Posts for January 5, 2010

MONDAY ECONOMIC REPORT

January 5, 2010 – Dave Huether - Chief Economist - National Association of Manufacturers

Last week's reports showed that the economy ended the year on a generally positive note. But while the recovery is continuing, the pace does not appear to be accelerating. Of the six major economic indicators, five improved last week. Only one decelerated, while still growing.

On the housing front, home prices rose for the fifth consecutive month in October, which is a good sign that the housing market collapse is now in the rear view mirror. With respect to consumers, confidence increased in December, but this was mainly due to the expectations component. With respect to current conditions, the level of confidence fell in December to its lowest level since February 1983. So, while it is encouraging that consumers believe conditions will improve in 2010, the low level of confidence in the fourth quarter will likely support lackluster spending in the final months of the year. Note: this week's report on December vehicle and chain store sales should provide some valuable information about how consumers ended 2009.

Half of the news last week revolved around the manufacturing sector, where three regional reports showed that the manufacturing recovery continued in December. As the chart above shows, two reports by Federal Reserve District Banks, Dallas (brown line) and Kansas City (blue line) indicated that manufacturing expanded in these sections of the country last month. For the Dallas report, this was just the second month above the growth threshold of 0. For the Kansas City report, December was the fourth consecutive month of growth, although the pace last month was slower than November.

Finally, the ISM manufacturing index covering the Midwest improved in December to its highest level since January 2006, and there was noteworthy improvement in the employment component. Collectively, these reports show that a manufacturing recovery is taking place across the country, though some of the regional upturns are further along, or more pronounced, than others.

This week, the closely watched ISM manufacturing index for December, factory orders for November and the Organization for Economic Cooperation and Development's (OECD) composite leading indicators will provide more information on how U.S. and global manufacturing closed 2009.

UTAH ENVIRONMENTAL DIRECTOR HONORED FOR HIS LEADERSHIP

January 5, 2010 - (Source: Amy Joi O'Donoghue, 12/8/09)

The EPA earlier this month recognized Bill Sinclair, retiring deputy director of the Utah
Department of Environmental Quality for his outstanding leadership in environmental protection
that spans three decades.

Carol Rushin, acting regional administrator for EPA Region 8, presented Sinclair with the
Lifetime Achievement Award for his dedication and environmental achievements in helping to
improve Utah's air, land and water.

Sinclair served as acting executive director of DEQ for eight months in May 2009. Since 2003, he has worked as the deputy director where he has worked with local health departments and EPA on implementing state and federal environmental laws and rules.

Sinclair served in the Air Force for seven years before beginning work in 1980 at the Utah
Department of Health in the Bureau of General Sanitation, transferring to the Bureau of Solid and Hazardous Waste before DEQ became an agency in 1991. In 1993, he was appointed director of the Division of Radiation Control.

During his tenure as radiation control director, he helped persuade the Nuclear Regulatory
Commission to do an environmental impact statement that ultimately led to the removal of the uranium mill tailings from the banks of the Colorado River to a permanent disposal site near the town of Crescent Junction.

Sinclair retired Dec. 11.

Amanda Smith, former aid to Governor Jon Huntsman has replace Sinclair at Executive Director at Utah DEQ.

US WILL RELY ON LESS FOSSIL FUEL BY 2035

January 5, 2010 – UAE Monthly Energy Update

U .S. energy consumption is expected to increase 14% by the year 2035. However, oil and other fossil fuels will be used less to meet the increased energy needs, the U.S. Energy Information Ad-ministration said in its latest long-term fore-cast.

The fossil fuel share of U.S. energy demand over the next 25 years is expected to fall from 84% in 2008 to 78% by 2035, EIA said in "The Annual Energy Outlook 2010," released Dec. 14.
According to EIA projections, shale gas will drive growth in natural gas production and reduce reliance on imported gas. In the EIA reference case, total domestic natural gas production is projected to grow from 20.6 Tcf in 2008 to 23.3 Tcf in 2035. With technology improvements and rising natural gas prices, natural gas production from shale is expected to grow to 6 Tcf in 2035, more than offsetting declines in conventional production.

Assuming no new policies, energy-related carbon dioxide emissions will continue to grow, the agency said, pointing to a projected 0.3% per-year growth in CO2 emissions from energy. Total energy-related CO2 emissions are expected to grow from 5.81 billion metric tons in 2008 to 6.32 billion metric tons in 2035, although per capita emissions fall by 0.6% per year, EIA said. Most of the CO2 growth in the AEO 2010 reference case is accounted for by the electric power and transportation sectors.

EIA also highlighted declining reliance on imported liquid fuels. Total U.S. consumption of liquid fuels, including both fossil liquids and biofuels, is projected to grow from 19 million barrels per day in 2008 to 22 million barrels per day in 2035, under EIA assumptions.
Biofuels will account for all the growth as consumption of petroleum-based liquids is essentially flat. As a result, reliance on imported oil is expected to decline significantly over the next 25 years.

Total electricity consumption, including both purchases from electric power producers and on-site generation, is expected to grow by 1% per year over the projection period, from 3.873 trillion kWh in 2008 to 5.021 trillion kWh in 2035.

Natural gas and renewable power plants will account for the majority of electricity generating capacity additions, the EIA said. The natural gas share is projected to fall slightly due to the completion of coal plants under construction, and the addition of new renewable capacity. However, by 2035 the share of generation from natural gas will again increase to 21%.

Renewable generation is expected to show the strongest growth between now and 2035, spurred by incentive programs in more than half the states. The renewable share of generation is expected to grow from 9% of generation in 2008 to 17% of generation in 2035.

According to the EIA forecast, U.S. crude oil production will increase from 5 million barrels per day in 2008 to more than 6 million barrels per day in 2027 and will remain at just more than 6 million barrels per day through 2035.

Growth in crude oil production is expected to result from increases in offshore production and in onshore production using enhanced oil recovery techniques.

NEW ENERGY BILL TAKES DIFFERENT PATH THAN WAXMAN-MARKEY

January 5, 2010 – UAE Monthly Energy Update

Senators Maria Cantwell, D-Wash., and Susan Collins, R-Maine, un-veiled a climate change bill in the Senate Dec. 11 that would auction carbon permits to producers and importers of coal, natural gas and oil, an approach that differs dramatically from the Waxman-Markey cap-and-trade bill, which the House of Representatives passed in June.

Under the Cantwell-Collins bill, 100% of cap shares would be auctioned monthly to "first sellers" of carbon, with 75% of auction revenues refunded directly to all legal U.S. residents each month, on an equal per capita basis as nontaxable income, and 25% going to a dedicated trust to fund climate mitigation and adaptation, clean energy and efficiency, and transition assistance programs.

Also under the bill, the Carbon Limits and Energy for American Renewal Act, or CLEAR Act, operators of power plants that burn coal would not buy carbon permits; the company that mined the coal would.

Under the Waxman-Markey approach, Cantwell's analysis said, several industries, sectors and other entities receive free allowances that phase out gradually from 2025 through 2035, with less than 20% of the allowances being auctioned through 2025. From 2012 to 2025, 38% of free allowances go to utilities; 19% for transition assistance; 15%, via auction proceeds, to low-income families; 13% to clean energy and energy efficiency; 10% go to domestic adaptation; 3% to ensure budget neutrality; and 1.6% for heating oil rebates.

Under the Cantwell-Collins bill, additional "bonus" shares, which are not included in the aggregate number of auctioned carbon shares, are granted to entities that permanently sequester carbon in their products and business operations.

Both bills contain auction price safe-guards. The Cantwell-Collins bill sets a floor price on carbon of $7 in 2012, which rises annually by 6.5% plus the rate of inflation. The ceiling price is $21 in 2012, rising annually by 5.5% plus the rate of inflation.

The Waxman-Markey bill sets a floor price on carbon of $10 in 2012, which rises annually by 5% plus the rate of inflation. A minimum strategic reserve price in 2012 is set at $28, rising by 5% plus the rate of inflation for 2013 and 2014, and at 60% above the 36-month average there-after.

Carbon offset programs play a major role in the Waxman-Markey bill in achieving emissions reduction goals, with offsets of 2 billion metric tons CO2-equivalent annually. Cantwell's analysis of the bills notes that U.S. Environ-mental Protection Agency modeling of the bill estimates more than $1.4 trillion spent on roughly 51,000 million metric tons of international offsets through 2050.

The bill establishes an "Offsets Integrity Advisory Board" to determine eligible offsets and offset projects, and to determine additionality, leakage, uncertainty, verifiability and make other determinations. A majority of emissions reductions from 2012 to 2030 are achieved through offsets, according to the Cantwell analysis.

EPA FINALIZES FINDING THAT CO2 ENDANGERS PUBLIC HEALTH

January 5, 2010 – UAE Monthly Energy Update

The Environmental Protection Agency (EPA) stated in early December that the science “overwhelmingly” shows that CO2 and other greenhouse gases threaten the public health and environment.

Noting that the Supreme Court ruled in 2007 that the Clean Air Act "is written to include greenhouse gas pollution," Agency Administrator Lisa Jackson said "there are no more excuses for delay."

Starting next spring, large emitting facilities will be required to incorporate the best avail-able methods for controlling greenhouse gas emissions when they plan to construct or expand operations," Jackson said. However, she added that the EPA would have to put out technical guidance to tell a facility what that would mean and then work with states to implement solutions.

Just hours after the EPA finalized its finding, the Competitive Enterprise Institute said it will file suit in federal court seeking to overturn the finding.

“The decision by EPA will trigger costly and time-consuming permitting requirements for tens of thousands of previously unregulated small businesses under the Clean Air Act," Marlo Lewis, CEI senior fellow, said. "The sensible solution would be for Congress to pass legislation that would pre-empt the EPA from regulating car-bon dioxide and other greenhouse gas emissions."

MILLIONS COULD REMAIN UNINSURED UNDER DEMOCRATIC REFORMS

January 5, 2010

Democrats are seeking the biggest expansion of health coverage in decades but estimates are that as many as 23 million people could still be without insurance by 2018. This is just one fact that illustrates the complexity of achieving the long-held Democratic goal of universal health care.

According to the Congressional Budget Office, the Senate legislation passed late last month, which is expected to resemble closely the final bill that is hashed out between the House and Senate over the next month, would leave about 8 percent of the population under age 65 without health insurance.