Friday, May 30, 2014

The Rock Island Clean Line, RPS, and the Commerce Clause, a Constitutional Cunundrum

Rule #1 when writing a blog: Everything is funnier with “ca-ca” and doubly so when mentioning Michael Zilkha’s Picasso in the loo. 

There is just something magically funny about putting a most expensive piece of art in the crappers.  Ironically that is where this blog is being composed.  In case you missed it, a British author once did a story about Sir Paul McCartney and the private turned public debate on where their child should attend school.  It’s a great commentary about society, but it starts and ends with a childhood story about Michael Zilkha’s family keeping a Picasso in the “loo”.  Tom Utley is right and ending a blog with Michael’s Picasso in the loo is a good humorous. 

Here is a piece of news not nearly as entertaining but much more relevant to RICL and GBE .

The era of Kumbaya in the America’s infatuation with wind energy is coming to a close as people are realizing this is cheap date is becoming too dang expensive.  Ohio freezes their Renewable Portfolio Standard!  Yes the wind industry likes to point to Kansas and defeating legislator’s efforts to repeal the RPS but there isn’t much fanfare about what just happened in Ohio.    Wind is just too expensive.

In a recent New York Times article, Jay Apt, director of the Electricity Industry Center at Carnegie Mellon University, said “Renewable portfolio standards and other mechanisms of pollution control are not cost-free.”  That was about the most aggressive quote in the New York Times article as much of it was spent quoting friends of wind energy crying about partisan politics.  Michael Skelly once said it is the states who are doing innovative legislation to help wind energy and not the federal government. 

Hopefully Ohio is just the beginning as legislators realize expensive wind energy is slowing the nations economic recovery.  It still irks me that the Illinois RPS mandates 75% of its “clean” energy must come from wind energy.  You’d think that is a violation of the US Constitution’s Commerce Clause. 

Think about it.  The Illinois RPS mandates 75% of the “clean” energy be wind energy.  While it can come from Illinois or any of the contiguous states next to Illinois, it’s still protectionism.  Buying wind energy from Iowa is interstate commerce.  By refusing to recognize solar or hydroelectric energy from Iowa or Missouri, Illinois is playing favoritism towards wind.  Illinois, under Governor Quinn’s leadership, and other states are succumbing to the wind energy lobby and regulating interstate commerce with their Renewable Portfolio Standards.   The United States Constitution states interstate commerce regulating is the domain of the federal government and not the states.  This is designed so states cannot make protectionist policies.  The Commerce Clause is often the most abused piece of the US Constitution as it allows the federal government to stick its hand in anything that crosses state lines.  

How is this different than Illinois taxing Iowa corn because Chicago residents are morally opposed to corn grown in Iowa raising the pollen count in Illinois?  Of course that’s silly.  Corn is corn.  Whether it’s grown in Iowa or Illinois it’s still No. 2 Yellow Corn.  Yet Governor Quinn and the American Wind Energy Association is making us believe all energy generation is created equal, except some forms of generation are more equal than others. 

The wind industry likes to bash the organization American’s for Prosperity as being funded by the “evil Koch Brothers”.  At least there agenda is cleaner than the AWEA and big wind.  It’s time to end all Renewable Portfolio Standards.  America’s economy will recover faster with economically priced energy rather than this nonsense of promoting wind energy as being “clean”.  Hopefully the Koch Brothers will start taking state’s RPS to federal court as violations of the Commerce Clause.  As much as the Commerce Clause is abused for political agendas, it would be good to see it used against the government for a change.  Might even make it to the Supreme Court.
Here’s something else to consider.  Look at the landmark ruling last summer by Judge Posner in the Illinois Commerce Commission v. FERC.  Judge Posner made reference to how Michigan put its foot in its mouth when the state referred to the RPS favoring instate Renewables over out of state renewables.   JudgePosner suggested states are probably practicing protectionism and regulating interstate commerce (the domain of the federal government).  He was basically encouraging a federal lawsuit. 

How much different is it for a Michigan to give preferential treatment to in state renewable energy or Illinois to give preferential treatment to wind energy from out of state over other forms of energy and even other forms of renewable energy.  It’s still playing political favoritism and protectionism as states are attempting to regulate interstate commerce.  Renewable Portfolio Standards are federal lawsuit waiting to happen.  Why American’s for Prosperity hasn’t gone that route to overturn RPS’s is a good question.  It’s only a matter of time.  Mike, think about that while you’re sitting in the loo.

Perhaps the era of Picassos in the loo are also coming to an end with RPS’s.  I better more and more people take their smart phones and tablets in with them and don’t even notice the color of the walls, let alone a piece of artwork nowadays.  So when you’re in the loo, try googling “RPS Commerce Clause”.  Might be surprised what you find. 

Thursday, May 29, 2014

Decommissioning the Rock Island Clean Line and Big Sky Dreams

Decommissioning sucks.  It what happens when a dream fails, prospects don’t materialize market changes, technology advances, and the public moves on.  Consumer preferences changes.  So what happens when technology becomes irrelevant? 

While we were planting corn I heard about this on the radio.  The local radio station was running commercials by concerned residents.  Bureau County did a smart thing before they approved construction of Big Sky Wind Farm was built in Illinois.   When Big Sky Wind Farm was built, $1.8 million went escrow to cover the costs of decommissioning should the wind farm become obsolete and unprofitable.  Big Sky has gone bankrupt and in a matter of a couple days, changed hands twice.  Now a British company owns Big Sky and they are asking for the decommission monies held in escrow be released.  They claim a letter of credit would suffice. 

That really doesn’t make much sense.  Banks give a letter of credit when times are good and borrowing money is easy.  When the profits run out and the wind turbines are depreciated into the ground, a letter of credit is worthless. 

The former Franklin Grove Village President says it well;

“Cash escrow means you have the money on hand,” Logan said. “If the [wind] companies go bankrupt, as many of them do, the letters of credit are worthless. Cash escrow is definitely better than a line of credit.”

Am I missing something here?  If the money is in escrow and setting in the bank, what incentive is there for the county to give it away?  The money is secured.  The wind turbines are planted in the ground and generating tax income.  What is there for Bureau County Board to gain by giving up the money?

And the folks at the Rock Island Clean Line LLC say there is enough money in scrap iron to decommission the powerline.  A private Merchant Transmission Line with no guarantee of a profit for wind energy technology should have to hold decommission money in escrow in every county it passes. 

Too big to fail?  How many rail lines have failed because markets move and technology changes?  There’s even a dead pipeline through the same field RICL wants to pass through.  As I understand it, the pipeline hasn’t been used in years but the easement is still there for perpetuity.   Infrastructure needs change. 

Do you think the boys in Houston know the history of the Rock Island Railroad?  The railroad spent most of its life in and out of bankruptcy.  The hey-day of the company was far shorter than the hard times as the company struggled to survive until it finally went under.   Funny when you sell nostalgia, the hard times are ignored.

The grain industry is another perfect example how markets change.  Look at the empty grain elevators in Minneapolis and Duluth.  Toledo was once a hot grain market.  Grain used to move up the St. Lawrence Seaway.  Now these grain elevators sit as monuments of dead markets as rail terminals are built to move grain to Hereford, Texas, the new hot market.   Technologies change, demands change, and markets change.  Big Sky Wind Farm is a good example. Bureau County would be wise to request RICL place decommission money in escrow for RICL.  Get the ball rolling now and make a precedent.

It would be wise for counties to consider mandating projects such as the Rock Island Clean Line post escrow money for decommissioning.