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Big Plans, Bad Ideas

Two big-state governors have hit the headlines last week with grand plans for the future. In California, Arnold Schwarzenegger proposed a massive infrastructure construction program, while in New York, George Pataki has called for a renewable energy program. Both plans were developed by comparatively moderate Republican governors with an eye to the challenges of tomorrow. Unfortunately for the residents of these states, both wind up missing the larger point.

Governor Schwarzenegger’s infrastructure plan, called the Strategic Growth Plan (or SGP) is the larger and more complete plan of the two. This plan envisions spending as much as $222 billion over the next ten years on various infrastructure projects statewide. $68 billion of that is projected to come from voter-approved General Obligation bonds, with the remainder of that coming from other state and federal sources along with new user fees. Infrastructure projects funded by this project would occur primarily in three areas: transportation, education and water (flood control and water supply improvements).

Unveiled during the annual State of the State address, this proposal seeks to address years of deferred construction on basic infrastructure needs as well as lay the foundation for future growth. It is no secret that state funding for roads, water systems, flood protection and schools has not kept pace with decades of population growth. Most of California’s major freeways and aqueducts were built decades ago when the state had less than half the population it does now. Equally important is the growing realization that several million people living in the San Joaquin and Sacramento Delta areas of the state are highly vulnerable to catastrophic, New Orleans-style flooding. (Similar to what the Times-Picayune covered for New Orleans, the Sacramento Bee has highlighted the vulnerability of Delta flood protection strategies). Addressing that issue alone will cost tens of billions of dollars.

The SGP is an actual proposal that should be taken seriously. The odds of electoral success for this plan are higher than Schwarzenegger’s 2005’s Special Election initiatives. Unlike the governor’s previous partisan attacks on left-leaning interests, this plan has a broader (if only cautious) appeal to members of both parties.

From a conventional perspective, Schwarzenegger’s plan makes a lot of sense. If the California is to grow and prosper over the next two decades, it is imperative that the infrastructure (transportation, education and water supply systems) be in place first.

Unfortunately for the state, the SGP is woefully inadequate for meeting the challenges of the future. For starters, this plan spends virtually nothing on improving the energy infrastructure of California. The California Energy Commission (CEC) has already recognized numerous shortcomings in the energy production and distribution networks of the state. Adding 10-15 million more residents (and jobs) with little to no attention to the energy details will be a recipe for disaster. Spending billions to build highways, aqueducts and schools will mean little if the state cannot keep the lights on, natural gas flowing or the gas stations full.

As it stands now, California’s electrical grid is highly dependent on natural gas to operate. Though the state has significant hydro, solar and wind generation capabilities, up to 40% of the state’s electricity is provided by natural gas fired generators. As natural gas supplies wane, price and supply pressures will seriously impinge on the state’s ability to keep the lights on. The botched deregulation and subsequent regulatory fixes have not helped matters. Most of the state’s gas generation is in the hands of for-profit energy companies. While most of them supply electricity to the grid under short and long term contracts, none are obligated to continue to do so when those contracts are up. As prices escalate, so will the costs of continuing those contracts? Will the energy companies continue generate electricity if it becomes more profitable to re-sell their natural gas futures on the commodities market? Will they upgrade older, inefficient plants? Will anyone build new ones? Can the state and the investor-owned utilities be able to negotiate long term contracts (for stability) in an unstable economic environment? What will that do to the retail price of electricity? If natural gas generation is out, what will take its place?

These are some very hard questions that need to be answered. The natural gas and electricity situation has the power to grind economic activity to halt across the state. The only thing the CEC seems to be planning for to head off this crisis is to build LNG importation terminals plus efficiency measures.

Nor does the Schwarzenegger remotely consider the liquid fuel implications of his SGP. The SGP (as currently proposed) directs 48% ($107 Billion) of the total $222 Billion package towards transportation projects. Of that only $4.5 billion go toward funding transit and pedestrian projects. California’s preliminary high speed rail planning efforts would be halted if this plan were enacted. At the same time, over half of the transportation project (and close to a quarter of the entire SGP) will be used to build new roads across the state. Billions more will go to repair existing ones. This huge mismatch in funding allocation between road construction and transportation system funding belies a continued dependence on easy and affordable motoring and trucking. Only in a future where transportation costs remain an insignificant proportion of household and business expenditures would this plan make any sense.

Nowhere in the transportation package is there any investment in alternative fueling systems. Arnold Schwarzenegger is well known for touting the hydrogen highway. Logic would dictate the SGP would at least contain even modest funds toward building a hydrogen fueling infrastructure to at least somewhat justify such a massive road building venture.

In reality this project would waste massive amounts of financial, raw material and labor expenditures to build a transportation network with no future.

Oil production will peak (if it hasn’t already) and start to decline in the next few years. Gas and diesel will get much more expensive. With 95% of the state’s transportation fleet dependant on liquid hydrocarbons (and nothing in the works to replace it) driving will get more expensive. So will trucking. At a certain point that would devastate state’s economy, reducing the amount of traffic regardless of how many new roads would be constructed.

In light of that fact, any proposal to build thousands of new lane-miles should be a non-starter. If the governor really was serious on making massive amounts investments on the future of transportation, he would propose a transportation package that emphasized transit expenditures over road construction. He would encourage local jurisdictions to stop making land use decisions that further the dependence on the automobile and retrofit what was already built. Furthermore, he would propose a plan that simply would necessitate less travel to begin with. Fewer vacation trips, fewer work trips, fewer shopping trips and so on. Instead California residents have been left with an infrastructure plan that gambles on the hope that somewhere in the next 20 years someone invents something to replace oil.

At a $107 billion, that’s one heck of a wager.

The rest of the SGP, while well-meaning is worthless without a stable source of energy. Where will the additional megawatts come from to pump ever more water from one end of the state to the other? As it stands now, close to 20% of all of California’s electrical production is consumed by moving water from one place to another. (This includes all aspects of the water system from well pumping to sewage treatment). How will the state be able to afford continual levee upgrades? What use will continued educational investments mean if it becomes unaffordable to transport the kids to the schools (not to mention heating and cooling them).

The real problem with the Schwarzenegger’s Strategic Growth Plan is that it represents the conventional approach to planning: rear view mirror planning. Every element of this plan is based on past trends carrying on into the future and making strategic accommodations for them. Growth (in every sense of the word) is presumed under the SGP. Whether it is the number of new schools, highways or water systems that will be funded or economic or the population projections that underscore the need for it, the only trend apparent in the plan is upward.

Given the fact that most Californians owe their continued existence to an infrastructure system that has already artificially extended the natural carrying capacity of the land to support tens of millions of people, is it really a good idea to be promoting more growth?

A real infrastructure plan would look those realities in the eye and be able to mitigate them or at the very least, not make them worse. The state’s future is not dependent on whether the average Los Angelino is able to drive to work in 17 minutes instead of 52. The state’s future really depends on whether it can keep the lights on and the water and food flowing to 10 million people living in an area with naturally occurring resources for only 100,000.

In contrast to Schwarzenegger’s ignorance of energy matters, Governor George Pataki’s recent proposals outlined in his State of the State and other speeches, focused primarily on the issue of energy. Unlike Schwarzenegger’s comprehensive plan, Pataki’s ideas are more free-formed and visionary in nature. In his State of the State Speech, he envisioned a plan that would jump-start investment in “renewable fuels” and “clean coal” and lessen the dependence of New Yorkers on “terror funding” foreign oil supplies. While as laudable as these goals are, serious questions arise on how they would be realized.

Renewable [liquid] fuel proposals in the US typically mean increased ethanol production and Pataki’s ideas are no exception. And any talk of ethanol, particularly by politicians, inevitably boils down to corn.

Though Pataki has not given firm inclinations on pursuing any particular technology, his apparent positioning for the 2008 Presidential Race (and its early Iowa caucuses) is not encouraging.

At the very least, a strong push for ethanol and its cousin, biodiesel should raise some real hard questions before billions of dollars are expended. Foremost among these is whether or not the purported fuel takes more energy to make than it yields in return. Calculations of Energy Return on Energy Invested (EROEI) ratios and not economic viability are more important. Just as important is the availability of the source bio matter to be converted into liquid fuels. Careful consideration has to be given on whether or not there is sufficient LOCAL production of bio matter to meet LOCAL fuel demands without harming the ecosystem or jeopardizing food production.

A New Yorker’s right to drive should not harm the health or well being of other people or ecosystems elsewhere on the planet.

This is not to say that any biofuel development is bad. There is definitely a place for biofuel usage in post-Peak Oil planning. What politicians need to realize is that it is no panacea. No amount of biofuel production can compare to the energetic bounty embodied in fossil fuels. Any plan that aspires to replace fossil fuels for an equal amount of biofuels without making any other changes will be doomed to failure.
Other elements of any eventual renewable energy plan that are worthy of incorporation would be increased solar and wind power generation incentives and energy efficiency program funding. While the governor’s speech did not delve into much detail, such a strategy would probably be compatible with whatever Pataki ends up promoting.
Any energy plan that emerges from Albany will be of little use if it is ignorant of basic physics. Nor will it be able to confront the challenges of Peak Oil or natural gas depletion with only supply-side solutions without asking any thing on the demand side. Effective planning would examine both sides of the supply-demand equation. Politics however, has a way perverting good intentions. The best New Yorkers could hope for out of this process would be a plan that brings some additional supplies online while making more efficient use of what we already use everyday. Hardly a great solution, but better than the alternative: a New York State equivalent to 2005’s massive pork-barrel, Federal Energy Bill.
In the end, both California’s Strategic Growth Plan and New York’s Renewable Energy push are superb examples of conventional thought processes. They both seek to plan for a future based on past performances or solutions. Neither makes any attempt to step back and fundamentally question the foundation of those assumptions. Both plans remain blissfully ignorant of the underlying energetic situation. Whether this is a product of political expediency, aversion to making hard choices, or bureaucratic inertia, the inevitable result will be a waste of precious, remaining resources.
The states of New York and California (and countless other governments like them) need to wake up and begin to make meaningful, holistic energy plans that address all aspects of energy usage and conform the rest of their non-energy plans to fit within those parameters. If they fail to do this, any grand plan they do conceive of and follow will be for naught.

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