Resisting the Siren Call for Subsidies

by James A. Bacon

Last week Gov. Bob McDonnell rolled out the 2012 energy policy and budget initiatives that he hopes to shepherd through this year’s General Assembly. The proposed measures fall far short of the governor’s lofty rhetoric of making Virginia “the energy capital of the east coast.” But that, as I shall explain below, is probably a good thing.

The press release laying out the legislative package provides lengthy quotes from McDonnell, Lt. Governor Bill Bolling and senior legislators in support of a job-creating “all of the above” energy strategy. As the press release explains, “The governor is leading in the push to develop offshore energy, supporting expansion of renewables, and advocating on behalf of traditional fuels including coal, natural gas, oil and nuclear energy in order to secure an adequate supply of affordable, reliable energy for Virginia’s future.”

That makes total sense to me. Other than its significant coal production in far Southwest Virginia, the Old Dominion is a laggard in energy production — we are a net importer of electricity. Producing more energy is a good way to create jobs and bolster the tax base. Just one problem. There is little in the energy package that would actually boost energy production. Even if we assume that all nine measures are passed, Virginia won’t get any closer to becoming the “energy capital of the east coast,” a title that is far more likely to fall to West Virginia, Pennsylvania or some other state cashing in on the Marcellus Shale natural gas boom.

One measure would make it easier for utilities to develop the infrastructure to supply natural gas to economic development projects. A companion measure would make it easier for electric utilities to gain regulatory approval for 138kv transmission lines used for economic development projects. Both of these appear to be aimed more at facilitating job-creating economic development deals than boosting energy production, although the natural gas provision supposedly would increase the market for Virginia natural gas.

The package also contains two measures related to energy efficiency. One would promote “customer engagement tools” that would result in measurable and verifiable energy savings. The press release did not elaborate upon what kind of “tool” was being considered. Smart meters, perhaps? Another bill would allow biomass-fueled cogeneration projects to trade “renewable energy certificates” to the power company buying its electric power and credit them toward its mandated use of alternate fuels. Yet another measure would allow utilities to credit research on alternate energy toward their mandated use of renewable energy.

The governor also proposes:

  • Allocating $500,000 in FY 2013 to develop data regarding resource availability in the federally designated “wind energy area” off the Virginia coast.
  • Creating an Alternative Fuel Vehicle Conversion fund to help finance the conversion of the state fleet to alternative fuel vehicles.
  • Advancing mine safety by requiring mine operators to submit planned mining maps earlier in the regulatory process.
  • Allocating $300,000 yearly to strengthen the oil and natural-gas permitting process.

Conspicuously absent from the list was any mention of developing Virginia’s uranium reserves. Although mining a mother lode of uranium in Pittsylvania County undoubtedly would be an economic development boon for Southside Virginia, McDonnell was properly cautious in stating, after the release of a National Academy of Sciences report, that public safety should trump economic considerations.

Also absent was any nod toward embracing more energy-efficient human settlement patterns and transportation systems as a conservation strategy. But that hardly comes as a surprise. McDonnell has never evinced an awareness of the energy/land use connection. Former Gov. Tim Kaine is the only Virginia governor who ever has.

The hidden good news here is what McDonnell is not doing. He is not proposing to spend a lot of state tax dollars subsidizing the pet causes of energy interests. He is not trying to pick energy winners and closers.

I have lambasted President Obama for squandering billions of dollars on uneconomical alternate energy projects like Solyndra. It would be equally wasteful for McDonnell to try playing venture capitalist at the state level. Fortunately, he has enough sense not to. If we can just persuade him to drop the “energy capital of the East Coast” hype, Virginia would be even better off.

Share this article


(comments below)


(comments below)


13 responses to “Resisting the Siren Call for Subsidies”

  1. DJRippert Avatar

    This is the problem with our gubernatorial term limit. At just past the half way mark our governors are motivated to stop making hard decisions and start putting out press release platitudes. This problem is made worse this year for Republicans in Virginia. Gov. McDonnell is wondering how the Veepstakes are going to look this summer. Meanwhile, Lt Gov Bolling could significantly increase his odds of getting that pesky Ken Cuccinelli off his back if he were to be the interim governor after Bob McDonnell heads into the presidential election.

    So, we get a campaign ad masquerading as a statement of policy. “We love all forms of energy, especially clean energy. As for mining uranium in Vrginia …. never heard of the stuff.”. Expect more of this “zero controversy commentary” until Mitt Romney picks his running mate.

    Luckily, Jim Bacon is not running for public office. So, he has no compunction about bringing up some controversy in his blogging.

    For example:

    1. Virginia is a net importer of electricity. While that might be true, it brings up an interesting point. A few years ago, Dominion wanted to run power lines through the Piedmont. This ignited a firestorm of NIMBYism led by the PEC. The rallying cry was that Dominion wanted to make electricity in Virginia while selling it in Pennsylvania and other north eastern states. Now, we import electricity? Given the amount of electricity lost in transmission, this seems like a good place to start with energy policy – we won’t export any electricity until we are self-sufficient within Virginia.

    2. Electricity for economic development. This sounds so good rolling off the tongue (or off the keyboard perhaps). Regulatory reform to allow the transmission of electricity for economic development projects. Logically, this begs the question of what type of economic development requires more electricity that is accessible in Virginia today. Aluminum smelting? Heavy manufacturing?

    3. Subsidies. Subsidies are the bane of Jim’s existence. Like all good conservative Republicans he hastes subsidies. Well … sort of. He hates new subsidies. However, farm subsidies are sacred to the conservative Republicans. We have to save the family farm. Never mind that the number of family farms has been falling since the turn of the 19th century. Never mind that the vast majority of those subsidies go to big agriculture. No. Republicans hate subsidies – unless, of course, we’re talking about subsidies for their own constituency. Those subsidies are just fine and dandy.

  2. Peter Galuszka Avatar
    Peter Galuszka

    You need to be careful complaining that Virginia is a “net importer” of electricity. Electricity doesn’t move exactly according to state borders. If you think that, then I am calling the looney bin. Electricity moves according to multi-state grids such as PJM. It shoots here and there according to demand or storms or whatever totally oblivious to invisible state border lines.
    As for using more in industry, sure there could be an aluminum smelter somewhere but good old digital Virginia uses tons of electricity. It takes enormous power to serve the huge server farm Google has in NOVA.
    I think McDonnell is nuts for pushing this state-centric idea of being the “Energy Capital of the East Coast.” It just makes no sense. There’s no way Virginia can compete with West Virginia or Kentucky for coal, or with Pennsylvania or New York for Marcellus shale natural gas. The only way McDonnell can achieve is odd dream is to build a bunch of new nuclear plants which can’t be done with out billions in federal aid or loan guarantees. Wind gets plenty of subsidies, too.
    Whoops. I know you hate subsidies, but then, how strong is your grasp on reality?


  3. First of all, let us all congratulate Groveton for coming out of the closet. His name is Don Rippert… DJRippert.

    Second, Say what? Don, you got part of it right: Subsidies are the bane of my existence. But don’t dare imply that hypocritcally support farrm subsidies. I’m against them, too!

  4. Peter, there is an easy way to calculate if Virginia is a net importer or exporter of electricity: Determine how much electricity is produced within its borders, and how much electricity is consumed within its borders. A lot of electrons may cross the state line going out and a lot of electrons may cross the state line coming back in, but you’ll find that more come in than go out. Thus, we’re *net* importers.

  5. ” “The governor is leading in the push to develop offshore energy, supporting expansion of renewables, and advocating on behalf of traditional fuels including coal, natural gas, oil and nuclear energy in order to secure an adequate supply of affordable, reliable energy for Virginia’s future.”

    this statement bothers me in the same way the Keystone Pipeline is promoted as to reduce the US energy dependence.

    I don’t have a problem developing energy resources per se but neither the Keystone pipeline nor what McDonnell is advocating is to “help” the country or Va.

    If the Keystone pipeline was approved with the proviso that the oil that was refined had to be sold in the US, then you’d have a legitimate basis for the claim that it would help the US with energy independence. But the evidence seems to indicate that they want a pipeline through the US so they can refine it Texas and export the refined fuels.

    Similarly in Va… if we wanted to talk about offshore drilling to “help” Va – it would be a far different proposition that to allow offshore drilling to sell to the highest world bidder

    So they sort of wrap themselves in the flag and all that rot but in the end – it’s little more than a private profit-seeking venture – which as I said.. I’m not opposed to per se – but I’m opposed to how it s promoted.

    McDonald could fix this pretty easy. No incentives unless it’s clearly demonstrated that Virginia will be a direct beneficiary. Otherwise, we should be competitively business friendly and ensure that our policies do not chase businesses away but lets be more honest about businesses to “help Va with it’s energy needs – ” (any more or less than any other business that would bring jobs).

  6. Bad argument, Larry. The Keystone pipeline will create temporary jobs during construction. It will provide ongoing jobs at U.S. refineries and ports along the Gulf Coast. It also will provide jobs indirectly because the U.S. oil/gas industry is so heavily involved in Alberta — Canada’s biggest trading partner is the U.S. Canadians will use their increased buying power from oil production to buy far more goods and services from the U.S. than, say, Venezuela would if it was producing the oil. The Keystone project is good for the U.S. economy.

    Regarding Virginia energy production… Oil and gas production would create Virginia jobs and pay Virginia taxes. That must be weighed against the cost of damage to the environment. The idea of requiring Virginia oil/gas to be consumed in Virginia is silly. We would provoke similar requirements (which are probably unconstitutional in any case) on the part of West Virginia and Pennsylvania. They will produce a lot more oil/gas than we ever will. We would be the losers.

  7. Jim – it will provide “temporary” jobs but the refinery jobs would exist no matter where the gasoline was sold.

    You realize that there are refineries in Alberta, right? They could refine that oil in Alberta and ship the gasoline to the US in a much shorter pipeline.

    why does Canada need to build a pipeline 3 times longer than the Alaskan pipeline? The Alaskan pipeline had to go to a port or a refinery but the Keystone pipe line will go past a 1/2 dozen existing refineries that could easily refine the oil and sell the gasoline.

    why is it going to the gulf?

    re: Va ..yes ..ANY business in Va WOULD create jobs but when there is risk to the environment of Va – then the benefits should accrue to Va.

    What I’m saying is that it is BOGUS to claim that oil/gas extracted in Va will benefit Va energy needs specifically.

    if we have to take the risk of a damaged environment – shouldn’t Va be the direct recipient of the benefits also?

    otherwise, we risk Va environment for what? to provide business opportunities to folks who don’t care what happens to Va environment as long as they can sell their product even if it might well cause serious economic damage to Virginia’s other businesses that rely on tourism and fishing?

    If this was just about any business proposition – then why do we say that its “energy for Virginia”?

    Why don’t we call it what it is? It’s just like any other business and won’t directly help Va any more than any other business will – and there is a significant risk to harming other businesses in Va?

    that would be an HONEST way to deal with the proposition.

  8. any business brings jobs to Va but some businesses like oil and gas also cause potential damage to Va.

    In these cases – they are not just offering more jobs ..they are offering also potential damage the way they are dealing with this is by saying that in ADDITION to the jobs they offer (like any business), they also offer specific benefits to Va in energy benefits.

    this is baloney.

    and what I am saying is don’t promote baloney and don’t buy it.

    these oil and gas businesses will provide jobs (like any business) BUT there are in addition potential damage to Va environment over and above and beyond what other businesses offer in the way of additional jobs.

    I’m not opposed to the exploration and potential drilling but i’m opposed to promoting it as giving extra benefits to Va over and above jobs that any business would provide.

  9. Peter Galuszka Avatar
    Peter Galuszka

    Why should we believe Groveton is Don Rippert?

  10. Because no one but Rippert can replicate Groveton’s inimical logic and rhetoric.

  11. Peter Galuszka Avatar
    Peter Galuszka

    You got a birth certificate?

    1. DJRippert Avatar

      Yes, but my college transcripts must remain a secret.


    Now the job is to quantify them accurately and fairly, and hold businesses 100% accountable for them, even if they forward the bill to us, those that they serve.

    We have to stop waving our hands around about unspecified, unquantifiable, and future damages.

Leave a Reply