SOUTH DAKOTA STRAIGHT TALK

When the U S Senate recently recessed the Parties could not agree on voting on an energy bill. Essentially Republicans favored more exploration to increase supply and thus lower prices while the Majority Democrat Party wanted to curb speculation in the financial markets to lower energy prices.

Unfortunately because it is an election year political pontificating seems to be more important than actually doing anything and the Democrats led by Harry Reid refused to have a vote on the GOP plan. Reid allowed not vote despite arious public opinion polls say a large majority (upward of 70%) of the American people support more drilling.

The Senators left town and oil prices fell. Why did they fall? The simple reason is that demand has lessened and those awful speculators at the New York Mercantile Exchange consequently bid prices down. Yes, those same awful, greedy people who the Democrats wanted to restrain.

Another maxim – the markets can sort out what people want far better than more laws and Legislatures.

Economic Endbar – Point of Information – Without those dreaded risk takers otherwise known as Speculators, Consumers of energy could not contract for their future needs and thus know what their cost are going to be. You don’t have to be Einstein to understand that there probably would not be for example any long term road construction projects or be able to purchase an airline ticket more than a week or two in advance.

Energy Independence is a goal that our elected officials agree on. How we achieve it is totally a different matter.

The benefits of being energy independent are stable energy prices, improvement in our balance of payments and thus a stronger dollar, an improved economy, and an improved foreign policy. Ridding America of its dependence on foreign energy would be a major defeat to the Terrorists that want to destroy us.

With so much at stake, our Government continues to fail us. Just a couple of weeks ago U S Senate Democrats were going to solve high gas prices by raising taxes on energy production (remember when you tax something it gets smaller) and today their answer to the our energy crisis is to stop excessive speculation on energy in the financial markets. Tinkering with the financial markets might be justified but it won’t solve the problem and won’t produce one btu on new production. Republicans want more exploration – a far more constructive approach that will actually produces something.

I agree with the GOP on more drilling but the problem requires an even Bigger Solution. In the last few weeks some of our biggest thinkers have likened the Energy problem to War. Recently when Newt Gingrich was in Sioux Falls he used the War analogy saying America needs a Manhattan like project to deal with the Energy Crisis. Oilman T. Boone Pickens also uses the war analogy when talking about how we must deal with the energy crisis saying it is America’s biggest problem since World War II.

Recently former Vice President Al Gore used a brilliant analogy in comparing our Challenge to that of putting man on the moon (though Gore’s plan deals only with electricity generation and solely using renewable sources of energy to stop global warming rather than focusing on energy independence).

Energy Independence requires a National Goal (as Gore suggests) and becoming Independent requires a War Like Attitude (as suggested by Gingrich and Pickens). Americans need both the focus and the willingness to sacrifice.

To become Energy Independent our Government needs to set aside all the partisanship and using energy to posture for elections and political gain. We need a national discussion and put ALL possible solutions on the table for discussion including but not limited to: Nuclear, renewables (wind, solar, bio fuels, hydro, hydrogen, algae, geothermal) oil shale, massive investments for clean coal technology, more petroleum and natural gas exploration, more domestic refineries, 21^st and 22^nd Century conservation technologies including battery power, hybrids and technologies we haven’t discovered.

Energy Independence must be green and without question using the best environmental science. That being said government must have expedited permitting procedures that provides that projects and processes have in depth investigation but are not used by the tree hugger or NIMBY crowd just to delay or kill projects.

John Thune’s bill S3222 – The Transition Act of 2008 is a great first step calling for more exploration, more reliance on renewables, and finding better utilization of coal and oil shale but it does not go far enough. EVERYTHING needs to be on the table. Stephanie Herseth Sandlin who has been on Speaker Pelosi’s committee, Select Committee on Energy Independence and Global Warming, recently said we need a comprehensive approach.

Sidebar – Our Congresswoman has had several positions on ANWR, most recently I understand supporting some version of it.

The War of Energy Independence is a War we should have embarked on in 1973 but as former Governor Bill Janklow often said,” the best time to plant a tree was 20 years ago the second best time is Today.”

Check out –

Newt Gingrich - http://www.americansolutions.com/General/?Page=9d64a628-d028-48c1-840d-330aea987841

T Boone Pickens- http://www.pickensplan.com/

I have posted on our Government’s failure to deal with energy prices previously All Talk No Answers and Gas Pains.

There is probably no more hot button political issue than Gasoline Prices.

Two years ago when gasoline prices hit 3 bucks a gallon, I wrote the post that follows on politicians getting all lathered with their outrage over high prices. What I said then is just as true today.

As we enter the Presidential Campaign season our pols are still posturing and pontificating but not really working to solve the problem. The problem is a supply and demand problem. The increase in Demand is coming from industrialization in China, India and other developing nations – Without any significant increase in Supply.

To further politicize this issue and use their votes in the November election Democrats dusted off their old Windfall Profits Tax on the Major Oil Companies. The bill also would have eliminated the tax credits that oil exploration companies receive. Admittedly with huge profits currently reflecting high petroleum prices the Oil Companies an attractive target. Generally Republicans in the U S Senate blocked the bill from debate. You will hear much more about this vote in the upcoming election.

Consider that the proposed Windfall Profits Tax would not have lowered prices. The profits then instead of going to the Oil Companies would simply have gone to the politicians.

Very Partisan Sidebar – It almost goes without saying that the Democrats just cannot help themselves that the solution to most every problem is a tax increase.

Also consider that when the drilling incentives were put in place the price of oil was at the $15 a barrel level and the cost of exploration was something like $20 a barrel. With current high prices and income it may be time to remove the tax credits because with $130 a barrel oil there is no need for an exploration incentive. The market will take care of it.

Price Supply and Demand is an economic fact. Another political and economic fact is: When you tax something it gets smaller and when you subsidize something it gets bigger.

What our Government needs to do is put policies in place to increase supply and reduce demand. Currently there is universal agreement that we need energy independence. Our politicians also agree on renewable fuels and finding alternative sources of energy. For the moment I will not venture into calling names or discussing policy but only to say that many Democrats seem opposed to employing known resources at sea or in the Alaskan Wilderness. We also should very aggressively be working on finding solutions to make Coal clean and of using Nuclear Power.

It is getting to be an old theme with me but the Washington Crowd needs to stop talking and start doing.

Gas Pains

Nothing gets the public and politicians excited like high-energy prices. Energy prices like taxes are one of the ultimate pocket book issues.

Consumers are reluctant to acknowledge it but they have been spoiled by relatively inexpensive energy. Higher prices cause pain to consumers and the economy. The public wants affordable energy and a higher price reduces discretionary spending and raises the cost of many goods.

Elected officials react to the outrage of higher prices with outrage of their own, they blame producers and distributors and come forward with quick fixes and salve but no real long-term solutions. Our Politicians try to find quick fixes to keep prices low (i.e. demand release of the Strategic Petroleum Reserve) or concoct schemes like the $100 rebate idea to act like they care and are dealing with the problem.

Of course they just want to deal with the next election. To work toward solutions causes pain, not something elected officials and politicians want to be associated with. In fairness except for minor tweaking not much has been done since our first “Energy Crisis” – The Arab Oil Embargo, thirty-five years ago. Yes we have CAFÉ standards for automobiles (although trucks and SUVs are exempt or have their own special rules) and yes we have made some very limited progress on renewable fuels (whose debates have been about special interest politics not solving problems). And standards for insulation and energy efficiency have been mandated in construction.

For more specifics on Inaction and possible approaches see the previous post Why Wait.

On energy and demagoguery Republicans are equally to blame as Democrats. I prefer free market approaches (generally favored by Republicans) but Government action (favored by Democrats) is also necessary.

The problem is one of Supply and Demand . We have done almost nothing to deal with them. We need more supply and relatively less demand or more efficient use of energy to solve the crisis. Giving rebates or taxing so called windfall profits will not create any more energy or reduce usage.

Mandating ethanol is just a small part of any solution. Ethanol is a step in the right direction but will not solve in a significant way shortages. Farm constituencies and ethanol plant owners love their Representatives, Senators, Governors and Presidents for championing it. But we need more than helping our agricultural constituency to solve this problem.

My generations of political activists have failed our children. We are less well off today on the energy front than when we were coming of age and when our children were our age.

The political pandering should stop and Statesmen should deal constructively with energy.

Fixing the problem takes political courage. Continuing to fail to do so simply mean that prices over time will continue to rise and our standard of living and national security will be diminished.

South Dakota Politicians for more years than anyone can remember have been running and making political promises on the issues of economic development, keeping our kids in South Dakota, better jobs, better pay, and diversification from the agriculture industry including further processing of South Dakota agricultural products.

Some Elected Officials to varying degrees have succeeded while others have just run on at the mouth about it; but there has been near unanimity on “I want to create jobs.”

Presumably the politicians not only agreed that developing local economies is a good thing to enable our cities and towns to prosper and prevent them from decaying (as many are or have) but also because they believed that development had broad public support.

Union County South Dakota on Primary Election Day is going to get it’s chance to give the go ahead to perhaps the largest Economic Development Project proposed in South Dakota – The Hyperion Resources Oil Refinery. Before this project was officially announced its code name was Gorilla, an apt description given its potential impact on South Dakota.

As proposed this is the first refinery to be constructed in over 30 years and will be of a modern design and environmentally friendly.

The high points are $10 Billion in investment, as many 1800 full time high paying jobs (reportedly as many as 400 professional engineers with balance primarily being technicians, pipefitters, welders, and maintenance personnel) and the important spin off jobs in retail and service workers. Local governments will enjoy (as will State government) a huge increase in revenues though as opponents point out much larger demands on their budgets for everything including infrastructure to law enforcement demands.

The Hyperion Project has the potential to strengthen the Cities in the immediate region (Elk Point, North Sioux City, Beresford and Vermillion) and to revitalize others (Alcester, Jefferson, Centerville, Irene and others).

The Proponents are promoting the Economic Development aspects of the project while the Opponents fall into three basic groups. Those who live in close proximity to the site and do not want to change the idyllic rural setting where they live, others who are just anti development and resist change and do not want to change the rural nature of Union and Clay counties, and the anti big oil and so called environmentalists who oppose anything they perceive as threatening their environment

Relevant Websites – Proponents, Opponents, South Dakota Department of Water & Natural Resources,

The Election – The Union County Commission on a petition by the Project’s Proponents for an election for County zoning approval voted 4 to 1 to put it on the June 3rd Ballot. Voter approval gives the project a green flag and some degree of acceptance and finality.

This would be a HUGE first step although the opposition will not go away using every conceivable public relations and legal strategy to slow down the approval of the project.

Some early polling showed the project to be very popular among Union County voters. The Proponents obviously are talking about the economic benefits. The Opponents are using the campaign of fear. The Opponents are talking and attempting to dissuade voters by talking about the very emotional environmental questions and concerns.

There is a reason that no oil refineries have been built in the last 3 decades – Environmental regulations and permitting. If Hyperion is not as clean as the promoters claim it will not receive the necessary permitting. What has not been discussed it that ultimately the project will have to receive their Federal EPA permits, a process estimated to take 3 or 4 years.

Extensive impartial Environmental data is available on the South Dakota DENR website. A cursory look at the data shows that the emissions are about 20% of what the motor vehicles in Union County are currently.

The vote is just an important first step. Information suggests currently about 40% of the voters support the project (the highest concentrations are in the North Sioux City/Dakota Dunes area and Alcester/Beresford) 20% opposed (primarily the Elk Point area and among older populations not residing in the towns) and 40% undecided.

Turn out for the election will be Extremely high. Some estimates of 80% or higher. I expect the election to pass by a 10% margin or less.

Sidebar – The fun in using the crystal ball is one is often wrong if the ball is cracked.

Hyperion is a good project if the Government Gets It Right. Voters should do more than just demand development they should support it.

Monday the South Dakota Public Utilities Commission begins hearings on the Transcanada Pipelines Ltd. proposal to construct a light crude oil pipeline through eastern South Dakota.

There is abundant information available about this project. The PUC website has extensive information on their website (the PUC shouldbe applauded for their transparency). KELO televison also has given the pipeline extensive and well-balanced coverage on this issue at well.

Regrettably opposition to the pipeline and the upcoming news coverage will deal far more with emotions than facts. Based on the facts this is a good project for Consumers, a good project for America, and a good project for South Dakota.

The opponents are driven primarily by their fear of a leak of the oil on to their land. Their additional opposition is seated in mistrust of oil companies, corporations, foreigners and those in authority. The flames of opposition have been fanned by Curt Hohn and the WEB development group (in this case anti-development.)

America needs increased energy resources and there is little disagreement that America needs to be independent of Middle Eastern oil. It is reasonably estimated that enabling the use of Canadian oil sands provides an additional 400 years of petroleum reserves. Canadian oil sands fully developed will produce an estimated 5 million barrels of light crude petroleum per day. The proposed Keystone pipeline would ship about 3 percent of the United States usage. That is significant!

Pipelines are safe, economic, and environmentally friendly. The undisputed facts are that pipelines are the most economic form of transportation and the most environmentally friendly. Think if all of this crude petroleum was moving on our highways. The costs would be outrageous and the associated environmental risks far greater.

The U S State Department who must also approve the Keystone proposal has already given preliminary approval with their final approval to come shortly.

At a time when farmers and politicians are screaming for transmission lines for wind produced electricity its ironic that there is opposition to petroleum transportation that is safe and willingly being funded by private rather than public interests.

Sidebar - An argument can be made that pipelines might even be more environmentally friendly than high voltage transmission.

Besides the obvious benefit of the economic development of construction jobs and maintenance jobs when constructed, the Keystone pipeline in South Dakota will pay an estimated $7 million dollars annually in property taxes. South Dakota rural electric coop will also be financially strengthened with a large new customer who uses power for pumping 7/365 (a constant steady demand).

Regarding the complainants - Pipelines are safe. No one disputes that we should not have oil pipelines and no one believes that increased supply is not a good thing. The objection is just a NIMBY (Not In My Back Yard). The opponents will use the legal process to obstruct and delay construction. In the end this pipeline is legal and a good project that benefits the majority while protecting even those opposed.

Energy Development Has Become A Significant Development In South Dakota – Governor Rounds often claims (rightfully) that South Dakota is an exporter of energy – meaning that we produce more than we consume. Ethanol development has caused this. Hardly a week (in many instances a day or two) goes by that we don’t hear about a new Ethanol development, Poet, Vera Sun, Bio Diesel, Switchgrass Ethanol, prospects for windpower, the Hyperion refinery or some other energy development. These projects or potential projects to varying degrees create jobs, help our agriculture industry, pay taxes, diversify and stabilize our economy.

Consider the following major energy projects and investment since 2000.(numbers are approximate) Ethanol plants $2 Billion, Hyde County Wind Farm $42 million, Northern Border Pipeline Waste Heat Recovery Units $20 million, Xcel Energy’s Angus Anson Natural Gas Addition $60 million, Basin Electric’s Groton Natural Gas Addition $70 million, Xcel’s Brookings, County Wind Farm $200 million, Tatanka Wind Farm $150 million.

Scheduled future energy projects include – Big Stone II Power Plant $1.6 billion, Basin Electric’s Deer Creek Natural Gas Plant $350 million, Xcel’s Wind Farms $750 million, Basin Electric’s Wind Farms $250 million, Heartland Wind Farm $75 million. Keystone Pipelin3 $350 million and the Big One - Hyperion Refinery $8-10 Billion.

Other projects being rumored or talked about are another coal plant (the Mobridge or Yankton I think it is) $2 billion, Canadian pipeline II $500 million and additional wind farms $300 million plus.

These are important and exciting developments for South Dakota. It is important that they are done right and in keeping with good science and public policy. But this is no time to be sending any signals that South Dakota is Anti development.

Straight Talk Commentary – It was interesting to learn that Tom Daschle has become Chairman of the Board of Prime Bio Solutions of Omaha. Daschle has been a champion of developing the Ethanol Industry for many years but now it appears he has joined the capitalist side of the equation.

With America’s rush to go Green and Daschle’s acute sense of public opinion it is worth noting his embrace of the closed loop technology.

I wish our former Senator a better experience with his new enterprise than another former Senator, George McGovern had with his investment, the Stratford Inn in Connecticut. In McGovern’s case, it was an expensive lesson in free enterprise and excessive government regulation. Perhaps Senator Daschle will make a mint and he can learn first hand the excessive cost of double taxation on our economy.

Dakota County getting “closed loop” ethanol plant

By Michelle Link

SiouxCityJournal.Com

Straight Talk Commentary - Our Congresswoman is off to Thule, Reykjavik, other points North and then off to Europe to speculate about the Euro version of the Kyoto accord where developed countries get punished. Nancy Pelosi seems to believe she was anointed President, first Damascus now Brussels.

It will be interesting to see what Stephanie announces on her return concerning greenhouse gas emissions particularly given her staunch support of the DM&E (that is so dependent on hauling coal). Her reconciliation of this apparent contradiction should be a work of political art.

However, there is some good news about our Representative’s efforts on our behalf.

The Congresswoman has introduced legislation to increase access to high speed Internet in rural areas. See HR 2035. She plans to incorporate this legislation into the new Farm Bill.

Universal communication is worthy of government support. The Internet is the modern Post Office. Congress is given the Constitutional mandate to establish postal roads and having universal Internet is a logical extension of this authority.

Along with universal service, perhaps we could increase government efficiency as previously suggested in the post on the FSA offices - Cut The Guy Behind The Tree.

Herseth Sandlin introduces legislation for high-speed Internet for rural America

By Rep. Stephanie Herseth Sandlin

Tri-State Neighbor

May 23, 2007

In rural America, we enjoy an unparalleled quality of life. However, we have always faced a unique set of challenges to maintaining and improving that quality of life. One of those key challenges - and opportunities - is our telecommunications infrastructure, which can help overcome barriers of geography and distance through technology.
As we continue to move into the information age, it's more important than ever that South Dakota families, businesses and schools have access to the high-speed, broadband Internet service that has become necessary to do business, stay in touch and stay informed.

Unfortunately, parts of South Dakota and rural America remain underserved or wholly unserved when it comes to high-speed, high bandwidth Internet access.
There already exists an important program that provides loans to provide broadband service in rural communities - the Rural Utilities Service (RUS) Broadband Loan Program. However, the current law contains a number of flaws that hinder its goals, and recently, I introduced legislation to improve and re-focus the program to ensure rural America really receives the help that it is supposed to.
The current law is designed to provide loans to areas of rural America that do not currently have service. Unfortunately, due to a loophole in that law, some areas that are neither rural nor suffer a lack of service are eating up scarce resources and preventing the program's focus from being where it should.
The problem arises because the definition RUS uses to identify “rural” areas is too broad to distinguish between rural communities and suburbs near cities. As a result, many loans are being granted to applicants proposing to serve areas that already have broadband providers. I am concerned that RUS is too often being used to subsidize Internet access to suburban and affluent communities that already have multiple high-speed Internet providers.

My bill does a couple of things to address these flaws and improve the program. First, it better defines “rural” and “urban” areas to ensure loans are being used in truly rural communities and not suburbs. Second, my bill ensures that loans are not going to applicants proposing to serve areas that already have a broadband provider.
I believe my bill will ensure that the original intent of the program is realized: ensuring broadband access to underserved areas of rural America. Passage of the recommendations put forth in my bill will ensure that truly rural providers are not denied loans because resources are funneled to providers serving urban areas.
This bill will be discussed in the context of the farm bill reauthorization, so as a member of the House Agriculture Committee, I will take the lead on ensuring that these improvements are made.
Access to broadband service is critical to the quality of life in rural America. It has the potential to be an unprecedented catalyst for economic growth and improvements in education and healthcare. After five years since this program's inception, precious dollars that could be used to bring high-speed Internet access to rural homes, businesses and schoolhouses across America continue to be misspent and I am hopeful we can right that wrong as we refocus the program.

Our social and political culture is Green.

Today everyone is environmentally friendly. Global Warming is almost universally accepted. Public Opinion even believes warming is based on science (which is still a matter of scientific debate).

The convergence of events including Katrina, a few warm years, drought (that is cyclical and not really new), high-energy prices, the War in the Middle East, the Al Gore Inconvenient Truth PR effort (geez an Academy Award that’s scientific validation) among other anecdotal evidence have convinced the public that Global Warming must be real. After all in the Public Culture today we all believe it is real.

Our politicians today don’t disagree. John Thune is promoting Wind Energy development, sponsoring legislation on bio fuel marketing, and (with Stephanie HS) is a leading advocate in Congress for Ethanol. Herseth Sandlin is on the Global Warming Special Committee in the U S House.

Today our largest energy dependent industries do not even dispute Global Warming. While they may not privately accept the science, on the commercial level our domestic Automakers are talking and implementing bio fuels and hybrid vehicles. Our utility companies while still using massive quantities of coal no longer argue about the science – they know what people are thinking and just want to avoid any argument.

Today Americans widely embrace the idea of Conservation (something we should be doing anyway). We talk a good game as we vacillate between energy efficient automobiles, SUVs and whether we should use and subsidize mass transit. Interestingly Nuclear energy, a very green solution still cannot gather enough public support to become accepted.

Today gas is $2.75 and there is hardly a whimper much less a public outcry. While still theoretic, American’s believe that if we could leave Iraq even $4 gas prices would be acceptable. Of course if gas would actually become 4 bucks opinion might change.

As we think about our environment on this Earth Day we should focus on Conservation and Energy Independence but our opinions should not be based on opinions or alleged Truths, Inconvenient or otherwise espoused even by the great scientist that claimed to invent the Internet.

Wind Energy - Everybody is For It. As posted previously, Wind Energy is desirable and seductive. The “Daily Republic” this week even goes so far at to claim it is profitable.

I am very curious to know where they get that information or how they come to that conclusion. If it is profitable and South Dakota has areas that have an abundant or even adequate source of wind, why are not the free market building wind farms?

Answer – Because based on pure economics it is not profitable.

Beyond public ownership or subsidies the Government can ease regulatory burdens, act as a facilitator but beyond being a cheerleader that is about it.

Besides being a very clean (desirable) and renewable (desirable) source of energy the economic development benefits may be somewhat less than the pie in the sky. A few landowners will derive increased income and local governments get an increase in taxes (particularly the school districts). Not all landowners will be winners. Just a very few actually have turbines, while many landowners do not.

There is the construction and sales and contractor’s taxes that are paid but very little ongoing economic activity. There are a few maintenance jobs and perhaps and administrative job or two depending on how the wind farm is structured (ownership etc.). These wind farms will not save our rural cities and towns.

Wind Energy should be part of our energy mix and it should be pursued but believing it is the answer to energy independence, global warming, or saving South Dakota’s rural areas is a dream.

The U.S. Department of Agriculture reported today that corn-planting intentions are the highest since 1944. Congratulate high oil prices and government subsidies and mandates and thus Ethanol demand for the increased demand for corn.

The increased demand for corn and subsequent high prices is good news for corn farmers (but not necessarily for the livestock producer or feeder) and higher farm income is good news for the Midwest. Increased production does not always keep prices high; though a reasonable assumption that increased ethanol capacity (more and bigger plants) will keep demand for corn high despite the record increased crop planting. If the weather cooperates and as mentioned earlier the price of oil that depends on other variables including war and peace remains high – life for the corn farmer will be good.

While we hope the best for the entire agriculture sector, sometimes their success is at the expense of the others. Markets are efficient so it will be an especially interesting year to watch the fortunes of our farmers, ranchers and ethanol producers.

Sidebar - Broin Companies of Sioux Falls one of the largest players in the Ethanol industry announced today that they would now be known as Poet.