Monday, December 13, 2010

Carbon Capture Takes Another Hit

The Obama administration’s pledge of $1 billion for construction of a major commercial scale power plant carbon capture project in Illinois, dubbed FutureGen 2.0, took another hit today with announcement of the economic failure of yet another in a series of European carbon capture projects subsidized by the European Commission. Illinois’ FutureGen 2.0 is a proposed a network of pipelines to deliver the sequestered carbon dioxide to a repository in Mattoon, where it would be stored underground, along with emissions from other plants in the region should the commercial scale carbon capture technology prove successful.

The 2.0 version of FutureGen is a scaled down version of an earlier, more ambitious project which began as planned construction of a ground up new 275 megawatt clean coal power generation facility in Mattoon, under the Bush administration. When the estimated $950 million price tag for the coal gasification facility more than doubled as construction estimates were finalized, FutureGen was revised to version 2.0 - revamping Ameren Corporation’s 200 megawatt Meredosia coal fired power facility with advanced combustion techniques, a new boiler, and an air separation unit to capture 90% of the carbon dioxide emissions.

The fourth hit in three months to carbon capture construction in the European Union came today with announcement of the financial failure and anticipated bankruptcy sale of Powerfuel plc’s proposed carbon capture facility at its 900 megawatt coal fired Hatfield power plant in South Yorkshire. Netherlands based accounting and consulting firm KPMG has been appointed administrator for the Powerfuel project. According to KPMG’s Richard Fleming, the Hatfield carbon capture development falls $1 billion short of capital investment needed, despite European Commission grants of $275 million in subsidies for the project.

Last October, Germany’s energy giant E.ON announced it was terminating development plans for carbon capture and sequestration on a commercial scale at its billion and a half megawatt coal fired power plant in Kingsnorth, U.K. That news was followed swiftly in November by announcement that both commercial backers bowed out of Finland’s carbon capture project at Meri Pori, and Royal Dutch Shell’s termination of plans for an underground carbon dioxide storage facility at Barendrecht.

Despite Powerfuel’s status as the only UK licensee for commercial scale carbon capture technology trials, and projections by UK’s Department on Energy and Climate Change that that carbon capture and sequestration is one of the cheapest forms of low carbon energy production, KPMG’s Fleming described the reasons for the financial failure of the Hatfield project: “Developing low-carbon energy generation requires a large amount of capital up front, and the CCS development falls $1 billion short of the investment needed to build the plant. … The substantial funding gap has not been addressed in the past 12 months, and accordingly the project has stalled.”

In light of this series of dramatic failures of carbon capture projects overseas, the silence from both Springfield and Washington about the prospects of completion for FutureGen 2.0 is deafening.

Thursday, December 9, 2010

Unemployment Benefit Extension Returns To Front Burner

In a deal struck between President Obama and Senate Republican leaders, legislation extending federal unemployment benefits for an additional 13 months, up to a total of 99 weeks, could be on the way to passage in both houses of Congress very soon. Trading the unemployment extension desired by Democrats for extension of Bush era tax cuts to even the wealthiest Americans for 2 years, Obama went against the grain of his own party politically. In his own defense, Obama said at a press conference yesterday “A long political fight carried over into next year might have been good politics, but it would be a bad deal for the economy, and a bad deal for the American people.”

The compromise package, carrying a price tag of a $700 billion increase in the nation’s deficit, includes the tax cut extensions, unemployment benefit extensions, a 2% cut in FICA taxes withheld from paychecks of working Americans, reinstatement of a 35% estate tax on inheritances of more than $5 million from a single decedent and $10 million per couple, and extension of the college tuition tax credit due to expire December 31, 2010. Also, businesses making capital investments next year will be permitted to expense the entire amount, rather than amortizing it over the life of the asset. The tax savings in 2011 are expected to total $120 billion for wage earners, and $150 billion for businesses.

Defending the deal, which comes on the heels of dual Senate defeats for proposals to extend the Bush era tax cuts only to families earning less than $250,000 per year, and then only to those earning over $1 million per year, Obama said: “The number one priority is doing what is right for the American people.”

Republican “Green” Legislation

Sitting on President Obama’s oval office desk for the past 5 days is a piece of legislation described by House and Senate Republicans as “green” legislation to create cutting edge energy conservation technology jobs. Called the Federal Buildings Personnel Training Act, and designated HR 5112 in the House and S 3250 in the Senate, the bill is supposed to cut federal government energy costs and train the federal building maintenance work force in the use of high performance technologies for energy conservation in federal buildings.

About 97% of federal office buildings use private contractors to maintain and manage the facilities, and according to House co-sponsors Judy Biggert (R-Ill.) and Russ Carnahan (R-Mo.), the legislation should cut the $7 billion spent annually on heating, cooling, powering and lighting federal facilities. GSA expects every dollar spent on training under this legislation to return $3.95 annually in energy cost savings. Senator Susan Collins (R-Me.), cosponsor of S 3250, quotes GSA as complaining that contractors responsible for managing federal facilities “lack qualified, well-trained people” to manage more than 500,000 federal buildings, structures, associated infrastructure and other physical assets in the U. S. and around the world.

The legislation was presented to Obama December 3, and awaits his signature. Interesting that the Republican climate change deniers were the ones to sponsor this bill in both houses. The stimulus legislation they have been complaining about for nearly 2 years appropriated $5.5 billion to GSA for upgrading energy efficiency of federal facilities, and ever since, GSA has been complaining that lack of proper expertise among facility operating personnel was a major roadblock in reaching federal government energy reduction goals. Once the bill is signed into law, training for the operators of the numerous federal buildings in the Chicago area should kick into high gear.

Sunday, November 21, 2010

Rationality and Experience to Guide Chicago Housing and Economic Development

Outgoing Mayor Richard M. Daley is intent on leaving his imprint on city government even after he leaves office early next year. He is busy reorganizing the city’s administration in the way he thinks best, and appointing interim heads to new departments, leaving the next mayor to decide whether or not to keep them. Kudos to Daley for one interim appointment announced last week, which should keep economic and housing development moving in all Chicago neighborhoods during the inevitable transition confusion once a new mayor is elected.

Daley appointed 58 year old Andrew Mooney, executive director of Local Initiatives Support Corp. Chicago, to be interim head of the newly created Department of Housing and Economic Development. The new department combines the responsibilities of the former Department of Community Development with the former Department of Zoning and Land Use, except for zoning inspections, which will now fall under authority of Chicago’s building department.

Mooney brings enviable experience in making community development work to his new position. Since it was started in 1980, his organization has invested $150 million in grant money in Chicago area neighborhoods, developing 27,000 housing units and 4.5 million square feet of retail, commercial, and community center space. Mooney’s able leadership has also attracted equity investment totaling $317 million to projects his organization supported, leveraging an estimated $3.7 billion in development throughout the Chicago metropolitan area. Some examples of housing developments succeeding under Mooney’s leadership include the 86 unit Churchview Supportive Living Facility in southwest side Chicago Lawn, the 87 unit Harold Washington Unity Cooperative affordable housing development in West Humboldt Park, and Bronzeville’s 3,000 unit Oakwood Shores development, located just south of Ellis Park.

There are so many candidates for mayor running in the February election that it is impossible to predict the outcome, much less the appointments of department heads a newly elected mayor might make. We can only hope that whichever candidate ultimately replaces Daley has the good sense to keep Mooney’s knowledge, experience and motivation working for Chicago’s neighborhoods after he or she takes over the reins.

Saturday, November 20, 2010

High Speed Rail Shuffle Could Be Chicago’s Boon

Newly elected governors in Wisconsin, Ohio and Florida – all of whom have announced their opposition to high speed rail construction projects in their states – could be the secret ingredient in increased funding for high speed rail construction projects and rolling stock manufacturing jobs in the Chicago area. Under the stimulus appropriations from early 2009, $8 billion was set aside to fund high speed rail construction projects planned but not yet implemented across the United States. In January of this year the Obama administration announced allocation of $1.23 billion of that money to Illinois, to fund high speed rail corridors between Chicago and St. Louis, Missouri, and between Chicago and Milwaukee, Wisconsin.

Of the remaining $6.77 billion in high speed rail appropriations, $810 million was awarded to Wisconsin for construction of a high speed line between Milwaukee and Madison, and also the Wisconsin portion of the Chicago to Milwaukee service. Another $400 million was awarded to Ohio, for high speed connections between that state’s capitol, Columbus, and Cleveland and Cincinnati, Ohio’s other two major cities. Florida was awarded $2.06 billion for a high speed rail link between Orlando and Tampa.

Under the “claw back” provisions of the stimulus legislation, any money allocated to particular projects, but not spent by the states winning the funds, must be reallocated among other proposers who got less than they asked for in the initial grant process. Florida’s governor elect Rick Scott, Ohio’s governor elect John Kasich, and Wisconsin’s governor elect Scott Walker have all publicly stated their opposition to going forward with the high speed rail construction for which these federal stimulus funds were awarded, putting a total of nearly $3.29 billion back in play among the states seeking federal funds for high speed rail development projects.

IDOT’s original funding proposal under the stimulus appropriation sought a total of $4.5 billion, and the clawed back funds could more than make up the entire shortfall from the Illinois grant request. Though it is unlikely Illinois will be given the entire amount, U. S. Transportation Secretary Ray LaHood said last Monday, November 15, that he will soon be announcing the reallocation of the $1.2 billion coming back from Wisconsin and Ohio. Several governors who support high speed rail development, including Illinois Governor Pat Quinn, will be holding their breath until LaHood’s announcement is official, and maybe even longer, until Florida’s $2.06 billion grant is reallocated.

Quinn is already wooing Talgo, Inc. the rolling stock manufacturer that recently opened a plant in the Milwaukee facility formerly owned by Tower Automotive, where Talgo expected to put 125 people to work building cars for the Chicago to Milwaukee high speed rail corridor, which plans to include stops at Mitchell Field, Sturtevant, Wisconsin, and Glenview, Illinois, as well as the terminals in downtown Chicago and Milwaukee. Talgo has said it would consider moving to Illinois after fulfilling its spring 2012 orders for two high speed trains in Oregon.

So, because of politics in three other states, Illinois could end up a much bigger winner in the competition for high speed rail funding and jobs that initially seemed possible.

Friday, November 19, 2010

House Rejects Unemployment Extension

Yesterday the House of Representatives voted on a bill to extent the application deadline for the next tier of federal unemployment benefits to February 28, 2100, and the bill was defeated 258 in favor to 154 against. The legislation would have required 275 votes in favor to pass under pay as you go rules, since it included no revenue raising measure to pay the $12.5 billion cost of the benefit extension. As a result, up to 4 million out of work citizens, and their families, will lose their jobless benefits on the current filing deadline, which is November 30, 2010.

State governments pay the first 26 weeks of unemployment benefits, and after that additional federal payments can last up to an additional 73 weeks, for a total of 99 weeks of benefits: just 5 weeks short of 2 years before payments are cut off. The last extension passed by Congress was for 6 months at a cost of $34 billion. In the last 3 years the unemployed have collected $319 billion in jobless benefits, with 8.5 million citizens now collecting benefits. Of the 8.5 million, 4.8 million have already exhausted their state benefits, and are now collecting federal payments.

The federal government has never cut off benefit extensions when the unemployment rate has been above 7.4%. With today’s rate at 9.6%, Congress is likely to ultimately pass further extensions, but not before the November 30 cutoff. The debate rages on in the House about how to pay for the cost of an extension, which Democrats argue should last another year. Republicans want to use unspent stimulus money to pay for the extension, but Democrats oppose raiding any pot of money appropriated for job creation.

The House/Senate Joint Economic Committee reports that failure to continue extended unemployment benefits could take as much as $80 billion out of today’s already weakened economy, since families receiving benefits spend the money immediately because they are already living so close to the edge financially. Nevertheless, deficit hawks in the House will likely continue to oppose any bill not fully funded under pay as you go rules.

Dodd-Frank Consumer Credit Reforms Under Assault

Do you accept credit cards in payment from your customers? Does your business use credit cards to pay vendors? Either way, you will be affected by the new consumer protection rules to be promulgated by the Consumer Financial Protection Bureau under the Dodd-Frank financial regulatory reform bill signed by President Obama in July. One of the top Republican congressmen on the Financial Services Committee, Representative Jeb Hensarling of Texas, has promised to defund the Bureau once the new Republican House majority assumes power in January.

Other incoming House Republican leaders, including presumptive Majority Leader Eric Cantor of Virginia, and leading Financial Services Committee chair candidates Spencer Bachus of Alabama and Ed Royce of California, are expected to introduce legislation revoking the independent funding of the Bureau from the Federal Reserve which is set to begin in July, 2011. Royce has also proposed giving bank regulators the power to veto any Bureau rules.

Republican Congressmen and banking industry lobbyists are attacking the rulemaking powers of the Bureau, because President Obama is likely to veto any Republican backed legislation weakening the power of the new regulators, headed by Harvard Law Professor and consumer advocate Elizabeth Warren. Republicans believe subjection of the Bureau’s budget to the annual Congressional budgeting process will subject the Bureau’s exercise of its rulemaking powers to increased political pressure from a Republican dominated House, where appropriation measures must originate.

Europe’s Failures Jeopardize Illinois Carbon Capture Project

Reversals of fortune as far away as Finland could jeopardize the future of Illinois’ FutureGen 2.0 project, to which the Obama administration pledged $1 billion in stimulus funds as recently as last August. FutureGen 2.0 began as planned construction of a ground up new 275 megawatt clean coal power generation facility in Mattoon, under the Bush administration. When the estimated price tag for the coal gasification plant of $950 million more than doubled as construction estimates were finalized, FutureGen 2.0 was revised to revamping Ameren Corporation’s 200 megawatt Meredosia coal fired power facility with advanced combustion techniques, a new boiler, and an air separation unit to capture 90% of the carbon dioxide emissions.

Babcock & Wilcox and a group of energy companies proposed a network of pipelines to deliver the sequestered carbon dioxide to a repository in Mattoon, where it would be stored underground, along with emissions from other plants in the region should the commercial scale carbon capture technology prove successful. Now, the failure of two proposed European commercial scale carbon capture power plant projects suggests the Meredosia project may never come off the drawing boards.

Finland’s Fortum Oyj and its partner Teollisuuden Voima Oyj have both backed out of a proposed 565 megawatt carbon capture project at Meri Pori, Finland, because they say the project presents too many technological and financial risks. Also this month, Royal Dutch Shell dropped a proposal for piping carbon dioxide emissions from its Rotterdam area Pernis refinery to a proposed underground storage facility beneath the small village of Barendrecht in The Netherlands. Citing three years of delays and “the complete lack of local support,” Dutch Minister of Economic Affairs Maxime Verhagen announced scrapping of the Barendrecht carbon capture and storage facility.

Last month, Germany’s energy giant E.ON announced it was terminating development plans for carbon capture and sequestration on a commercial scale at its billion and a half megawatt coal fired power plant in Kingsnorth, U.K.

The fact that European technology leaders in industry and government in Finland, Germany, England, and The Netherlands are concluding in rapid succession during the design phase that commercial scale carbon capture and sequestration is not economically viable, combined with Illinois’ own experience of projected cost overruns totaling more than 100% on the original version of FutureGen 2.0, could eventually scotch the Meredosia/Mattoon project, despite political support in both Springfield and Washington, D.C.

Tuesday, November 9, 2010

Gradual Fuel Tax Hike Proposed

Mindful of the burgeoning federal deficit, yet equally mindful that the federal Highway Trust Fund reauthorization legislation is mired in the House, and finally mindful that infrastructure construction projects will keep folks working as long as funding is in place, Republican Senator George Voinovich of Ohio and Democratic Senator Tom Carper of Delaware have proposed to the Obama administration debt commission that motor fuel taxes be gradually increased one penny every month for the next 25 months. Touted as a debt reducing and jobs creating measure, the proposal would go a long way towards funding the needed $500 billion, six year Highway Trust Fund reauthorization. If the lame duck Congress can get the measure through both houses before the anti-infrastructure Republican majority takes over next year, it could help save the heavy construction sector from the complete disaster that awaits if Congress elects to depend on year by year reauthorization measures that choke long term infrastructure planning by state and local governments which depend on the Highway Trust Fund for 75% of the money they spend each year.

So far, this is the only practical funding increase suggestion to come out of a Congress already deadlocked over the reauthorization legislation so important to keeping our roads, bridges, waterways and drinking water systems in good repair over the long term. As it is, state and local governments will be hard pressed to come up with their 25% matching contribution to keep infrastructure projects moving forward during the near future.

U. S. Northeast Sees Construction Investment Launches

Delaware, New Jersey, New York and Pennsylvania are looking forward to fourth quarter launches of planned major construction projects with a total investment value of over $2.3 billion. Leading the way are the industrial manufacturing and biotech-pharmaceutical sectors of the economy, with 25 biotech or drug making projects worth $572 million, and 17 industrial manufacturing projects worth $715 million.

Examples include the $175 million Fisker Automotive renovation and expansion of the former GM plant in Wilmington, Delaware, to produce plug in hybrid cars, mostly for export. The completed 3.2 million square foot facility is expected to go into production in 2012, and to be making up to 100,000 cars and trucks a year by 2014. One of the big biotech projects will be expansion of the Cornell University Department of Food Science Stocking Hall laboratory to a 145,000 square foot facility at an investment of $105 million under the construction management of Gilbane Building Company. Construction of the Stocking Hall expansion at Cornell is expected to take four years.

Husky Energy Moves Forward on Diesel Desulfurization

Calgary based Husky Energy Inc. plans a diesel hydrogen treatment facility with capacity to produce 25,000 barrels per day of low sulfur diesel fuel, with construction to begin in 2013. Approval for construction is expected in 2012, with selection of an engineering, procurement and construction contractor the same year. Husky is a refiner, marketer and distributor of gasoline, diesel fuel, asphalt, ethanol, and aviation and specialty fuels in Canada and the U.S.

Saturday, November 6, 2010

Alternative Energy Policy Vacuum Takes Its Toll

The lack of a comprehensive national policy for alternative energy sources and alternative fuels continues to take its toll on the industry, and with Republican control of the House of Representatives, we can only look for more such disasters. On Wednesday, November 10, a brand new, 90% complete facility designed to annually produce 20 million gallons of fuel ethanol and 3.2 megawatts of electric power will go under the auctioneer’s gavel in Heyburn, Idaho. Owner of the new plant, Renova Energy of Idaho, LLC, filed chapter 11 bankruptcy last year, after halting construction, with the factory more than 90% complete, in 2008. Construction started in 2007.

The facility will be sold as is and in place, or if that does not succeed, equipment and structures will be auctioned off piece by piece. Renova’s plant would have been only the second ethanol facility in the State of Idaho. With very little prospect of Congressional action on national energy policy legislation any time soon, given the outcome of this week’s elections, it seems unlikely a buyer willing to complete construction and put the Renova factory into operation will come forward.

Friday, November 5, 2010

Stimulus High Speed Rail Curtailed

The first fallout of the election returns came down in Wisconsin today, with the announcement by the outgoing Democratic Doyle administration that design and engineering work on the $810 million stimulus funded Milwaukee to Madison high speed rail construction project will be suspended, pending a determination by the incoming Republican Walker administration. Wisconsin Transportation Secretary Frank Busalacchi says the stoppage is temporary, but governor elect Walker campaigned against high speed rail as a waste of taxpayer money.

Permanent cancellation of the extension of high speed rail from Milwaukee to Madison would imperil jobs at the Milwaukee plant of Spanish based Talgo, Inc, which was slated to manufacture new rolling stock for the Madison branch, where the intent was to increase train speed from the current 79 mph up to 110 mph along the route.

Additionally, Ohio governor-elect John Kasich has also reiterated his opposition to development of a high speed rail corridor in that state connecting Cincinnati, Columbus and Cleveland. It seems the $8 billion in federal dollars allocated to high speed rail construction in the stimulus package may never get spent after all.

The New Republican Agenda

According to Republican Representatives heading back to Washington, D.C. after the election recess, their emphasis in Congress will be on job creation and economic recovery. Their first priority – making the Bush tax cute permanent. They expect Obama and the Democrats to cave in to this legislation. Ohio’s John Boehner, expected to be elected speaker once the lame duck Congress comes to a close, announced in a Wall Street Journal piece today that the next Speaker should take four immediate steps to restore voter confidence in the federal government: 1) no more earmarks for favorite projects in appropriations legislation; 2) no floor votes on legislation that has not been available on line to the public for at least three days; 3) no more unfocused, thousand page bills with spending priorities and policy changes buried in incomprehensible bureaucratic text; and 4) no more secret drafting of legislation in the Speaker’s office rather than through the open committee hearing process.

Call me a cynic, but I expect if Boehner is elected speaker, his adherence to these four principals will last just until the first House Bill in the new congress comes to the floor for a vote. I hope he proves me wrong.

Wednesday, November 3, 2010

Unfinished Business In Congress

The Republican sweep to power in the House virtually assures that the unfinished business on the Obama administration agenda will not be finished any time soon. Most important to the construction industry is reauthorization of the federal highway trust fund, which Congress could not accomplish while both houses were under Democrat control. Now, unless the lame ducks get their tails in gear and pass a six year $500 billion reauthorization before Republicans take over in the House, it seems unlikely that anything good will come out of the next Congress for the construction industry.

Other construction related legislation likely to languish under Republican House leadership includes the Clean Energy and Security Act – also known as cap and trade, a public option for health insurance, the DREAM comprehensive immigration reform bill, and two bills designed to redirect unused TARP funds to infrastructure building: the Jobs for Main Street Act and the Small Business and Infrastructure Jobs Act. Any second infusion of federal stimulus dollars into the construction industry seems completely imaginary now.

Low Carbon Energy Technologies In Peril

New Chinese restrictions on export of rare earth metals threatens the development of low carbon energy technologies to commercial scale in the United States, according to Senator Edward Markey of Massachusetts, who is asking for the Obama administration to take action against the proposed 30% reduction in Chinese rare earth export limits. China is the largest supplier of the exotic metal elements used in solar cell power generation technology, as well as in computer chips for commercial and defense applications.

FTC Issues New Green Marketing Rules

Cracking down on misleading claims of environmental friendliness in marketing materials for numerous products and technologies, the Federal Trade Commission has issued new rules respecting the use of terms like “degradable” and “carbon offset” in advertising materials and on product packaging. Proponents of claims that products are “environmentally friendly” will be expected to produce competent and reliable scientific studies backing up their claims. Use of misleading certifications and seals of approval could subject advertisers to penalties. The guidelines discourage use of ambiguous phrases like “renewable materials” or “renewable energy” in favor of specific information about the materials and energy sources used in product manufacturing.

Nypro Bucking The Trend

Nypro Incorporated is expected to seek trade subcontract bids for construction of an 80,000 square foot addition to its existing Asheville, North Carolina plastic molding facility, with construction to begin this December and to be completed next summer. The addition will create 156 new jobs once the production line is activated. Samet Corporation of Greensboro N.C. is the design/build contractor for the project. Nypro has 16,000 employees at plants in 15 countries, producing plastic moldings for Dell, Nokia, Procter & Gamble, and other customers.

Feds Moving Ahead With Women Owned Set Asides

The SBA is implementing websites for self certification of women owned businesses, which could begin receiving federal government business in the first quarter of 2011, if they complete the certification process now. The set aside program will go into effect under new rules beginning February 4, 2011. Seminars are already being offered on implementation of the Women’s Contracting Rule.

India Orders From GE

GE Energy has received a three quarter billion dollar order for steam powered generators as well as gas fired turbines to be delivered before March 2012. The equipment will be installed in $2.3 billion expansion of a Reliance Power plant in Andhra Pradesh.

Northeast Biodiesel Builds For The Future

Looking ahead, and seeking a jump on its competitors, Northeast Biodiesel LLC of Greenfield, Massachusetts, has finished site preparation at its new waste grease biodiesel production plant in Greenfield, and is set to begin pouring the foundations for its 6,600 square foot plant. President Larry Union said, “I know we’re going against the grain right now, given the state of the industry without the producer tax credit.” The two phase project will install a 1.75 million gallon production train immediately, with an additional 1.75 million gallons of production capacity available when market conditions improve. Phase one should be complete by February 2011, and phase two by the end of 2012.

Wednesday, October 6, 2010

Congressional Gridlock Makes Congress Look Silly

So far this congressional session, beginning in January 2009, the House of Representatives has passed 420 bills on which the Senate has failed to take any action one way or the other. The bills awaiting Senate action include many which would have salutary impact on the American economy, and some, like a bill requiring auditing of the $20 billion BP oil spill claim fund, which should be completely non-controversial. That’s one bill for nearly every Congressman which sits on a shelf awaiting action in the Senate. We should all be angry about this, and right now House members are angrier than most of us that their work is clogged up in Senate partisanship.

Wind Farm Nuisances

The “clean, green” wind generated electrical power from rapidly rising wind farms across America has brought nuisance lawsuits in Illinois, Massachusetts, Pennsylvania, Texas and Wisconsin, contending that turbine noise and vibration from nearby windmills has driven down the value of neighboring residential property. Whether this is just another example of NIMBY, or whether it will become a growing problem for regulator responsible for locating wind power production facilities remains to be seen.

Overseas Cement Gambles

Foreign cement manufacturers are staking hundreds of millions of dollars on investment in new cement production capacity, betting that construction activity will pick up rapidly in their corners of the globe. MerchantBridge of London and LaFarge SA of Paris invested $220 million in expansion of a cement factory in Karbala, Iraq, and MerchantBridge has obtained a license to construct a new two million ton per year cement factory less than ten miles away from the expanded Karbala facility. Iraqi government spokesman Ali al-Dabbagh predicts Iraq will invest $200 billion in infrastructure construction over the next four year period – hence the need for a dramatic increase in cement production capacity.

Meanwhile, Brazil’s Votorantim Cementos SA is investing $1.47 billion in construction of eight new cement making facilities in Brazil, bring Votorantim’s Brazilian capacity to 35 plants producing 42 million tons of cement per year. Votorantim also owns cement making plants in Bolivia, Canada, the United States and Chile.

Tuesday, October 5, 2010

Transportation Capital Funding – The Next Battleground

America’s position in the global economy is rapidly being undermined by a rapidly deteriorating and drastically underfunded transportation system. Congress’ failure to act before the midterm elections on a long term reauthorization of the Federal Highway Trust Fund is just the main symptom of pain in this sector. A report released yesterday contains warnings by bipartisan transport experts that unless
Congress and the public quickly get behind innovative transportation reforms, America’s global economic leadership will fade in the near future.

Yesterday afternoon Transportation Secretary Ray LaHood announced federal grants totaling $776 million to 45 states plus the District of Columbia for bus system improvements, but much of that cash will go to purchase busses and other equipment, and very little of it to transportation infrastructure construction.

Meanwhile, several Republican gubernatorial candidates in hotly contested state election races are making campaign promises to block the Obama administration’s ambitious plans for bullet train service in the northeastern industrial corridor from Boston to Washington, D.C. The Stimulus legislation committed billions to high speed rail construction proposals touted as “shovel ready,” but so far the shovels have not turned a single scoop of railroad ballast onto high speed rail construction projects anywhere in the nation. If economic recovery is depending on the construction industry to bring job growth, these gubernatorial campaign issues are an ill wind blowing the wrong direction.

Small Business Lending Restricted By Market Forces

Average people and many small businesses needing working capital are finding their usual lenders have no money to lend them, severely crippling job growth in this slowly recovering economy. Why? Because the megacorporations who really don’t need to borrow are in fact borrowing and hoarding huge sums merely because they are able to issue debt at amazingly low interest rates. While Microsoft and other huge borrowers are placing huge bond issues at interest rates so low any of us would gladly have them instead of our current historically low home mortgage interest rates, these companies are not investing the borrowed funds in new, factories, equipment or payroll expansion. Instead, they are hoarding the cash until the economy improves, effectively drying up sources of working capital for the smaller business which would love to hire and grow of only they had working capital to fund their expansion.

Friday, July 2, 2010

June Jobs Crash

Despite President Obama's insistence that the economy is still "headed in the right direction," the June jobs report shows the addition of 83,000 private sector jobs was more than offset by loss of 225,000 temporary Census jobs, for a June net loss of 125,000 jobs from the economy.

HHS May Renege On Coverage For Preexisting Conditions

Jay Angoff, HHS director of Consumer Information and Insurance Oversight, acknowledges that the interim high risk pools created to cover people with preexisting conditions between now and 2014, when health insurers are forced to cover them, may well run out of cash and be forced to turn the sickest people away before private market insurance is available to them. Applications for insurance from the pools, funded by $ 5 billion in federal cash, opened July 1. Richard Popper, Angoff's deputy director, acknowledges at the same time that proposed plan premiums of $ 140 to $ 900 per month may also serve to exclude a lot of people with preexisting conditions from these plans.

Thursday, July 1, 2010

Balancing Federal Budgets On The Backs Of The Jobless

Three times in the last three weeks the U. S. Senate has filibustered legislation which would extend unemployment benefits for those who have been out of work for more than six months. Ben Nelson of Nebraska was the only Democrat to vote against cloture on the bill. A total of 1.7 million jobless folks will see their benefits run out by Independence Day. The bill would have extended the unemployment benefit period from 26 weeks to 99 weeks.

Home Sales Not Leading Any Recovery

One in three home sales during the first quarter of 2010 was a foreclosure. There were 1.2 million foreclosure sales in 2009, a four year increase of 2,500%.

Obamacare Fallout Starts

Anthem Blue Cross in California, the first major health insurer to come to grips with Obamacare, is proposing 20% rate hikes.

State Budgets Spiral Downward

Fifty states with a total of $89 billion in state budget deficits mean cuts this fiscal year of as many as 900,000 government employee jobs and jobs at companies doing business with state and local governments. Even with Obama's wished for $50 billion federal aid to state and local governments, which now appears doomed to nearly certain failure in Congress, state and local governments, and the businesses depending on them for survival, would lose nearly 395,000 government and private sector jobs in the last half of 2010 and the first half of 2011. State governments already cut 200,000 jobs in 2009 and the first half of 2010.

Employment losses have already meant drastic cuts in state and local tax revenues. In Illinois some sate government bills 8 months old still go unpaid, according to Illinois Comptroller's office spokesman Alan Henry. More layoffs will mean more revenue losses, and the downward spiral in state and local government employment and services will continue unabated for years to come.

Friday, May 28, 2010

Highway Trust Fund Reauthorization – No Time Soon

Despite pressure from influential state and local officials like California Governor Arnold Schwarzenegger and Pennsylvania Governor Ed Rendell, and New York City Mayor Michael Bloomberg, as well as influential lobbies like the Amalgamated Transit Union and the Transport Workers Union of America, Transportation Secretary Ray LaHood predicts there won’t be any action on a full six year reauthorization of the Federal Highway Trust Fund until after the November 2010 midterm elections. Blue Dog Democrat Congressmen and other House fiscal conservatives don’t want to be pushed into voting this session for the tax increases which will be needed to fully fund a $500 billion, six year reauthorization.

As a result, Connecticut Senator Chris Dodd is pushing legislation to create a $2 billion emergency fund to subsidize state and local transit operations until a new Highway Trust Fund bill can be enacted. Without such a measure, local transit agencies all around the country will be facing route and schedule cutbacks and employee layoffs before a new House can be elected in November.

Blue Dogs Cut House Extender Package – Senate Delays Action

With authorization for longer unemployment benefits and COBRA subsidies expiring after Memorial Day, the House passed a cut back version of the extender legislation this week, but the Senate adjourned without taking any action, once leaving out of work Americans whose benefits expire in limbo until Congress reconvenes June 7. Fiscally conservative House “Blue Dog” Democrats cut $33 billion from the proposed legislation before it passed, and separated out $23 billion in Medicare doctor reimbursement extensions for consideration apart from unemployment benefits. Both House measures now extend doctor pay and unemployment compensation only through November 2010 rather than through June 2011 as originally proposed.

As passed by the House, the bills will still increase the federal budget deficit by $50 billion, and the Senate threatens to reinstate the June 2011 cutoff date when it reconvenes June 7. The House measure also includes $6 billion for federal bond issues to support local and state infrastructure construction projects.

Of course, all these Senators and Congressmen are getting their regular paychecks while they keep out of work Americans waiting two or three more weeks for their next benefit payments.

Wednesday, May 26, 2010

Extenders In Jeopardy

Leaders in both the House and the Senate are threatening to keep their bodies in session through the Memorial Day recess, in spite of members desire to travel home to their respective districts now for holiday parades and rallies. Nevertheless, it looks like the proposed legislation extending unemployment and COBRA benefits, along with Bush era tax breaks for individuals and small businesses, and Medicare payment levels for physicians, is doomed. Neither House nor Senate leaders have the votes to pass the proposed extenders through year end, because of the cost to the federal government. While the House could probably pass a three month extension, even that short relief appears to fall flat in the Senate, leaving those still looking for work whose benefits have already run out, or will run out soon, with little hope of further relief.

Senators and Congressmen who face tough reelection battles have added a number of revenue raising measures to the extender proposal, including an increase in oil excise taxes from eight cents to 32 cents per barrel, limits on corporate use of foreign tax credits, and a 157% increase in the tax rate venture capitalists pay on “carried interest” earnings. Business lobby protests over these tax increases could scuttle the entire benefits extension package. In addition to extension of benefits for the jobless, the bill also includes $24 billion in assistance to state governments with serious budget deficits, $6 billion to fund summer job programs for young people, and $65 billion to postpone pay cuts for doctors treating Medicare patients.

Fiscal discipline went out the window when the Obama administration wanted to stimulate the economy and pay for nearly universal health care benefits, but now that midterm elections are approaching it seems like Congress is completely willing to try balancing the federal budget on the backs of those who have still been left behind by the effects of the stimulus measures.

Health Care “Reform” Becoming Health Care “Conform”

When stumping for his federal health care legislative package, President Obama repeated over and over at every rally and speech to Congress that “if you like your existing health coverage, you can keep it” under the bill which he signed into law this spring. As the Department of Health and Human Services begins writing the rules and regulations that will carry the provisions of the new law into effect, it is becoming clear that Obama’s promise was just a technicality on the road to limiting everyone’s health coverage to what the federal government wants you to have.

The proposed regulations will provide a penalty of $3,000 per year per employee against any employer whose health plan costs any of its employees more than 9.5% of their earnings. Of course, this penalty will eventually push all employers into offering only the health coverage the federal government wants you to have. Furthermore, there is no guarantee whatsoever that federal bureaucrats won’t reduce the 9.5% figure even lower in the future, in the name of “affordability” of health insurance. Because most Americans get health coverage through their employment, this provision of the new law puts the federal bureaucracy at HHS firmly in charge of what form of health insurance will be available to the vast majority of the population.

Yes, you can keep your current health plan, but only for a little while. Eventually, fewer and fewer employers will be offering health coverage costing more than 9.5% of the pay of the lowest employee on the totem pole, and rapidly declining demand for more comprehensive health coverage will drive insurers which might offer better coverage out of the market. Before long, we will all be on something that looks a lot like Medicaid, regardless of how much we would be willing to pay for better health insurance.

Pricing Cuts Promote Commercial Scale Solar Power Development

According to panelists at the 12th Annual Electric Power Conference and Exhibition in Baltimore this week, decreasing material and construction costs of commercial scale photovoltaic power plants [PV] and thermoelectric solar power production facilities [CSP/CST] are promoting commercial scale solar power production developments in climates where sunlight is available most of the year to “fuel” such facilities. Leo Casey, Vice President and Chief Technical Officer of Satcom Technology Corp. in Boston told attendees that utility scale installation cost for PV facilities has dropped from $5 per watt to $4 per watt already, and he expects future pricing cuts down to the level of $1 per watt for solar panels and $1.50 per watt for construction cost, or a total of as little as $2.50 per watt of installed capacity. According to William Bettenberg of Applied Materials, Inc., more and more utility companies are embracing PV technology, with 485 megawatts of PV generating capacity installed last year.

Bob McDonald of Skyline Solar, Inc., echoed the same theme regarding CSP/CST solar power production facilities. McDonald cited both reduced module cost and improved installation expense as contributing to an improved position for commercial scale solar thermal power generation, particularly since the stored heat involved in the CSP/T process makes such production facilities especially useful as load following power generation facilities, rapidly becoming less expensive to build than other types of “peaker” generating units.

Sunday, May 23, 2010

Financial Market Reform Legislation Moves Ahead

With Senate passage of a second version of the financial markets regulatory legislation last week comes a prediction by Congressman Barney Frank that the conference committee will have a final markup very soon, and Congress will have a bill on President Obama’s oval office desk by Independence Day. If you are in the business of building houses and condominiums, it won’t matter which version of this bill comes out of conference committee, the legislation will put another brick on financing for your business. New rules on consumer lending will make it harder for home buyers to get mortgage loans, and this will keep the housing market in the doldrums for both new and existing homes and condos. New working capital for home builders is going to remain difficult to find because of this legislation.

Frank and his Senate counterpart Christopher Dodd have yet to release a timetable for conference committee action on the bills. The principal difference between House and Senate version of the measure is the Senate requirement that banks spin off their financial derivatives business into separately capitalized business units. Lobbying activity respecting this legislation will surely intensify in the coming weeks. So far in the 2009 and the first quarter of 2010 business and consumer groups have spent $1.33 billion in lobbying efforts regarding this bill, with 3,000 lobbyists contacting our 100 Senators and 435 Representatives, making a ratio of more than five and a half lobbyists for every politician in Congress.

Will Power Plant Carbon Capture Costs Prove Prohibitive?

Carbon capture technology for coal fired power plants has been one of the darlings of Congressional committees working on climate change bills during the last year and a half, but panelist comments from industry leaders at the 12th Annual Electric Power Conference and Exhibition suggest that two aspects of carbon capture – cost and facility location – could toss a monkey wrench into the grand legislative plans surrounding this approach to greenhouse gas emission control. A representative of AES Corporation told the conference last week that under cap and trade the carbon dioxide allowances for coal fired electricity cost about $2 per ton. On the other hand, construction of a carbon capture facility adds $37 per ton to the cost of coal fired power, and transportation of CO2 to a storage site could add another$13 per ton, for total carbon capture cost of up to $50 per ton.

Just as the issue of nuclear power spent fuel rod disposal generated the acronym NIMBY, for Not In My Back Yard, conference attendees were busy discussing the new acronyms already in use regarding opponents of carbon capture facility site construction: NUMBY for Not Under My Back Yard; NOPE for Not On Planet Earth; and the new pejorative acronym for environmental activists opposed to carbon burial sites – BANANA, for Build Absolutely Nothing Anywhere Near Anyone. At least the debate is enriching Washington’s alphabet soup.

CAFÉ Standards For Big Rigs May Hit Construction In 2014

President Obama announced last week that USEPA is going to expand the motor vehicle emission standards to include large trucks, including 18 wheel dump trucks widely in use by construction businesses. After they go into effect in 2014, the truck standards will undoubtedly result in significant price increases for new dump trucks you are planning to add to your fleet. The construction industry, so recently prized as the engine of economic stimulus legislation, is taking yet another 2x4 to the back of the head on this one.

War Funding Bill May Include Renewable Power Loan Rider

The $58.5 billion emergency military funding legislation for Iraq and Afghanistan now working its way through Congress might give a small boost to power plant construction in the form of $180 million in loans for nuclear plant construction and wind and solar power plant development. Speaker Pelosi is insisting that a nuclear loan program proposed for addition to the emergency funding bill give parity to wind and solar power development, with $90 million for nuclear construction loans and $90 million for wind and solar power development. If the package survives the legislative process, this funding could support as much as $9 billion in additional loan guarantees for nuclear power plant construction and $3 billion in loan guarantees for wind and solar power generating facility construction, including the $2 billion “borrowed” from earlier legislative proposals to fund extension of the “cash for clunkers” program in the economic stimulus package.

“Extenders” Delayed Another Week

Despite the pain and agony additional delay is inflicting on every American citizen out of work and looking for it, Congress has delayed action for an additional week on legislation extending unemployment benefits for folks whose checks ran out weeks or months ago. The “extenders” of unemployment and COBRA benefits, Bush era tax breaks for individuals and small businesses, and other essentials for the survival of the economically disadvantaged, was supposed to be put to a vote last week. Neither house of Congress is prepared to act, in spite of the fact that the last temporary extension of these provisions expires over the Memorial Day weekend.

Wednesday, May 19, 2010

Federal Highway Trust Fund Reauthorization Stalled

There has been no significant legislative action to move forward the stalled reauthorization of the Federal Highway Trust Fund since House Transportation and Infrastructure Chairman James Oberstar’s hearing over a month ago on innovative financing methods for surface transportation infrastructure construction. Everyone in Congress recognizes that motor fuel taxes will be woefully inadequate to fund a six year $500 billion reauthorization measure, yet, in an election year, no one wants to sponsor new revenue measures to bridge the funding gap. Consequently, we can look forward to continuation of the series of three and six month interim funding measures for federal surface transportation projects, and the resulting inability of state and local government officials to make any long term plans or budgets for transportation infrastructure construction projects.

While the construction industry segment of the struggling American economy continues to languish behind the pace of nascent recovery, you would think our legislators in the nation’s capitol would take some interest in legislation with a very good chance of picking up the pace of job creation in construction, but you would be mistaken.

American Company Leads In Wind Power Operations

With 23 years of experience as a third party operator of wind power generation facilities, NAES Corporation of Issaquah, Washington, right here in the United States, is the world’s largest third party operator of wind energy generation facilities. NAES manages and operates 43 billion watts of wind energy facilities at 122 operating plants.

With 375 additional gigawatts of wind energy under development worldwide, NAES is a leader in power production even before passage of any American federal legislation promoting renewable energy growth and development. Hats off to one example of American technological ingenuity continuing to progress in spite of Congressional indifference.

Power Industry Lobbying Efforts Support Senate Climate Bill

Electrical generation industry leaders at the twelfth annual Electric Power Conference executive forum in Baltimore yesterday rallied behind the Kerry/Lieberman American Power Act, the Senate’s alternative to the Waxman/Markey cap and trade bill passed last year by the House. Urging his colleagues to get behind passage of the Kerry/Lieberman legislation, James Connaughton, Executive Vice President of Constellation Energy Group, told the assembled power industry executives: “In Washington, difficult legislation is often declared dead – right before it is passed.”

Lamenting that heavy handed USEPA regulation of carbon dioxide emissions is the likely alternative should Congress fail to pass any climate change bill this session, Connaughton told the power industry leaders that in his experience USEPA rules usually accomplish about a quarter of their goals at four times the estimated cost to industry.

During the executive round table on climate change legislation, Connaughton’s sentiments in support of the Kerry/Lieberman bill were echoed by Keith Trent of Duke Energy.

Wednesday, January 6, 2010

Congressional Health Care Secrecy Betrays Public Trust

In a continuing program of concealing debate and compromises on the pending health care reform legislation from the public view, Democratic leaders in both houses of Congress have agreed to bypass the formal conference committee process for reconciliation of the differences between the House and Senate bills, and instead intend to draft compromise provisions behind closed doors before the House reconvenes later this month, have the House pass the agreed compromise provisions as an amendment to the House bill, and then send the amended House bill to the Senate for a final vote in which 60 affirmative Senate votes would result in passage of an identical version to send to the Oval Office for signature before President Obama’s State of the Union address to a joint session of Congress.

By these measures, Congress would avoid public observation of the process through C-Span broadcasts of conference committee hearings and debates, and issuance of a published conference report before either house votes on the bill. This alternative to the customary procedures also insures that most Senators and Congressmen, like the rest of the citizenry, will be ignorant of the details of the 2,074 pages of the legislation they are voting on.

The House amendment will have to resolve conflicts respecting the inclusion of a “public option” in the legislation, threshold levels of premium cost for imposing a 40% tax on “Cadillac” health insurance plans, the Senate’s favored funding mechanism for the bill, and the minimum level of income before imposition of a wealth surtax, the funding mechanism favored by the House bill. Congressional leaders expect the final compromise measure to include aspects of both funding mechanisms, thereby reducing the number of taxpayers affected by either type of revenue increase.

Democrats are feeling more intense pressure to get this legislation to the president’s desk before midterm elections, as announced and expected Senate and Congressional retirements open more and more seats in both houses to Republican challengers. The Congressional Budget Office predicts that the final bill will leave between 18 million and 23 million citizens still without health insurance coverage. As of yesterday, it appeared House leaders were unwilling to press forward their version of a nationwide public option in the final legislation, since Sensate passage of such a provision appears nearly impossible.

Senate Majority Leader Harry Reid’s secretive approach to the manager’s amendment, which became the final Senate version of this bill, illustrates the sort of provisions which can creep into legislation at the last minute, leaving the public and most legislators unaware of the details of bills passed in this secretive way. While the Senate bill does not require all employers to provide workers with health insurance, it does impose a $750 per employee annual penalty on every business with over 50 employees if the business does not provide health coverage, and any one of its employees receives a federal subsidy to pay his or her individual or family health insurance premium. At the last second urging of Oregon Senator Jeff Merkley, Reid secretly accepted an amendment to the Senate bill applicable only to the construction industry, reducing the size of penalty exempt employers from 50 employees to 5 employees.

Labor unions argue the Merkley amendment is needed to avoid giving non-union contractors an unfair competitive advantage in an industry where 90% of businesses have fewer than 20 employees, and union health care costs can represent 12.5% to 20% of payroll costs. Labor’s health insurance costs are expected to increase dramatically under this legislation, by as much as $1,000 per employee per year, due to the bill’s elimination of annual and lifetime benefit limitations, preexisting condition exclusions, and extension of family coverage to children of the employee until age 26.

On the other hand, smaller contractors argue that imposition of payroll cost increases amounting to as much as 25% will require layoffs at a minimum across the home building sector, or at worst, drive many of them out of business altogether. Whether the Merkley amendment stays in the final, secretly compiled bill, remains to be seen. The ongoing closed door drafting of this legislation, which will affect each and every American one way or another, acquiesced in by Speaker Pelosi and President Obama who campaigned on pledges of greater transparency and openness in government, leaves too much room for many similar last minute special interest provisions to creep into the bill, sight unseen.