Capitol Ideas | 2012 | Issue 3 | Energy by The Council of State Governments

MAY | JUNE 2012

HOT TOPIC : Energy

Fueling

Our Future 10 Things You Should Know about Keystone XL Pipeline Puerto Rico Governor

Luis Fortuño

“The transition to natural gas represents the biggest environmental protection effort in Puerto Rico’s history.” —Puerto Rico Governor Luis Fortuño

P LU S : 10 Captivating Capitol Buildings

One Man’s Trash is Another Man’s Energy Cash for Clunkers Report Card

DON’T SETTLE FOR JUST A SNAPSHOT

©AP Photo/The Independent Record, Eliza Wiley

CSG gives you the big picture for all three branches of state government— legislative, executive and judicial. » Visit www.csg.org

CAPITOL IDEAS CAPITOL IDEAS|| contents contents © Corbis/ImageZoo

ON THE COVER Puerto Rico Governor Luis Fortuño has worked to diversify the island’s energy resources. His energy diversification plan includes an effort to convert Puerto Rico’s oil-fired plants to natural gas and to develop multiple renewable energy projects. Photo provided by Fortaleza, Office of the Governor

MAY/JUNE 2012

Fossil fuels have played a major role in our energy past. Forecasting their role in our future is difficult. Energy experts and futurists advise state policymakers to expect the unexpected because of changing technology and emphasis in energy sources.

Puerto Rico Gov. Luis Fortuño discusses energy policy, the importance of conservation and efforts to make the island territory the 51st U.S. state.

For the first time in 30 years, the Nuclear Regulatory Commission has approved construction of reactors at two existing nuclear plants. While it may not be a nuclear renaissance, most agree the decision is a nuclear thaw in the U.S.

American state capitols have evolved only moderately in the more than 200 years since their early beginnings. But some states have adapted their capitols in particularly atypical ways.

HOT TOPIC— FUELING OUR FUTURE

10 QUESTIONS— LUIS FORTUÑO

HOT TOPIC— NUCLEAR ENERGY

FEATURE— CAPTIVATING CAPITOLS

MAY / JUNE 2012

CAPITOL IDEAS

contents | CAPITOL IDEAS

hot topic | 13 FUELING OUR FUTURE

20 ENERGY INFRASTRUCTURE More electric cars are expected to be sold worldwide in 2012. The electric grid should be able to handle the addition of these vehicles, but it will take a lot of planning. 22 FRACKING 101 As the use of hydraulic fracturing—or fracking—has grown and as the practice has become more controversial, states have taken action in three primary ways. 27 NUCLEAR ENERGY For the first time in 30 years, the Nuclear Regulatory Commission has approved construction of reactors at two existing nuclear plants. While it may not be a nuclear renaissance, most agree the decision is a nuclear thaw in the U.S. 31 RENEWABLE ENERGY The interest in renewable energy creation has waned as natural gas costs have fallen. But states are still making investments to attract economic development in these new industries. Some states are starting to classify waste-toenergy as a renewable energy as well. 36 KEYSTONE XL PIPELINE The Keystone XL Pipeline was designed to bring Canadian crude oil down to large U.S. refining markets along the Gulf Coast. Here are 10 things state policymakers should know about the Keystone XL project.

CAPITOL IDEAS

MAY / JUNE 2012

38 CASH FOR CLUNKERS The success of the Cash for Clunkers program is still debatable two years later. It depends on who you ask and what metrics you use to determine if it measured up to expectations.

features | 44 STATE CAPITOLS American state capitols have evolved only moderately in the more than 200 years since their early beginnings. But some states have adapted their capitols in particularly atypical ways.

they said it | regional roundup |

5 ENERGY 6 EAST 7 SOUTH 8 MIDWEST 9 WEST by the book | 10 ENERGY PRODUCTION Texas is a leader in energy production in several key categories, including overall energy production. Meanwhile, other states have taken a lead in renewable energy, with Maine leading in production of nonhydroelectric renewable generation.

in the know | 12 ENERGY TRENDS Brydon Ross, director of energy and

environmental policy at The Council of State Governments, highlights three energy trends to watch in 2012.

10 questions | 18 LUIS FORTUÑO

Puerto Rico Gov. Luis Fortuño discusses energy policy, the importance of conservation and efforts to make the island territory the 51st U.S. state.

straight talk | 40 FEDERAL ENERGY POLICY

Experts at key energy publications and state officials offer their views on the future of federal energy policy.

stated briefly | 42 AFFILIATE & ASSOCIATION NEWS

News from The Council of State Governments and its affiliates

how to | 46 MANAGE ENERGY on the road | 47 UPCOMING MEETINGS shout out | 48 WEST VIRGINIA DELEGATE HAROLD ’PETE’ SIGLER West Virginia Delegate Harold “Pete” Sigler is

a former underground coal miner and has a unique perspective on safety issues as well as the role coal can play in our energy future.

CSG'S EXECUTIVE DIRECTOR | notes

“The biggest energy crisis we have in our country today is the energy to be serious—the energy to do big things, in a sustained, focused and intelligent way.” —Thomas Friedman

All of the Above Energy policy remains one of the most complicated and vexing problems we face as Americans. The intensity of the politics around energy issues and the long time frames required to craft solutions make finding a way forward elusive. Yet the fierce urgency we feel when confronting our energy future compels us to work toward meaningful answers. The challenge is great. World population has more than doubled since 1950 and is set to increase another 40 percent by 2050. China and India are just starting their journey on the energy ladder. History has shown that as people become richer, they use more energy. Our nation’s national security also is directly impacted by energy policy. In 2010, energy produced in the United States provided about three-fourths of the nation’s energy needs. The remainder of our energy was supplied mainly by imports of petroleum. From 1949 to 2010, primary energy consumption in the United States tripled. Global demand for energy by 2050 could triple from its 2000 level if emerging economies follow historical patterns of development. This need for new energy will not be met by energy efficiency or supply growth alone. Policymakers, including state leaders, will need to innovate. The time to successfully meet the challenge of filling the energy gap in 2050 is now. State leaders are working to expand a number of energy sources. Solar, wind, geothermal, biofuels, nuclear and fossil fuels are part of an “all of the above” energy strategy. Petroleum (oil) is the largest share of U.S. energy consumption, followed by natural gas, coal, nuclear electric power and renewable energy (including hydropower, wood, biofuels, biomass waste, wind, geothermal and solar). States are getting into the energy game in a big way. The failure of the federal government to develop and deploy a comprehensive energy policy has left the states to explore innovations. Clean coal technologies, carbon sequestration, fracking to expand the supply of fossil fuels, the development of new energy storage systems, expansion of wind and solar energy, and a fresh look at nuclear energy all are being driven by policymakers at the state level. Energy efficiencies are a big part of the picture with some states creating strong incentives for energy savings. Other states have set targets for renewable energy growth. For example, Colorado was the first state to pass a voter-approved renewable energy standard with the goal of using 30 percent renewable energy by 2020. States are leading the way in finding new opportunities to invest and grow the new energy economy. In this issue, you will find articles designed to expand your understanding of how states are successfully addressing energy policy. Beyond the pages of this magazine, CSG maintains a rich array of resources, including professional staff in our national and regional offices whose expertise is available to help guide your work in the energy arena. We also created the CSG Knowledge Center, an online resource at www.csg.org, to help you navigate the complexities of energy policy. CSG members also benefit from the active participation of and partnership with provincial leaders from Canada. This relationship has allowed us to explore the intertwined interests of our two nations. Canada remains the top foreign supplier of energy resources for the United States and we look forward to continuing to work with our friends in Canada to better prepare for our shared energy future.

At The Council of State Governments, we work every day to keep state leaders informed about new developments and innovations in energy policy. In the absence of federal leadership, it is imperative for state leaders to come together and learn from each other. A coordinated approach among state leaders is essential, because energy sources and energy demand are not evenly dispersed across the United States. We hope you will put the power of CSG to work for you.

CAPITOL IDEAS

David Adkins

MAY / JUNE 2012

Very truly yours,

credits | CAPITOL IDEAS

publisher DAVID ADKINS

dadkins@csg.org

general manager KELLEY ARNOLD karnold@csg.org

staff writers HEATHER PERKINS

CSG Membership Coordinator hperkins@csg.org

KRISTA RINEHART

managing editor MARY BRANHAM

mbranham@csg.org

CSG National Leadership Center Coordinator krinehart@csg.org

associate editor JENNIFER GINN

contributing writer BRYDON ROSS

technical editor CHRIS PRYOR

graphic designers REBECCA FIELD

jginn@csg.org

cpryor@csg.org rfield@csg.org

CSG Director of Energy and Environmental Policy bross@csg.org

CAPITOL IDEAS, ISSN 2152-8489, MAY/JUNE 2012, Vol. 55, No. 3—Published bi-monthly by The Council of State Governments, 2760 Research Park Dr., Lexington, KY 40511-8482. Opinions expressed in this magazine do not necessarily reflect the policies of The Council of State Governments nor the views of the editorial staff. Readers’ comments are welcome. Subscription rates: in the U.S., $42 per year. Single issues are available at $7 per copy. POSTMASTER: Send address changes to Capitol Ideas, Sales Department, P.O. Box 11910, Lexington, KY 40578-1910. Periodicals postage paid at Lexington, Ky., and additional mailing offices. Mailing lists are available for rent upon approval of a sample mailing. Contact the sales department at (800) 800-1910. Copyright 2012 by The Council of State Governments. Periodicals postage paid at Lexington, Ky., and at additional mailing offices.

email capitolideas@csg.org

internet capitolideas.csg.org

JESSICA HUGHES jhughes@csg.org

CHRIS PRYOR

cpryor@csg.org

KELSEY STAMPER kstamper@csg.org

The Council of State Governments president GOV. LUIS FORTUÑO, Puerto Rico | chair SENATE MAJORITY LEADER JAY SCOTT EMLER, Kansas vice chair SENATE PRESIDENT GARY STEVENS, Alaska | immediate past chair DEPUTY SPEAKER BOB GODFREY, Connecticut executive director/ceo DAVID ADKINS (dadkins@csg.org) | washington, d.c., director CHRIS WHATLEY (cwhatley@csg.org) east director WENDELL M. HANNAFORD (whannaford@csg.org) | south director COLLEEN COUSINEAU (fitzgerald@csg.org) midwest director MICHAEL H. McCABE (mmccabe@csg.org) | west director EDGAR RUIZ (eruiz@csg.org)

CAPITOL IDEAS

MAY / JUNE 2012

GOV. LUIS FORTUÑO PUERTO RICO CSG National President

SENATE MAJORITY LEADER JAY SCOTT EMLER KANSAS CSG National Chair

ASSEMBLYMAN JOHN S. WISNIEWSKI NEW JERSEY CSG East Co-Chair

SEN.  JIM WHELAN NEW JERSEY CSG East Co-Chair

HOUSE SPEAKER RICHARD THOMPSON WEST VIRGINIA CSG South Chair

REP. ARMOND BUDISH OHIO CSG Midwest Chair

REP. ROSIE BERGER WYOMING CSG West Chair 2007 Toll Fellow

ENERGY | they said it “There’s been tremendous peaks and valleys in the energy industry. This is our 15 minutes of fame. Twenty years ago, if you mentioned energy, the conversation stopped.” —Michael Fischette, chief executive officer of Voorhees-based Concord Engineering, according to the Asbury Park Press. He predicted that “nuclear and renewables will dominate in the future,” even as he noted nuclear development is currently in a

“So much of the quality of our lives could well depend on how we as a country decide to handle energy policy.” —Former Colorado Gov. Bill Ritter, who now heads the Colorado State University-affiliated Center for the New Energy Economy, in an article in the Rocky Mountain Collegian in February.

holding pattern.

“We need to recognize that we didn’t get on oil overnight, (and) we’re not going get off oil overnight.” —Vice Admiral Dennis McGinn (ret.), in an article in the Rocky Mountain Collegian in February. McGinn served 35 years with the United States Navy as an aviator, commanding officer and national security strategist and is now the president of the American Center on Renewable Energy.

“Natural gas is the solution to America's energy problems.” —T. Boone Pickens, the energy billionaire who has a major stake in Chesapeake Energy, in the March 1 Rolling Stone.

“God has put it off of our shore. What we have to make the choice to do is to harness it.” —Maryland Gov. Martin O’Malley, talking about offshore wind, a priority of his administration, according to WJZ, CBS’s Baltimore affiliate, in February.

MAY / JUNE 2012

Conservation Block Grant Program, made possible with federal stimulus funding through the U.S. Department of Energy.

—U.S. Sen. Chris Coons of Delaware, in a February press release talking about Delaware's Energy Efficiency and

CAPITOL IDEAS

”Energy efficiency has enormous potential to change our future—our economic competitiveness, our environmental footprint, our technology, and the world that our children and grandchildren will inherit from us.”

regional roundup | EAST

DE • MA • MD • ME • NH • NJ • NY • PA • RI • VT • NB • NL • NS • ON • PE • PR • QC • VI

The East MARIJUANA PENALTIES

CHEATING CRACKDOWN

Maryland’s House Judiciary Committee approved legislation in March that would lessen penalties for possession of insignificant amounts of marijuana, The Baltimore Sun reported. The bill sponsored by Delegate Luke Clippinger would set the maximum penalty for possession of 7 grams or less at 90 days and a $500 fine. It also would call for those convicted to be tried before a district court rather than a jury trial in circuit court. The full legislature approved the bills in April.

New York’s Education Department in March hired Tina Sciocchetti to lead efforts to prevent educator cheating, The Wall Street Journal reported. Schiocchetti, an assistant U.S. attorney for the Northern District of New York, will head up a group of five to 10 people who will investigate cases of suspected pervasive educator cheating as well as train school districts to better prevent cheating. The new group was created in response to the department’s inability to follow up on previously reported cases of educator cheating.

CONCEALED WEAPONS Maine state workers now will be allowed to keep concealed weapons in their locked cars while at work. Gov. Paul LePage in March signed into law a bill giving state workers that privilege, according to The Associated Press. The law is similar to one passed last year that afforded workers employed by private companies the same right. The law is scheduled to take effect 90 days after the conclusion of the 2012 legislative session.

SAME-SEX MARRIAGE

VOTER ID Pennsylvania voters will be required to show a photo ID in November’s general election. Gov. Tom Corbett signed a law in March requiring voters to present a state driver’s license or nondriver ID card, passport, municipal government ID, college or university ID or military ID. Those voters not presenting photo IDs will have the opportunity to fill out a paper ballot. Their vote, however, will not count unless they acquire a valid photo ID and present it within six days of the election, according to the Pittsburgh Tribune-Review.

CAPITOL IDEAS

MAY / JUNE 2012

The New Hampshire House in March rejected House Bill 437, which would have repealed the state’s gay marriage statutes. House members voted 211-16 against the legislation, the New Hampshire Union Leader of Manchester reported. Gov. John Lynch signed both a civil union and a gay marriage bill in 2007. He had previously said that he was ready to veto House Bill 437 if it passed.

learn more about these and other in the Eastern Region, visit:  Todevelopments capitolideas.csg.org and www.csgeast.org.

New Jersey Governor Proposes Urban Scholarship Program New Jersey Gov. Chris Christie in March announced details of a new initiative that will offer college scholarships to students in 14 urban school districts throughout the state, The Associated Press reported. Christie unveiled the scholarship program and other higher education initiatives during his 2012 budget address in February. The Governor’s Urban Scholarship Program will provide up to 1,000 students with $1,000 scholarships for four years. Christie indicated the 2013 fiscal year budget will include $1 million to fund the program. The state Higher Education Student Assistance Authority will administer the scholarship program, which will first be made available during the 2012–13 school year.

Eligible students in Asbury Park, Camden, East Orange, Irvington Township, Jersey City, Lakewood, Millville, Newark, New Brunswick, Trenton, Paterson, Palinfield, Roselle and Vineland will benefit from the program. Students would be able to use the scholarships at any college or university, both public and private, in New Jersey. To qualify for the scholarships, students would need to have at least a 3.0 grade point average, be in the top 5 percent of their class and meet certain income requirements. Christie’s office said in a press release the creation of the Governor’s Urban Scholarship Program keeps “true to the governor’s commitment that no child’s educational destiny should be predetermined by ZIP code.”

AL • AR • FL • GA • KY • LA • MO • MS • NC • OK • SC • TN • TX • VA • WV

SOUTH | regional roundup

The South

Missouri Improves Due Diligence in State Economic Development Grants

REMEDIAL CLASSES Florida teachers and schools are preparing for a sizable increase in the number of students requiring remedial classes after the State Board of Education changed the grading scale of the Florida Comprehensive Achievement Test. Seminole County alone identified 4,000 students at risk of failing to achieve a sufficient test score, the Orlando Sentinel reported. The new standards follow a new teacher evaluation system, an updated school grading formula and new end-of-course high school exams, as well as continuing pressure from historically low education funding as the state recovers from the Great Recession.

STORM SOFTWARE Missouri recently launched a new Web tool called Stormaware to better prepare residents for severe weather, The Columbia Missourian reported. Stormaware includes videos on best practices regarding shelter and weather alerts.

SKILLED TRADES Georgia recently launched a new program, “Go Build Georgia,” to promote training in skilled trades in favor of traditional college education because of a growing shortage of skilled laborers such as pipefitters, steel workers, boilermakers, electricians and carpenters. The initiative targets high school counselors, teachers, students and parents, in an attempt to fill the 16,500 skilled labor openings estimated for 2012, according to the Atlanta Business Chronicle.

learn more about these and other in the Southern Region, visit:  Todevelopments capitolideas.csg.org and www.slcatlanta.org.

MAY / JUNE 2012

bond issues. Liability for the bonds likely could transfer to the Moberly municipality, but the state had not yet issued payments on the incentives offered, Rep. Mike Kelley said in a Joplin Independent commentary. A legislative investigation into the matter affirmed the need for greater due diligence into the background of potential economic development grantees. In addition to the targeted funding, Rep. Jay Barnes, the leading investigator, also introduced legislation to correct the issue, according to the Columbia Daily Tribune. The bill would require third-party verification of financial claims by grant applicants, criminal and financial background checks of key officers in any company applying for grants and full information sharing between state and local economic development agencies.

TAX CUTS Alabama’s Senate Finance and Taxation Education Committee in March approved a proposal to increase tax credits for production companies filming in the state. If approved, the measure will raise funding limits on incentives from $10 million annually to $15 million annually. According to the Montgomery Advertiser, it also would raise the amount that can be spent on a production to qualify for the tax incentives to allow for smaller films to benefit. The House of Representatives passed the bill without opposition earlier this year.

CAPITOL IDEAS

The Missouri House of Representatives in March set aside $50,000 to give closer scrutiny to the process of due diligence required for state economic development grants. The funding comes after an investigation into what has been dubbed the “Mamtek fiasco,” according to the Columbia Daily Tribune. The controversy began with the promising announcement by the state Department of Economic Development that Hong Kong-based Mamtek International would be constructing a factory, and with it, bringing 612 jobs, to Moberly, Mo. Plant construction began after the town issued $39 million in industrial development bonds and the state offered $17 million in incentives. The project was scrapped during the building phase, however, and the company has missed its first payment on the

UNEMPLOYMENT The South experienced a statistically significant overthe-month unemployment rate change of -0.2 percent in January, according to U.S. Department of Labor figures. According to a Southern Legislative Conference report, 45 states recorded a decrease from the previous month. Among the nation’s nine geographical divisions, the Pacific reported the highest jobless rate at 10.2 percent, while six divisions, including the East, South Central, and South Atlantic, enjoyed statistically significant unemployment rate declines in January. Of the 14 states that recorded unemployment rate declines, two Southern states—Mississippi and Missouri—secured the largest declines, of -0.5 percent each.

regional roundup | MIDWEST

IA • IL • IN • KS • MI • MN • NE • ND • OH • SD • WI • AB • MB • ON • SK

The Midwest FULL-DAY KINDERGARTEN

OVERSEAS VOTING

Indiana Gov. Mitch Daniels signed an act in March to ensure access for all children to full-day kindergarten, The Indianapolis Star reported. House Enrolled Act 1376 will provide $80 million so children may attend full-day kindergarten without any additional cost to families. According to Daniels, only 14 percent of the state’s eligible children attended full-day kindergarten in 2006 because of the additional costs associated with the programs.

The Wisconsin Government Accountability Board received a federal grant in March to aid in the development of an online system to simplify overseas voting. According to The Associated Press, the $1.9 million grant will be used to create an online system that would allow military and overseas voters to immediately access an online ballot without first having to wait for an election official’s response.

BULLYING TASK FORCE

Recent analysis released by Arizona State University in March ranked North Dakota as the top state for job growth. According to U.S. Bureau of Labor Statistics data, the number of new jobs for the state increased by 6.3 percent in January 2012 compared to January 2011, The Bismarck Tribune reported. The university’s analysis noted that states atop the list were those rich in natural resources at a time when energy prices are high.

Minnesota’s Task Force on the Prevention of School Bullying held its inaugural meeting in March. The task force will have four months to examine bullying within the state school systems and come up with new policies to curb the problems, according to Minnesota Public Radio. Minnesota’s current state bullying law leaves policies up to each individual school system and is only 37 words— one of the shortest such laws in the nation.

JOB GROWTH

PENSION SYSTEM The Kansas House passed a bill in March to help close the long-term funding gap facing the state’s pension system, The Associated Press reported. Revenue from state-owned casinos would go into the system to lessen the projected $8.3 billion gap between revenues and retirement benefits promised to teachers and state government workers through 2033. The measure also proposes state workers hired after 2013 to choose between two new pension plans.

CAPITOL IDEAS

MAY / JUNE 2012

learn more about these and other in the Midwestern Region, visit:  Todevelopments capitolideas.csg.org and www.csgmidwest.org.

South Dakota Promotes Online Drilling and Geological Records South Dakota State Geologist Derric Iles recently announced the state’s expanded effort to attract companies interested in exploring for oil and gas, The Associated Press reported. Iles discussed the state’s work to boost interest in exploration within South Dakota during the state Department of Environment and Natural Resources’ annual conference in March. The department recently began putting state drilling and geological records on the Internet. This process will allow companies interested in the exploration of oil and gas to efficiently search scanned images of permits, drilling records and maps of underground rock formations. Many of South Dakota’s neighboring states, including North Dakota, have seen a large boost in oil and gas production. Iles said while neighbor-

ing states have put their own information on the Web, his state’s efforts are a solo undertaking. “We are trying to be better than the other states because this is a promotion effort. We’re trying to get people to take a second look at South Dakota,” Iles said at the conference. The development of the website is an ongoing process and includes an interactive map on which people can search particular areas and gather information on wells that have been drilled in the past. According to The Associated Press, information is available on nearly 100,000 holes drilled across the state. That number includes 1,900 oil and gas holes. Future plans for the website include the addition of production information on every oil and gas well in the state and on the leasing status of School and Public Land sites.

WEST | regional roundup

AK • AZ • CA • CO • HI • ID • MT • NM • NV • OR • UT • WA • WY • AB • AS • BC • GU • MP

The West

CRIME VICTIMS

SCHOOL ATTENDANCE

Alaska Gov. Sean Parnell, a 1998 Toll Fellow, signed a law in March to help in the recovery of crime victims’ property being held in evidence. According to The Associated Press, Senate Bill 30 is designed to speed up the process by which property is returned to crime victims. Currently, property can be held for months or years at the request of prosecutors or defense attorneys. Under the new law, crime victims can petition the court to retrieve their property.

Colorado schools will no longer take official enrollment counts on religious holidays. In March, Gov. John Hickenlooper signed into law a bill to ensure more accurate enrollment counts, The Denver Post reported. The state’s official pupil enrollment count date is Oct. 1, which sometimes falls during Yom Kippur and Rosh Hashanah. Under the new law, the count will take place on the first day of school immediately following the end of the holiday if Oct. 1 falls on a weekend.

FEMALE BUSINESS OWNERS

Oregon Retirees Will See Reduction in Benefits to Repay Overpayment

WOLF HUNTING EXTENSION The Idaho Fish and Game Commission in March approved wolf hunting regulation changes to address the state’s overpopulation of wolves. According to The Idaho Statesman, the changes include higher bag limits, expanded trapping and extended hunting seasons in some areas. Idaho is one of two states allowed to regulate the number of wolves using public hunts. The number of wolves in Idaho is now down to 500 to 600 wolves, from more than 1,000 in 2011, according to estimates from Idaho’s wolf managers.

learn more about these and other in the Western Region, visit:  Todevelopments capitolideas.csg.org and www.csgwest.org.

MAY / JUNE 2012

not receiving monthly benefits will be required to set up a payment plan with the Department of Revenue. State officials say it will take the average retiree roughly 6.5 years to pay back the overpayments via monthly deduction. Retirees will be given the option to repay through a single lump sum instead of through monthly reductions. They also will have the option of taking a benefit reduction larger than 2 percent in order to repay owed money in a shorter amount of time. The Statesman Journal reported those receiving monthly benefits owe, on average, $6,650 in overpayments, while those who took lump sums owe an average of $8,351. The retirement system plans to go to the legislature’s emergency board in May to request more than $2 million in funding for the repayment process. The money will pay for administrative fees of the program, including temporary employees to oversee the repayment collections.

AIR POLLUTION The Environmental Protection Agency has proposed a cleanup of Montana’s air pollution that would require three industrial plants to spend $90 million on improvements, according to The Associated Press. The plan would rid the air around Yellowstone and Theodore Roosevelt national parks of 15,000 tons of sulfur dioxide and nitrogen oxides annually. The proposed renovations would need to happen within the next five years at Colstrip coal power plant, Ash Grove cement plant and Holcim cement plant.

CAPITOL IDEAS

To help repay a decade-old overpayment in benefits, more than 20,000 Oregon public retirees will see a 2 percent reduction in their monthly benefit payments at some point in the next year. The state’s Public Employees Retirement System board of directors in March approved a plan to recover $156.3 million in overpayments to some retirees. That action followed a court order allowing the board to proceed with planned collections. According to the Statesman Journal of Salem, overpayments were made to 28,042 “window retirees.” The term refers to those who retired between April 2000 and April 2004. A majority of those retirees receive monthly payments from the retirement system, while more than 8,000 are people who have received retirement payments but don’t get monthly benefit checks. That group includes retirees who took early withdrawals or lump sum pension payments, or the beneficiaries or estates of deceased members. Those

The number of Hawaii businesses owned by women increased by 55 percent over the past 15 years, according to a report released in March by American Express. The Honolulu Star-Advertiser reported women own 39,900 Hawaii businesses doing $5.34 billion in sales annually. Hawaii ranked 18th in the nation in the creation of new female-owned businesses and eighth in job growth.

by the book | ENERGY

State Energy Leaders The top five energy-producing states provide about half the nation’s energy. Texas, Wyoming, Louisiana, West Virginia and Kentucky produce 36,100 trillion Btu of the U.S.-produced 72,640 trillion Btu. Texas is a leader in several energy resources, while Wyoming leads in coal production. © Corbis/Bob Scott

THE BOOK OF THE STATES

Since 1935, The Council of State Governments’ The Book of the States has been the leading authority on information about the 50 states and territories. » www.csg.org/bookofthestates

CAPITOL IDEAS

MAY / JUNE 2012

Renewed Interest in Renewable Energy The past decade has seen a vibrant interest in renewable energy generation across the states. In 2011, Maine had the highest percentage of non-hydroelectric renewable generation, at 27 percent of total in-state generation, up from 20 percent in 2001, according to the U.S. Energy Information Administration. South Dakota and Iowa followed, with 21 percent and 17 percent, respectively, in 2011, up from 1 percent and less than 1 percent in 2001. Wind is the largest driver of this increase across all states. Only Alaska, Arizona, Kentucky and Ohio still have less than 1 percent of their energy generated by renewable resources. When hydroelectric power is included, Idaho leads the pack of states with the largest shares of generation coming from renewables with 93 percent. Washington’s generation of power from renewables, including hydro, stood at 82 percent in 2011, followed by Oregon at 78 percent. The Pacific Northwest produced a particularly high amount of hydroelectric power in 2011.

ENERGY | by the book

TOTAL ENERGY PRODUCTION, 2009 (trillion Btu)

n 0–500

n 501–1,000

n 1,001–2,000

n > 2,000

TOP 5 Natural Gas Marketed Production, 2010 (million cubic feet)

Texas » 6,715,294 Wyoming » 2,305,525 Louisiana » 2,210,099 Oklahoma » 1,827,328 Colorado » 1,578,379

TOP 5 Coal Production, 2010 (thousand short tons)

Wyoming » 442,522 West Virginia » 135,220 Kentucky » 104,960 Pennsylvania » 58,593

(thousands of barrels)

Texas » 49,233 Alaska » 18,956

TOP 5 Total Net Electricity Generation, 2011 (thousands MWh)

California » 16,454

Pennsylvania » 19,161

Oklahoma » 6,584

California » 17,167 Illinois » 16,851 Florida » 16,845

Source: U.S. Energy Information Administration

MAY / JUNE 2012

Texas » 33,689

North Dakota » 16,581

13 CAPITOL IDEAS

Montana » 44,732

TOP 5 Crude Oil Production, 2011

in the know | ENERGY

3 ENERGY TRENDS TO WATCH IN 2012 The lack of a true federal energy policy has been a source of frustration for policymakers on all sides of the ideological spectrum. Unfortunately, Washington will provide little clarity any time soon as the pattern of fits and starts and conflicting messages on energy policy will continue as gas prices climb. But there is some good news despite the gloom. Oil and natural gas production is booming domestically, with states directing 96 percent of the increase in production since 2007. Solar installations doubled and installed wind energy increased by 31 percent over the past year. The economics of alternative energy development, however, rely heavily on federal tax incentives and low-interest loans that have come under fire over their cost and charges of political favoritism by picking winners and losers. Expect to see a contentious debate in Congress as the alternative energy production tax credit and a cash grant program designed to reduce financing risks are set to expire by the end of the year. Here are three trends state leaders should follow in 2012.

BRYDON ROSS DIRECTOR OF ENERGY AND ENVIRONMENTAL POLICY The Council of State Governments bross@csg.org

1. Incredibly low natural gas prices and substantial supplies present a paradigm shift in U.S. energy markets. Natural gas futures prices dropped to $2.28, their lowest prices in nearly 10 years, on the New York Mercantile Exchange in mid-March; prices were nearly double that last spring. After Hurricane Katrina, natural gas prices were more than $15, which pummeled energy intensive industries and consumers. Historically low prices may save consumers more than $16 billion on their energy bills, according to a study conducted by the Federal Reserve Bank of Dallas. Growing supplies spurred by increased hydraulic fracturing have driven down operating costs for industries heavily reliant on natural gas prices, thereby driving a domestic manufacturing renaissance. Reserves have increased so substantially the U.S. may become an exporter of natural gas—something unimaginable just a few years ago. Cheap prices also may make the short-term financing of new renewable, nuclear and coal-fired power plants economically unattractive. Expect to see states implement new environmental regulation and production fees on hydraulic fracturing to direct more money to impacted communities to hedge against boom/bust cycles and to fill budget gaps. 2. States must be more creative as federal incentives for alternative energy development will diminish. Renewable energy development has relied largely on a predictable suite of financial incentives like tax credits and loan guarantee programs to fuel growth. Support for continuing these federal inducements is declining and many analysts expect the production tax credit for renewable energy to expire this year.

CAPITOL IDEAS

MAY / JUNE 2012

If states want to continue down this path of development, they must get more creative and look for regulatory or policy changes to encourage desired outcomes. Virginia, for instance, passed legislation to allow private businesses to purchase electricity directly from utilities and sell it to consumers as a way to expand the infrastructure for plug-in electric hybrids without spending taxpayer dollars. Big box chains or a local hardware store can now sell power to a customer to charge up a vehicle while shopping; previously, state regulations allowed only public utilities to sell electricity to consumers. 3. As if consumers need more bad news, the pain at the pump will likely continue. The largest refinery on the East Coast is expected to close this summer; that would eliminate nearly 25 percent of the region’s gasoline refining capacity. Two other refineries are expected to shutter their doors in the Northeast due to decreasing domestic fuel demand and poor economic margins. More than half the region’s refining capacity will be eliminated if all three facilities close, thus increasing reliance on foreign supplies when prices are approaching $4 per gallon. What can states really do when the value of crude is largely determined by the world market? Immediate policy solutions are fraught with controversy. Industry advocates have urged the suspension of expanding EPA Clean Air regulations and state boutique fuels mandates, in addition to providing waivers to the Jones Act to allow foreign-flagged vessels to bring additional refined gasoline from the Gulf Coast to the Northeast.

ENERGY OUTLOOK | hot topic © Getty Images/Amy Guip

» MAY / JUNE 2012

America’s appetite for fossil fuels is well known. While U.S. consumption of crude oil and other fossil fuels has grown steadily, consumption in other lesserdeveloped countries has skyrocketed. That will play a part in the future of energy in America. As the nation strives to become less dependent on foreign oil, policymakers and stakeholders are looking at other types of energy, such as power from wind, solar and other renewable sources.

15 CAPITOL IDEAS

FUELING OUR FUTURE

hot topic | ENERGY OUTLOOK

Expect the

Unexpected In the future of energy

CAPITOL IDEAS

MAY / JUNE 2012

The crystal ball is murky when it comes to predictions about energy consumption, markets and future trends. Consider hydraulic fracturing, for example. Ten years ago, the U.S. Geological Survey estimated resource potential in the Marcellus Shale region was off by 70 times, according to current federal surveys. “I think it’s essentially impossible to anticipate what energy markets are going to look like in 20 or 30 years, because the rate of change in technology and potential for climate change are so great and so disruptive that the world is going to be fundamentally different than it is now,” said John Petersen, the founder of the Arlington Institute, a nonprofit research organization that focuses on future global trends. Howard Gruenspecht, administrator of the U.S. Energy Information Administration, echoed similar thoughts about the future. “Predicting a particular game-changing technology is difficult, if not impossible, to do,” he said. Despite this limitation, Gruenspecht said his analysts spend a significant amount of time thinking about how technological change might occur in North American energy markets, where crude oil prices have exceeded natural gas prices by a 4-to-1 ratio on an energy-equivalent basis—converting the current price of crude oil to its natural gas equivalent rate. “The implication is that there currently exists a four-fold price advantage for substituting natural gas for oil-based products,” he said. This price disparity could potentially last for some time, triggering the deployment of natural gas vehicle infrastructure because of favorable market signals to investors. Futurists like Petersen believe the electric grid and energy markets are especially susceptible to wild card events like drastic changes in consumption, geopolitics, solar flares and changing societal values. “There is a new generation of young people who see their relationship to the environment, to the Earth and their social relationships with one another in a really different way than all of us old guys,” he said. Their strong reaction to a wild card event

by Brydon Ross

could galvanize them to say “never again” in the same way that Three Mile Island impacted the nuclear power industry. “Industries and policymakers need to be sensitive to this,” Peterson said.

Expect the Unexpected

State policymakers can prepare to deal with this unpredictable future in several ways, Petersen said. “Resilience is extraordinarily important, not only for physical shocks to the system, but there also needs to be resilience in terms of technology,” he said. Decision-makers also need a “mechanism for anticipation, as well as a commitment to use foresight in planning.” That’s true, also, for utilities. “I know this sounds antithetical to many utilities, but they need more agility, even in such a capital-intensive industry,” Petersen said. Capital-intensive industries with large sunk-costs—things such as construction and overhead that are difficult to recover—that are heavily reliant on energy prices can create opportunities for unconventional solutions, such as the development of electric cars. “When you get a breakthrough in battery technology, it will create a dramatically different energy landscape with vehicles that not only run on electricity, but can also produce electricity that can be sold or managed on the grid,” Petersen said. But David Wright, vice chairman of the South Carolina Public Service Commission and president of the National Association of Regulatory Utility Commissioners, believes the ability for electric cars to change the energy landscape is still far off until more advancements are made in battery storage technology. Wright said more research and development funds in this area are needed and states must make complex regulatory decisions to develop the battery charging infrastructure. Increasing amounts of distributed generation from solar power on homes would allow people to charge their electric cars and generate more power off the grid. Petersen said that indicates changes coming to the system.

ENERGY OUTLOOK | hot topic SUNNY HOT WATER Skyline Innovations last year installed solar thermal systems on a number of buildings in the Baltimore-Washington, D.C., area. A 174-unit system at American University provides hot showers to more than 2,000 students living on campus and hot water to the university's largest dining hall. © PRNewsFoto/Skyline Innovations

State Energy Future

While it may be difficult to predict the nation’s energy future, state energy officials must track the markets not just in the U.S., but also around the world. “Energy markets in states are affected globally,” said Wright. “From a regulator’s perspective, we have to monitor what’s going on, but keep an open mind and a watchful eye that utilities are doing smart planning.” Natural gas costs, he said, may not remain as cheap as they are now. Wright lamented that state utility regulators often face tough choices with promoting new technology and alternative energy development because of their obligations to maintain reliability and keep rates low. “We have $4 (trillion) to $5 trillion in investments, maybe more, that need to be made just in the utility sector over the next 15 years,” he said. Those investments, he said, are needed to upgrade and replace the electric grid, water systems, pipelines and telecommunication infrastructure. Investments in new technology have to compete with the same capital resource pool as basic infrastructure maintenance, which is a difficult balancing act for independent voices like state commissions—especially in a weak economy. But that doesn’t mean states shouldn’t invest in incentives for alternative energy, Wright said. “I’m a free-market guy and it’s not that I’m opposed to renewable energy; where it’s available, states should go for it,” he said, noting regional differences in the availability of resources like wind and solar. He used his home state as an example of the difficulty regulators face in promoting alternative energy and new technology through the rate-making process. “By and large, South Carolina is a poor state,” said Wright. “Our median income levels are below the national average and we have lots of housing with old, inefficient heating and cooling systems. Many of our residents don’t have insulated windows,

17 CAPITOL IDEAS

» MAY / JUNE 2012

MARCELLUS FRACKING CLAYSVILLE, Pa.—A local contractor closes a valve on his tanker truck after watering the dirt roads to keep the dust down at the Range Resources hydraulic fracturing operation. The company is one of the many using the fracking process to extract natural gas from the deep wells drilled into the Marcellus Shale in the region. © AP Photo/Keith Srakocic

hot topic | ENERGY OUTLOOK because then they have to make a choice between buying food and clothes for their kids or even their own medicine. “One of the real tragedies of many federal (energy) incentive programs is that tax dollars go to support them, but (some taxpayers) can’t really afford to participate in them.” Wright, like others, is frustrated by the lack of a federal energy policy. Part of the problem, he said, is that many federal regulators look at energy and environmental issues in silos and make decisions in a vacuum. “They’re not looking at how overall costs and rapid implementation will not only impact an industry’s bottom line, but the consumer as well,” he said.

State Innovations

The absence of a comprehensive federal energy policy, however, isn’t stopping states from trying to innovate. “When conducting EIA’s (Energy Information Administration) analysis, we attempt to reflect the impacts of state policies as much as possible,” said Gruenspecht. Key state policies include renewable portfolio standards, electricity efficiency standards, state and regional carbon dioxide cap-and-trade programs, industrial energy-efficiency rules and clean energy regulations. “Together, these programs are slowing electricity demand growth, and together with federal tax incentives, stimulating increased use of renewable fuels for electricity generation,” he said. “States are also leading the way in several appliance efficiency standards for residential and commercial products. Eleven states and the District of Columbia have adopted energy efficiency standards for products not currently covered by federal standards, “ said Gruenspecht. “Recent history has shown that several product types covered by state standards are eventually addressed by federal standards.” Connecticut, for instance, is developing a legislative plan that will offer some potentially transformative changes in the state’s electricity market and provide redundancy for critical energy infrastructure that is cleaner, cheaper

FUTURE ENERGY HOUSTON—Menahem Anderman, president of advanced automotive batteries for Total Battery Consulting Inc., left, and David Raney, a senior associate with IHS Cambridge Energy Research Associates, were speakers at the 2011 CERAWEEK conference in Houston. CERAWEEK is a gathering of senior energy executives, government officials and thought leaders from the energy, policy, technology and financial communities. © F. Carter Smith/Bloomberg via Getty Images

and more reliable. Snowstorms that caused billions of dollars in damages and left more than 1 million people without power for two weeks in 2011 spurred the action. The storms showed state leaders they needed to do more to enhance the resiliency of the grid. “The human and economic cost of that storm was enormous to the state,” said Jessie Stratton, policy director in the Connecticut Department of Environmental Protection. “Despite the terrible impact of the storms, it forced the state to look at our preparedness, particularly for an era of when we may have stronger storms. A category 3 hurricane could knock out power for a month.” Proposed legislation by Gov. Dannel Malloy would direct the department to develop a plan for promoting distributed power generation through connected microgrids at critical facilities across the state. The Connecticut initiative could potentially create a shift to small, local, distributed, clean power generation that oper-

CAPITOL IDEAS

MAY / JUNE 2012

“Ultimately, I think an all-of-the-above strategy (for energy policy) is the best way to go.” —David Wright, vice chairman South Carolina Public Service Commission

ates independently and uninterrupted, even when the power goes out. In South Carolina, Wright sees nuclear power playing a big role in the state’s clean energy future. Two new reactors are scheduled to go online in 2016 and 2019 respectively. “One of the benefits of the new nuclear plants coming online will be the retirement of older, dirty coal plants that will bring significant clean energy and improved air emissions benefits,” he said. He also suggested that states may want to look at small, modular nuclear reactors as a way to avoid the large expenses associated with new nuclear power plants, which often cost several billion dollars. Some nuclear engineering firms are designing concept reactors that could be about the length of a bowling lane and could power tens of thousands of homes for a fraction of the cost of building a large, conventional nuclear plant. But nuclear power takes time. “You can’t have a renaissance in nuclear power without a federal license,” he said. The Nuclear Regulatory Commission takes nearly four years to review a new license and only recently approved the construction of the nation’s first new nuclear power plant in 33 years. State and federal policymakers will need to embrace creative solutions to regulatory or policy challenges as they plod their way to the future of energy in the U.S. “Ultimately, I think an all-of-the-above strategy is the best way to go,” said Wright.

ENERGY OUTLOOK | hot topic WIND-POWERED BASEBALL CLEVELAND, OHIO—Workers attached a wind turbine to the top of the southeast corner of Progressive Field, home of baseball's Cleveland Indians, in March. The Indians are the first Major League Baseball team to install a wind turbine. The innovative corkscrew-shaped structure, which was designed at Cleveland State University and funded by grants from the U.S. Department of Energy and the state, was ready for operation on opening day. © AP Photo/Amy Sancetta

19 CAPITOL IDEAS

» MAY / JUNE 2012

10 questions | LUIS FORTUÑO

DIVERSIFICATION AND CONSERVATION »

Puerto Rico Implementing

Cleaner, Leaner Energy Plan by Mary Branham © Steven G. Smith / Corbis © AP Photo/Michael Dwyer

How would your proposal to convert Puerto Rico’s oil-fired plants to natural gas benefit Puerto Rico? ”Puerto Rico faces some of the highest energy costs in the country, with electricity costs more than twice that in the rest of the nation. … The cost of electricity is a significant drag on the Puerto Rico economy. According to the U.S. Energy Information Administration, Puerto Rico’s (kilowatt hour) cost in 2009 was 21.69 cents, compared to the U.S. average of 10.2 cents. Puerto Rico’s extreme reliance on oil is clearly bad for the environment as well. Puerto Rico’s energy diversification efforts, especially the transition to natural gas, will cut environmental emissions by 79 percent and will save individuals and businesses as much as $1 billion per year when the transition to natural gas is complete in the next four to five years.”

What are the environmental benefits of Puerto Rico’s energy strategy?

CAPITOL IDEAS

MAY / JUNE 2012

”The transition to natural gas represents the biggest environmental protection effort in Puerto Rico’s history. Burning dirty oil for 68 percent of existing power needs, as Puerto Rico is currently doing, is bad for the environment. Transitioning to natural gas will cut emissions of criteria pollutants by 79 percent and cut greenhouse emissions by up to 30 percent.”

What are Puerto Rico’s near-term strategies for addressing the cost of energy? ”One strategy we are implementing immediately to bring down energy costs is improving the way Puerto Rico purchases oil and natural gas in the marketplace. … We are transitioning to direct purchases from oil suppliers and diversifying purchase contracts to get the best price, a strategy that, when combined with other measures underway, should help cut energy bills for consumers in the coming months. These efforts will augment Puerto Rico’s transition to natural gas.”

What are your goals for renewable energy? ”Puerto Rico’s diversification strategy incorporates renewable sources, including wind, solar and waste-to-energy, as key elements of our comprehensive energy reform. New energy reform laws that I signed in 2010 lay out incentives for alternative energy development and commit the government to ambitious goals for the growth of renewable energy. Through the Energy Diversification Act, the government’s new targets for energy generation are: 12 percent of power generation through renewable and alternate sources by 2015, 15 percent by 2020 and 20 percent by 2035.”

The Caribbean’s largest wind farm and largest solar energy project will be located in Puerto Rico. What will that mean to Puerto Rico’s energy future? ”Puerto Rico is in the process of developing multiple renewable energy projects, with our high energy costs actually making renewables more economically feasible than in many parts of the United States. Two of the largest projects that are currently being developed include a 24 megawatt solar project by AES Solar and a 75 megawatt wind turbine project by Pattern Energy, which would be the largest wind project in the Caribbean to date. Another planned project by the company Energy Answers would use waste-to-energy technology in a 58 megawatt energy plant.”

How is Puerto Rico incentivizing renewable energy? ”Puerto Rico’s new Green Energy Fund, created in 2010, will enable the government to co-invest $290 million in renewable energy over the next 10 years. The Green Energy Incentives Act also creates several special tax exemptions for companies engaged in renewable energy generation. The first round of funding from the clean energy fund provided $20 million for 114 small and medium scale renewable energy projects.”

LUIS FORTUÑO | 10 questions

Puerto Rico Gov. Luis Fortuño, the 2012 CSG national president, has taken steps to lower energy costs and decrease the island’s dependence on foreign oil. The former Puerto Rico representative to Congress also sees benefits in working with other U.S. territories in the Caribbean to address energy challenges. He served as Puerto Rico’s secretary of Economic Development and Commerce, and touts the benefits of many energy projects in improving the island’s economy. the full interview with Luis Fortuño at capitolideas.csg.org.  Read

What kind of infrastructure and development plans will Puerto Rico—and other states— need to make electric vehicles a viable option? ”Puerto Rico is working to develop a market for electric vehicles, and a (memorandum of understanding) we signed with Nissan last year includes exploring the creation of a battery recharge network to support electric vehicles, as well as possible incentives for using it. This effort is part of a larger economic development strategy to create a new ecotourism destination in the eastern region of Puerto Rico. … Developing clean transportation options like electric vehicles will help position the region for smart growth through a sustainable tourism plan.”

Policymakers across the country are touting the benefits of conservation as part of an energy plan. Why is conservation an important energy strategy?

”As islands not connected to a national grid, both U.S. territories rely heavily on imported oil and have smaller, isolated energy markets that inhibit our ability to take full advantage of the wind, solar and geothermal resources throughout the Caribbean region. In 2009, we proposed using undersea cables to connect the electrical grids of the two territories and, ultimately, island nations in the Caribbean, to expand the size and economic viability of our energy market for renewable energy, natural gas and other energy resources. Because Puerto Rico isn’t connected to a grid, our utility, the Puerto Rico Electric Power Authority, must produce excess energy to meet unexpected surges in demand; this excess generation could be sold to the U.S. Virgin Islands, which is grappling with electricity costs even higher than in Puerto Rico.”

Voters will be asked to consider the political status of Puerto Rico in November. How important is this vote to Puerto Rico? 21

» MAY / JUNE 2012

”In November, citizens in Puerto Rico will take their first ever up-ordown vote on their support for the island’s current status as a U.S. territory. The ballot will pose two questions to the island’s electorate. Voters will first be asked if they agree with maintaining the current unincorporated territory status, to which they can answer either yes or no. Voters will also be asked to express their preference for one of the three non-territorial status options recognized by Congress, and Republican and Democratic presidential administrations: statehood, full independence or independence with free association to the United States. … Once the people make their choice in November, it will then be the turn of elected officials—both in San Juan and Washington—to act upon that mandate.”

CAPITOL IDEAS

”Puerto Rico’s Energy Affairs Administration has made energy efficiency a top priority. One of (the administration’s) most exciting initiatives is the new partnership with energy-savings companies as a result of Puerto Rico’s recently passed Energy Savings Performance Contracts law (Act 19), which authorizes government units to use (energy-savings companies) to implement large capital investment projects that will conserve energy and water. The (energy-savings companies) perform audits of public buildings and help secure financing to make energy efficient upgrades—which are ultimately paid for by energy savings.”

Why are the efforts by the Puerto Rico Federal Affairs Administration to interconnect Puerto Rico’s power grid to the U.S. Virgin Islands and other islands in the Caribbean important?

hot topic | ENERGY INFRASTRUCTURE

Taking Charge of Electric Vehicles—

Grid Can Bear It 2012 is supposed to be the Year of the Electric Vehicle—the year when Americans stop asking if electric vehicles are for real, according to Pike Research. The global marketing firm that analyzes clean energy markets, expects more than 257,000 plug-in electric vehicles will be sold worldwide in 2012. More than 66,000 of those will be sold in North America alone. That’s a lot of new cars needing to be plugged

CAPITOL IDEAS

MAY / JUNE 2012

by Jennifer Ginn

in every night to recharge. If electric vehicles are here to stay, the question then becomes this: Can the power grid handle so many new cars? The answer is yes, but it’s going to take a lot of planning.

A Slow Revolution

Alan Shedd, director of the residential and commercial energy programs at Touchstone Energy, said America’s adoption of electric

vehicles has been relatively slow. Consider what Shedd calls the surrogate adoption rate for electric vehicles: It’s taken 10 years to get 1 million Toyota Priuses on the road. A Prius is a hybrid vehicle that uses both batteries and gas. “Ten years is a long time to follow the trend, do the build-out and get ready for it,” Shedd said. “Let’s say we double that rate, triple that rate. I don’t see a huge, ‘Oh my God, the sky is falling’ impact that some have commented on.

ENERGY INFRASTRUCTURE | hot topic

“In general, the grid has excess capacity to support a decent penetration level of electric vehicle s.” —Dan Ton, program manager, Smart Grid research and development program U.S. Department of Energy

… If we woke up tomorrow and everybody had one, sure we’d have a problem.” Dan Ton, program manager for the Smart Grid research and development program at the U.S. Department of Energy, said the department’s research shows that electric cars won’t buckle the power grid any time soon. “In general, the grid has excess capacity to support a decent penetration level of electric vehicles,” Ton said. “Some problems may occur at the local level, let’s say in a neighborhood where you have five homes connected to a specific transformer. Everybody comes home at the same time and tries to charge their vehicle during the peak hours when these transformers are already at capacity with the current household usage. Adding another load with electric vehicles can cause it to overheat. “The utility can (handle) it by replacing the transformer with a larger transformer.” Communities also can manage the charging to times of day when electric demand is low to help alleviate that problem. “We call it smart charging,” Ton said.

Hawaii’s Push for Clean Energy

One of the country’s leaders in the push toward preparing for more electric vehicles is Hawaii, where the vehicles are a vital part of the state’s ambitious clean energy initiative, said Mark Glick, administrator of the State Energy Office. The initiative aims to reduce the amount of petroleum used in the state by 385 million gallons annually by 2030. Glick said Hawaii has slightly more than 700 plug-in electric and more than 10,000 hybrid

vehicles. That hasn’t happened by accident. Policymakers have been passing bills and establishing programs encouraging electric vehicle adoption since the late 1990s. Electric vehicles with a special license plate can park for free at state and county facilities and drive in the high-occupancy lanes with a single occupant. Parking lots with 100 spaces or more must set aside 1 percent of them for electric vehicles, with at least one having a charger. Hawaii also offers up to a $4,500 rebate for the purchase of an electric vehicle and up to a $500 rebate for installing a charger. Glick said Hawaiians probably have been quicker to buy electric vehicles because the island’s temperate climate helps maximize battery life. “We have a little less driver anxiety (about batteries running out of a charge) because our average miles traveled per vehicle … are less than on the mainland,” he said. “That’s led to a little more confidence on the driver’s side. That’s why we’re focusing now on a fast-charging network.” The state is hoping its main electric utility, through a public-private partnership, will lead installation of a large network of fast chargers, which can fully charge a vehicle in 30 minutes or less. “I think that will be a game changer,” Glick said. Pike Research reports that California has seen the biggest growth in the number of electric vehicles on the road than anywhere in the country. Adam Langton, staff lead on electric vehicle regulatory proceedings with the

California Public Utilities Commission, said the state has more than 1,500 charging stations already. But those charging stations—as well as home chargers—have led to some big questions every state must answer. “Are charging stations utilities or not?” Langton asked. “… If it is a utility, it’s subject to rate regulation by the public utilities commission. It has to meet certain additional requirements we put on utilities for energy efficiency, renewable energy procurement. … The California Public Utilities Commission decided charging stations, provided they are used for transportation fuel, are not subject to regulation as a utility.” Another big question for states, Langton said, is whether utilities can own charging stations. In California, the answer was no. “That has a big impact on how the charging market develops,” Langton said. “There were concerns that utilities could cross-subsidize the cost of charging stations, perhaps unfairly competing with the private sector.” Langton said nobody has the complete picture yet of what electric vehicles will mean for the states or the power grid. “We don’t know if the impact (of electric vehicles) will be big or not,” he said. “Some people have said, ‘Oh, we’re really worried about grid impact. We think it will cost a lot of money.’ We don’t know that yet. It depends upon the clustering of vehicles; it depends on the infrastructure in different regions. Coastal areas tend to have more houses per transformer than other areas. We have to analyze this.”

23 CAPITOL IDEAS

» MAY / JUNE 2012

ELECTRIC HIGHWAY CENTRAL POINT, Ore.—Bruce Sargent of Ashland, Ore., topped off the charge on his Nissan Leaf in 2011 at an electric car charging station. The station is one of eight along a 160-mile section of Interstate 5, marking the biggest section yet of an “Electric Highway'' that will eventually allow electric cars to drive from Canada to Mexico. ©AP Photo/Jeff Barnard

hot topic | FRACKING 101

THE ‘FRACKING’ RULES As the use of hydraulic fracturing—or fracking— has grown, and as the practice has become more controversial, states have taken action in three primary ways.

by Brydon Ross

[ Chemical Disclosure ]

To address concerns some people have with the chemicals used in the fracking process, several states have adopted disclosure rules. Wyoming’s law requires public disclosure of the chemical compounds used in fracking solutions before operations begin. It also requires companies to list the actual names of chemical additives, compound type and concentration rate before and after the process. Wyoming’s law served as a framework for the Bureau of Land Management’s recent proposal to require chemical disclosure of fracking operations on federal land. Several states—including Arkansas, Colorado, Texas and Wyoming— require operators to publicly disclose the chemical makeup of fracturing solutions on the website, http://FracFocus.org.

[ Moratoriums, Bans ]

Some states, like New York, have acted quickly to slow down the development of shale deposits and have been a high-profile battleground for policies related to fracking. Former New York Gov. David Paterson vetoed the legislature’s ban on the practice in 2009, but he issued an executive order directing further environmental review by the state Department of Environmental Conservation. The executive order created a de facto moratorium until a final decision is issued. And, although no producer has applied for a permit to use the fracking technique, the Vermont House of Representatives in February passed a three-year moratorium on any hydraulic fracturing activities.

[ New Regulations ]

CAPITOL IDEAS

MAY / JUNE 2012

FRACKING & GROUNDWATER PAVILLION, WYO.—Louis Meeks holds a jar filled with water from a contaminated well on his property near Pavillion, Wyo. One concern about hydraulic fracturing is the possibility of groundwater contamination from the process. © AP Photo/Casper Star-Tribune, Kerry Huller

State legislation relating to fracking wastewater treatment, disposal and transportation has markedly increased over the past few years. According to an Associated Press analysis, hydraulic fracturing generated roughly 10 million barrels of flowback, or wastewater, in the last half of 2011, with 97 percent of it either being recycled or sent to deep underground injection wells or waste treatment plants. Sending flowback to municipal sewage treatment plants has become increasingly worrisome for regulators in states like Pennsylvania. The state Department of Environmental Protection has found high concentrations of dissolved salts like bromide in treated water, which has proved harmful to water quality and public health. In April 2011, Gov. Tom Corbett directed that all drilling operations in the state voluntarily comply with a ban on sending flowback to wastewater treatment plants. Earthquakes in northeastern Ohio in late 2011 raised concerns about increased seismic activity when thousands of gallons of wastewater are injected in reservoirs at high pressure. In response to public concerns, Gov. John Kasich shut down wastewater injection within five miles of the well where the earthquakes were taking place. He recently proposed expanding the regulatory reach and the severance taxes the industry pays. Legislation introduced in both Maryland and New Jersey would ban the shipment and treating of wastewater from fracking operations in the nearby Marcellus region.

FRACKING 101 | hot topic

Hydraulic Fracturing In hydraulic fracturing, commonly called “fracking,” more than a million gallons of water are injected at high pressure into a well to create millions of tiny cracks to release natural gas contained in rock. The injected fluid contains sand, which becomes lodged in the cracks to provide a path for the gas to flow up the well. The fluid also contains chemicals to allow the water to flow easier under high pressure and to keep the sand suspended.

Tanker trucks deliver water, which is mixed with sand and chemicals before being pumped into the well.

Stored gas from the site is sent to markets via a network of pipes.

Natural gas flows out of the well and into storage tanks. The recovered water is stored in open pits and then delivered to a treatment facility.

Storage Tanks

The energy from the highly pressurized fluid creates new channels in the rocks to release the trapped natural gas.

Well Fissure

Sand keeps fissures open

Shale

Mixture of water, sand & chemicals

Natural gas flows from fissures into well

25 CAPITOL IDEAS

» MAY / JUNE 2012

Information Source: Environmental Protection Agency

CSG

N AT I O N A L LEADERSHIP CONFERENCE La Quinta, California | May 17–20, 2012

CSG’s NATIONAL LEADERSHIP CONFERENCE La Quinta, California | May 17–20, 2012 A Message to State Leaders from CSG’s National Chair This year has been an exciting one in state capitols across the country. The issues of the day are complex and the expectations of the electorate are often volatile and elusive, all at the same time. It is more important than ever that state leaders come together to learn from each other and work together to craft the solutions needed to move our nation forward.

SENATE MAJORITY LEADER

JAY SCOTT EMLER

KANSAS CSG National Chair 2012

CSG’s National Leadership Conference features a robust agenda, including plenty of time for you to network with state officials from other states, giving you the opportunity to learn firsthand how other states are working to address the same challenges you face. You also will have the chance to share with others what works in your state. CSG has always been about finding the best ways to allow state leaders to share capitol ideas. The CSG National Leadership Conference is a great place to do just that. During our time together, we also will feature presentations by national experts, giving you a chance to learn insights from today’s thought leaders that will help you be an even better state leader.

Your involvement with CSG helps make CSG an active and relevant resource for all of us. I hope you will plan now to join us in La Quinta. I am certain this meeting will make a difference for both you and the citizens you serve. I look forward to hearing from you and to seeing you in California.

CSG EXTENDS A SPECIAL THANK YOU TO THE

2011–2012 COMMITTEE & TASK FORCE CHAIRS 21st Century Foundation

» Chair: Sen. Jeff Wentworth, Texas » Vice Chair: Rep. Deborah Hudson, Delaware

Associates Advisory Committee » Chair: Sen. Lesil McGuire, Alaska

Education Policy Task Force

» Co-Chair: Rep. Roger Eddy, Illinois » Co-Chair: Rep. Sara Lampe, Missouri » Vice Chair: Rep. Vern Swanson , Kansas

Energy and Environmental Task Force » Chair: Rep. Tom Lubnau, Wyoming » Vice Chair: Jessie Stratton, Department of Environmental Protection, Connecticut

Finance Committee

» Co-Chair: Rep. Maxine Bell, Idaho » Co-Chair: Rep. Bob Damron, Kentucky

Health Policy Task Force

» Co-Chair: Sen. Kim Gillan, Montana » Co-Chair: Sen. Vicki Schmidt, Kansas

International Committee

» Co-Chair: Sen. Mike Brubaker, Pennsylvania » Co-Chair: Assemblyman Marcus Conklin, Nevada » Vice Chair: Wade Merritt, Vice President, International Trade Center, Maine

Suggested State Legislation

» Co-Chair: Rep. Bobby Moak, Mississippi » Vice Chair: Jerry Bassett, Legislative Reference Service, Alabama

National Conference Committee (2012 Officers)

» Co-Chair: Sen. Jay Scott Emler, Kansas » Co-Chair: Rep. Bob Godfrey, Connecticut » Vice Chair: Sen. Gary Stevens, Alaska

Transportation Policy Task Force

» Co-Chair: Rep. Alice Hausman, Minnesota » Co-Chair: Sen. Kevin Van Tassell, Utah » Vice Chair: Sean Connaughton, Secretary of Transportation, Virginia

FEATURED SPEAKER

SESSION HIGHLIGHTS } Diabetes: From Treatment to Prevention

CSG Health Policy Academy Friday, May 18 | 8 a.m.–Noon This session will promote a better understanding of diabetes and the disease’s burden on individuals, society and the health care system. Attendees also will learn about effective state policies to prevent and treat people affected by diabetes and diabetes-related complications. Panelists will discuss the state of science around prevention, diagnosis and treatment of the disease, as well as new policy initiatives that apply a public health template to diabetes. Sponsoring legislators and supporting advocates will present successful state policy initiatives.

Disparate Funding for Public Education Impacts Transformation and Academic Success

Education Policy Task Force Friday, May 18 | 8–10 a.m. Policymakers, parents and stakeholders are demanding improvements in public education by raising metrics of academic success, pushing for progress in low-performing schools, and raising the bar on teacher and leader effectiveness. Differences in funding formulas, allocations and revenue have created disparate funding across the states. These variations in spending per student impact the educational opportunities provided as states ramp up their educational reform. This session will highlight various options states can implement to address these critical budget deficits.

Transportation’s Uncertain Future: Politics, Roads & High-Speed Rail

Transportation Policy Task Force Friday, May 18 | 8–10 a.m. Finance at the state and federal levels and alternatives to the gas tax are two major topics in the transportation discussion. In addition, as highspeed rail is put on the back burner elsewhere, the dream is still alive in California. This session will focus on how infrastructure investment can impact the road construction industry and a company like UPS. Speakers also will discuss what California has planned in high-speed rail and what it could mean for the rest of the country.

America’s Forgotten Borders

International Committee Friday, May 18 | 10:15–11:45 a.m. The U.S. borders with Canada and Mexico are the subject of frequent and sometimes heated debate regarding trade, security and immigration. America’s frontiers across the Caribbean basin and along the Arctic, however, have received little attention, but are just as vital for the future of commerce and public safety. This session will feature discussions of the economic opportunities and security challenges along these forgotten borders and the impact that developments in these regions will have on states.

Lunch on the Lawn

Friday, May 18 | Noon–2 p.m. CSG’s Lunch on the Lawn is an opportunity to enjoy the outdoors while networking with other attendees. Representatives from CSG East, CSG South, CSG Midwest and CSG West will be on hand to give highlights on their upcoming annual conferences taking place this summer.

Moving Forward on Health Care Reform

Health Policy Task Force Friday, May 18 | 2:30–4:30 p.m. Reform, whether mandated by the Affordable Care Act or not, is needed to address citizens’ demands for quality health care services. Medicaid, state employee health care and health insurance exchanges are potential policy levers to increase quality, improve states’ health outcomes and hold the line on costs. This session will highlight replicable initiatives undertaken by states to build an improved health care system responsive to today’s fiscal and policy context.

Siting Large-Scale Renewable Energy Projects Energy & Environment Policy Task Force Friday, May 18 | 2:30–4:30 p.m. The Obama administration announced dramatic goals for developing alternative energy. What does that mean for states and what considerations should policymakers undertake to turn aspirations into reality? Panelists will provide insight from federal, state and private sector perspectives in siting large-scale, commercial renewable energy power plants. This session will cover the financial, regulatory and stakeholder process associated with developing complex projects to help states anticipate future challenges.

Making Main Street Fair

Intergovernmental Affairs Committee Saturday, May 19 | 8–10 a.m. States’ ability to tax Internet-based transactions has remained a topic of heated debate in the 20 years since the Supreme Court ruled that states could not compel merchants without “substantial nexus” within their boundaries to collect and remit sales taxes. Three separate bills that could allow states to begin imposing sales taxes on Internet transactions are working their way through Congress. This session will include discussion of those bills and the potential impact any legislation may have on state budgets.

CSG National Leadership Center Breakouts (open to all attendees) Saturday, May 19 | 10:15 – 11:45 a.m. } Crafting

and Controlling Your Message Brian Selander, chief strategy officer to Delaware Gov. Jack Markell, and a 2011 Toll Fellow, will share keys to effectively crafting—and sticking to—a cohesive political message. From determining the best angle for a story to dealing with the inevitable bumps in the road, Selander will discuss the keys to communicating with press and constituents in a way that gets your message across. The discussion will include ways to combine traditional and new media to spread information quickly and effectively.

} Social

Media Boot Camp Learn about the primary social media tools—Facebook, Twitter and YouTube—in this interactive how-to discussion. Participants will learn the basics of social media, including security settings and video uploading.

} Managing Your

Inbox So It Doesn’t Manage You Every public official is inundated on a daily basis with an ever-increasing number of emails. Stuart McKee, U.S. national technology officer for Microsoft Corporation, will offer tips on how to manage your inbox through filters, autoreplies, folders and other important tools so you can more effectively organize and prioritize emails. The goal is to help you gain control of your correspondence and confidence that you are responding to what needs immediate attention.

AMY WEBB

WEBBMEDIA GROUP General Session Luncheon: Living Digitally

Presented by the CSG National Leadership Center Noon–2 p.m. | Saturday, May 19

As a public official, you know how important the Web has become as a tool for citizens to learn about you and their government. The virtual world presents both opportunities and risks. In order to successfully navigate both, you need to know how the Internet and social media can both help and hurt you. Amy Webb is a leading expert on life on the Web. Her presentation will change the way you interact with technology and empower you to make better choices about your presence on the Web.

Committee & Task Force Schedule 21st Century Foundation (invitation only) Friday, May 18 | 4:30–6 p.m.

Associates Advisory Committee Saturday, May 19 | 10:15–11:45 a.m.

Education Policy Task Force Friday, May 18 | 8–10 a.m.

Energy & Environment Policy Task Force Friday, May 18 | 2:30–4:30 p.m.

Executive Committee

Sunday, May 20 | 8–10 a.m.

Finance Committee

Saturday, May 19 | 8–10 a.m.

Governance Committee (invitation only) Thursday, May 17 | 10 a.m.–1:30 p.m.

Health Policy Task Force

Friday, May 18 | 2:30–4:30 p.m.

Intergovernmental Affairs Committee Saturday, May 19 | 8–10 a.m.

International Committee

Friday, May 18 | 10:15–11:45 a.m.

Investment Subcommittee Friday, May 18 | 10:15–11:45 a.m.

National Conference Committee Friday, May 18 | 10:15–11:45 a.m.

Suggested State Legislation Part 1: Thursday, May 17 | 2–5 p.m. Part 2: Saturday, May 19 | 2–5 p.m.

Transportation Policy Task Force Friday, May 18 | 8–10 a.m.

CSG’s State Leaders’ Energy & Environmental Issues CSG’s Energy & Environmental Policy Expert

BRYDON ROSS

Brydon Ross joined CSG in January 2012 after nearly 11 years in Washington, D.C., on Capitol Hill and in the private sector. In addition to staffing CSG’s Energy and ROSS Environmental Task Force, Brydon provides guidance, research, analysis and development to help identify trends in the energy and environmental policy arena.

Read about energy and environment issues at www.csg.org/energy or www.csg.org/ environment Read Brydon’s blog at knowledgecenter.csg.org/energy Learn more through States Perform, CSG’s database that provides access to customizable and comparative state performance information, at www. statesperform.org

Want to become an expert in energy and environment policy? Brydon Ross recommends the following as a good place to start: » » » » » » » » » » » » » » »

U.S. Department of Energy: www.energy.gov The Official Blog of the Department: www.energy.gov/news-blog U.S. Energy Information Administration: www.eia.gov Today in Energy: www.eia.gov/todayinenergy/ State Energy Profiles: www.eia.gov/state/ U.S. Department of the Interior: www.doi.gov Bureau of Land Management: www.blm.gov Bureau of Ocean Energy Management: www.boem.gov Bureau of Safety and Environmental Enforcement: www.bsee.gov U.S. Environmental Protection Agency: www.epa.gov Greenversations: The Official Blog of the Agency: blog.epa.gov/blog National Association of State Energy Officials: www.naseo.org National Association of Regulatory Utility Commissioners: www.naruc.org Interstate Oil and Gas Compact Commission: www.iogcc.state.ok.us Electric Power Research Institute: www.epri.com

Essential Reading » » » » » » » » » » »

Stateline: www.stateline.org Stateline Energy News: www.stateline.org/live/issues/Energy Stateline Environmental News: www.stateline.org/live/issues/Environment Energy and Environment Daily: www.eenews.net/eed/ Greenwire: www.eenews.net/gw/ Politico Pro Morning Energy Pulse: www.politicopro.com E2 Wire, The Hill Newspaper’s Energy and Environment Blog: www.thehill.com/blogs/e2-wire The New York Times Green Blog: www.green.blogs.nytimes.com The Houston Chronicle’s Fuel Fix: www.fuelfix.com Real Clear Energy: www.realclearenergy.org InsideEPA: www.insideepa.com

www.csg.org/transportation

NUCLEAR ENERGY | hot topic ÂŠ Corbis/ Todd Davidson

Going Nuclear The Nuclear Regulatory Commission has approved, for the first time in more than 30 years, the construction of reactors at two existing nuclear plants. While it may not be a nuclear renaissance, most agree the decision signals a nuclear thaw. Since the partial meltdown of a nuclear reactor at Three Mile Island in Pennsylvania in 1979, the commission stopped issuing building permits and took a hard look at safety measures in U.S. plants as other countries moved forward. Now, as those countries take a step back following the Japanese disaster at the Fukushima Dai-ichi Nuclear Power Plant, the U.S. is moving ahead.

29 CAPITOL IDEAS

Âť MAY / JUNE 2012

hot topic | NUCLEAR ENERGY

A NUCLEAR THAW After 30 Years with No Construction, Feds Give Blessing to New Reactors by Jennifer Ginn For the first time in more than 30 years, the Nuclear Regulatory Commission has given the go-ahead to build reactors at two existing nuclear power plants—one in Georgia and one in South Carolina. Some pundits have said this signals a nuclear renaissance for the United States, while experts agree that it’s more of a nuclear thaw. “We are in expansion mode,“ said Steve Kerekes, senior director of media relations for the Nuclear Energy Institute, a policy organization representing the nuclear industry. “We readily acknowledge it’s going to be a fairly measured expansion. At best, we’ll have five new reactors online by the end of this decade.”

A Stalled Program

CAPITOL IDEAS

MAY / JUNE 2012

While nuclear energy programs moved ahead in Europe and Asia over the past three decades, it stalled in the United States. The Three Mile Island accident in 1979, which led to a partial meltdown of one of the plant’s reactors, led the Nuclear Regulatory Commission to stop issuing building permits and take a hard look at safety measures in U.S. plants. In February, the Nuclear Regulatory Commission issued a combined operating license, giving the Southern Co. permission to build and operate two new reactors at its Vogtle plant, located near Waynesboro, Ga. The new reactors are expected to come online in 2016 and 2017 and will generate 1,100 megawatts each. “The other four commissioners and I felt like … nuclear power would be the best-cost option for our consumers,” said Tim Echols, chair of Georgia’s Public Service Commission. “More than anything else, it is the cheapest form of electricity to generate in Georgia. Planning for the future, having reliable power at a cheap price, is important to us. It also means a lot of jobs for Georgia.” In South Carolina, Santee Cooper and SCANA Corp. received permission in late March to build two of the same reactors being used at Vogtle at the V.C. Summer plant near Jenkinsville. The first reactor is due to go online in 2016, with the second following in 2019, said David Wright, vice chair of

the South Carolina Public Service Commission and president of the National Association of Regulatory Utility Commissioners. “We’re getting a lot of industries in the state and they’re big users of power,” Wright said. “You need to make sure you have an abundant source of power so you can promote economic development and jobs. … We feel this (the new reactors) is going to meet that in a big way. The side benefit, and it’s a big one, when the nuclear plants come online, a lot of the older coal plants will be retired.”

Big Price Tags and Natural Gas

Getting to those environmental benefits has taken some economic investment. One of the major obstacles to building more nuclear power plants in the U.S. is the high cost of construction, Wright said. Both the Georgia and South Carolina plant expansions are estimated to cost $14 billion each. The federal government has guaranteed $8.3 billion in loans for Georgia’s expansion. That high cost is a big problem with nuclear energy, said Jordan Weaver, nuclear program scientist with the Natural Resources Defense Council. The council is a national nonprofit group seeking to improve the environmental, health and safety conditions at America’s nuclear facilities. Nuclear energy is unproven economically, Weaver said, because new plant construction often requires financial assistance from the federal government. “I think nuclear does have a part to play as long as they (the energy companies) do it safely and with less taxpayer influence,” Weaver said. “… I’d much rather see us not license this massive fleet of reactors without any proven commercial viability, when you’re locked into that commercial rate structure for the next 60 years. It’s based on this really long-lived risk financially.” Hydraulic fracturing—or fracking—is adding to the uncertainty of nuclear power’s future by making natural gas abundant and cheap. “Right now, gas is really, really cheap,” Wright said. “Any utility right now would be looking at natural gas as a cost-saver for customers. …

NUCLEAR ENERGY | hot topic

States Challenge Feds Over Nuclear Waste Inaction Everybody involved in the nuclear debate agrees that the more than 65,000 tons of spent fuel rods being housed at nuclear sites across the country need to be stored somewhere, but the billion-dollar question is, “Where?” In 1987, Congress picked Yucca Mountain—located on federal land in the Nevada desert—to be the country’s nuclear waste disposal site. Three decades of litigation followed and, in 2009, the Obama administration cancelled funding for the project, effectively killing it. “It’s been pretty clear the main problem was that it was a political landmine,” said Lisa Janairo, senior policy analyst for The Council of State Governments’ Midwest office, who has studied nuclear waste issues. Some states are becoming impatient for the federal government to make up its mind where the waste should go. Since 1983, states that generate nuclear power pay a tax to the federal government that is supposed to go toward developing a national repository. Although the fund now contains more than $25 billion, nuclear waste continues to be stored at power plants. In March, U.S. Sen. Lindsey Graham of South Carolina was pushing a bill that would refund much of that money to utility customers. Many states are suing the federal

government for either ruling that nuclear waste could be stored at closed nuclear plants or reneging on an agreement to dispose of nuclear waste. In January 2010, President Obama tasked the newly formed Blue Ribbon Commission on America’s Nuclear Future to recommend a new plan for what to do with the country’s nuclear waste. In January, the 15-member panel recommended a “consent-based” siting process for a new nuclear repository. That presents some interesting questions, Janairo said. “When you’re dealing with a facility that takes 20 years to develop and will operate for millennia, it’s hard to really pin down consent,” she said. “Who do you need it from and how long do you need it for?” Although remaining questions will be tough to answer, the commission said the country has an ethical responsibility to come up with practical solutions for storing the country’s nuclear waste. “… Americans have benefitted from the energy and deterrent capacity provided by nuclear technologies for more than 50 years,” the report said. “We cannot and must not continue to defer responsibility for dealing with the resulting high-level wastes and spent fuel.”

31 CAPITOL IDEAS

NEW NUCLEAR WAYNESBORO, GA.—U.S. Secretary of Energy Steven Chu visited the Vogtle nuclear power plant in February. The Nuclear Regulatory Commission issued a combined operating license, giving the Southern Co. permission to build and operate two new reactors at its Vogtle plant. © AP Photo/David Goldman

» MAY / JUNE 2012

hot topic | NUCLEAR ENERGY

At the same time, if everybody does a mad dash to gas and puts all their eggs in one basket, then the price would surely go up. You need to have a balanced portfolio. You need to have a generation mix that is responsible, efficient and can provide least-cost energy to your consumers in a way that keeps volatility minimized.” Georgia’s Echols said cheap natural gas could derail the country’s interest in nuclear power. “I think the renaissance depends upon what happens with natural gas prices,” Echols said. “I think if natural gas prices stay low, I don’t think we’re going to see the interest in nuclear I thought we were going to see. I think we are going to see (natural gas) prices stay low unless the EPA gets its hand on fracking.”

Safety Concerns

Even if natural gas prices rise and make nuclear energy economically more attractive, it still faces significant safety concerns. Those concerns gained a new focus last year because

CAPITOL IDEAS

MAY / JUNE 2012

of the disaster caused when an earthquake and tsunami cut off power to Japan’s Fukushima Dai-ichi Nuclear Power Plant. Three reactors had a meltdown and 90,000 people were evacuated. “I think the accident in Japan really sent shockwaves through the industry and through the American public, who legitimately were concerned about whether it (an accident) could happen here,” said Lisa Janairo, senior policy analyst for The Council of State Governments’ Midwest office, who has studied nuclear energy and nuclear waste. “… I don’t think the Nuclear Regulatory Commission has done a good job of getting information out to people about what the likelihood is of something like that happening here.” Janairo said people need assurance a similar loss of power and inability to control what’s happening in the reactor can’t happen here. Other countries have placed moratoriums and bans on future construction of nuclear plants because of the Fukushima accident.

“Even China is halting construction until they do a full safety review and they’re building 20 or so plants,” said Weaver. “Here in the United States, in the 12 months post-Fukushima, … we’ve seen almost twice as much activity than in the 12 months before (the accident). … Why is the rest of the world taking a step back?” Kerekes said nuclear power has proved over time to be a safe energy source in the U.S. “No one would have been talking about nuclear energy if we hadn’t been operating well over many years now,” he said. And, Georgia’s Echols said, nuclear isn’t the only energy source with problems. “There’s no form of energy that doesn’t have some negative aspect to it,” he said. “… The fact that it is highly regulated, by numerous agencies, will help ensure that safety is paramount and is always a priority. I really think it’s worth the risk. It is my hope that after we finish these two (reactors), we get approval to build two more on this site.”

RENEWABLE ENERGY | hot topic

A Bright Future for Renewables ÂŠ Corbis/Eric Westbrook

33 CAPITOL IDEAS

Âť MAY / JUNE 2012

Cheap natural gas, with its competitive ability to deliver low-cost kilowatt-hours, and the slow growth in the national economy have slowed the interest in renewable energies such as solar and wind. The federal government has lowered its expectations, and its funding, for these projects, but many states continue to invest in those efforts because they not only provide an alternative fuel to cut their dependence on foreign oil, but also can help attract business. Other states are making it easier to turn garbage into energy, promoting waste-to-energy facilities as renewable energy sources.

hot topic | RENEWABLE ENERGY

Future of Clean Energy is Bright … With a Little Help With no pun intended, Sen. Jim Kyle believes the future of solar energy in Tennessee is bright. Kyle, sponsor of the state’s Clean Energy Act of 2009 championed by former Gov. Phil Bredesen, said the new solar farm near Memphis and the success of the Tennessee Solar Initiative will determine whether that future will be dimmed in any way. “There’s a lot riding on these two particular projects,” Kyle, a 1986 Toll Fellow, said. The case for alternative energy in Tennessee is much the same as it is across the country. States are looking at clean energy as a way to reduce dependency on foreign oil, as well as to boost their economies with manufacturing plants to build necessary components for the industry. Although the federal government has gotten the ball rolling with large investments in alternative energy programs, keeping those programs going will likely depend on the states. “Given the budget uncertainties that we face, the federal incentives look more and

MAY / JUNE 2012

Spurring Growth

Tennessee may be an anomaly. It’s one of 13 states without a renewable portfolio standard, but it’s also home to a full supply chain for the solar industry. The West Tennessee Solar Farm became operational in April. The Tennessee

Solar Initiative—a partnership among the University of Tennessee, Oak Ridge National Labs, the state and the solar industry—operates the solar opportunity fund, which provides grants for solar installation and innovation. “Our mission is to speed the deployment of solar throughout the state, as well as provide assistance to the state’s solar manufacturing industry,” said John Sanseverino, director of programs for the solar initiative. The development of solar power in Tennessee has come more in small bites rather than on a full plate; private industry and individuals have played a major role in the deployment of the energy resource. Sen. Lowe Finney, who proposed legislation this year to expand the solar farm near Memphis, can point to three office complexes in Jackson, Tenn., that have recently installed small solar farms to generate the energy they need. Volkswagen, which has been building cars near Chattanooga for about a year, just announced plans to build a $30 million solar

el M. Simpkins

al, Alan Spearman

more in jeopardy,” said Jeff Logan, senior energy analyst with the National Renewable Energy Laboratories. “State roles will become more and more important in the relative way they push renewables into the market.” Much of that push has come through renewable portfolio standards, which 37 states have adopted. Logan said states with these standards demonstrate in a concrete way they are interested in a clean energy future, and that can attract the industries and jobs. “Most states that really want to have the clean manufacturing facilities locate within their borders realize you have to have a strong market to get those technologies deployed in order for them to be successful,” he said.

CAPITOL IDEAS

by Mary Branham

RENEWABLE ENERGY | hot topic

“Every state has a role (in alternative energy) and there may not be one single route to choose.” —Tennessee Sen. Lowe Finney

park to power its plant there. Finney believes the incentives the state has offered have spurred the developing industry as an economic base and that, in turn, is spurring interest in using the alternative energy source. He fears the loss of the incentive—as is part of a bill this year—would stunt the growth of the clean energy industry, which has seen employment numbers grow from 16,000 in 2007 to 76,000 today, according to a study by Middle Tennessee State University. “To say that we need to do away with those economic incentives for this developing industry would seem to be premature,” Finney said. Christopher Davis, communications manager for the Tennessee Solar Institute, said the incentives have helped kickstart the solar projects in the state. Finney said the state is reaping benefits from the solar industry, and all renewables have become more accepted in the Southeast and across the country.

Maintaining Interest

But even with the job base that’s been created over the past few years, the long history

of energy in Tennessee—Finney points out energy and that energy is going to have to be the state still has mountaintop coal removal— used by somebody in Tennessee and it’s going could make for slow going, especially if the to have to be shown that if we just did more of incentives end, Finney said. it, more people could use it in an economically State and federal incentives aren’t the only feasible way,” he said. things affecting the future of clean energy deployment. Sticking to It “There is some threat for continued expanThe evidence of success will likely take some sion of renewables, at least at the scale that it’s time, said George Douglas, media relations achieved in the past few years,” Logan, of the manager for the National Renewable Energy renewable energy laboratory, said. Laboratories. States must consider what they The threat to renewable energy development want the energy system to look like: clean, comes not only from the low costs of natural gas affordable and domestic. and its competitive ability to deliver low-cost “Some solutions can be very short-lived,” he kilowatt-hours, but also from the slow growth in said. “They can provide a spike in benefit, but the national economy, according to Logan. only for a very short period of time. “The demand for electricity has been rela“It’s our view that investment in renewables tively low and so those things in combination is a long-term investment that will pay off for are probably serving to slow down the growth many years to come.” of renewables, at least compared to how it’s Sujit CanagaRetna, senior fiscal analyst with occurred in the past couple of years,” he said. The Council of State Governments Southern Logan paints a grim view of the potential office who has studied the economics of clean to speed up that growth. He said progress in energy, said a diversified energy portfolio will renewable energy would continue to slow with- help states in the long run. out additional federal incentives, especially for “What it comes down to is you need a blend wind energy. Those alternative energy sources of different things,” he said. “We’re not going are getting very close to the point where they to have one energy source that’s going to be can compete on a level playing the magic bullet that’s going to solve all our field with more traditional problems.” energy sources, he said. Finney said much the same. When that playing field is “Every state has a role and there may not be Learn more aboutroute the Volunteer leveled, more people are likely one single to choose,”State he said. andalternative the economic to buy into the policy behind Solar Initiative Fostering energy, Finney said, of clean energy“One, at theitCapitol renewable energy, and not justimpactdoes two things: lessens our depenIdeas website. the economic benefit of the jobs dence on foreign countries for our energy that can be created, Kyle said. supply; and two, it creates jobs right here in our “We’re going to have to create own backyard.”

Learn more about the Volunteer State Solar Initiative and the economic impact of clean energy at the Capitol Ideas website.

CAPITOL IDEAS

» MAY / JUNE 2012

SOLAR POWER The solar industry in Tennessee is growing. A new solar farm in Memphis, the Agricenter International Solar Farm, was commissioned in April. Roy Taylor, far left, installed solar panels at the farm in Memphis, Tenn. The 4,160 photovoltaic solar panels—mounted on 5.5 acres within view of thousands of motorists driving through Shelby Farms daily—will produce enough electricity to power 400–500 homes at peak demand periods. David Lyons, left, a Nashville attorney, is one of hundreds of property owners who are using solar power to generate electricity and are getting paid for it with the help of the Tennessee Valley Authority and local power distributors.

hot topic | RENEWABLE ENERGY

One Man’s Trash Is Another Man’s Energy Spokane, Wash., officials were simply looking for a way to deal with the city’s solid waste two decades ago when they stumbled upon a solution that could turn that trash into treasure. City officials and the community made the decision to invest in a waste-to-energy facility, burning solid waste from the Spokane region to create energy. City Administrator Theresa Sanders said the waste-to-energy facility has given Spokane a solution to the solid waste issue that is environmentally sound, and also gives the city an alternative energy and a new business opportunity. “It’s a rare thing to find that sweet spot where you can make an investment to have those kinds of outcomes,” she said. To maximize that new business opportunity, however, the city needed a little help from the state legislature. Although the Environmental Protection Agency designates electricity from municipal solid waste as a renewable energy, the state of Washington’s designation wouldn’t apply to the Spokane facility. So the city made proposed legislation to grant renewable energy designation to electricity generated at its waste-to-energy plant its top legislative priority this year. “It’s important because the value of the energy produced from a renewable source can be sold at market at a higher price, so it improves the profitability of the resource,” she said.

Job Creation

Energy Costs

Many people may not know that Alaska— with its abundance of oil and natural gas—has some of the highest energy costs in the nation, Alaska Rep. Pete Petersen said. Diesel in some parts of the state costs about $6 a gallon, while electricity costs can be more than 50 cents per kilowatt-hour in some areas, he said. The average U.S. cost per kilowatt-hour for residences is 11.6 cents, according to the U.S. Energy Information Administration. Alaska passed a renewable energy loan fund five years ago and has been putting around $50 million a year into it, Petersen said. “In many cases, the goal is to displace diesel fuel with renewable energy,” he said. With the dual problems of solid waste disposal and high energy costs, “waste-to-energy

seems like a no-brainer to me,” Petersen said. He introduced a resolution this year urging support for turning garbage into power for Alaska communities. His goal is simply to educate municipalities that waste-to-energy technology exists and can help lower energy costs. “If you could displace 10 to 15 percent of your dependence on diesel, that would lower the cost per kilowatt-hour,” he said. Petersen said Alaska is similar in climate to Sweden, which has a successful waste-to-energy program, producing electricity at a cost of less than 4 cents a kilowatt-hour in some cases. The technology is already in use at the Eielson Air Force Base near Fairbanks. And Anchorage will be opening a facility in January 2013 that harnesses the natural gas from the regional landfill that will produce power for the equivalent of 2,500 homes, Petersen said. Many Alaska municipalities are already burning trash in the colder months, he said, because the ground is sometimes too frozen to bury the garbage in landfills.

Solid Waste Disposal

Using that garbage to produce energy addresses Spokane’s original problem, and one that many cities still face today—disposing of an ever-growing pile of waste. New York City Mayor Michael Bloomberg in March released a request for proposals to build a waste-to-energy plant as part of the city’s goal to double the amount of waste diverted from landfills. The city processes about 10,000 tons of waste per day, according to a press release from Bloomberg’s office. “Using less and recycling more are the most effective ways to address the problem,” he said in a statement, “but this project will help us determine if some of that waste can be converted to safe, clean energy to meet the city’s growing power needs.” But groups opposing the technology challenge any benefits the governments tout. The Natural Resources Defense Council, for

CAPITOL IDEAS

MAY / JUNE 2012

That designation also helps in economic development, she said. “We have an opportunity to connect businesses to energy from a renewable source and that matters to business these days as they’re looking for site selection and areas to grow their companies,” said Sanders. States across the country are looking into waste-to-energy for much the same reason as they are looking at other renewable energies. Job creation and retention are just part of that. When Washington Sen. Brian Hatfield introduced the Legacy Biomass bill in this

session, for instance, he was looking at helping the state’s timber industry. The bill was an amendment of sorts to Initiative 937, which set the state’s renewable energy standard in 2006. Senate Bill 5575 loosened the regulations of Initiative 937 to include new sources of biomass energy and allow biomass facilities in operation before 1999 to qualify as renewable energy. Before this bill passed, only facilities built after March 31, 1999, qualified for renewable energy credits. “Using the black liquors in the pulping process—basically wood chips and bark and things like that from the mills—to power those mills has been in operation for decades, if not almost 100 years,” Hatfield said. The change, he said, helps to stabilize the portfolios of the timber industry and save jobs. “The utility gets that credit. It helps with the bottom line of the mill, which of course, helps protect the desperately needed jobs in parts of rural Washington,” said Hatfield. But jobs are just part of the benefits states and municipalities tout when advancing the idea of waste-to-energy facilities. They also see benefits in a reduction in energy costs and getting rid of an ever-growing supply of garbage.

by Mary Branham

87 municipal solid waste-fired power generation plants operate in the U.S.

RENEWABLE ENERGY | hot topic

AIRPORT CONSTRUCTION PALM SPRINGS, CALIF.—Community leaders across the country have been anxiously awaiting reauthorization of the Federal Aviation Administration funding bill to firm up plans. In August, U.S. Sen. Barbara Boxer, of California, center, Palm Springs mayor pro tem Lee Weigel, right, and council member Ginny Foat discussed the construction of the new air traffic control tower at the Palm Springs International Airport. © AP Photo/The Desert Sun, Jay Calderon

WASTE-TO-ENERGY SPOKANE, Wash., was looking for a better way to dispose of its municipal solid waste when its waste-to-energy plant was built two decades ago. More cities, including New York City, are considering such plants to address their solid waste problems and create an alternative energy source. Opponents of such plants say taxpayer dollars would be better spent on recycling efforts. © Bob Rowan; Progressive Image/CORBIS

“Waste-to-energy seems like a no-brainer to me.” —Alaska Rep. Pete Petersen

burning waste for energy is more costly than producing energy from coal, even with carbon capture, natural gas and oil. “It is not a cheap way to produce energy,” he said. In addition, Hershkowitz said states and municipalities could produce more jobs by investing more in recycling efforts rather than waste-to-energy plants. “For every one job produced by incineration, 400 jobs are produced in paper recycling,” he said. “Almost 1,000 times more jobs

are in plastics recycling compared to waste incineration.” Sanders, whose city strives for one of the highest recycling rates in Washington, agrees any plan for waste-to-energy must include a comprehensive environmental plan that promotes recycling. “I wholeheartedly agree with the environmental groups that we cannot ignore our opportunity to recycle and reuse post-market recycled materials,” she said. “We shouldn’t just burn them if we could use them in other ways.”

37 CAPITOL IDEAS

instance, says the more trash burned in wasteto-energy facilities, the less trash is recycled. “More than half the material going to existing waste-to-energy is either nonburnable glass and metals or recyclable paper, plastics, metals, glass, textiles,” said Allen Hershkowitz, senior scientist and director of the solid waste project at the Natural Resources Defense Council. He said building waste-to-energy plants is very costly, as is the process to produce energy at them. Hershkowitz argues that

» MAY / JUNE 2012

These Waste-to-Energy Plants generate 2,500 megawatts of energy per year.

hot topic | KEYSTONE XL PIPELINE

10 THINGS

You Should Know about the Keystone XL Pipeline by Brydon Ross The Keystone XL Pipeline was designed to bring Canadian crude oil down to the large U.S. refining markets along the Gulf Coast. The project drew intense political opposition from environmental groups over the development of oil sands, while supporters touted its energy security benefits, including much-needed pipeline capacity. In January 2012, the Obama administration denied the project’s necessary permit to cross the international border citing arbitrary deadlines set by Congress to force a decision. The company backing Keystone XL now has decided to break up the project in two phases, which will allow domestic construction to proceed while it reapplies for a permit needed to cross the international border.

PIPELINE’S SOUTHERN PORTION CUSHING, Okla.—President Barack Obama spoke at the southern site of the Keystone XL pipeline March 22. Obama is pressing federal agencies to expedite the section of the Keystone XL pipeline between Oklahoma and the Gulf Coast. The Obama administration in January rejected the part of the pipeline that would cross the Canadian border. © Photo by Tom Pennington/Getty Images

CAPITOL IDEAS

MAY / JUNE 2012

KEYSTONE XL PIPELINE | hot topic

JOBS

BOTTLENECKS

SITING

PRODUCTION

PREVIOUS APPROVAL

OIL IMPORTS

OIL SANDS

GREENHOUSE GAS EMISSIONS

THE SANDHILLS

STATUS

The 1,700-mile project is designed to bring 830,000 barrels per day of Canadian heavy crude oil to Gulf Coast refineries and alleviate the glut of crude oil supplies at Cushing, Okla., the storage hub, origination and terminus of our nation’s oil pipeline network. Historically, the oil pipeline network is designed to run from Gulf Coast refineries in the South to Northern markets. Declining imports of heavy crude oil from Venezuela and Mexico, and a lack of pipeline capacity, have created bottlenecks at Cushing that have ripple effects across energy markets.

Before the permit debate, few knew the State Department was in charge of the siting process for oil pipelines crossing international borders. A 2004 executive order directs the State Department to review all permit applications for oil pipelines and consult with at least eight federal agencies to determine if a project is in the national interest. Typically, interstate oil pipeline projects are sited on an ad hoc basis in each state.

The Keystone XL pipeline is expected to transport 100,000 barrels of crude oil from Montana and North Dakota each day.

The Obama administration approved two oil sands pipeline projects before the Keystone XL decision. Alberta Clipper was approved in 27 months in 2009 and the first phase of the Keystone pipeline was approved in 23 months in 2010.

Canada is the largest supplier of imported oil to U.S. markets, providing 25 percent of the nation’s overall imports. According to a study commissioned for the U.S. Department of Energy, the Keystone project could reduce imports from the Middle East and Venezuela by 40 percent.

The Canadian oil sands, from which the pipeline would originate, are a mixture of sands, clay, water and bitumen, which is heavy, thick oil that must be heated or diluted before pumping it into a pipeline. Oil sands are recovered in two ways: surface mining or in situ— Latin for “in place”—drilling that injects heat into the formation and sends the bitumen into wells. Canada has 174 billion barrels in total reserves, second only to Saudi Arabia, and 97 percent of those reserves are oil sands.

Environmental advocates are strongly opposed to oil sands development because of the large amount of energy used during the extraction process that increases greenhouse gas emissions. Last summer, Environment Canada—the nation’s environmental regulator—estimated that greenhouse gas emissions from oil sands operations would triple from 33 million tons in 2005 to 101 million tons by 2020. Oil sands production now makes up about 6.5 percent of Canada’s overall greenhouse gas emissions.

This fragile area in Nebraska has an important groundwater resource, the Ogallala Aquifer, which stretches across eight states and where the original route of the Keystone project was planned. Objections by many elected leaders in Nebraska to the proposed route formed the basis of state legislative action to direct the company to reroute the project.

MAY / JUNE 2012

The Obama administration originally delayed a final decision on the Keystone project until the first quarter of 2013 based largely on objections raised by Nebraska. This came after more than 40 months of review. Congress included a provision in the payroll tax extension in December 2011 to force a decision on the presidential permit within 60 days. The administration rejected the application due to the short review period. TransCanada resubmitted its application for the project with the State Department for the segment crossing the international border, but the company recently announced its intention to construct a 435-mile leg that will run from Cushing, Okla., to the Gulf Coast, which needs no federal permit. The company expects the entire project to be completed by 2015.

CAPITOL IDEAS

While opponents and supporters hotly debate total job numbers, an independent study conducted on behalf of project owner TransCanada estimated that Keystone XL would create 20,000 direct jobs and, potentially, 120,000 indirect jobs. The State Department has estimated that approximately 5,000 construction jobs would be created over a two-year period to construct the pipeline.

hot topic | CASH FOR CLUNKERS

GEM OR CLUNKER:

Success of Auto Rebate Program Debatable The economic forecast was anything but rosy when the Car Allowance Rebate System— otherwise known as Cash for Clunkers— kicked off in July 2009. Unemployment had reached 9.4 percent. Both Chrysler and GM had filed for bankruptcy. Things were not looking good for the economy in general or automakers specifically. That’s where Cash for Clunkers came in. For almost two months, the federal government offered car buyers a rebate of $3,500 to $4,500 to trade in an older gas-guzzler for a more fuel-efficient new car. In the end, almost 700,000 vehicles were purchased under the $3 billion program. The success of Cash for Clunker is debatable, and determining that success depends on who you ask and what measures you use.

In the Short-Term

Mike Omotoso, senior manager of global powertrain for LMC Automotive, said Cash for Clunkers did succeed in the short-term. LMC is the industry leader in automotive forecasting. “It boosted vehicle sales overall,” Omotoso said. “More successfully, it boosted sales of fuel-efficient vehicles and took old gasguzzlers off the road. It did help kick-start

CAPITOL IDEAS

MAY / JUNE 2012

”The whole purpose of the program was to provide some kind of catalyst to kick-start the economy, and by all accounts the extra production that was added this year was a boost to the economy.”

the auto industry, which had been in a severe downturn because of the economic recession. It did give a boost to all manufacturers, specifically the domestic manufacturers, who had been struggling at that point.” But there were many critics of the program. Newspapers frequently cited complaints by auto dealerships that the paperwork required for the rebates was too time-consuming and took too long to be processed. A report produced by researchers at the University of Michigan Transportation Research Institute said Cash for Clunkers didn’t do much to improve the fuel efficiency of cars on American roads either. The fuel economy of vehicles purchased in July and August 2009 increased just 0.6 and 0.7 miles per gallon respectively. Auto website Edmunds.com was a particular critic of the program, saying the vast majority of the cars sold under Cash for Clunkers would have been sold anyway. The President’s Council of Economic Advisers countered the Edmunds.com claim. A U.S. Department of Transportation survey showed that the car purchases would have taken place in closer to three years, rather than just being pulled forward a few months. “A plausible interpretation of the available data, in fact, is that many of the CARS

”From an economic standpoint it seems to be a roaring success. From an environment and energy perspective, it’s not where you would put your first dollar.”

—George Pipas, a sales analyst with Ford Motor Co. As quoted by CNN Money in 2009

—Bill Adams, spokesman for the Department of Transportation As quoted by CNN Money in 2009

sales were to the kinds of thrifty people who can afford to buy a new car but normally wait until the old one is thoroughly worn out. Stimulating spending by such people is very nearly the best possible countercyclical fiscal policy in an economy suffering from temporarily low aggregate demand,” wrote Christina Romer and Christopher Carroll. Romer was chair and Carroll was a senior economist at the council at the time.

In the Long-Term

Omotoso said in the long-term, the American auto industry was going to survive, with or without Cash for Clunkers. The multibillion-dollar bailout from the federal government helped ensure that. In the 2011 fiscal year, GM’s profits were up 11 percent, from $7 billion in 2010 to $8.3 billion in 2011. Chrysler posted its first profitable year since 2005. It made a profit of $183 million in 2011, compared to a loss of $652 million in 2010. “It was going to head there anyway,” Omotoso said. “I would say the CARS program just sped up the process by six to 12 months, let’s say. The turnaround in the economy would have caused car sales and production to increase anyway. High gas prices were really forcing consumers to look for more

”As a carbon dioxide policy, this is a terribly wasteful thing to do. The amount of carbon you are saving per federal expenditure is very, very small.”

—Michael Gerrard, director of the Center for Climate Change Law at Columbia University, who examined the clunkers program in an academic journal As quoted in a 2009 Associated Press article

”There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most.”

by Jennifer Ginn

—Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Change at MIT As quoted in a 2009 Associated Press article

”Influencing the timing of consumers’ durable purchases is easy. Creating new purchases is not.” —Edmunds CEO Jeremy Anwyl

In a September 2010 blog post looking back at the program

CASH FOR CLUNKERS CLUNKER BUSINESS LAS VEGAS—United Suzuki Mitsubishi used a painted Dodge Ram Van to advertise the federal ”Cash for Clunkers” program in August 2009. © Photo by Ethan Miller/ Getty Images

fuel-efficient cars.” The economic picture, however, was about more than just GM and Chrysler. Cash for Clunkers did have an effect on the thousands of jobs that support the auto industry, Omotoso said. “There was definitely an effect downstream,” he said. “The tier one and tier two suppliers, people who make engines, who make steel, robots, the transportation industry, the trains and trucks that transport the vehicles and parts to the carmakers, they all needed help to survive. One of the reasons of the bailout in the first place wasn’t just to save Chrysler and GM. It was to save thousands of suppliers.”

Congress initially allotted $1 billion for rebates; that grew to $3 billion after the popularity of the program was seen.

690,000 vehicles

were sold under Cash for Clunkers.

To qualify for a rebate, the trade-in vehicle had to get 18 mpg or less.

MAY / JUNE 2012

A new vehicle purchased under the program had to get 22 mpg or more to qualify for a rebate.

The program provided a maximum $4,500 rebate for trading in a less fuel-efficient vehicle.

41 CAPITOL IDEAS

The average rebate awarded under the program was $4,000.

The program ran from July 1–Aug. 24, 2009.

straight talk | FEDERAL ENERGY POLICY

Straight WHAT DO YOU SEE AS THE FUTURE OF FEDERAL ENERGY POLICY?

DA RR EN SA MU ELS OH N POLITICO Senior Energy and Environment Reporter

BIL L LO VE LES S

CAPITOL IDEAS

MAY / JUNE 2012

ELECTION WILL AFFECT AGENDA

Platts Editorial Director, U.S. Energy Policy

e the future of federal “November's elec tion is sure to shap ma wins a second Oba ck energy policy. If President Bara en’ jobs and an ‘gre ing term, look for him to keep push wable energy rene the e agenda that tries to advantag . A Republican tors peti com industry against its fossil fuel estic energy dom e mor ns in the White House likely mea les that batt the of at production policies and a repe entalists ronm envi with ht President George W. Bush foug to do, lots be will e ther , and Democrats. Whoever wins natural of t sigh over ral fede including whether to pursue ution poll air and ate clim EPA gas drilling operations and

Host, "Platts Energy Week" Inside Energy

policies.”

NATURAL GAS SETS TONE “Predicting U.S. energy policy has always been a risky proposition. Remember claims in the 1970s that the nation was running out of natural gas, and the accompanying law (since repealed) that restricted gas use in elec tric power stations? Once again, natural gas is setting the tone for U.S. energy policy in a big way, with estimates of abundant shale resources and prices at 10-y ear lows. With that, and more regulation of emissions, gas seems well on its way to substantially increase its share of elec tricity generation and transpor tation, and provide a competitive edge to U.S. industries reliant on gas as a feed stock.”

FEDERAL ENERGY POLICY | straight talk

TO M LU BN AU

ENERGY POLICY TIED TO PROSPERITY

Representative Wyoming

“Energy policy is inextricably tied to econ omic prosperity. Countries that have access to cheap, clean and reliable power have the best health care, standard of livin g and income. Energy policy will become more drive n by the world markets. Our balance of trad e, deficit and zealous protection of the environm ent will drive this country to become an ener gyexporting nation. Without a compreh ensive energy plan, we will export mor e ener gy overseas, see economic prosperity in those countries consuming U.S. expo rted energy and a more balanced worldwide standard of living.”

Chair, CSG’s Energy and Environmental Task Force 2011 Toll Fellow

KATIE HOW ELL

DO UG LA S R.M. NA ZA RI AN

Deputy Editor, Greenwire

Chairman Maryland Public Ser vice Commission

ENERGY INDEPENDENCE A FOCUS

» MAY / JUNE 2012

“The future of federal en ergy policy is going to remain paralyzed unless and un til the politics of energ y in Washington become les s polarized. Congress ha s made little or no progress in recent years on carbon policy, renewable energy polici es, loan guarantees an d energyrelated tax policies, an d the silence creates an overhang of uncer tainty that lea ves industry and policy makers understandably wary. States have filled the vac uum on their own ... But in the long run, these lost yea rs will be remembered as lost op portunities to address the ver y real challenges the status qu o presents for all of us, and will make the ultimate soluti ons harder and more exp ensive to achieve.“

CAPITOL IDEAS

“Partisan gridlock and election-year politics have brought conversations about energy policy to a virtual standstill in Washington, D.C. In the short-term, energy conversations will revolve around campaign issues and gas prices, with Republicans calling for more domestic drilling and pushing back against Obama administration regulations, while Democrats urge scaled-back oil industry tax incentives and call for more investment in alternative energy. In the longer-term, conversations about energy will revolve around efforts to boost the United States’ energy independence, but the direction those conversations take will be driven by who wins control of the White House and Congress in November.”

POLARIZATION PARALYZES ENERGY FUTURE

stated briefly | AFFILIATE & ASSOCIATION NEWS

CAPITOL IDEAS

Â»

MAY / JUNE 2012

AFFILIATE & ASSOCIATION NEWS | stated briefly

45 CAPITOL IDEAS

Â» MAY / JUNE 2012

feature | STATE CAPITOLS

10 CAPTIVATING Capitol Buildings by Jim Stembridge American state capitols have evolved only moderately in the more than 200 years since their early beginnings in the late 18th and early 19th centuries. Typically, state capitols were designed, from the earliest, to have multi-storied wings housing the legislature’s two chambers, with galleries for viewing by the public, on two sides of a central rotunda opening high into a dome. Often, the governor’s ceremonial office also opens onto the rotunda. In 12 states, the supreme court also meets in the capitols. Ten states have adapted to this “ideal” in particularly atypical ways.

ILLINOIS

The Illinois capitol fits the conventional mode—dome and rotunda in the middle and legislative chambers on either side—but the capitol is unique among all the domed capitols; at 361 feet, it is the tallest. Construction began in 1868 on a site known as the Mather Block in Springfield, but only after the decision was made to make nearby Oak Ridge Cemetery, rather than the Mather Block, the final resting place of President Abraham Lincoln.

LOUISIANA

Louisiana’s capitol in Baton Rouge is unique for its relationship to one particular individual, former Gov. and U.S. Sen. Huey P. Long. The nation’s tallest capitol, it was completed in 1932. Long, who was its inspiration from the start, died from an assassin’s attack inside the building three years later and is buried on the building’s grounds.

NORTH CAROLINA

CAPITOL IDEAS

MAY / JUNE 2012

North Carolina’s capitol in Raleigh has been abandoned by the state’s legislature and state Supreme Court and is rarely used by the governor. That’s a good thing for architectural history buffs. The building they left behind has been preserved as the nation’s most authentic 19th century state capitol and grounds.

NEW MEXICO

In Santa Fe, New Mexico’s is the nation’s only round capitol building. From above, it is the shape of the Zuni Zia sun symbol, a circle radiating in four directions. Its curving corridors are filled with works of New Mexican artists. The “Zia” also appears on the state flag; thus New Mexico is the only state with a diagram of its state capitol as its state flag.

STATE CAPITOLS | feature NEBRASKA

Nebraska, in its 1932-completed capitol in Lincoln, took the then-risky step of building the first office tower capitol rather than a traditional dome. Perhaps as cover for its daring design, the building is finished in exquisite Gothic detail, with intricate carvings that make it a national treasure.

NEW YORK

New York’s capitol in Albany is unique for its complete lack of a dome, cupola or any other central roof feature. Some say it looks more like a cathedral or fancy European hotel. The finely crafted interior, especially its gothic detail and grand staircases, however, leave no doubt as to its central place in the history and politics of New York state.

HAWAII

In Hawaii, the central “rotunda” is a lanai, open above to the sky, open at its front and back to the mountain and ocean breezes, and the city of Honolulu. The 1969 building is a beautifully symbolic volcano, said to emulate nearby Punchbowl, which is now a military cemetery. Public entrances to the legislative chambers are broad glass doorways off the open-air lanai. Hawaii’s “dome” is the dramatic tropical sky: sun and rain, moon and stars, clouds and clear.

NORTH DAKOTA

North Dakota’s state capitol in Bismarck is the only one in the nation that is nonsymmetrical. Both legislative chambers are on the left and an executive branch tower is on the right. The 1935 building is finished in carefully crafted art-deco detail, and contains the Theodore Roosevelt Roughriders Gallery: portraits of famous North Dakotans, including Roger Maris, Peggy Lee, and, of course, Lawrence Welk.

ABOUT THE AUTHOR

» MAY / JUNE 2012

Jim Stembridge worked as legislative staff in Oregon’s Capitol in Salem for more than a decade. He visited the 50 state capitols to see how each state exhibited the classical ideals of democracy. “Every state’s capitol is unique,” Stembridge said. “One of the fun things about visiting each of them is to see how individually and creatively each state molds itself into the structure and detail of its capitol building, incorporating features that cradle and nurture American-style representative government.” His book, Fifty State Capitols: The Architecture of Representative Government, is available at many state capitols, state museums, state archives and historical society gift shops.

47 CAPITOL IDEAS

ALASKA

Alaska is sometimes referred to as the only state without a capitol; the 1931 building that functions as the state’s capitol supposedly was built as a Juneau warehouse. Modified inside with committee rooms, legislative chambers and offices, the building was transformed into a state capitol with the addition of a four-columned Jeffersonesque portico (porch) at its entrance.

NEW JERSEY

New Jersey boasts the largest number of additions to its capitol, crowded between the Delaware River and the streets of Trenton, some six add-ons in all since the original structure, or what’s left of it, was finished in 1792. The governor’s office occupies part of the original 1792 state capitol. The lovely dome and rotunda were added in 1845. The latest addition, completed in 1999, includes a wonderful visitor center and a fine café.

how to | MANAGE ENERGY

REMEMBER: ENERGY EFFICIENCY IS AN ISSUE THAT IS ALWAYS WITH US States have been concerned with making their buildings more energy efficient for more than 30 years, said David Terry, executive director of the National Association of State Energy Officials. But energy efficiency has long gone past the days of adding weather stripping and insulation. Now, the discussion is all about public-private partnerships, new financing options and using energy efficiency as a way to create jobs. Here’s what Terry said policymakers should do for better energy efficiency.

TAKE THE LEAD. States and state energy offices have been engaged in energy policy and concerned about energy price, supplies and fuel diversity since the oil embargo of the 1970s, Terry said. “That’s how these offices were formed,” he said. Iowa adopted the first renewable portfolio standard, for instance, in the 1980s. “It’s certainly become more sophisticated and advanced in that time period, but really, the foundation for it (energy efficiency) developed in the states many years ago,” said Terry.

THINK OF PROJECTS AS JOB GENERATORS. Projects like energy performance contracting can mean savings for the state and jobs in the private sector. In this type of contracting, the state hires a company to evaluate a building and make energy-saving improvements. The savings on utility bills is used, over a set period of time, to pay for the improvements. “The public building piece is particularly important,” Terry said. “It’s privately financed. It’s a win-win for everybody.”

KEEP ENERGY PLANS UP TO DATE. A governor or legislature may require the state to create a periodic energy plan, which looks at a state’s current and future energy needs and makes policy recommendations on how to meet those needs. “It’s a very inexpensive thing to produce for a state,” said Terry, “but it really informs a legislature’s or governor’s decision-making a lot.” These up-to-date plans can guide the discussion when energy becomes a hot issue. “They provide some data, underpinning whatever energy plans a state makes,” he said.

DON’T FORGET ABOUT ENERGY POLICY. The country all too often only thinks about energy policy when the price of energy spikes. “It’s a little bit like the old saying about the Golden Gate Bridge,” Terry said. “When are you done painting it? Never.” Energy efficiency is like that. “Right now, we’re all doing a good job (with energy efficiency) I think. When prices fall back, we kind of forget about it,” he said. “Remember, this issue is always with us and we can always do better.”

LET YOUR STATE ENERGY OFFICE HELP.

CAPITOL IDEAS

MAY / JUNE 2012

Every state has a state energy office. The offices work on energy efficiency and energy building codes in the public and private sectors, renewable energy, energy production and distribution, and energy security and emergency preparedness. The offices are a good place to find policy support for examining a state’s energy policy, finding “where there’s a gap or weakness,” Terry said. “I think they (the state energy offices) tend to be the conveners in the state, bringing together different energy stakeholders. If there’s a contentious issue or area that needs to be addressed that hasn’t been, … they can work on it.”

UPCOMING MEETINGS | on the road

National and Regional Meetings Registration and application deadlines may apply. Visit www.csg.org/events for complete details. CSG West—65th Annual Meeting July 20–23 | Edmonton, Alberta

more information, visit: www.csg.org/events.  For

CSG Midwest—67th Annual Meeting July 15–18 | Cleveland, Ohio

NASPE 2012 Annual Meeting July 22–25 | Jersey City, N.J.

CSG East—52nd Annual Meeting July 20–23 | Atlantic City, N.J. CSG South—66th Annual Meeting July 28–Aug. 1 | Charleston, W. Va.

NAST Treasury Management Conference May 15–18 | Albuquerque, N.M.

CSG

N AT I O N A L LEADERSHIP CONFERENCE La Quinta, California | May 17–20, 2012

CSG AFFILIATES NAST (National Association of State Treasurers) | www.nast.net NASPE (National Association of State Personnel Executives) | www.naspe.net

Mark Your Calendars for CSG Regional Meetings CSG East: 52nd Annual Meeting of the Eastern Regional Conference in Atlantic City, N.J., July 20–23. Early registration, June 24; hotel cutoff, June 22.

MAY / JUNE 2012

CSG WEST: 65th Annual Meeting in Edmonton, Alberta, July 20–23. Early registration, June 1; hotel cutoff, July 16.

CSG South: 66th Annual Meeting of the Southern Legislative Conference in Charleston, W.Va., July 28–Aug. 1. Early registration, May 25; hotel cutoff, June 22.

The Council of State Governments Health Policy Academy 8 a.m. to noon Friday, May 18, in La Quinta, Calif., will focus on diabetes. The goals of this session are to understand diabetes and the disease’s burden on individuals, society and the health care system and to learn about effective state policies to prevent and treat people affected by diabetes and diabetes-related complications.

CAPITOL IDEAS

CSG Midwest: 67th Annual Meeting of the Midwestern Legislative Conference in Cleveland, Ohio, July 15–18. Early registration, May 7; hotel cutoff, June 11.

Diabetes: From Treatment to Prevention

shout out | WEST VIRGINIA DELEGATE PETE SIGLER

Photo by Jurgen Lorenzen

HAROLD ‘PETE’ SIGLER West Virginia Delegate / Former Coal Miner

CAPITOL IDEAS

MAY / JUNE 2012

Harold ‘Pete’ Sigler spent more than 30 years working in the coal business as a contract underground miner. That gives him a unique perspective in addressing not only the energy needs of his state, but also any safety regulations and laws the legislature might pass. He took office shortly after the Upper Big Branch mine disaster that left 29 people dead. While others were promoting new laws to protect miners, Sigler asked an important question: “If the Upper Big Branch mine had obeyed the laws, what would have happened?” The regulators response: “We wouldn’t be here.” Just as he wants to ensure safety in the industry, Sigler also wants to ensure a future for coal in the changing energy scene. “We have to get ahead of these issues now and prepare and build a responsible energy economy,” he said. Even though he’s left the mines, Sigler is still digging for ways to help his state.

Do you know someone in state government who deserves a shout out? Email Krista Rinehart at krinehart@csg.org.

more on Harold ’Pete’ Sigler,  For visit: capitolideas.csg.org.

Thanks to the Members of CSG’s

21st Century Foundation These partners invest in CSG’s efforts to bring leading edge policy solutions to state leaders. 1-800 Contacts, Inc. Altria Client Services, Inc. AstraZeneca LP AT&T Esri GlaxoSmithKline Golden Living Intuit The National Education Association Novo Nordisk Pfizer, Inc. PhRMA Reynolds American The Procter & Gamble Company United Parcel Service

The Council of State Governments 2760 Research Park Drive P.O. Box 11910 Lexington, KY 40578-1910

W W W. CSG . OR G

SAVE THE DATE

2012 Meetings of The Council of State Governments