With energy prices soaring, Consumer Energy Alliance examined the impact shutting down critical energy infrastructure, like Line 5, would have on transportation fuels in Michigan and across the Midwest. Farmers Forum looked at how the $2.2 billion increase in gas and diesel would affect Michigan.
“Even using very conservative estimates, households, businesses, and governments will spend billions more for gasoline and diesel with the closure of Line 5,” according to the analysis prepared for the Consumer Energy Alliance (CEA), a U.S. non-profit consumer advocacy non-profit. “The economic pain of this welfare loss will be exacerbated by consumer prices currently rising at their fastest pace in more than 40 years,” the report says, “adding insult to economic injury” for those consumers.
With Floridians experiencing higher energy costs every day, CEA President David Holt discusses the policy options available for the Biden Administration to help lower gas prices.
“The Biden administration is kind of continuing to move things around the edges, but we really haven’t seen an announcement for lease sales in the Gulf of Mexico or expedited permitting for oil and gas development onshore,” said David Holt, president of the Consumer Energy Alliance. “Those would really have a meaningful impact.”
CEA President David Holt spoke with The Telegraph about surge pricing in electricity markets which can leave families and small businesses vulnerable to extreme swings in energy costs.
“Extremely hot weather and extremely cold weather is going to happen,” he says. “Part of our concern is regulations that inadvertently create situations that reward volatility.
“In Texas, the lesson we learned was that surge pricing simply adds to the costs and the unreliability of the energy grid.”
Albany, NY – Today, Consumer Energy Alliance, the leading energy and environmental advocate for families and businesses, applauded the decision made by the New York Public Service Commission (PSC) to approve the contracts for the Champlain Hudson Power Express Project (CHPE) that will provide significant amounts of emissions-free, always-on clean energy that will benefit all New Yorkers.
In response, Wendy Hijos, Executive Director for CEA in New York, issued the following statement:
“This is a truly historic day for all New Yorkers – both Downstate and Upstate. The CHPE project has been under extensive and rigorous reviews, it has all of its federal and state permits and with the action yesterday by the Public Service Commission we can finally start making real, substantial progress towards meeting New York’s stringent decarbonization requirements under the Climate Leadership and Community Protection Act (CLCPA).”
“This is a solution, rather than a theoretical concept, where New Yorkers can have large amounts of reliable, constant and carbon-free energy that is being done in a cost-effective and thoughtful way, which will also strengthen our transmission grid, create jobs, improve the environment and bring economic and community development across the state.”
She went on to note, “Importantly, this project will help drive down wholesale power costs across the state with independent estimates predicting it could save consumers over $17 billion in lower costs over the coming decades. Approving the CHPE project would also reduce New York’s carbon emissions by an average of 3.9 million metric tons per year – which is equivalent to removing 44% of the passenger vehicles from the streets of New York City. CHPE will provide 1,250 megawatts of clean hydropower onto our grid that we can count on and doesn’t need back up generation or a battery.”
“New York had to start getting serious about meeting its CLCPA requirements, which requires that 70% of the state’s power generation come from renewable generation by 2030. The CHPE was crucial in meeting that obligation and it can actually be put in service soon so we can start enjoying those benefits in the near term. We thank the PSC for advancing this critical project.”
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About Consumer Energy Alliance Consumer Energy Alliance (CEA) is the leading voice for sensible energy and environmental policies for consumers, bringing together families, farmers, small businesses, distributors, producers, and manufacturers to support America’s environmentally sustainable energy future. With more than 550,000 members nationwide, we are committed to leading the nation’s dialogue around energy, its critical role in the economy, and how it supports the vital supply chains for the families and businesses that depend on them. CEA works daily to encourage communities across the nation to seek sensible, realistic, and environmentally responsible solutions to meet our nation’s energy needs.
Did you know we have an energy justice czar? Shalanda Baker is the first-ever federal official advising and coordinating these policies as the new U.S. Department of Energy’s (DOE) Deputy Director for Energy Justice. It is Baker who is helping to manage this fast-emerging civil rights issue.
And that’s a challenge. The DOE defines energy justice, which connects to the terms environmental justice and climate justice, as “the grassroots energy agenda, supporting communities threatened by polluting energy and waste technologies.” But what does that mean? And how can it help consumers across the nation who are being impacted by rising energy prices, less-reliable energy, blackouts or brownouts, and who share our common desire for an improved environment?
As the magazine Experience, which relates stories at the intersection of technology and humanity, sees it “energy justice starts with the idea that injustice is baked into today’s fossil-fuel-driven energy system.” But that’s a disturbingly incomplete and inaccurate definition.
Even Ms. Baker – whose book “Revolutionary Power” offers a cover image showing fists raised in Black Power salutes, with one fist holding a wind turbine – indicates she finds that definition inadequate. Unlike some outspoken anti-energy activists, she believes energy justice is not about fighting the fossil fuel industry but rather about ensuring that the transition to renewable energy – mainly solar and wind power – treats people and communities fairly in energy decision-making.
As a Fulbright scholar in Mexico, she says she experienced energy injustice in Oaxaca, the country’s second-poorest state when the transformation to wind energy development came at the expense of the local population.
Those concerns about the current development of renewables are certainly a welcome aspect of energy justice. But it also undervalues the need for ever-greener traditional sources of energy, like oil and natural gas, and the role they play in ensuring those on the front lines of the energy justice discussion receive adequate, affordable, reliable, and equitable energy. It also does not weigh heavily enough on the role oil and gas must play in helping us diversify our energy mixture to enable the addition of more renewable power while maintaining reliability and affordability.
The Issue of Affordability
After all, isn’t affordable energy a civil right? Shouldn’t a just society strive to ensure that we achieve a net-zero future and meet our energy needs? It is clear to all experts – including the U.S. Energy Information Administration – that oil and gas must be a large part of our energy future. Just look how lack of access is affecting Americans all across the country.
The inequality posed by fuel prices – a regressive tax – on those that reside in the various socioeconomic classes is only growing. We can see it best now as fuel prices are driving soaring inflation. Gas prices are $4.09 today. One year ago, it was $2.86. You only have to do basic math to understand that an additional $1.23 per gallon every time you fill up gets expensive, and so will the cost to heat your home. Add in that the average commute to work is 15 miles one way and the average person fills up a 12-15 gallon vehicle between 45-55 times a year. That’s just fuel. That’s not even the pass-on costs to food and products or even home heating and cooling.
That’s just costs, what about the violence?
Ms. Baker’s definition also disregards the countless people, including construction crews and other blue-collar workers, who are being tormented, threatened, and hurt by lawless rioters at pipeline construction sites, anti-energy activists bullying people at city council and community meetings, or attacks on rural farmers for leasing their land to renewable developers.
Isn’t it an injustice when 1,000 protesters damage a U.S. Army Corps of Engineers-approved pipeline upgrade project, sitting atop construction equipment, clashing with police, and prompting the evacuation of over 40 employees? Isn’t it an injustice when anti-wind farm protesters in 2019 blocked a road by cutting down a utility post where a Hawaiian wind farm was slated for construction, preventing wind turbines from being delivered?
What About Just Being Thoughtful?
A just society allows civil discourse and thoughtful industrial growth as part of its energy justice efforts and indeed, even as part of its fundamental respect for citizens and companies that act within the mutually agreed bounds of the law and common courtesy.
Shouldn’t energy justice apply as well when we make rash decisions to cancel or shut down a project for one community to another’s detriment? If we demand energy justice, how do we justify it by deciding which community matters more? This was the case for Murdo, South Dakota, whose 444 residents are facing ruin after working for more than a decade to prepare for the influx of people and business expected when the Keystone XL pipeline came.
Yet an Executive Order on day one of the Biden Presidency took that all away with a stroke of a pen. That has forced the residents of Murdo to look for work where the closest jobs are, 150 miles away. Shouldn’t this be part of our energy justice calculations?
Writer Brian Alexander said it best in The Atlantic when he stated that to erode small-town culture is to erode the culture of a nation.
We need to fully factor all the aspects of energy justice into our national dialogue. Certainly, energy injustice is prices that are too high for those who can’t afford it; it is no electricity on a 15-degree day; it is the lack of propane when it is the only way to warm your home; it is knowing that only the rich can afford solar power, and it is a union worker facing dangerously hostile protestors trying to trespass onto an energy project.
In a sense, energy justice comes down to ensuring that each of us has one less thing to worry about. Can our energy czar help us out?
CEA’s Wendy Hijos examines how New York officials can learn from states like California that have passed partisan energy policies that have resulted in frequent brownouts and some of the highest energy costs in the nation.
The reality is that when lawmakers make short-sighted solutions like rebates and gas tax holidays, it ignores real solutions, like building pipelines and opposing bans on natural gas that will continue to power our communities even as we evolve our energy mix.
As some municipalities and states look at limiting or removing consumer choice for heating and cooling homes and businesses, CEA examined the costly impact this would have on families in states like New York in our report “Wealth Inequality: The Hidden Cost of New York City’s Natural Gas Ban”.
Removing access to natural gas can prove costly for businesses and consumers alike. The Consumer Energy Alliance (CEA) estimates that New York City’s proposed ban on natural gas hookups would cost every household roughly $25,600.”
CEA’s third-party analysis, Line 5 Shutdown Impacts on Transportation Fuel, found that small businesses and families across Michigan would pay 11 percent more at the pump than they are paying today – over $2.2 billion annually – for transportation fuels if Line 5 is shut down. As a result, many small businesses across the state are talking about how this will affect their ability to operate and employ Michiganders.
For small business owners directly tied to fuel and transportation work, a shutdown would be even more devastating. David Rhoa, an entrepreneur from Kalamazoo, recently shared with me that fuel costs for his company’s fleet of vehicles increased more than 50 percent in the last year. He said a Line 5 shutdown would add to the significant pressure small businesses are already under and add costs during an already difficult economy. Small businesses are already under enough pressure, we don’t need to add more.
After receiving nearly $2.5 million dollars from activist groups, Gov. Gretchen Whitmer’s first act upon taking office in January of 2019 was to take steps to shut down Line 5, regardless of her campaign promise to be a champion for all Michiganders. This action came after a bipartisan law was passed in the Michigan Legislature to create a privately funded tunnel by the pipeline operator burying the segment crossing the Straits that was the concern to virtually eliminate the potential threat to the environment and water quality.
This political activism has stretched into a longer, more complicated problem that ended up triggering our neighbors to the north to invoke a 1977 bilateral treaty, sending the matter into international arbitration. Gov. Whitmer and AG Nessel doubled down, saying similarly that the Line “has imposed on the people of Michigan an unacceptable risk of a catastrophic oil spill in the Great Lakes that could devastate our economy and way of life.”
The unique challenge for Governor Gov. Whitmer is marrying two issues that must be addressed; one, her concern for the safety of the Great Lakes, and two, the fact that Michigan uses 20.5 million gallons of oil a day. The kicker: Line 5 carries 18.9 million gallons of that.
So it is curious that when a tunnel was proposed with private sector funding and approved by a bipartisan legislative majority to bury the pipeline segment crossing the Strait 100 feet or more below the lakebed, essentially entombing it, Gov. Whitmer and AG Nessel still were not satisfied. The tunnel provided a real, safe solution to provide energy that would not only be reliable but would also help save jobs, safeguard the economy, keep prices low at the pump and most importantly – protect the Great Lakes they vowed to defend. Yet, their campaign promise wasn’t actually to Michiganders, it was to the activist groups.
The problem with aligning with out-of-state activists is fourfold.
First, many don’t live in Michigan enough to care about the people that might be affected by higher prices and lack of access because they are only working to appease the dark money and otherwise anonymous funders for whom they work to stay employed.
The second is the actual economics. Pipelines are built by pipeline companies who contract space within their line to oil companies to transport their product, similar to how networks like Verizon sell service providers bandwidth to connect communities with the internet. These are done through long-term contacts since they’re dealing in bulk commodities that require long-term investments. They don’t physically own the oil or energy products they are moving. They just provide the space and transportation service.
Plus, building pipelines is a very capital-intensive undertaking, and the long-term contracts that these companies require help justify the upfront financing and investment. That’s why oil companies sign contracts for several years, even decades, which guarantees they will move their product on that line over that time period. However, because of the amount of oil pipelines can move, they are not only considered the most efficient but also the most cost-effective. The longer the contract, the cheaper the rate of transportation can be. It’s kind of like buying in bulk at Costco.
The rule of thumb is that pricing and efficiency go down by different modes of transportation based on the volume they can move per day. So pipelines take the top spot, a ship or barge follows, then train and finally – truck. The trucks you see on the road, perhaps going to your gas station, are only taking fuel the last few miles.
Also, in bulk commodities like oil, roughly 80% of the delivered cost of that barrel is from transportation to the refinery where it is priced at the intake valve. So if you can keep delivery costs low with longer contracted rates, it’s better. By canceling a pipeline, it doesn’t mean you can just add oil on another line, take another company’s place or re-route an existing line. It’s why you can’t rent an occupied apartment – until the paying tenant’s lease is up and they decide to leave, you can’t move in and sign your own lease. Remember, these long-term contracts take years to realign and the oil in those lines is often already spoken for and there may not be additional space on another line.
Third, there is no real logistical equivalent to a pipeline. The alternatives like a truck or railcar are no match for pure capacity, safety or emissions. It’s estimated that it would take 2,100 trucks heading east every day – or 90 trucks an hour – leaving from Superior and traveling across Michigan, or roughly 800 railcars to do the same job. To do this, it would also require the state of Michigan, which is notorious for its damaged highways, to develop roads and rail lines that would be able to handle the increased traffic. Then there is the question of who pays for the train tracks since they don’t have the same state-federal funding that roads already do.
Then you’ll need enough of the specialty trucks and railcars that are certified to carry hazardous materials and assume you’ll have enough drivers in the middle of a truck driver and commercial driver’s license shortage across America. These modes of transportation also rely on fuel to power their engines, which actually leads to higher greenhouse gas emissions, according to the latest study by the Energy Information Administration. It’s ironic since the stated goal of Gov. Whitmer and AG Nessel is to protect the environment. Federal data also confirms that pipelines are the safest way to move the oil our economy relies on every day, so using other modes of transit-only increases the potential risk of a spill into the environment. Yet, their craven support for shutting down Line 5 actually flies in the face of our country and Michigan’s shared goal of reducing carbon emissions. It may be the reason they give, but the fact that they continue to brush off these consequences in defiance tells us something else is motivating the governor and her AG.
Source: Energy Information Administration (https://www.eia.gov/energyexplained/oil-and-petroleum-products/)
It’s no surprise since activist goals are almost always about stopping something and rarely align with the bigger picture or more realistic solutions to the problem they point to. It’s always full ahead stop, and damn the torpedoes.
Lastly, and most importantly are the distinctions in how crude oil is refined. When people talk about oil, it is important to know that there isn’t just one type. Crude oil is a general term to describe all varieties of oil, but there are essentially four main types of oil – very light, light, medium, and heavy oils. Depending on what type of oil is being transported, a specific refinery will be needed. The crude oil transported on Line 5 is light oil. The refineries it is sent to process light oil. You can’t just bring in oil from another line if it doesn’t match up. Similarly, you wouldn’t put water and flour in a Ninja blender or an apple in a mixing bowl – their intended use has been skewed. Not to mention, the refineries also have set contracted rates that come into play.
These refineries also run 24 hours a day, 365 days a year, and require a large number of
employees to produce on average, from a 42-gallon barrel of crude oil, roughly 19 to 20 gallons of motor gasoline; 11 to 13 gallons of distillate fuel most of which is sold as diesel fuel; 3 to 4 gallons of jet fuel; and other byproducts, according to the Energy Information Administration.
Many of the solutions that have been suggested by these out-of-state activists will take time and lots of money. Both of which won’t alleviate the problem for some time and don’t account for the continued demand for gasoline and jet fuel. With roughly 2,691,704 registered vehicles on the road in Michigan and 1,100 flights per day out of Detroit – that’s a lot of fuel to bring in. While the prices we’re seeing now will go down, adding in a supply deficit would make them go back up.
Our latest economic study on fuel prices showed that families and businesses in Michigan and across the Midwest would spend at least $23.5 billion more on gasoline and diesel – a 9.5 – 11.7% increase in fuel prices over the following five years. That increase also gets passed on to food production and products, which increases the cost of everything by one-third. We’re already living through what happens when there is a shortage of fuel, and seeing its effects on literally every part of our economy. Is that really what we want to do to people in Michigan – especially now?
