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.

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.

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.

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.

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.