NEWS OF THE DAY:
Deregulation before subsidies: Order matters
Eli Dourado, The Center for Growth and Opportunity, November 9, 2021
One not-so-simple trick to ensure infrastructure deployment success
Sometimes, the order in which you do things matters.
As Elon Musk explained in an interview with Tim Dodd (Everyday Astronaut), manufacturing success at Tesla and SpaceX relies on a very specific 5-step process that must be completed in order:
- Make the requirements less dumb
- Try very hard to delete the part or process
- Simplify and optimize the design
- Accelerate cycle time
As Elon noted, it’s easy to do things in the wrong order.
“I have personally made the mistake of going backwards on all five steps multiple times. So, I have to repeat this. Multiple times on Model 3. Literally, I automated, accelerated, simplified, and then deleted.”
By recognizing and correcting the mistake of going in the wrong order, Elon ensures that his companies don’t waste resources prematurely automating or accelerating cycle time on an unoptimized design or optimizing a part that shouldn’t exist.
Likewise, among tech startups it is well known that companies are supposed to find product-market fit before they scale. If a company scales based purely on the founder’s vision, it risks losing an enormous amount of investor funds on a product that doesn’t meet a market need. If, instead, the company finds product-market fit first, the money needed to scale is less likely to be wasted.
The Biden administration is planning to massively scale our country’s infrastructure as part of his clean-energy agenda. This infrastructure deployment is just like a production line or a tech startup entering a new market. Order matters.
We need to deploy all kinds of new clean infrastructure in the coming years: new power plants, transmission lines, charging stations, and more. Each kind of infrastructure is different, but the two main steps for moving forward with scale are the same for all of them:
- Remove regulatory barriers, inefficiencies, and red tape so that deployment can rapidly scale.
- Pay for the infrastructure, either directly or through subsidies.
Remember, order matters.
We live in a funny era, in which money is cheap. Interest rates remain low, and the public doesn’t seem especially concerned about increased government borrowing or taxes. Politically, it’s easier than ever to spend a few trillion dollars on the administration’s priorities, including clean infrastructure deployment.
What remains politically hard is the regulatory reform needed to ensure that infrastructure deployment can scale. It’s relatively easy to extend production tax credits. It’s harder to simplify permitting so that it’s straightforward to actually deploy geothermal energy. It’s relatively easy to subsidize new direct-current, high-voltage transmission lines. It’s harder to revise the siting regime for transmission so that it doesn’t have so many veto players.
Order matters. If we subsidize geothermal without fixing the paperwork burden, subsidies will be wasted on unnecessary applications and bottlenecks as the Bureau of Land Management struggles to keep up with permit approvals. If we subsidize transmission lines without fixing the siting regime, we will be paying people to wade through the delays and legal expenses associated with vetocracy.
In these cases and in others, it makes sense to address the major bottleneck to scaling first, then add the subsidies as necessary. It may turn out that by doing so, fewer subsidies are needed and that money can be reallocated to do greater good elsewhere. But even if the same amount is spent on subsidies, the money will go further if the obstacles are removed first.
The tendency of our political system, of late, to take only the easy steps is troubling. It reflects a lack of seriousness and a genuine dysfunction. Unlike an Elon Musk company that optimizes parts that shouldn’t exist to fulfill the wrong requirements, the US government can’t fail. By necessity, there is no way it can become deprived of funds because of its poor decisions and therefore be forced to make way for a better government that makes smarter choices.
We can vote a particular party out of office, but that is cold comfort when the dysfunction is shared by all parties and when the voters themselves care about culture war issues far more than the current mismanagement.
Congress just passed one infrastructure bill implementing the Biden agenda, and it may pass one more. Like most significant legislation, these bills reflect a lot of compromises.
If the parts of the agenda that rely on building new things in the physical world are to succeed, this legislation should be quickly followed by another bill—one that strives to eliminate the bottlenecks to building in the physical world. This third bill could cover, among other things, NEPA reform, transmission siting, creation of new categorical exclusions, and incentivizing state governments to decrease land use regulation.
This prescription is a tall order because the work to achieve consensus on these issues is challenging. But it is necessary—and because it should have happened first, we are already behind.
Biden ‘Antagonism’ to U.S. Oil Industry is Strange, Historian Says
David Wethe, Alix Steel, Bloomberg, November 8, 2021
While President Joe Biden has been “jaw-boning” OPEC nations to pump more crude, the rest of the world finds it odd that the leader of the top oil producer isn’t paying more attention to domestic shale, said oil historian Daniel Yergin.
“There’s a basic antagonism and lack of interest — indifference — to the industry, although it has 10.5 million people work in it,” Yergin, vice chairman of IHS Markit Ltd., said in a Bloomberg Television interview on Monday. “The rest of the world is saying this is really strange.”
As Biden considers tapping the Strategic Petroleum Reserve to stem a surge in gasoline prices, Yergin said there isn’t much the White House can do. Talk of releasing crude from the reserve always comes up anytime gasoline prices are high, he said.
“President Biden has been in Washington a long time and knows that high gasoline prices are not good for incumbents,” Yergin said. “They’re obviously worried about 2022 and people do vote their wallets.”
How the Energy Department views rising gas prices
Andrew Freedman, Axios, November 9, 2021
The discussions over tapping the U.S. Strategic Petroleum Reserve in a bid to bring down gas prices continue at the highest levels of government, Deputy Secretary of Energy David Turk told Axios.
Why it matters: The Biden administration is trying to strike a delicate balance between emphasizing a push to pour hundreds of billions into clean energy technologies, including electric vehicle charging stations, while at the same time dealing with an energy supply crunch driving up prices.
Details: Turk, speaking to Axios at COP26, said if past administrations had made greater strides in renewable energy technologies, we might not be feeling the squeeze quite so acutely. Gas prices have increased by $1.314 since the same time last year, according to the Energy Information Administration.
“There is no doubt we need to have affordable, reliable, resilient energy in our country and other countries. It’s a political imperative. It’s necessary for people’s jobs, livelihoods, etc, etc. And at the same time, we have a climate imperative,” Turk said.
“And so of course, we’re looking at whether it’s the SPR or other mechanisms, but we [have a] variety of different tools in the tool belt,” Turk said.
Turk said the conversations he’s been a part of with senior White House officials have a “seriousness of purpose” that focuses on “what’s hurting real people in the real world.”
Context: Democrats are looking for ways to shield the public from some of the impacts of rising costs, including gas prices. The rising cost of living likely played a role in the defeat of Democratic gubernatorial candidate Terry McAuliffe in Virginia last week.
AIDEA receives West Susitna Road funding
Shane Lasley, North of 60 Mining News, November 5, 2021
The Alaska Industrial Development and Export Authority Oct. 27 announced the receipt of $8.5 million in funds for the advancement of predevelopment work for the West Susitna Access Road project, which would extend into resource-rich areas west of Cook Inlet in Southcentral Alaska.
“Investing in access projects creates the infrastructure necessary to bring natural resources to market, which creates good-paying jobs for Alaskan families and generates local tax revenue that helps fund social and emergency services,” said AIDEA Executive Director Alan Weitzner.
Originally proposed under Alaska’s Roads to Resources program, the West Susitna Access Road would run about 100 miles northwest from the Port MacKenzie area, opening up the west side of Cook Inlet to responsible natural resource development.
Access to this region west of Cook Inlet is expected to open many new opportunities for Alaskans, who will have easier access to 6 million acres of recreation area. In addition, the state’s economy is expected to enjoy growth from the resource development opportunities offered by providing less expensive access to the gold, silver, copper, strategic metals, oil and gas, agricultural lands, timber resources, and alternative energy options in this region.
“This important project makes it possible to travel by road from the Point MacKenzie/Big Lake area to the millions of acres on the west side of the Susitna River, opening access to strategic minerals and known proven oil and gas reserves,” said Alaska Gov. Mike Dunleavy. “That’s the role of government – building transportation infrastructure that leads to economic development while ensuring that those resources are developed responsibly.”
The Matanuska-Susitna Borough and AIDEA had previously entered into an agreement to look into this potential road. Under the agreement, AIDEA and the borough each committed to investing $50,000 towards studies for the road if a third party would also contribute funds.
Nova Minerals Ltd. committed $100,000 to assist in funding further works that would be needed to advance the road toward its 6.2-million-ounce Estelle gold project in the Western Susitna area.
Created by the Alaska Legislature in 1967, AIDEA is the development finance arm of the state of Alaska. With a primary objective of spurring economic growth in Alaska, AIDEA has financed hundreds of projects around the state that range from small business loans to the development of large infrastructure projects. As a result, AIDEA has been responsible for directing more than $3.5 billion in economic development in Alaska and has paid $439.7 million in dividends to state coffers since 1997.
Alaska’s fiscal year 2022 budget provided AIDEA with $8.5 million to carry out the third and final phase of a feasibility analysis for the Western Susitna Access Road.
“Access is a common barrier to developing Alaska’s resources,” said AIDEA Chair Dana Pruhs. “With this funding from the legislature to advance predevelopment work, AIDEA can help facilitate access for the Mat-Su Borough to develop purpose-built infrastructure.”
To complete this phase, AIDEA will procure a third-party contractor to assist with the application process with the U.S. Army Corps of Engineers and begin an environmental impact analysis under the National Environmental Protection Act, an important step in gaining federal permits for the 100-mile road.
AIDEA anticipates having this firm selected and under contract by the end of the year.
Highways, ferries and more: What the federal infrastructure bill will fund in Alaska – Alaska Public Media
Liz Ruskin, Alaska Public Media, November 8, 2021
The U.S. House on Friday passed an enormous infrastructure bill, sending it to President Biden for his signature. All three members of Alaska’s Republican delegation to Congress voted for the $1.2 trillion bill — reflecting how important the bill is to the 49th state.
In federal highway funding alone, the legislation will send Alaska $3.5 billion. That’s just the start.
“I think it’s very big for Alaska. Very far reaching,” said Garrett Boyle, federal co-chair of the Denali Commission, whose mission is to improve Alaska’s infrastructure.
Boyle took note of the large amount of money for ports, and the bill’s emphasis on broadband internet. Alaska will get at least $100 million from one broadband program in the bill. Also, there’s a substantial sum water and sewer projects.
“One thing I am super excited about that hasn’t been getting a lot of press is $3.5 billion for the Indian Health Service to build sanitation facilities,” Boyle said. “So I think we might finally see a significant advance in building out water and sewer projects in villages that have never had piped water before.”
The bill has $75 million for the Denali Commission too, in addition to its regular federal funds.
“That’s about six times what we’ve been getting in the annual appropriation process in recent years. So, it’s a pretty significant expansion of funding,” Boyle said.
The bill was largely negotiated last summer by a group of 10 senators — five Democrats and five Republicans, including Sen. Lisa Murkowski. The bill doesn’t have a lot of direct earmarks to any particular state but read between the lines and you can see Murkowski’s work, particularly when it comes to ferries.
The bill, for instance, creates a new program for “essential ferry service” for rural areas.
The bill doesn’t say that the Alaska Marine Highway System is the beneficiary of that $1 billion program but consider the eligibility criteria: The ferry has to serve at least two rural communities that are at least 50 miles apart. Most of the country’s 200 ferry systems travel much shorter distances. Boyle, who was a top Murkowski aide until August, said that provision was the senator’s doing.
“I’m biased, because I was still working for her at the time, but I would say she’s 100% responsible for that,” Boyle said.
The bill also has $250 million for a pilot project to buy ferries running on electricity or some other low carbon emission fuel. Again, the Alaska ferry service isn’t specified by name, but the bill says at least one grant must be “for a ferry service that serves the state with the largest number of Marine Highway System miles.”
No other state comes close. Alaska’s ferry system is relatively small in terms of passengers served, but it accounts for more than half of all the ferry-route miles in the United States.
The infrastructure bill has a lot of the Biden administration’s agenda, including renewable energy programs and improvements to the electrical grid that will support more green energy. There’s more in the so-called social infrastructure bill, which House Democrats are still working to pass.
Mike Navarre, a former state commerce commissioner and former Kenai Peninsula Borough mayor, has been talking up the infrastructure bill on a radio show he hosts on KSRM.
“This is good for America, and it’s great for Alaska,” he said.
His mostly conservative audience appreciates the benefit of infrastructure spending, by and large, he said. Even though a lot of the money Alaska will get is aimed at improving rural infrastructure, Navarre said the impact will ripple through the whole state.
“Anytime there’s spending in an economy, the urban areas are the areas that benefit the most, because that’s where the businesses are located. That’s where the freight comes through etc., etc. So everybody in Alaska will benefit,” he said.
Republicans at COP26 Have a Message: We Care About Climate Change, Too
Timothy Puko, The Wall Street Journal, November 8, 2021
Republicans have been such a rare sight at international climate conferences that a Utah congressman borrowed a line from a support group to introduce himself at the COP26 summit.
“My name’s John Curtis. And I’m a Republican,” he said, drawing laughs from fellow lawmakers and others at a panel session over the weekend. “And I’m at COP. How cool is that, right?”
Mr. Curtis is among a handful of Republicans here working to persuade skeptics that climate change isn’t just a one-party issue. Others include Rep. Dan Crenshaw (R., Texas) and Rep. Garret Graves (R., La.), Republican leader of the House Select Climate Committee.
In an interview, Mr. Graves said that many Republicans now want to champion the role U.S. companies and technology can play in transitioning the world to cleaner sources of energy. To help, they must bolster U.S. credibility by assuring allies and business leaders that U.S. policy won’t swing wildly with a new president or Congress every few years.
“Showing that consistency is important,” he said.
Republicans have a special challenge because of their long history opposing the process around climate diplomacy. Former President Donald Trump pulled the U.S. out of the Paris climate accord, while former President George W. Bush refused to implement the Kyoto Protocol, a deal struck before he was elected.
“They’re on the sidelines,” Sen. Ed Markey (D. Mass.), said of Republicans at the conference. He said representatives of other countries are more concerned about whether Democrats have the votes to carry the $2 trillion social-spending and climate package in the Senate.
“They’re asking about our political process and we’re telling them it will produce the 51 votes,” Mr. Markey said in an interview.
In a speech at the summit Monday, former President Barack Obama took note of the political divide over climate change in the U.S. and said the country needs more Republicans to support climate action.
“Saving the planet isn’t a partisan issue,” Mr. Obama said. “I welcome any faction within the Republican Party of the United States that takes climate change seriously. And that may be a rare breed right now but keep in mind such Republican elected officials used to be commonplace.”
Mr. Obama went on to compliment former President George H.W. Bush, who actively tried to rally nations behind action on climate change and who championed legislation that strengthened the Clean Air Act during his presidency.
Democrats have a bigger presence than Republicans in Glasgow, with more than 40 expected to be here this week, many of them eager to tout House passage late Friday of the $1 trillion bill to boost infrastructure spending. Some are seeking to persuade the international community that they can quickly follow the infrastructure bill with a larger bill that includes $555 billion in spending aimed at cutting greenhouse-gas emissions.
Mr. Graves’s GOP delegation shrank to four after Rep. David McKinley (R., W.Va.) canceled to stay in Washington, where he was one of 13 Republicans to vote for the infrastructure bill Friday night.
Sen. Chris Coons (D., Del.) touted a delegation he headed to Glasgow as bipartisan, but the group had just one Republican, moderate Sen. Lisa Murkowski (R., Alaska).
Ms. Murkowski joined Mr. Curtis at an event called “Bridging the Divide on Climate” hosted
by the Atlantic Council, a think tank.
During a question-and-answer period from reporters at the end, Ms. Murkowski said that she is concerned about too few Republicans supporting climate legislation. If just one or two sign on, any bill is vulnerable to being overturned later, and businesses will expect that and delay investments, she said.
“We need more than me and John,” she said.