that ODNR lists friends of parks/forests groups and communities who live near state parks/forests as “allied audiences” who would share the same goals as the administration. As I’ve noted in the past, the people who bear the greatest burden from natural resource extraction are those communities sitting on the front lines. Yet, despite the fact that fracking has damaged at least 360,000 acres of land nationally since 2005 (including more than 1,600 in Ohio), neither Governor Kasich’s bill nor HB 375 specifically sets aside a single dollar from severance taxes on the industry for affected communities. I’m just a tad bit skeptical that a group of lawmakers who ignore perhaps the single most important tenet of good natural resource governance is going to oversee fracking in a way that will cause no “disturbance” to our common, public heritage as Ohioans.

Ohio’s oil & gas industry literally wrote HB 375

state rep. matt huffman

State Representative Matt Huffman (R-Lima) is the main sponsor of HB 375 (courtesy of Ohio House GOP).

As a follow-up to my piece on the horrors of HB 375, Ohio Republicans’ plan to alter the state’s severance tax on the oil & gas industry, I came across an article from The Columbus Dispatch on the potential impact of the bill to tax revenues in the state:

The state tax commissioner says the impact on Ohio taxpayers of a tax plan for the state’s burgeoning oil and gas industry — sold as a way to reduce Ohioans’ taxes — cannot be predicted.

“The bill has some significant components that would have unpredictable impacts on state revenues,” Tax Commissioner Joe Testa told The Dispatch. “Specifically, the net-proceeds model it’s based on gives us no way of knowing what net figure these taxpayers will be declaring.”

Testa joins the nonpartisan budget analysis arm of the legislature in declaring the financial impact of the severance tax in House Bill 375 difficult to ascertain. Money would go for drilling oversight, capping of orphan wells and a minor annual income-tax cut.

“It allows for credits to be taken against other taxes for severance tax paid,” he said. “That approach is a lot like the old corporate franchise tax that Ohio wisely did away with because there were too many loopholes.”

Buried at the bottom of the article, however, is a single clause in the last sentence of the piece that, while not surprising in the least, is definitely illuminating. Tom Stewart, the president of the Ohio Oil and Gas Association noted that

oil and gas interests came up with the methodology used in the legislation.

In other words, the industry wrote the language on what may be the most important piece of legislation regulating their profits in Ohio over the last 40 years.

We already knew that HB 375 amounted to little more than a massive giveaway to Ohio’s oil & gas industry. Now we have proof, straight from the horse’s mouth.

Ohio can’t afford the GOP’s massive giveaway to the oil & gas industry

fracking well ohio
fracking well ohio

A hydraulic fracturing well looms large over the Ohio countryside (courtesy of Ideastream).

In March 2012, the Ohio House of Representatives introduced HB 487, a bill which included changes to the way that Ohio taxes oil and gas extraction in the state. Ohio’s current system of regulating oil and gas production was implemented in 1972. Almost everything about the energy sector in the United States has changed drastically in the last 40-plus years; I wish I could say these regulations were included.

Ohio’s existing severance tax

Ernst & Young analyzed Ohio’s existing severance tax and Governor Kasich’s proposed changes (PDF) in 2012. E&Y compared Ohio’s tax policy to that of seven other oil and gas producing states. Of the eight states, Ohio has by far the lowest effective tax rate (ETR). The state’s combined ETR of 1.8% is 80% lower than the average in the seven other states. Based on a 2011 analysis from Policy Matters Ohio, this tax rate has cost the state millions in foregone tax revenues. From 2001-2010, the  value of the oil and natural gas extracted within the state was $8.38 billion. But Ohio collected a mere $26,017,858 in taxes – equal to 0.31% of the market value. That’s not at typo. Using these numbers, Policy Matters projected the amount of severance taxes that Ohio would collect from shale gas production from 2012-2015, compared to five surrounding states. Of the $10.77 billion in estimated value, Ohio will capture just $39.8 million in taxes. Compare this number to West Virginia and Michigan, whose 5% tax would bring in $538.4 million.

The Kasich proposal

Clearly, Ohio’s current severance tax sucks. Governor Kasich’s plan was supposedly introduced to rectify this issue. The proposal would have doubled severance taxes on oil from conventional, vertical wells to $0.20 per barrel and altered the tax on natural gas from vertical wells to the lessor of 1% of the market value of the gas or $0.03 per thousand cubic feet (mcf). It would have also priced oil and gas from horizontal wells, which is produced using the controversial hydraulic fracturing method, separately. This oil would have been taxed at 1.5% of the market value for one year, then at 4% for the lifetime of the well. Natural gas from fracking wells would have been taxed at 1% across the board. E&Y’s analysis found that this proposal would have increased the effective severance tax rate from just 1.8% to 2.7% overall; however, Ohio would still have the lowest tax rate in the region. Under Kasich’s proposal, Ohio’s ETR for an average oil/gas well would be just 40% lower. What a relief.

Ohio Republicans strike back, introduce HB 375

And yet, Ohio Republicans balked at Kasich’s plan. During budget deliberations, the plan was completely stripped out of the bill. Recently, Ohio Republicans finally offered up their alternative to Kasich’s proposal. State Rep. Matt Hoffman (R-Lima) introduced HB 375 on December 5. Shockingly, the bill has overwhelming support from the oil & gas industry.

Thomas Stewart, head of the Ohio Oil & Gas Association, issued a statement saying the bill “includes a sensible modification of the severance tax based on actual well economics.”I’m not sure what energy economics textbook Mr. Stewart is reading from, but suffice it to say he’s just a tad off the mark. Headwaters Economics issued a report in 2012 that included a list of 12 recommendations for crafting fiscal policies for the oil and gas sector. HB 375 goes against every single recommendation. So let’s compare the bill to just three of these recommendations.

1. Maintain a high effective tax rate

Headwaters argues that it is essential for states to keep a high ETR on their mineral deposits, because it provides additional resources to mitigate the impacts of drilling and allows them to invest in long-term economic development.

kevin bacon dancing

Even 1980s Kevin Bacon knows that the oil & gas industry isn’t footloose (courtesy of People Magazine).

Contrary to fear-mongering from industry reps and the Ohio GOP, the oil & gas industry is not going to flee the state and give up concessions just because the state increases slightly its pathetically low severance tax. As Headwaters notes, Montana had an ETR of 4.6% for oil and gas in 2011. Neighboring North Dakota, in contrast, keeps its rate at 9.9%. Despite this, North Dakota has seen significantly more drilling activity, and Montana’s poorly-designed tax policy cost the state $60 million in foregone tax receipts in 2010 alone.

The minerals sector is not directly comparable to other economic activities, like the service sector. Oil and gas producers migrate to where the oil and gas deposits are, not where taxes are lowest. The industry is not, in economics parlance, particularly footloose. If it were, then Texas and Alaska, where tax rates are 8.2% and 25%, respectively, would not be leading producers. There is simply no valid evidence to suggest that slightly higher severance tax rates will keep companies from drilling here.

Yet, HB 375 institutes tax rates even lower than Kasich’s proposal. It would lower the tax on conventional gas from $0.025 per mcf to $0.015 per mcf. It also repeals the regulatory cost recovery assessment fee passed in 2010 to offset the costs of land reclamation. And, for horizontal wells, it introduces a severance tax of 1% of the value of net proceeds from oil/gas sales for 20 months; this tax then increases to 2%.

2.Remove “holiday” incentives

Several states have production tax “holidays” during the early days of oil and gas production. The logic behind these tax holidays is based on the fact that, for conventional wells, there is a lengthy gap between the drilling phase and the production phase (when the oil/gas is actually flowing). This gap can be upwards of two years for vertical wells.

But this model does not apply to horizontal wells. The drilling phase for a horizontal well is compressed, and the production phase typically jump starts thereafter. The majority of oil/gas from horizontal wells is extracted during the the first two years, after which production drops precipitously – by more than 60% in just one year in most cases.

shale gas production cycle

This image from the EIA charts the production cycles of shale wells across five different shale plays.

By providing a five-year tax holiday, HB 375 effectively ensures that Ohio will forfeit the overwhelming majority of tax revenues from its oil and gas deposits. By the time that the tax rate increased to 2% in year six, it’s entirely likely that drillers may have simply moved onto the next well.

3. Guarantee adequate local share in revenue collections

A central tenet of good oil/gas policy is to guarantee that the benefits of the fuels are adequately shared with communities on the front lines of extraction. As I’ve written before, the US isn’t somehow immune to the impacts of the natural resource curse. Far from it. One can find evidence of the resource curse from horrifically high mortality rates (PDF) in Appalachia to skyrocketing crime rates in North Dakota to groundwater pollution from fracking in multiple states to increased damage to infrastructure in Texas.

HB 375 does nothing to support front line communities. Ohio’s past two biennial budgets have taken a toll on local governments. Ohio Republicans balanced the state budget by holding onto tax revenues that should have been returned to local governments. The 2014-2015 budget reduces the amount of money local governments will receive by $1.4 billion. HB 375 simply exacerbates the issue further. Under the proposal, the funds raised would go to the Ohio Department of Natural Resources to cover the costs regulating the industry, remediating abandoned wells, and conducting geological surveys for the industry. Any additional funds would go to reduce personal income taxes. This policy would disproportionately benefit the wealthy and leave those directly affected by drilling on the outside looking in.

HB 375: Great for the industry, terrible for Ohio

All told, Policy Matters Ohio found that HB 375 would cost the state $620-800 million over the next decade, compared to the Kasich proposal (which is far from ideal policy). The bill amounts to little more than a giant handout to the oil & gas industry. Ohio’s current oil/gas severance tax is a 40-year old relic of terrible policymaking. It would be a challenge to make a policy that’s worse.

Somehow, Ohio Republicans have crafted a bill so terrible that it gives existing law a run for its money. If you were looking to develop a policy that took the full advantage of our natural resource endowment and benefited ordinary Ohioans, you could hardly do worse than HB 375. But, on the other hand, if your goal was to benefit the wealthy, well-connected, and your political benefactors, you would be pressed to outdo HB 375.

This bill is egregiously bad policy. Naturally, I expect it will be on Kasich’s desk by the spring.

FirstEnergy: The Grinch Who Stole from Ratepayers

firstenergy grinch

Image courtesy of @darth, who is a freaking national treasure.

In this season of giving, FirstEnergy seems intent to give its customers the finger.

Based on Ohio law – SB221, which was passed nearly unanimously in 2008, to be exact – the state’s investor-owned utilities must provide a portion of their electricity from advanced energy sources. By 2025, when the state’s renewable portfolio standard is set to expire, the utilities are required to source at least one-quarter of their electricity from such sources; of this amount, at least half of this total must come from renewable energy sources, like solar and wind.

But recognizing the constraints of quickly ramping up green energy production in a state where it was largely nonexistent before 2009 – along with a wise desire to take advantage of economies of scale – SB221 allowed utilities to buy renewable energy from other providers or to purchase renewable energy credits (RECs) from those providers when sufficient energy is not available. These RECs are an essential component of any renewable energy program.

Unfortunately, FirstEnergy, which rejects the value of energy efficiency/renewable energy and continues to fight aggressively against the mandates, has consistently failed to meet its obligations under the law. Environment Ohio, which grades each of the state’s four major utilities based on how well they abide by the mandates, gave FirstEnergy an F in year 1 and a D- in year 2. FE has come into compliance with the mandates since this point.

But as FE continued to fight the law with one hand and tread water with the other, it decided to purchase a number of RECs to meet its renewable energy mandates. In doing so, however, it drastically manipulated the REC market, allowing it to extract millions of dollars in excessive charges from ratepayers. As Plain Dealer energy reporter John Funk writes:

In a kind of reverse Robin Hood maneuver, FirstEnergy managed to pay the highest known rates for the credits when it bought them in those early years, including some from its affiliate, FirstEnergy Solutions…

[A] management audit by Exeter Associates of Columbia, Md.,found that FES paid up to 15 times more for credits than the Illuminating Co., Ohio Edison and Toledo Edison would have spent had they just paid the fines for not buying the credits.

In fact, the cost of those renewable energy credits was higher than RECs bought anywhere in the country, before or since, the audit noted.

A consultant to the Public Utilities Commission of Ohio (PUCO) calculated that FE’s actions allowed it overcharge customers by at least $100 million. NRDC looked at the numbers and came up with $130 million in overcharges. In August, the PUCO called out FE’s malfeasance and required it to return $43.4 million to ratepayers for its manipulation of the REC market.

But rather than acknowledge its wrong doing, FE has decided it won’t go down without a fight. Instead of returning the money back to its customers, the company has filed an appeal of the PUCO’s ruling to the Ohio Supreme Court. It apparently thinks that, as long as you have the money, two wrongs make a right.

So as we approach Christmas, let’s hear it for FirstEnergy, Ohio’s largest private utility and The Grinch Who Stole $100 Million from Ratepayers.

Please pardon my awful parody of Dr. Seuss:

While all Ohioans seemed to like renewable energy a lot, FirstEnergy, who lives above downtown Akron, does not.

The company hated green energy, everything in the sector. It had no good reasons, just some straw men and specters. It could be that it was concerned about costs. It could be, perhaps, that it feared about jobs being lost. But I think that the most like reason for its tantrums and fits may have been that the policy didn’t fit its ideological interests.

Happy holidays.