Sunday Train: A Dime A Gallon Tariff on Imported Oil for Energy Independent Transport

Burning the Midnight Oil for Living Energy Independence

The big news from July was: Senate's energy bill: What a disappointment (LA Times Editorial):

Amid tough fights over healthcare and financial reform, Obama's push for cleaner energy ran out of gas long ago. It looked like a losing battle anyway; with Senate Republicans universally opposing a cap-and-trade program or other efforts to reduce greenhouse gases, and some Democrats in heavy manufacturing states also opposed, it may have been impossible to round up the 60 votes needed to overcome a filibuster on a Senate energy bill as strong as the one passed by the House last year. But that doesn't excuse Obama or Reid for surrendering so easily, or so completely.

So we need to do something. And the strategy to stitch together a complex, multiple part, massive sprawling suburb of an Energy Bill that would be all things to all people has failed in precisely the way its opponents intended it to fail: this is a big reason why Big Oil was so heavily invested in the fight against health care reform, to make sure that it took so much time that the Energy Bill would run into election year politics and their direct lobbying efforts and come unglued.

Treason? Well, given that we are far more exposed to a disruption of our energy imports than to any threat to be found in Afghanistan, and are far more exposed to catastrophic climate change than to any threat being secured by our bases in Japan, Germany or any of the balance from the 687,347 acres of overseas military bases ... sure.

But what to do about it?

The proposal here is to get a target that can be fought for, now, and campaigned for, in the fall: as the title says, A Dime A Gallon on Imported Oil for Energy Independence

It won't get all of the way there, of course, but with sufficient leverage it can provide an immediate economic stimulus while getting an essential start on the problem.

The basic policy behind the label is:

• $0.10 tariff on imported crude oil. Crude oil, after all, is an "unscheduled" commodity under existing WTO agreements, so we are free to put any tariff on it that we wish
• Four funds (two and a half cents each) for electric transport, active transport, Steel Interstates, and High Speed Rail
• Spending must be on qualified projects, but money is distributed to state and local accounts on a per capita basis
• For capital investment projects, account holders in the first ten years can borrow on the OMB projected revenue in the first ten years

A Dime A Gallon: How Much is That

According to the US Energy Information Administration, our annual imports of Crude Oil in 2009 (a low year, because of the recession) were 3,289,675 thousand barrels. Each barrel is 42 gallons, so that is 138,166,350 thousand gallons. Times ten cents is $13,816,635 thousand, or $13.8b.

Divide this into fourths for each project, and that is $3.45b per task. At a real interest rate of 3%, that is up to $29.4b per task or, in other words, about $95 per capita (based on a Census July 2009 figure of 307m.

This is, admittedly, not sufficient for the magnitude of the task ahead, but, unlike the status quo, its a step in the right direction.


Electric Transport Fund

The electric transport fund is divided into state-based accounts, so that, for example, if the following states borrowed the full ten years ahead (based on 2009 Census estimates):

• California, 36,96m, $3.5b available;
• Ohio, 11.5m, $1.1b available;
• Iowa, 3m, $287m available; and
• New Hampshire, 1.3m, $127m available.

So, what could this money be spent on?

• Electrification of rail corridors
• Purchase electric rolling stock
• Electrification of bus corridors
• Purchase of electric trolleybuses
• Purchase of pluggable hybrid buses
• Charging infrastructure in support of electric vehicles
• Credits on the purchase of electric vehicles
• operations of an electrified transport system (this is not capital spending, so it would be out of current revenues)

The state presents a project, its vetted for qualifying as electric transport spending, if approved, the state can direct the money in its account to the project.


Active Transport

This is an area that is often overlooked, but an important aspect of this was addressed in the PBS BluePrint America show Dangerous Crossing. Outer suburbs were, of course, established for people who could afford cars, but as suburbs have grown to account for half of US residences, there is a growing share of suburban populations can't afford or don't wish to spend on a car.

Watch the full episode. See more Need To Know.

And that leads to situations like that documented in Dangerous Crossing:

27-year-old Nimia Larcia lives in a suburban housing complex just outside of Atlanta, Georgia. She moved here from Honduras six years ago in search of a better life.

Suburban America used to be synonymous with good living, not the least of which was because its streets were so much safer than those in the city. Not anymore.

Every morning when Nimia walks from her apartment to her minimum-wage job at a jewelry store, she has to cross one of the most dangerous roads in Georgia: Buford Highway. People in cars race back and forth, many if not most exceeding the 45 mile per hour speed limit.

A system that is designed so that it kills people for crossing a street - on foot is not one that encourages existing transport systems that can be shifted toward oil-independent transport ... and, indeed, active transport to get to a public transport stop is especially dangerous in these kinds of communities:

Demand for transportation is so high here that taxis, freelance car services and private buses race down these roads competing for customers with the public transit system, often using the very same stops.

People rushing to and from buses account for one in four of the accidents here [Buford Highway].

And of course, there is demographic change:

Demographers are warning that millions of older Americans living in car dependent communities could be left isolated, unable even to get to the grocery store. Dunham-Jones is hoping the country will design its way out of these problems. Even Buford Highway, she says, could be transformed with medians, trees and buildings set closer to the road. Changes that are known to slow traffic. But outside of the ivory tower, change does not come easily. Or quickly.

Last year Georgia spent more than two billion dollars on transportation, but only a tiny fraction, less than 1 percent, went specifically to pedestrian safety.

Of course, the typical state -highway- transportation department faces a situation just like Georgia's, with roadworks having dedicated funding while pedestrian facilities do not.

So this is allocated to local communities: incorporated cities, towns and villages, and for residents in unincorporated areas, counties and reservations. Qualifying projects include:

• Capital spending on sidewalks and pedestrian crossings
• operating spending on sidewalks (eg snow removal) and maintenance of pedestrian crossings
• Pedestrian benches and bus stops
• Dedicated cycleways
• Shared use bicycle boulevards
• Public bicycle parking and secured storage
• Recreational bike and hike trails

Steel Interstates

The Sunday Train has covered Steel Interstates several times in the past. The basic idea is to start with the Department of Defense Strategic Rail Corridor Network (STRACNET), and upgrade selected corridors to support electric heavy rail and rapid rail, including 110mph paths (whether by separate track, passing track, or time scheduling), including provision to support High Voltage Direct Current transmission line to connect renewable energy resource grids to renewable energy consumer grids.

This is a single fund, since the purpose is to establish a single network. Unlike the first two funds, this is an interest subsidy on capital funds, with the capital funds themselves paid by user and access fees paid by the various freight railroads and passenger rail operations that might make use of the corridors.


High Speed Rail

The Sunday Train has also covered High Speed Rail projects once or twice in the past.

The High Speed Rail fund is set up with state by state accounts. States such as California, Florida, and Illinois that already have Express or Emerging HSR programs already in progress can simply apply their accounts to existing projects. At the other end of the spectrum, are states that do not have projects in hand, which will be applying the state High Speed Rail account funding to project development, design, and environmental impact assessment.

The Department of Transportation is already in a position to vet whether a project qualifies for HSR funding, with the project evaluation framework established for Stimulus II HSR funding.

For the 220mph Express HSR projects, such as in California and Florida, and for the most promising approach to the 125mph Regional HSR as well, the same project can draw funding from both the HSR fund and the Electrification Fund. This increases the total that could be applied to the California Express HSR project from these account based funds to around $7b for California, and around $3.5b for Florida.

On the other hand states such as Ohio that are (or may be) pursuing the less capital intensive Emerging HSR corridors might focus the HSR funding, around $1.1b in our case, on Emerging HSR and focus the electrification funding on local electric transport.

Of course, states that do not have programs up and running would be in a position to simply draw on the current revenue in the account on project development, to put their state in a position to launch a system.


But the Politics Are ... Possble, Maybe?

As we have seen over the past year and a half, its a lot harder to stop something from being done than to get something done.

While it is nicely symbolic to be using a tariff on imported oil to be financing these things, and while it sidesteps a lot of investment in framing by the drill baby drill crowd ... it also includes a substantial wedge for the opposition. For US based oil production, what a tariff means is that $4.20 gets added to the cost of each imported barrel of crude oil. So while the projects being funded will cut oil production profits in the long term ... its an extra $4.20 per barrel in the pocket of each owner of a domestic oil well.

That's the production offshore of Louisiana, the production of the Bakkan field in North Dakota and Montana, ongoing (if declining) production in Texas ... an extra $4.20 per barrel in the short term, against the substantial reduction in oil dependency a decade from now.


Could it actually get started?

If I were designing a program from scratch hoping for a Presidential candidate to run on in the primaries and then take into the General Election, this probably would not be it. However, pragmatically, that is four to five years in the future, and we don't really have that much time to sit on our hands.

In the aftermath of the abandonment of the Energy Bill, and the aftermath of the BP oil spill ... having foreign oil finance our return to the Energy Independence that we relied on from Independence through two World Wars and the height of the US economic development in the 50's and 60's is the best shot that I can see from here.


Midnight Oil ~ A River Runs Red

...
So we came and we conquered and found
Riches of commons and kings
Who strangled and wrestled the ground
But they never put back anything
Now I'm trapped like a dog in a cage
Wherever the truth is pursued
It must be the curse of the age
What's taken is never renewed