Month: February 2021

I Don’t Think We’re In Kansas Anymore

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West Virginia Capital Building

In January 2011, the State of Kansas embarked upon an experiment, where they deliberately slashed tax rates without a plan to replace the revenue. The revenue would be replaced, and indeed it would grow, due to the influx of investment and residents responding to the reduced tax rates. Alas, this plan ran afoul as reality intruded, and in order to maintain a balanced budget, the state had to cut spending for education and other expenses. Finally, the state legislature had to wrest control back from the governor, and raise tax rates back to their previous level in order to keep schools from imploding, and get the state’s bond rating back to an acceptable category. Governor Brownback ended up resigning his office, only to land on his feet when the President nominated him to be the US Ambassador-At-Large for International Religious Freedom. Governor Brownback was so toxic that it took two congressional sessions for his nomination to be approved, and it was only approved when Vice President Mike Pence broke a tie to place him in this newly-created office.

Never one to learn from the experiences of others, the West Virginia legislature this year is treading much of the same path that Kansas did a decade ago. Flush with cash from COVID legislation, the governor of West Virginia has proposed slashing the state income tax in half this year, with a view at eliminating it altogether in the future. He is proposing to replace the revenues with a combination of sales tax increases, and expansion of items that will be covered by sales tax. He also is proposing increases in certain sin taxes. But his plans are bereft on guidance on how the basic needs of the state will be met when eventually 41% of the taxes funding the state budget are eliminated.

At the same time, the state legislature is proceeding to add another layer of bureaucracy in the state judicial system, by instituting an appeals court system. Considering that the workload for the Supreme Court of the state has declined precipitously over the past decade, the addition of the new court layer is aimed at pleasing the corporate clientele of the legislature, as they enable another opportunity to delay and perhaps overturn verdicts from lower courts. And at the suggestion of the Governor, two new cabinet posts have been created, and given the natural tendency of bureaucracies to grow over time, state government appears to be growing instead of shrinking.

Now, looking ahead a few years, one can envision a future where it becomes obvious that the revenues lost from the income tax rate reduction have not been replaced from the consumption tax increases. Since there is no more coverage of state expenses from federal appropriations, the state will have to look for opportunities to cut. Indeed, the targets have already been floated for a significant portion of the cuts. It’s in higher education, where the flagship universities of Marshall and WVU offer the chance to reduce expenditures and force the increased expenses upon the students in the form of higher tuition and fees. Oh, by the way, the program that the state has to off-set tuition, the Promise Scholarship? That is also in the gunsights of those who would plow ahead and reduce the income tax rates to zero.

What would be the potential gain for making these cuts in tax rates? Why, the increased revenues coming in from the flood of business investment, and the in-migration of residents who react solely to tax rates as a way of making a decision about where to live.

Look, this state has a well-deserved reputation for refusing to value education. We are the lowest in the nation regarding post-secondary graduation rates. We have difficulty in providing potential employers with an educated work force already. To put the screws further on the universities of this state is self-defeating. Instead of cutting education further, we need to enable students to attend community college, and to improve the offerings of community colleges to better match up with the needs of employers. The last thing we need to do is cut aid to the institutions that offer us hope of moving ahead in the world.

By the way, most people do not make decisions about where to live solely based upon tax rates. Maybe in the case of New York, and California, where income and property taxes are significantly higher than in West Virginia, tax rates are a factor, but in a state with competitive total taxation, the little bit of tax reduction we can offer will not be a significant driver of behavior. A better determinant will be whether broadband access is adequate (it’s not in much of the state), and whether the local roads are adequate (they are horrible once you get off of the interstates and Appalachian corridors). And also, the issue of schools and support for the same comes into play. Needless to say, this legislature is also toying with the idea of cutting funding to local schools in the future by proving vouchers for homeschooling or private schools (in person or virtual). Just what we need, an opportunity for the next generation of this state to be able to marinate in their petri dish of ignorance and intolerance rather than be exposed to the real world through the public school system.

Speaking of the reputation of this state, our legislators seem bound and determined to uphold our perception of being a bunch of yahoos who don’t belong in civil society. After all, it is not every state legislature that has a newly elected member film himself entering the Capital during the January 6 riot. It certainly is not the case where several members of the legislature wear masks made of mesh on the floor of their chamber so as to comply with the letter of the regulations concerning face covering. It is not every state that has multiple bills being offered to pull back on sex education in the schools, and eliminate any chance for providing protection to those who do not choose to use the missionary position to procreate. Yes, the national media does not tire of holding up examples of West Virginia politicians in order to feed the stereotypes to the national audience, and we keep giving them ammunition. This past election has resulted in Republican supermajorities in both houses of the WV legislature. The members certainly seem to be having fun as they dance upon the shredded remnants of decency and hopes that this state can ever float the ship of state off of the shoals we foundered upon many years ago.

Weather – We Like It Or Not

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In January 1982, I worked at a chemical plant in Memphis when we suffered through a spell of bitterly cold weather like Texas went through last week. Chemical plants are like other similar facilities, such as oil refineries and power plants. Memphis is not in the deep South, but our plant was not designed for an extended period of extremely cold weather.

So I can understand why Texas has suffered as much as they have in their current cold snap. And the longer temperatures remain so much below freezing, the worse the damage will get. When we suffered our freeze in Memphis, our first priority was to shut down in a safe way and prevent leakage of hazardous materials. Once that was safely completed, all we could do was settle in for the inevitable thaw that would come.

But when the thaw came, that is when the true damage was revealed. All of the water and steam piping that froze, often burst. The sound of dripping water showed how much repair was needed before we could start up again. In our case, large diameter cooling water pipes had frozen solid and burst, which delayed our restart for weeks. This was certainly a contributing factor in the decision by Du Pont to close the process a year later.

For facilities in Texas, often it’s the smallest components that cause the biggest issues. Pressure sensors have very small diameter piping that leads to a gauge and signal transmitter. That little bit of piping is often what freezes, leading to a loss of the sensor. Faced with the option of running their process blind, operators shut down their facility. Then the loss of heat from combustion or chemical reaction leads to more freezing. It’s a vicious cycle.

There are other factors that exacerbated the situation in Texas. By isolating themselves from the national power grid, they were able to claim that their utilities were not engaged in interstate commerce. That freed them from Federal regulation, and enabled them to rely solely upon intrastate regulation. For Texas, that is a prime motivating factor, and one reason why the situation has been so dire during this time. The few corners of the state that are tied into the national grids (El Paso and Beaumont) appear to have come through this crisis with minimal damage, since they were able to import electricity from outside of the borders of Texas. But everywhere else has been held hostage to the native stubbornness of the state.

To many on the outside looking in, it is inconceivable that Texans would willingly put themselves through a disaster just to continue to be free of external regulation. But that would not be a true assessment of the state of Texas. I first visited Texas nearly 50 years ago, and was struck by the attitude I encountered there. If any place in the US could be an independent country, Texas was that place. In the intervening decades, it seems this feeling has only strengthened. What Texas will find out is that there are real benefits to be had in integrating with the rest of the country. What I fear is this most recent incident will only serve to ossify the attitudes of true Texans, and perhaps send the secessionist movement into overdrive. It seems as though the tendency in Texas, and through much of the country, is that it is much better to go it alone. As if someone could wall themselves off from the rest of the world and still maintain a standard of living better than anyone else.

This was the motivating factor leading to the building of “the wall”. If we could just put up a barrier and prevent the others from diluting our genes, we would solve many of the problems of the nation. Funny thing, though. In Texas the concept of private property rights proved ascendant to the need to build a barrier. In many of the border lands adjacent to the Rio Grande, families that had owned the land for generations objected to their property being broken in two by a barrier wall. Civil litigation has held up construction for years, and there’s no end in sight.

So the tragedy unfolding in Texas is both of natural and human making. The cold they’ve been subjected to is certainly something that would cause much suffering by itself. But it was due to the nature of the power business in Texas, where no one enforced requirements to maintain back-up capacity, or winterize their facilities, that made a natural disaster an order of magnitude worse. Keep the situation in Texas in mind as Republicans keep insisting on a steady drumbeat of deregulation. Maybe regulations are more expensive. Maybe we pay a little more each month to ensure continuity of service. I know that it is a bitter struggle each time a utility in our state tries to recover funds spent on upgrading infrastructure. But as Texas has shown, you can pay me now, or pay me later. For Texas, later has arrived.

Two Roads Diverged in a Yellow Wood

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I’m not a normal American. I know that. I always have. Ever since I was in the first grade, and I stated my strong preference that it was a big bang that created the universe, not a steady state universe. Maybe I thought explosions were cooler, but that’s what I thought. In first grade!

I thought I could be a great athlete as a kid, but didn’t have the fast-twitch muscles needed to be good at any sport. No, I found plays and musical theatre as an outlet for my energy. That, and choral singing. The latter I still do at age 66, which is one way in which the pandemic has robbed me of a creative outlet.

I fancied myself as a potential novelist, but when I tried it, my dialogue came out like stilted lettuce. I found my real skill early on, when I competed in Informative Public Address in high school forensics. One time, when visiting my high school, I realized that a trophy in a trophy case was partially due to my efforts. It made me realize that I hadn’t wasted my time back then.

I really diverged from being normal when I went to college. Majoring in Chemical Engineering, I toured all of the hard sciences and math courses. I had to add in one choral group each year in order to maintain my own sanity by sustaining a creative outlet. Looking back, it was amazing that I didn’t end up in legal trouble in those days, due to a certain prohibited substance that is only now gaining legitimacy in many states.

When I got a job after college, I moved away from Nebraska and moved to Memphis. A bit of a cultural shock, I found a niche and not only grew at work, but also continued with musical theatre. The one show I was in at the premiere theatre in Memphis where I did a month with 7 shows a week (matinee on Sunday) and still maintained my work showed me I did not want to do this sort of thing for a living. Not that I had the talent for it, but there are plenty of opportunities for us abnormal people to find creative outlets if you let yourself open to those opportunities.

The opportunity came for me to transfer to a sister plant in West Virginia. Despite all of the stereotypes about hillbilly culture, the capitol city of Charleston offered very good cultural fare. I continued to seek out opportunities for musical theatre, and was rewarded with a leading role (for a male) in what is really a tour de force for the female lead (Sweet Charity). I met my wife during those days at a cast party. She was in the orchestra, and at that time I played as a table in Evita (along with many other chorus roles). After we got married, I had one last opportunity with the local theatre group, and can say that I was in a show with Jennifer Garner when she was in high school.

Children came along, and the time to take to rehearse and perform theatre went away. But it was replaced by singing in church choirs, and in a select choral group. It was through doing these abnormal things that I had opportunities to sing in churches in Scotland and Yorkshire, and perform multiple times at Piccolo Spoleto festivals in Charleston, SC. Later as our children grew and performed in vocal ensembles, we accompanied them to Europe and Hawaii. All of these opportunities came about because we were not normal, and never could accept being merely passive consumers of mass culture.

So, since we are both a bit iconoclastic, we’ve been a good match. We both are liberals in this most conservative state in the nation. Fortunately we’ve found an Episcopal church that believes in social programs, and we lend our support to those.

But we’ve become aware of just how out of the mainstream we’ve become. We don’t do Amazon. We don’t shop at WalMart. We don’t watch reality TV. We don’t stream. New forms of social media are created, flower, and die before we even become aware of them.

We try to keep our cars for 15 years. We’ve never owned a SUV. Commercialism is lost on us, though we’ve plenty of disposable income. If the economy had to depend upon consumers like us, there are entire industries that would become a tiny fragment of their current size.

What’s really important, is that we believe it is of utmost importance to use creative talents to entertain others, rather than always have the cultural exchange be solely one way. We find it difficult to live in a society where so much of your “worth” depends upon how much of your net worth you are willing to flaunt. And we especially find it difficult to live in a world where the definitions of Christianity are perverted into displays like the prayers offered by the QAnon shaman on the floor of the halls of Congress.

We know that we will never be pacesetters in the world. But by being consistent to ourselves, and continuing to create through instrumental music, choral music, quilting, and writing, we may serve as examples for those who also wish to tread a path less traveled. A secret here – often the path that is used less has softer grass growing underfoot. It makes it a more pleasant journey as compared to the thoroughfare trodden by the masses.

Fossil Fuels? What a Quaint Notion

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Fossil fuels are responsible for the huge advances in living standards over the past several hundred years. Since the beginning of the industrial revolution, the economy has depended upon concentrated sources of energy which is converted into useful work. Coal was the first source of energy meeting this need. Once extracted, and moved to its point of use, a lump of coal when burned expanded man’s capabilities through the turning of turbines and through the production of steam, which could move large machinery.

Then we discovered liquid petroleum. That was an even better source, and quite literally, it seemed to jump out of the ground once we poked a straw into its hidey-hole. Now you could use liquid hydrocarbons to fuel the transportation revolution that unfolded in the 20th century. Humanity grew used to its availability and deemed it as a birthright to maintain access to inexpensive forms of liquid hydrocarbons.

But then the 1970’s happened, and the producers of liquid hydrocarbons realized they controlled the production of a substance the industrialized world was addicted to. Quite logically, they withheld their product, saw the reaction from the rest of the world as of an addict writhing in the agony of withdrawal, and then resumed selling, but at a higher price. Thus the US began a period where the foreign and military policy of this nation was directed to protect the producing nations and protecting the transportation lanes. The military cost for this was never factored into the price of oil, which stayed high but never reflected the full cost for the fuel.

Just when the US grew accustomed to the external costs associated with securing petroleum supplies, technology threw the US a lifeline. See, the true reserves of hydrocarbons greatly exceeded the stated volumes, but much of those extra reserves were locked up in sedimentary rock, instead of pooling in geologic formations. And those oil and gas bearing sedimentary rocks could be found in many areas of the country. Technology gave the tool to unlock these hydrocarbon reserves in the form of fracking.

So the great fracking revolution was unleashed. Since about 2007, fracking has resulted in significant increases in production. So much so, that for several years, we’ve been able to forego much of the imported petroleum we once depended upon. The new solution of fracking was going to replace our old sources of energy, and we could rely upon a new generation of American wildcatters going out and perpetuating the stereotype of macho men dealing with steel and oil.

There is just one problem with fracking, though. The input costs to get the energy out are a more significant portion of the energy produced when compared to standard oil wells. See, in energy production there is the little matter of energy return on investment (EROI). Similar to a financial ROI calculation, this ratio shows the energy return for any form of technology. And fracking has a lot of inputs that a standard drilling rig doesn’t have. The inputs for fracking are sand, water, and chemicals, and a large amount of excess water produced from fracking has to be disposed of. Anyone who has lived in or visited an area with active fracking can attest to the volume of trucks going to and fro dealing with the water from the wells. Plus, another secret with fracking is that the amount of oil and gas produced declines much faster with a fracked well as compared to a standard well. Declines of as much as 60% from year to year are noted in fracked wells, whereas a standard well may decline only at a 5% per year rate. Thus to maintain or improve production requires ever more drilling, and this vicious cycle perpetuates through the lifespan of the producing field.

The chart below shows expected EROI for various forms of energy. Note the steep drop off once you get below an EROI of about 10. In particular note the figure attributed to biofuels. Since corn-generated ethanol is the main source of biofuels, it is evident that it takes about as much energy to produce it as it releases. The original reason for the corn conversion to ethanol  was to reduce US dependence on foreign oil. But when all of the inputs are considered, it is obvious that ethanol from corn is strictly a political beast that has developed a constituency far beyond its original intent. That is a subject for a separate post.

Looking at this chart, one would think that fracked oil and gas offers a significant increase in the available hydrocarbon supply. It does, but not as much as standard reservoir wells. And the steep depletion rates for these wells masks another issue with fracking. The cost of hydrocarbons needed to produce a positive ROI is higher than the current price. In other words, fracking does not make economic sense while the cost of oil is near $50/barrel. At $80/barrel, you can show a positive cash flow, but not at the price we’ve seen for many years. So we now are in the situation where the technology we’ve used to reduce our dependence on foreign oil, is shown to be an endless dollar pit.

So now, as almost all problems go, this has become a political issue. One party in the US wants the fossil fuel party to continue, noting that our lifestyle is dependent upon an ever-increasing supply of hydrocarbons. And one side has looked into the future, seeing that the only way to keep the fossil fuel party going is to increase the cost of that fuel beyond the ability of the population to handle. So we should deliberately speed up conversion of the economy towards renewable sources of energy, in order to avoid falling off of the energy cliff.

You might bring in concerns about global warming into this discussion, but in my opinion, that is icing on the cake. It is a straight-forward economic calculation that will dictate our migration away from fossil fuels. By the way, one final thought on the EROI charts – if you are using a fossil fuel to convert it into electricity, you run into thermodynamic losses. Even in an extremely modern power plant, 40% of the fuel goes into waste heat, which greatly reduces the EROI of the fuel source. So wind and solar, even though they show up as lower on the chart than fracking, they have the advantage of having converted input energy directly to electricity, thus avoiding the thermodynamic losses.

We in the US are at the mercy of our political class understanding these issues and making decisions that are better in the long run. Given the track records of the parties, skepticism is warranted.