Kerry Lieberman – The Great Big April Fools Day Tax Grab

Posted on Fri 05/14/2010 by

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Where do you start?

This Legislation, artfully called The American Power Act, is quite literally dynamite, but not for what you might think.

987 pages, and the thing that worries me most is that surely there must be people out there who, in drafting this legislation, must know the impact it is going to have. The average person has no concept of the scale involved with something like this.

When a Bill like this is drafted, those proposing it will know assuredly that no one will bother to read it, so they release a short three page summary of some of the points. In the summary for this bill, the concentration is on things that are almost meaningless, and the actual detail of the implications are not even mentioned.

Other commentators will concentrate on some areas of the bill that they think mean the most.

I want to canvass some of the things in this legislation that are absolutely vital, and what worries me is that surely I can’t be the only one to see this, a humble nobody from Australia, when surely, there must be someone in your vast U.S. who can see this.

You’ll be told that this legislation will actually lower the emissions of Greenhouse Gases, when in actual fact, all it will do is generate huge amounts of money for the Government, and by huge, I mean mammoth amounts, because what the average person fails utterly to comprehend is the scale of what this entails.

I’m only going to deal with the electrical power generating sector, and in particular coal fired power generation, because that is where the bulk of this huge grab for money will be coming from.

Coal fired power currently provides almost half of all electrical power that is consumed in the U.S. To achieve this, they have to burn crushed coal in a critical furnace to boil vast amounts of water to high pressure steam, which then drives a multi stage turbine, which then drives the generator, that provides its power to the grids we are all connected to.

The scale of the amount of coal being burned is this.

A single large coal fired power plant of around 2000MW Nameplate Capacity will burn 6.5 million tons of coal each year, or on average 18,000 tons a day, or around 750 tons an hour, or 12.4 tons a minute.

Got that? 12.4 tons of coal each and every minute, or one ton of coal every five seconds, and that’s just for ONE large scale coal fired power plant.

Each ton of coal being burned produces 2.86 tons of Carbon Dioxide. (CO2) This is sometimes the most difficult thing of all related matters to try and explain, but in fact it is really just basic first year High School Science, and is explained in detail in the post at this link.

So, that one large coal fired power plant will emit just on 19 million tons of CO2 each year.

Got that? One Plant – 19 million tons of CO2.

Across the whole of the US, an amount of 940 Million tons of coal was burned in the last year to give us all the electricity that is now a staple of life. That 940 million tons of coal produced 2.7 Billion tons of CO2.

Got that? 2.7 Billion tons of CO2.

That’s just from coal fired power. When you add in the emissions from the Natural gas fired sector, and from the petroleum based sectors, that amount comes to around 3.5 Billion tons of CO2. You do the math on that. It works to emissions of CO2 in the amount of 111 tons each and every second, just to produce the electrical power we all use, and in fact, is now a staple of life.

So what does this legislation propose in respect of that?

It proposes to place a cost on that CO2, and that cost starts at $25 per ton.

So, at that starting point, the Government, who will be originally issuing those permits, will be raising $88 Billion.

Got that? $88 Billion.

This is just from the electrical power sector alone. That sector emits around one third of all CO2 emissions, so the overall take for the Government now comes in at $263 Billion.

Got that? $263 Billion, and keep in mind that this is the starting point only.

However, it doesn’t end there.

Let’s go back to an individual single large coal fire power plant of that 2000MW Nameplate Capacity.

As I have mentioned before, they have to purchase the high grade steaming coal to burn in their plant. At 6.5 million tons a year, that then becomes a pretty large cost. Because of that the plant burns only what is absolutely required to produce the electricity it then supplies to the grid. They cannot burn any less coal than that, because that is what is required to keep the turbines rolling enough to drive the generators to produce that electrical power.

So, the minute this legislation comes into power, that plant then has to purchase those credits from the Government at the starting price of $25 per ton of CO2. Straight away, there is an added cost now for that plant of $25 X 19 million tons of CO2, or $475 Million for year one.

On April 1st each year, that plant then has to hand those credits back in, equivalent to how much CO2 they emitted. They then have to purchase new credits for the coming year, at the going rate. However, what the Government has done with this legislation now is to lower the actual amount of CO2 that is being emitted.

The same happens again every April 1st.

Hand in credits to cover the previous year. – The Cap is lowered. – Then, buy new credits.

The hair on the back of the necks of some readers might be beginning to prickle right about now, as something sinister begins to sink in slowly.

The intent might ‘sound’ good, but as I have explained, the plant burns only what is required to produce its electrical power.

So, if that plant still provides that same amount of power to the grid it always has, then it will obviously exceed the cap for each subsequent year.

The legislation has a contingency for this. If the plant exceeds its cap, it then has to purchase those extra credits, at the going rate, and then pay a penalty on top of that of 2 times the value of those exceeded credits at the closing rate from the most recent auction, with the further possibility of having that excess deducted from the following year’s allowance.

This is for each and every subsequent year.

Can you now see what is going to happen?

The plant will reach the limit for that year, and then just stop producing power. It becomes too costly to keep producing that power. So, effectively, that large scale plant is removed from the grid.

Do you seriously think the Government, any Government, Federal, State or Local is going to allow that. It would mean widespread blackouts, brownouts and power rationing on a large scale, because now, this is not just one large coal fired power plant. It’s all of them.

Remove half the consumed power from the U.S. You must be kidding.

As the cap is reduced, and the cost of those extra credits and penalties come into play, coal fired power plant operators everywhere will be seriously ‘counting their beans’, and it will come to a time that it will become not economically viable to stay in operation. They’ll just shut up shop and close the plant down. It will be not worth their while to sell the plant, because it will be worthless, because no one could afford to come in and buy the plant with those extra costs involved.

As to viable replacements, there are none that can provide the power on the scale of those coal fired power plants, and supply that for the requisite 24 hours of every day that it is required absolutely. Those renewable plants just cannot do that, and no amount of hoping they will come through will ever make them able to do this.

Hence, what this legislation very effectively does is to go after a captive market that just cannot be closed down, in effect a guaranteed supply of money, snowballing in fact every year as the cap gets lowered.

As to the credits themselves, that starting point of $25 is just that, a starting point. The proposal is that they be auctioned. Again. this ‘sounds’ good, and the hoped for intent is that the cost will rise, and rise considerably. Barack Obama in the run up to the election stated categorically that he hoped to make $50 per ton, and could not care less if it rose considerably from that.

Okay then, consider if that cost does rise. Then the plant has its credits enough for the year in hand. They cannot sell them because they would then have to have credits enough to hand in on that April 1st date. Then, at the end of that year, they then have to buy the new credits they need for the coming year and the cost has increased by a large amount, thus significantly increasing their costs. If they exceed the cap, they then have to pay for the credits and the 1.5 times credit value penalty.

That is really only conjecture, because where this scheme actually is in operation in some European States, the value started out at around $55, and sunk to around $12 and even lower. They are classed in the same category as junk bonds. If the bottom does fall out of the ‘Carbon Market’, then that still hurts the plant, because they originally purchased them at the top price. To cover this contingency, the legislation proposes a concrete base price for them of $12, so, if the cost of these junk bonds falls considerably then they will always charge that base of $12.

There is also a contingency for foreign credits. They will not be valued the same as for U.S. credits.

Don’t think that this so called ‘Carbon market’ will not be manipulated. Even though the legislation restricts the trade in these credits to only those entities causing the emissions, eg, those power plants, and those credit trading auctions will be held 4 times a year so credits can be purchased or sold, supposedly by well regulated auction, smart people will still be finding ways to manipulate this, have no doubt.

Imagine a large scale highly cashed up entrepreneur. This will not be happening on a small scale, because power plants will looking for lots in the hundreds of thousands of credits, so a couple of hundred here and there will mean nothing to them. However, a large scale investor could buy millions of them, and then manipulate the market on a scale that profits him, and please don’t tell me this won’t happen. I feel sure there are people out there eying this off with hungry eyes. Come that auction time just prior to the April 1st deadline to hand back their credits, watch as those entrepreneurs cash in as the price rises, sell them to the highest bidder, and then watch at the first auction after April 1st when the cost goes back down considerably, those entrepreneurs will be making huge profits, and then replenishing the stock holdings they had prior to that pre April 1 auction.

All of these costs incurred by power plants having to buy those credits will be passed directly down to consumers who use electricity. That happens in three areas, Residential, (38%) Commerce, (37%) and Industrial. (24%) So, not only will your household electrical bill rise, and rise considerably, but the increased costs in those other two sectors will also be passed directly down to you as well.

The people proposing this legislation will try and tell you that there are provisions in the bill for this, but this is not something that is revenue neutral. Why would they collect such a vast amount and then give it directly back to you. They cannot just direct those plants not to pass the cost down to you, because the plants will just shut down totally, on the spot.

No, this is a direct imposition of an extra cost on something you just have to use. Very little you do at a residential level can be achieved to significantly lower your usage of electrical power, so overall power consumption will not significantly decrease, and you only need to see earlier posts I have made regarding power consumption during the hard Winter just gone, when power consumption increased, and did so dramatically, the largest increase of all being felt across that coal fired power generation sector.

So, when John Kerry sits in front of you on the TV and says that this is for the good of us all, and that this legislation will lower CO2 emissions, well, there’s no other way of saying this. He’s lying, flat out.

This will result in the largest increase in the cost of electricity that the Country has ever seen.

You may think that the CO2 component is what they are largely aiming at, and because that is the largest of the emissions, then that is so, but this legislation is aimed at all gases being emitted from power plants, and the legislation names another 16 of those gases. Those gases are emitted in considerably lesser amounts than the CO2. To cover this contingency, the legislation places a value also on those gases. That value is an equivalence with CO2. What that means is that each one ton of these gases are the same as for X tons of CO2. For example, one ton of Methane is calculated as being the same as 25 tons of CO2. One ton of Nitrous Oxide is the same as 298 tons of CO2, and so on. Some gases have a value of 22,800 tons of CO2. From that, it’s now plainly obvious that the Government income from this will now rise considerably above the original $88 Billion from just the CO2 component.

So now a plant does not have to carefully calculate its CO2 emissions content, but for every other gas as well. This is already being done. The only difference now is that the legislation proposed by this Administration now places a huge cost on them as well.

All of this will be paid for, first by the plant, and from that, by you the consumer of electrical power.

As that electrical power is not a discretionary thing, because you just have to have it there in every aspect of your everyday life, whether you are a normal consumer, or even a rabidly green, friend of the dirt environmentalist, then you have to use it.

That is what makes this just another Tax grab, and a huge one at that.

This has nothing whatsoever to do with the environment.

It’s just about the money.

You would have thought they would have picked a better day than April 1st.

Now for an exercise is absolute futility. This is the link to the Bill itself, all 987 pages of it, not that any of you will go there and read it.

I haven’t read it line for line all the way through, because you’d need weeks to read and digest it, even if you did know what it was all about. The area I have picked here is from the hundreds of pages of the ‘Title VII’ area of this Legislation.

Early next week I will also be mentioning two other areas from this same legislation where Senators Kerry and Lieberman will chase that most futile of all dreams, by throwing Billions of your dollars down into a bottomless pit called Carbon Capture and Storage, and they even call it ‘Clean Coal’ and where they will also spend more Billions of your dollars on the futility of Renewable power.

This is absolute madness, the whole Bill.

RELATED POSTS

Kerry Lieberman American Power Act – Unintended Consequences. (How this Carbon Cap and Trade Bill also impacts Renewable Power as well.)

Kerry Lieberman’s Clean Coal Hole In The Ground – Just Throw In Money. (How this bill deals with (the unobtainable concept of) Carbon Capture and Storage.)

Kerry Lieberman American Power Act – Renewable Power – Strike Three. (How this bill artfully explains away how Renewable Power can take up the slack, and how it patently does not even come close to doing this.)

NYT Fact Check Failure Agrees With ‘Independent’ Report Fact Check Failure. (How the Media misreported the intent of the legislation.)

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