Joseph Krist

Publisher

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ENVIRONMENTAL – CARBON CAPTURE AND EMINENT DOMAIN

The issue of carbon capture and its need for expanded pipeline capacity is an issue for landowners in several states. The proposal for three new pipeline projects and the need for those projects to acquire right of way from private landowners has moved the issue of eminent domain to the fore. Iowa has become the epicenter for that debate.

The debate in Iowa is pitting several interests against each other. The differences are highlighted in proposed legislation before the Iowa legislature. One bill would require that commercial solar installations not be placed on land that is rated as having high suitability for farming. It would also bar installations within 1,250 feet of the nearest residence. That bill made it out of committee. Another bill would have removed a portion of Iowa Code allowing utility companies to use eminent domain to condemn agriculture land.  That did not make it out of committee.

A third bill would restrict land purchases by the Iowa Department of Natural Resources and county conservation boards. The proposal, would cap purchase prices between 65 and 80 percent of the fair market value, depending on the parcel’s potential for farming. The underlying issue is that the sponsors of the bill want to delay the move away from fossil fuels thereby preserving the market for ethanol. After all. Iowa is the nation’s largest corn producer. That’s why the bill made it out of committee.

JUST TRANSITION – WHY IT WILL BE HARD

Legislation has been introduced in the California Assembly which would create a state funded program to transition oil industry workers to jobs producing green energy in the state. It seeks to act on the concept known as Just Transition. It is easy to forget that in environmentally conscious California, about 112,000 people are employed in California in fossil fuel-based industries. That was some 0.6% of the total California workforce in 2019. Over 70% of workers in the fossil fuel sector have employer-provided health insurance, 65% receive retirement benefits and union membership levels are at 23%.

Average salary figures in this analysis include all salaries – even that of the CEO – but they still provide a comparable indicator. Fossil fuel jobs have an average overall compensation of $130,000 (including CEOs, lawyers and frontline workers,) compared to $97,000 for solar industry workers, who are the highest paid workers in California’s clean energy sector. The jobs also address one group: Of all workers, 65% have less than a Bachelor’s degree (30% have a high school degree or less, 35% have some college or an Associate degree).

The legislation does not specify a spending figure. Union research has come up with a number of $470 million annually. Their goal is to encourage steady annual reductions in production and jobs versus three specific cut years between now and 2030. They estimate that If the fossil fuel sector should close in three large episodes (for example in 2021, 2026 and 2030) with one-third of job loss each time, then in each episode, 4000 workers would voluntarily retire, 2800 workers close to retirement (age 60- 64) would be provided with a glide-path to retirement, and 12,500 would require re-employment. It would raise average costs $833 million.

The most interesting aspect of the reaction to the bill is that it has split the response from labor. The debate reflects the clash of goals as the climate change response unfolds across the country. The coalition of unions (teachers and municipal workers) which produced the research cited here is opposed by those in the industry directly (Ironworkers, electrical workers and Teamsters). Those unions want the state to provide them employment directly through state financed infrastructure projects. Traditional, big ticket stuff.

VOTGLE DELAYS AGAIN

Southern Co. has announced another delay for the startup date for Plant Vogtle’s first reactor until early 2023 and moved the date for the second one to later that year.  The cause of the delay is paperwork. critical inspection records were missing or incomplete. The volume of missing or incomplete documents is causing a delay of three to six months in the compliance approval process. Southern said. That additional time is costing $920 million.

Based on a 2018 agreement, the extension of the schedule requires the electric other participants companies to officially vote whether the project should keep going. Southern has already approved continuing. Oglethorpe Power Corp., the Municipal Electric Authority of Georgia (MEAG) and Dalton Utilities must decide by March 8. The decision facing these municipal participants is likely to depend on the shape of cost sharing going forward.

The 2018 agreement establishes financial benchmarks which determine how much of the cost of additional delays is to be retained by Southern given its role as project manager. The owners do not agree on two things: whether the monetary benchmark that would let the other developers tender a portion of their ownership share in megawatts in exchange for not paying anymore for Vogtle has been reached, and how much Covid-19-related costs played a role. As to the latter, Oglethorpe is pretty clear – “The co-owner agreement is very clear that force majeure related costs (including COVID) have no impact on [this] provision.”

THE BATTLE AGAINST RENEWABLES HAS A GAME PLAN

The folks at the American Legislative Exchange Council (ALEC) are at it again. The conservative group is known for creating “model legislation” which it provides to supportive legislators across the country. They have campaigned against government employee unions among other things. Now, ALEC is taking its playbook on the road in the fight to stymie the growth and adoption of renewable energy.

Some form of the Affordable, Reliable, and Resilient Electricity Act would require an “electric utility regulatory agency to develop rules and procedures promoting an affordable, reliable and resilient electric grid that meets peak net load and peak demand, including during extreme weather events.” How could that be bad? Well, the legislation goes on to include provisions clearly designed to impede the adoption of renewables.

“Generation resources serving the grid meet continuous operating requirements for summer and winter peaks, including extreme weather events that necessitate on-site fuel storage, dual fuel capability, or fuel supply arrangements to ensure winter performance for several days. Intermittent generation shall be required to provide firming power up to their average output level during periods of peak net load, and the cost of that firming shall be attributed to or otherwise included in the rate structure consistent with cost-causation principles.”

The intent could not be clearer. The bill is also designed to make heretofore uncompetitive fossil fueled generation more competitive by the worst of methods – artificially driving up the cost to competitors.  “Reliable” according to ALEC means that load shedding events are extremely rare and that there are no system wide power shortages or brownouts for more than a few hours once every 10 years. By that metric, the fossil fueled utility that supplies my power fails the test so that must not be the goal.

FARE ENFORCEMENT CHALLENGED IN WASHINGTON STATE

The Washington Supreme Court heard arguments in an appeal from an individual arrested on outstanding warrants discovered through the process of enforcing fare payment on Seattle’s mass transit system.  Fare enforcement is being challenged on grounds that it discriminates against the poor and people of color.

The issue of transit fares and enforcement has risen to the fore through the pandemic. The pandemic has been the basis of decisions to suspend fares, collection, and enforcement as agencies try to help cope with limits and impacts of the pandemic across the country. This litigation argues that enforcement at other than the point of payment is illegal. The system referred to is commonly used across the country requiring either purchase of a ticket (presentable on demand) or through use of one’s smart phone.

While the case will be decided under state law, the implications of a decision against fare enforcement could be far reaching. Advocates for free transit have been hoping that temporary responses to the pandemic will become permanent. Should fare enforcement be found to be illegal, transit systems will face the issue of revenue shortfalls as paying customers would likely soon join with other riders not paying the fare.  The Seattle system has lost some 50% of its patronage during the pandemic. At the same time, it is undertaking a program to address “non-destinational riders”. Predominantly homeless passengers who have mental health or drug problems.

RURAL POWER CHALLENGES

The same economics that impeded the development of the nation’s electric grid in the 20th century continue to play out as rural electric providers deal with their unique costs related to the unconcentrated nature of their customer base. As individuals increase their installation of solar panels and utilities deal with the cost of transmission and maintenance, the utilities are targeting solar power development to generate additional income even though they provide less service.

It is part of what is driving the industry response which increasingly relies on fixed charges for electric service rather than having revenues based on kilowatt hour sales. One recent example raising the ire of customers comes from rural Colorado. The Sangre de Cristo Electric Association in Colorado serves some 13,000 customers across four counties. Many of its customers are low consumers of power and are also installing solar panels. They sell the power they don’t use back into the grid under what is known as net metering.

The vast majority of customers are residential and some 40% are second homes owners so their electricity use is lower than one might expect. If those customers install solar, the base of remaining standard use customers shrinks and revenue is impacted. So, this co-op has decided to raise fixed charges on a monthly basis from $31.83 to $46.15. At the same time, it will reduce the cost of a kilowatt hour by from 1 to 5%. The co-op also plans to commence time of day pricing to raise the cost of electricity in the hours between 5 and midnight.

It is a pretty blatant effort to suppress individual renewable energy production. The $46.15 monthly service charge ranks as the highest among the 24 large and small electrical co-ops in Colorado.  The cutoff point for determining the level of fixed charges in 590 kwh. Members who have solar panels on their homes find themselves pushing energy back onto the grid during the day, but since their use falls below 590 kilowatt hours a month, they will pay more for the power they use at night.

That’s on top of an increased fixed fee for service. Some of this reflects the longtime tension between “natives” and newcomers which have characterized life in Colorado for years. Some natives who use lower amounts of power for economic reasons will be lumped in with second home owners and see their bills actually increase. Is this good policy?

 Colorado’s 2008 net metering law that requires cooperative electric associations to credit solar-paneled homeowners with 1 kilowatt hour for every kilowatt hour they add to the grid. The legislation was designed as an incentive for homeowners considering solar panels.  In contrast, Florida’s net metering law specifies that “public utility customers who own or lease renewable generation pay the full cost of electric service and are not cross-subsidized by the public utility’s general body of ratepayers.”  

STADIUM FINANCE BACK AS AN ISSUE

A March 2020 study published in the National Tax Journal estimated that the federal government had lost $4.3 billion in revenue as a result of tax-exempt municipal bonds used for stadium construction since 2000. Now, those numbers are being cited in support of legislation to deny tax-exempt financing for stadiums. Three long time antagonists in the House have joined together to sponsor the “No Tax Subsidies for Stadiums Act”.  

The tax expenditure number pencils out to an average tax loss (or tax expenditure) of $215 million per year for the twenty-year period. The real reason for the move is in response to the ongoing investigations and scandals regarding sexual harassment at the Washington NFL franchise. It is known that the team’s unpopular owner is considering locations in the greater D.C. metropolitan area.  Many regional politicians seek to make any new stadium project as difficult to accomplish as possible. In the end, the hope is that the owner will sell the team.

It is not a major campaign issue now but the quest by the owners of the Buffalo Bills to develop a new stadium may become one. It is one of the oldest NFL stadiums at nearly 50 years old. The Bills play at the stadium under the terms of a ten-year lease to stay in Buffalo until 2023. Ownership has estimated $1.4 billion for a new stadium in Orchard Park with the majority expected to come from taxpayers.

The hope among Bills fans is that the election of Gov. Hochul to a full term will help drive a deal for the new stadium. She is after all, from Buffalo.

DROUGHT ISSUES

Lake Powell is the second-largest reservoir in the U.S. In order for the hydroelectric generation plant constructed as part of the dam to operate, the lake must maintain a water level that is at least 3525 feet above sea level. At this time last week, the lake elevation was at 3529 feet, just four feet above the critical level. Now, to address the low water condition stemming from the long term drought in the American West, a new plan will be implemented.

The states in the Colorado River drainage area agreed to the Congressionally approved 2019 Drought Contingency Plan. The agreement includes the provision that if Lake Powell is projected to possibly drop below 3,525 feet, the states upstream of the river will have a plan in place to send more water to Lake Powell. That water will likely come from three other reservoirs – Flaming Gorge on the Utah-Wyoming border, Navajo in New Mexico and Blue Mesa in Colorado. 

The process shines an even brighter light on the role of water as an economic development and survival issue in the West. Blue Mesa was significantly drawn down in 2021, and the reservoir — Colorado’s largest — hit its lowest level on record by the end of the year. The data from the U.S. Bureau of Reclamation shows that Lake Powell could pass below the critical 3525 foot level by the fall of 2022 if conditions remain historically dry. The short run impact will be on economic activity related to the reservoir. In the longer run, Blue Mesa wills serve as a real example of the competition among a wide range of water users.

The importance of hydro power is highlighted by data from the California Energy Commission. The CEC estimates that in 2020, 34.5 % of the state’s retail electricity sales were served by Renewables Portfolio Standard (RPS)-eligible sources such as solar and wind. When sources of zero-carbon energy such as large hydroelectric generation and nuclear are included, 59 % of the state’s retail electricity sales came from non-fossil fuel sources in 2020. 

That is a drop from the prior year. In 2019, over 60 percent of the state’s electricity came from renewable and zero-carbon sources. The decrease in 2020 is due to decline in hydroelectric generation caused by severe drought, as well as pandemic-related delays to new renewable energy projects. A nearly 20 percent decline in large hydroelectric generation compared to 2019 was a major driver.

In the Pacific Northwest, the Columbia River Basin contains more than one-third of U.S. hydropower capacity and generates enough electricity to power over 4 million homes. The U.S. Energy Information Administration (EIA) estimates that while some snow conditions remain below normal that 17% more electricity generation from hydropower will be available in the Pacific Northwest in 2022 compared with 2021.

EIA estimated that hydropower generation in 2021 fell by 10% in the Northwest and by 9% in the entire U.S. compared with 2020. In its February STEO, EIA forecast that U.S. hydropower plants would generate 278 million MWh of electricity in 2022, half of which would come from the Northwest. This would be an 8% increase in U.S. hydroelectric generation from 2021. Overall, EIA said it expected hydroelectricity to account for 7% of total U.S. electricity generation in 2022.

INDIAN GAMING AT THE SUPREME COURT

The Restoration Act of 1987 established a federal trust relationship with the two Texas tribes – the Tigua (the Ysleta del Sur Pueblo) and Alabama-Coushatta. The legislation included a provision barring the Tigua and Alabama-Coushatta from conducting gambling prohibited in Texas. The Tiguas own and operate the Speaking Rock Entertainment Center. Games offered include traditional bingo and electronic machines that resemble casino-style slot machines and are based on bingo principles.

The State of Texas has sought to limit the tribe’s casino operations on several occasions gaining favorable rulings from the U.S. Fifth Circuit Court. A 1994 5th Circuit Court of Appeals decision known as Ysleta I held that federal law prohibited gambling on Tigua (also known as Ysleta del Sur Pueblo) and Alabama-Coushatta land. The 5th Circuit rulings have meant that the Tigua and Alabama-Coushatta tribes of Texas are the only Indigenous people in the United States without a recognized legal right to offer gambling. For the Tiguas, the casino is the primary source of funding to the tribe and its provision of services for education, housing, and health.

The Tigua argue that the Restoration Act does not allow the state to regulate tribal bingo, the basis of the games it currently offers. The U.S. Department of Justice has reversed the position of the prior administration that supported the 5th Circuit rulings. Now, DOJ is being asked by the Court to weigh in on the matter. In the immediate term, that allows the entertainment center to continue to operate. The new Supreme Court order does not give the Justice Department a deadline for filing a brief. The step will cause the appeal process to be extended by several months.

HYPERLOOPS

While some localities consider hyperloops or some variation of them for their transit needs, the concept is slower to gain acceptance generally. The latest example comes from Texas. The North Texas Regional Transportation Council (RTC) recently revised its policy on developing a high-speed corridor to focus solely on high-speed rail, eliminating plans to build hyperloop tech into the corridor. The RTC is seeking to build a high speed connection from Dallas to Fort Worth.

The announcement reflected the concerns that many have with the hyperloop concept.  The Commission’s lead planner said “hyperloop is still a developing technology with no clear path to approval, and including it in the corridor’s plans could delay development.”

PUERTO RICO

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) authorizes the Oversight Board to approve and amend Puerto Rico government spending independent of the legislature’s actions. Those provisions anticipated the delaying tactics and outright noncooperation on the part of the Puerto Rico Legislature. Now that the Legislature has failed to pass the necessary authorizations to balance the budget and pay debt service, the Board must act on its own.

To that end, the Board has approved a $23.5 billion General Fund budget for the current fiscal year. The budget provides some $1.09 billion of current year revenues for debt service. The payments will be used to cover debt service on general obligation capital investment bonds, capital appreciation bonds, Sales and Use Taxes Contingent Value Instruments, and rum cover tax Contingent Value Instruments. Mindful of the politics of pensions, the approved budget includes $1.42 billion to be contributed to the government’s pension trust and $1.3 billion to active and retired government employees who never received their investments in the Systema 2000 pension system.

Other categories of debt remain to be restructured. The Highway and Transportation Authority has some $6 billion of outstanding debt. The Board has recommended that tolls on the Authority’s facilities be raised. The recommended toll hikes would result in increases of 8.3% each year fiscal 2022 to fiscal 2024 and then they should increase by the inflation rate plus 1.5%. That may be a hard political lift given that tolls have not been raised since 2005. The PREPA restructuring remains incomplete. The Board is expected to submit its proposal for a Plan of Adjustment for the PREPA debt by April 15.

UPDATES

Last week, we commented on a proposed bill which would have provided financial incentives to communities willing to adopt state standards for renewables siting. The bill had support from a number of constituents. Nonetheless, the bill is advancing through the legislature without the funding provision. The issue seems to be the lack of a dedicated source of funding for the plan. The bill in its current form establishes minimum statewide standards for commercial renewable energy system siting for communities that choose to adopt them.  It makes no mention of funding.

New York’s MTA reported its highest daily patronage last week as ridership exceeded three million.

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