How Manipulating the Tax Code Promotes Bad Government

WHERE  HAS  COMMON  SENSE  GONE?

(How Manipulating the Tax Code Promotes Bad Government)

No. 3

Thomas Paine – May  2009

Essay No. 2 shed light on an attempt to promote solar energy by once again using a rightfully popular concept to distort logic and perpetuate a tax and spend mentality which is so aptly demonstrated by our elected officials.

Was there not a wise American, who when discussing the political arena said …..

“Here they go again!” or something very similar?   Well here they go again……

The Weatherford Democrat on May 5, 2009 made legislation pertaining to Texas House Bill 469 the front page headline. This bill relates to coal fired generation facilities and a way to reduce the amount of free carbon dioxide they emit when operating.

Texas House Bill 469 appears to have all of the necessary ingredients to provide something useful and cost effective for the State, and it is surely as green as grass. The same color as your money which will go into supporting the activity this bill references. Perhaps we should look at it a bit closer. After all, we have already discussed the basic requirement for our politicians….. get elected!  Far too many of them are either unwilling or inept when it comes to providing the critical thinking required as a prerequisite for important decision making.  HB 469 is a good example.

The proposed legislation would seem to embrace all of the necessary components to be regarded as a useful contribution to the greening of Texas.  It has been carefully drafted to respect other existing legislation and in fact draws on that legislation for support and functionality.  What it does not tell us is that some of the existing legislation being cited as a contributing reference is bad legislation. Was this fact considered or did the HB 469 drafters merely check to ensure that supporting references were accurate and reasonably complete?  Never-the-less the purpose of this essay is to discuss HB 469, not previous legislation which is voluminous.

Upon reading the draft which is proposed to take effect on September 1, 2009, a few examples of legislation designed by legislators to please lobbyists, while appearing green, become apparent. Tax and spend is rampant. The actual taxing is applied to someone other than the facility owner. The facility operators get a tax credit, and even then if they cannot use it all (since they have significant other tax reduction incentives) they are free to sell it to someone else. Good job, we certainly would never want a tax credit to go unused!

“The generating facility must be capable of capturing and sequestering in a geologic formation at least 60 percent of the carbon dioxide resulting from the generation of electricity.” I believe capable is the operative word!  What about the carbon dioxide resulting from ancillary activity which is necessary but which does not directly generate electricity? The amount of additional carbon dioxide created by ancillary activity could be substantial.

Never mind. The important thing is 60 percent of the carbon dioxide created directly by generation could be sequestered. “After sequestering, the carbon dioxide must remain in the formation for at least 500 years.” Bravo! This shows some serious intent. But wait! It is only necessary to have 60 percent of the sequestered carbon dioxide remain in the formation. Let’s see….60 percent of 60 percent is only 36 percent. Oh well, we can hope this percentage is exceeded even though it is only necessary for the generating facility to meet the minimum required standard. This is good because we are not sure how much additional carbon dioxide will be produced by ancillary operations. We can be pretty sure it is less than 36 percent, therefore ensuring a net positive reduction in carbon dioxide produced by the electric generating facility.

But wait….the generating facility will not be the entity actually utilizing the sequestered carbon dioxide.  The carbon dioxide will be handed over to oil and gas producing companies that will utilize it to pressure hydrocarbon bearing formations which have neared the end of their producing ability as a result of formation pressure drop.

One might ask….. “If pressuring the formation is all that is necessary for more oil production, why haven’t the producing companies just used air which is free for the taking and readily available?”  There is a good reason why they have not done this. Air does not form a solution with petroleum liquids nearly so well as carbon dioxide does. The formation will produce more hydrocarbons as a result of the increased pressure of carbon dioxide in solution. This also guarantees the produced liquids, and gas for that matter, will contain very much more carbon dioxide than they otherwise would have done. Is this where the missing 40 percent of the total amount of carbon dioxide being sequestered has gone?

Now who is responsible for the carbon dioxide once it is removed from the oil and gas? Where might it go next? If it is re-injected into the formation after recovery from the produced hydrocarbons then why will there be a continuing need for more carbon dioxide from the generating plants as the legislation presumes?  Was there any analysis done that indicates a need for anywhere near 60 percent of the carbon dioxide produced by the electric generating plants? By the way, how much more carbon dioxide will this additional compression and injection create?  What happens if the hydrocarbon producers become sufficiently saturated with carbon dioxide and cannot effectively utilize the amounts being produced? Is this another opportunity for the word “could” to come into play?

Will government expand to provide the necessary oversight or will the government rely on the regulatory honor system, of the Texas Railroad Commission which is now much used and often abused?  Will government expand the already punitive eminent domain provisions to allow additional pipelines for the transport of this corrosive carbon dioxide from the electric generating plants to the injection points? Can ANY of these questions be answered before the September first activation date for the legislation? Very likely not!  This proposed legislation is a fine example of lawmakers run amok!

WHERE HAS COMMON SENSE GONE?

Once again the government has distorted the picture to create the impression that something important is happening. The increased production of oil and gas by a state and nation that is in a deficit position is absolutely a worthy concept. So is the reduction of free carbon dioxide; however, to use this concept as a supporting argument for passing bad legislation that will increase the tax burden of the citizens with little verifiable positive carbon dioxide reduction is bad government, and another example of the abuses fostered by a system of seemingly unlimited tax manipulation by special interests and their government facilitators. When is government going to demonstrate some ability to actually cut spending and reduce staffing? The citizens want that time to be now!!

T.P. (2009)

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