Desperately seeking some global warming in New York City for Mets opening day

3/31/14, "Welcome to Mets SnOpening Day," CDerespina, Newsday twitter pic, Lake Ronkonkoma, NY. via newsday.com

3/31/14, "Rain and snow dampen Nats-Mets opening day," Washington Post, James Wagner

"UPDATE, 11: 35 a.m.: The tarp is off the field at Citi Field and the grounds crew is preparing the field for what appears to be an on-time start. The rain and snow, which wasn’t sticking, has stopped. The forecast still isn’t calling for any further precipitation around first pitch, but it will still be cold. It is 39 degrees now and a predicted 43 by game time
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UPDATE, 9:55 a.m.: First pitch is more than three hours away, but the weather in New York is bleak this morning. The tarp is on the field while a combination of rain and snowflakes fall. The little bit of snow, however, isn’t sticking. The forecast calls for it to clear up by first pitch at 1:10 p.m. By 2 p.m., the temperatures are expected to rise to 52 degrees. Based on the weather along this morning, it doesn’t quite feel like opening day yet."...image from Washington Post

 

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3/31/14, "Snowpening Day: The Scourge of Winter Encroaches on the Boys of Summer," Breitbart, Daniel J. Flynn

"The Mets opened the season at Citi Field today against the Washington Nationals. Snow opened the day in New York City. Is freezing anyway to play America's pastime?

Thankfully, the only white sticking on the Queens field was the tarp protecting the infield from snow, sleet, and rain. So, the game went off, if not as planned, at least on time."...

final in 10 innings, 9-7, Washington Nationals over Mets  

 

 

 

 

 

 

 

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WTO rules against China policies restricting exports of rare earths minerals. China said restrictions were in place to protect the environment but WTO said that's not a valid reason to limit exports. How this decision effects US natural gas exports-Marlo Lewis

Though rare earths minerals are highly polluting for China to mine, Mr. Obama said China should increase exports to give "American workers and American businesses a fair shot in the global economy:"

3/27/14, "WTO Rules against China’s Export Restrictions: Implications for U.S. NatGas Export Debate," Marlo Lewis, GlobalWarming.org

"The World Trade Organization (WTO) confirmed Wednesday that China’s policies restricting exports of rare-earth minerals violate global trade rules. According to the Wall Street Journal:

The WTO said China’s export duties on rare-earth metals, molybdenum and tungsten are inconsistent with its obligations in the organization. It also ruled against Beijing’s export quotas on the materials and its move to restrict their trade.
China has said the restrictions are in place for reasons of environmental protection. The WTO ruling says those aren’t valid reasons for limiting exports.

The WTO ruling casts doubt on the legality of the current process for approving exports of liquefied natural gas (LNG). By compelling aspiring exporters to run a long and unpredictable bureaucratic and political gauntlet, the existing process informally but effectively constrains gas exports.

More importantly, in light of the WTO ruling, the quantitative restrictions on LNG exports advocated by Dow Chemical, America’s Energy Advantage (AEA), and the American Public Gas Association (APGA) are plainly illegal.

On Tuesday, the House Energy & Commerce Committee heard testimony on trade law and LNG exports from former congressman James Bacchus (D-Fla.), who now chairs the Global Practice at GreenbergTraurig.

The hearing was on H.R. 6, the Domestic Prosperity and Global Freedom Act, introduced by Rep. Cory Gardner (R-Colo.). H.R. 6 would amend the 1938 Natural Gas Act to provide that applications to export LNG to any WTO-member country be “granted without modification or delay.”

Witnesses debated whether H.R. 6 would help or harm U.S. manufacturers and consumers, and whether the legislation would undermine Russia’s monopoly power to coerce Ukraine and other countries dependent on Russia for most or all of their gas.

A future post may examine the back-and-forth on those issues. Here I’m going to excerpt passages from Bacchus’s testimony and offer some brief comments. Bacchus’s remarks are indented in blue.

Largely overlooked so far in the emerging Congressional debate about restricting exports of natural gas is the possibility that such restrictions are inconsistent with the obligations of the United States to other WTO Members under the WTO treaty. If our restrictive energy measures are inconsistent with our treaty obligations, the United States risks losing a case in the WTO. Such a loss could cause the WTO to authorize expensive economic sanctions against us through the loss of previously granted concessions in other sectors of our international trade.

Comment: It’s not surprising proponents of LNG export restrictions ignore the incompatibility of their agenda with global trade rules. They also ignore the incompatibility of their agenda with property rights and the constitutional principle of equality under law. Even though Dow, AEA, and APGA didn’t invest a dime to find and produce the gas, they fancy themselves entitled to determine who gets to buy the gas and at what price.

WTO rules apply to trade in natural gas and other energy products in the same way they apply to other traded products. Some have suggested that energy products are somehow separate and apart from other traded products in how WTO rules apply to them. There is no legal basis for this view. The United States has taken no reservations from our obligations under WTO rules for exports of natural gas or other energy products.
WTO rules prohibit bans, quotas, and other forms of quantitative restrictions on exports unless those restrictions take the form of export taxes. Taxes on exports are prohibited by our Constitution, so energy export taxes are not an option for the United States.

Comment: Quantitative restrictions, such as Dow, AEA, and APGA advocate, are out of bounds. Those organizations don’t care. All that matters to them is buying gas at the lowest possible price. So they lobby to (1) exempt themselves from having to compete with foreign buyers, and (2) deny gas producers a basic economic liberty (“unfettered” freedom to export) they claim for themselves. How noble!

WTO rules also permit temporary restrictions on exports to prevent or relieve critical shortages of essential products, but that can hardly be said to apply to our current situation with supplies of natural gas.

Comment: The best insurance against future shortages is exactly what Dow and AEA denounce — “unfettered,” “unconstrained,” “unlimited” freedom to compete in the global marketplace. The bigger their potential customer base, the more oil & gas companies will invest in exploration and production.

Bacchus next argues that the preferential treatment given to Free Trade Agreement (FTA) countries in LNG export licensing is discriminatory – another potential conflict with WTO rules.

First of all, the current US process gives special treatment in licensing exports of natural gas to countries with which we have a free trade agreement. Natural gas exports to these countries are deemed to be in the “public interest” and permitted without delay. In contrast, the Department of Energy has elected to subject licensing requests for LNG exports to non-FTA countries to a thorough and lengthy assessment intended to determine whether exports of natural gas to those countries serve our “public interest.” In this way, applicants that will ship LNG to FTA countries are, preferentially, given expedited review in the licensing process as compared to those applicants that will ship LNG to non-FTA countries.

Comment: The Department of Energy’s witness, Dr. Paula Grant, notes that the Natural Gas Act ”neither defines ‘public interest’ nor identifies criteria that must be considered.” In the past, the Department of Energy has based ”public interest” determinations on several factors including “economic impacts, international considerations, U.S. energy security, and environmental considerations, among others.” It is far from evident that the FTA exports automatically deemed to be in the public interest would pass muster under the multi-factoral review applied to non-FTA exports. 

This bifurcated system seems both discriminatory and arbitrary.

Bacchus goes on to discuss three “legal concerns” regarding the consistency of the current LNG export licensing process with WTO rules.

One remaining legal concern is the question of the lengthy delays in granting export licenses. Under WTO rules, a license can clearly be a restriction on exports, and case law has defined the notion of a “restriction” broadly to include licensing procedures that pose limitations on actions or have a limiting effect, such as by creating uncertainties or by affecting investment plans. In one case, delays of up to three months in issuing export licenses were found to be inconsistent with the rules.

Comment: Since 2011, DOE has received 31 applications to export LNG to non-FTA countries. To date, DOE has granted six authorizations. As the sages teach, “Trade delayed is trade denied.”

A second remaining legal concern is the lack of clarity in how the Department of Energy defines the “public interest.” Conceivably, even lengthy delays in the licensing process could be excused under WTO rules of it could be proven by the United States that such delays are necessary to protect life or health, or are related to the conservation of exhaustible natural resources, so long as the process is not applied in a way that results in arbitrary or unjustifiable discrimination or a disguised restriction on international trade. If, however, in determining the “public interest,” the DOE considers as a factor the effect the proposed exports will have on domestic producers that use natural gas when producing their products in their competition with like foreign products, then these exceptions to WTO rules will not be available, and will not excuse a WTO violation caused by lengthy licensing delays.

Comment: Bingo! Dow and AEA argue for LNG export restrictions precisely to reduce their input costs relative to those of foreign competitors. In effect, they equate the public interest with whatever enhances their bottom line. Their agenda conflicts with both the letter and spirit of rule-based trade.

A third remaining legal concern may arise under the WTO rules on governmental subsidies. Under WTO rules, subsidies are illegal if they are specific to certain industries and cause adverse effects in the marketplace. The questions in a WTO case would be: by restricting exports so as to reduce the domestic price of natural gas, is the United States granting a subsidy to the manufacturing firms that are the downstream users of natural gas, and, if so, does that subsidy have illegal trade effects?

Comment: Dow and AEA want to Congress to subsidize their exports by curbing oil & gas industry exports. This is both short-sighted and incoherent. It is short-sighted because the smaller the market oil & gas companies are allowed to serve, the less they will invest in exploration and production. Freedom to export is the best long-term strategy for keeping natural gas supplies plentiful and affordable.

The Dow-AEA public-interest rationale is incoherent because it can also, with equal validity, be invoked to justify restrictions on their exports. Dow and its AEA allies argue that curbing gas exports is in the public interest because lower gas prices will reduce their production costs and make them more competitive. But the products they manufacture — chemicals, plastics, aluminum, and steel – are intermediate goods and input costs to still other companies. So by Dow and AEA’s logic, Congress should curb exports of chemicals, plastics, steel, and aluminum to boost the competitiveness of companies manufacturing pharmaceuticals, computers, automobiles, and other consumer goods.

Dow and AEA would scream bloody murder if Congress proposed to give them a dose of their own medicine. Come on guys, admit it, if you are free to sell your products to the highest bidder, then oil & gas companies should be as well. Or is Dow prepared to argue that some companies — those who make the biggest campaign contributions – are “more equal” than others?

Bacchus concludes by explaining why Congress should care about WTO-related legal concerns when deliberating on natural gas export policy.

First, and foremost, of course, the United States of America should always comply with our international treaty obligations. If we don’t, then who will?

Comment: Trade liberalization is one of the great, hard-won achievements of U.S. foreign policy in the post-war era. It promotes peace and prosperity and, therefore, the “public interest” of all mankind. The U.S. is its chief architect, proponent, and defender. We dishonor it at our peril.

Second, we could choose to ignore our treaty obligations as a Member of the WTO, but that could prove costly. If, in an exercise of our sovereignty, we chose not to comply with a ruling against us in the WTO, the resulting economic sanctions could cost us billions of dollars in lost trade – annually.

Comment: Bacchus doesn’t provide any specifics on this point. I did a quick Google search. Here’s what I found. If a country refuses to abide by a WTO dispute settlement, the injured party or parties may lawfully retaliate.

An example is Brazil’s retaliation against U.S. subsidies to cotton producers. The dispute began in 2002, and in 2008 the WTO ruled that the U.S. cotton subsidies were discriminatory. In 2010, the Brazilian government, with WTO approval, published a list of 100 U.S. goods that would be subject to higher tariffs unless the two governments reached an accord in 30 days. The tariffs would raise the cost of U.S. imports by an estimated $531 million. It was one of the few times the “WTO has allowed cross-retaliation, meaning the wronged party can retaliate against a sector not involved in the case,” according to the BBC.

And lastly, and significantly, the United States has for decades, as a matter of bipartisan trade policy, opposed restrictions on exports because of the many ways such restrictions distort world trade and deny economic opportunities to the American people. In furtherance of this policy, the United States has been in the forefront in the WTO in fighting rising restrictions on exports worldwide, and is, even as we meet today, aggressively pursuing, with the bipartisan support of the Congress, not one but two major WTO cases against Chinese export restrictions, on raw materials and on rare earth elements.

Comment: As indicated above, the day after the hearing, the WTO announced its ruling against China’s export restrictions. LNG export foes want Congress to flout the same trade principles and provisions the U.S. invoked in its successful WTO petition against China’s export restrictions. Congress cannot heed their advice without making America look hypocritical and undermining other nations’ respect for rule-based trade."

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3/26/14, "WTO Confirms China Loses Rare-Earths Case," Wall St. Journal, by Matthew Dalton and William Mauldin

"World Trade Organization Says International Trade Rules Violated." (subscrip.)

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Added: Highly polluting rare earths minerals mined in China are required for the manufacture of many electronic devices. The US stopped mining rare earths because they said it was too polluting: 
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1/10/10, "Explosives tear down yet more rock in the vast Baiyun Obo mine." UK Daily Mail. Highly polluting rare earths minerals needed to make laptop computers, wind turbines, electric car batteries, green light bulbs, and other 'green' items. China makes the case that the US and others unwilling to pollute their own air should pay more for China rare earth exports:

10/24/13, "China Tries to Clean Up Toxic Legacy of Its Rare Earth Riches," NY Times, Keith Bradsher

"China has made ample supplies [of rare earths minerals] available to manufacturers within China that produce crucial components for a host of products like laptop computers, compact fluorescent bulbs, wind turbines and electric cars. Some Western and Japanese companies have moved factories to China to make sure that they have access to rare earths. ...

In Guangdong province in southeastern China, regulators are struggling to repair rice fields and streams destroyed by powerful acids and other runoff from open-pit rare earth mines that are often run by violent organized crime syndicates....

In a white paper issued in June last year, China’s cabinet described at length the environmental harm caused by the rare earth industry, an admission that although embarrassing for Beijing may have buttressed its case at the W.T.O. that the rare earth industry is a dirty business for which export restrictions are justified. “Excessive rare earth mining has resulted in landslides, clogged rivers, environmental pollution emergencies and even major accidents and disasters, causing great damage to people’s safety and health and the ecological environment,” the white paper said.

Chinese officials have repeatedly denied that their newfound concerns for the environmental consequences of rare earth mining and refining are driven by a desire to help avoid defeat at the W.T.O., although the cleanup could help on that. 

Whole villages between the city of Baotou and the Yellow River in Inner Mongolia have been evacuated and resettled to apartment towers elsewhere after reports of high cancer rates and other health problems associated with the numerous rare earth refineries there. 

The most hazardous refineries are those that crack the tight chemical bonds that tie rare earths found in mineral ores to a variety of hazardous materials, notably radioactive thorium....A hazardous stew of toxic chemicals and low-level radioactive waste is left behind....

On orders from Beijing, state-controlled enterprises have dismantled Baotou refineries and rebuilt them at an enormous mining complex at Bayan Obo in the Gobi Desert, which mines about half the world’s rare earths. Chinese state-controlled media have reported that tens of thousands of goats and other livestock there have died and many baby goats have been born severely deformed, possibly because of radioactive contamination from the rare earth industry....

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In 2012 Obama said China should give the US a better deal on rare earths minerals so Americans could have "a fair shot in the global economy" which China found shocking since Obama portrays himself as pro-environment and rare earths mining is highly polluting:

3/15/12, "Rare earth case reveals US hypocrisy," Peoples Daily Online, by Chen Weihua (China Daily)

"US President Barack Obama announced on Tuesday that the United States, joined by Japan and the European Union, has filed complaints with the World Trade Organization over China's rare earth export quotas.
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He said this as an effort to give "American workers and American businesses a fair shot in the global economy".

His words, however, imply that he does not really care about the environmental degradation caused by China's disorderly and excessive mining of rare earth materials, as long as US workers and businesses can profit from China's cheap supply.
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This is shocking for a president who likes to portray himself as pro-environment."... . 
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Countries such as the US, Canada and Australia, which used to produce rare earth minerals, stopped such manufacturing a decade ago due to the environmental concerns and the higher cost compared with Chinese exports.... 
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According to the US Geological Survey, there are about 13 million metric tons of rare earth deposits in the US. Instead of buying from China, Obama should propose tapping the US' own deposits. Such a move would not only enable the US to share the responsibility for the supply of rare earth materials, it would also create jobs for Americans."...

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Lack of severe storms in US in March 2014, near record low tornado activity-USA Today

"Some good news about the chilly March has been the lack of severe storms, including tornadoes. Through the first three weeks of the month, the USA saw four tornadoes, one of the lowest marks on record."

3/29/14, "It was March misery in frigid northern, eastern USA," USA Today, Doyle Rice

"What spring? Many parts of the northern and eastern USA took a serious chill pill in March, and several places probably will record one of their 10 coldest Marches.

"Several cities in the Upper Midwest, Great Lakes and northern New England are flirting with a top 10 coldest March," says Weather Channel meteorologist Chris Dolce. "It's a huge turnaround from two years ago in March 2012, when many of these same cities saw their warmest March on record."

Dolce reports that Burlington, Vt., and Caribou, Maine, are seeing their coldest March since weather records began. (Burlington's weather records began in 1884 and Caribou's in 1939, according to the National Weather Service.)

Despite what happens in the final days of the month, both cities are likely to see top 10 coldest Marches.

Other cities that have been unusually frigid in March include Green Bay, Wis. (fourth coldest), Buffalo (fourth), Detroit (sixth) and Chicago (eighth). Most of those cities should remain in the top 10 regardless of temperatures this weekend.

Nationally, according to data from the National Climatic Data Center, 2,071 record low temperatures have been set this month, compared with 242 record high temperatures.

March also has been snowier than average in several locations, including Northern Virginia's Dulles International Airport, which recorded its snowiest winter since records began in 1963. Detroit has seen more than a foot of snow in March, almost double the average.

While the central and eastern USA has been shivering, cities in the Southwest are enjoying an unusually warm month, the weather service reports. Tucson is having its sixth-warmest March (records date to 1895), and Las Vegas is having its seventh warmest (data date to 1937).

March continued a season-long pattern — the frigid central and eastern USA and the mild West. The reason: a persistent ridge of high pressure over the western half of the USA balanced by a trough of low pressure in the East.

"This winter, there was a big blocking ridge of high pressure in the western U.S., all the way up into Canada, and that redirected the flow of the jet stream and allowed that very cold air to come down into the Midwest and Northeast.," Weather Channel meteorologist Carl Parker says.

High pressure usually brings clear skies; low pressure brings clouds and precipitation.

Some good news about the chilly March has been the lack of severe storms, including tornadoes. Through the first three weeks of the month, the USA saw four tornadoes, one of the lowest marks on record.

Final March weather data for individual cities will be available Tuesday. Data for states and the nation as a whole will be out in mid-April." via Drudge






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Great achievement of Kyoto climate agreement wasn't to reduce CO2 which actually skyrocketed under its watch, but to create a market worth tens of billions of dollars a year-UK Guardian, Jan. 2010

Jan. 25, 2010, "Don't let the carbon market die," UK Guardian, Oliver Tickell

"The great achievement of the (Kyoto) protocol was not to reduce carbon (dioxide) emissions – they actually rose at an increasing rate under its watch, three times faster in the early 2000s than during the 1990s – but to create a market in emissions rights and notional emissions reductions worth tens of billions of dollars a year."...

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Oliver Tickell is an advocate of global climate governance.






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China now world's most dependent on foreign oil, Saudi Arabia its biggest supplier, US now major oil exporter, US fuel exports up 173% 2005-2013, China fuel prod. only a third of US-EIA

3/24/14, "China is now the world’s largest net importer of petroleum and other liquid fuels," EIA

"In September 2013, China's net imports of petroleum and other liquids exceeded those of the United States on a monthly basis, making it the largest net importer of crude oil and other liquids in the world. The rise in China's net imports of petroleum and other liquids is driven by steady economic growth, with rapidly rising Chinese petroleum demand outpacing production growth.

U.S. total annual petroleum and other liquids production is expected to rise 31% between 2011 and 2014 to 13.3 million barrels per day, primarily from tight oil [shale] plays. In the meantime, Chinese production will increase at a much lower rate (5% over this period) and is forecast to be only a third of U.S. production in 2014. 

On the demand side, China's liquid fuels use is expected to reach more than 11 million barrels per day in 2014, while U.S. demand hovers close to 18.9 million barrels per day, well below the peak U.S. consumption level of 20.8 million barrels per day in 2005. U.S. refined petroleum product exports increased by more than 173% between 2005 and 2013, lowering total net U.S. imports of petroleum and other liquids. 

China has been diversifying the sources of its crude oil imports in recent years as a result of robust oil demand growth and recent geopolitical uncertainties. Saudi Arabia continues to be the largest supplier of crude oil to China and in 2013 provided 19% of China's 5.6 million barrels per day. Because production levels from Iran, Libya, and Sudan and South Sudan dropped since 2011, China replaced the lost shares of crude oil and other liquids imports from these countries with imports from 

Oman, 
Iraq, 
the United Arab Emirates, 
Angola, 
Venezuela, and 
Russia."

"Principal contributor: Candace Dunn" chart from EIA, via Free Rep.




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US now supplies over 10% of world crude oil production, EIA.gov, 4Q 2013, up from 9% in 4Q 2012

"Tight oil refers to oil found within reservoirs with very low permeability, including but not limited to shale."

3/26/14, "Tight oil production pushes U.S. crude supply to over 10% of world total," eia.gov

"U.S. tight oil production averaged 3.22 million barrels per day (MMbbl/d) in the fourth quarter of 2013, according to U.S. Energy Information Administration estimates. This level was enough to push overall crude oil production in the United States to an average of 7.84 MMbbl/d, more than 10% of total world production, up from 9% in the fourth quarter of 2012. The United States and Canada are the only major producers of tight oil in the world. In recent years, North American producers have developed technologically advanced drilling and completion processes to produce oil from tight formations.

Tight oil refers to oil found within reservoirs with very low permeability, including but not limited to shale. Permeability is the ability for fluid, such as oil and gas, to move through a rock formation. In February 2014, 63% of U.S. tight oil production came from two basins: the Eagle Ford in South Texas (1.21 MMbbl/d, or 36% of total U.S. tight oil production), and the Bakken Shale in North Dakota and Montana (0.94 MMbbl/d, or 28% of total U.S. tight oil production). Tight oil production in the United States represents 91% of all North American tight oil production, with the remaining 9% coming from Canada. 

Canada and Russia were the only countries outside the United States that have produced commercial quantities of crude oil from tight formations:
 
In Canada, total tight oil production averaged 0.34 MMbbl/d in 2013, close to 10% of the 3.52 MMbbl/d of total Canadian crude oil production. This production was concentrated entirely in the country's western provinces of Alberta, Manitoba, and Saskatchewan. 

Russia is producing some oil through the use of hydraulic fracturing applied to tight formations, mainly in the West Siberia Basin. The 0.12 MMbbl/d of tight oil produced in Russia in 2013 accounted for 1% of its total oil production.
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With industry conditions resembling those of North America, Australia and the United Kingdom have the potential to be among the next countries with commercially viable tight oil production. Outside these two countries, there are many examples of energy companies drilling exploratory wells and committing to large investment plans to develop tight oil formations. Many of these formations are located within basins that already produce conventional crude oil in Mexico, Russia, China, and Argentina. The Argentine national oil company YPF claimed in their third-quarter 2013 report the production of more than 10,000 barrels of oil equivalent per day from Vaca Muerta in the Neuquin Basin, of which 7,887 barrels per day was crude oil." chart from EIA.gov





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The UN renounces biofuels. What about US EPA biofuel mandates? What about US military biofuel mandates? Will UN 'isolate' US?

3/24/14, "The UN Renounces Biofuels," American Thinker, Charles Battig

"I had to check to be sure that it was not yet April Fools Day.  Surely our friends in the UK would not be so unkind as to mislead their unrepentant ex-colonists over here, would they? The March 23, 2014 Telegraph carried this article stating that “Biofuels do more harm than good, UN warns.”  The United Nations said that?

Of course a lot of other people have been saying that for years.  In 2007, near-riots took place in Mexico over the increase in corn meal prices triggered by corn for automobile biofuel alcohol. Even Al Gore fessed-up in 2010 that his idea for corn ethanol was a “bad idea” prompted by his presidential ambitions.

What about the U.S. armed forces now committed to run on green biofuels?  What about the U.S. Air Force?  What to tell the Navy?

What to tell the EPA which has mandated the use of nonexistent stocks of biofuels, and fines consumers for not using the nonexistent fuel?
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The day of reckoning seems to have come for all these acolytes of the green goddess. The U.N. IPCC, the self-declared expert on all things climate, has finally seen the light of reason and perhaps the multitudes of the food-starved.  The new mantra seems to be easier to swallow…”biofuels bad.”"

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Calif. State Sen. Leland Yee accused by FBI of gun trafficking was among hosts of SF Sierra Club Dinner Oct. 4, 2013 with billionaire Tom Steyer Keynote Speaker

"4th Annual David Brower Dinner," SanFranciscoBay.SierraClub.org
Friday, October 4, 2013, 6-9pm Parc 55 Hotel, San Francisco
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"Honoring CA State Senator Loni Hancock, Phil Burton Badge of Courage Award, Mosaic solar finance company, Trailblazer Award, Tom Steyer, Keynote Speaker...

"Host Committee Members

U.S. Representatives John Garamendi and George Miller CA State Senator Leland Yee * Assemblymember Nancy Skinner * Berkeley Mayor Tom Bates * California Energy Commissioner David Hochschild * Earthjustice * Ella Baker Center for Human Rights * Lynn Jurich, CEO, Sunrun"...

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Screenshot of Host Committee Members in case the website link becomes inactive, retrieved 3/28/14, 3AM, ET

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5/21/2011, "Leland Yee endorsed for San Francisco mayor by Sierra Club," SF Examiner, Dan Schreiber

"State Sen. Leland Yee netted an endorsement from the Sierra Club for his San Francisco mayoral run, with Supervisor John Avalos getting the second-place vote.

Sierra Club political chairman John Rizzo said in a news release Saturday that of the nine candidates running for the seat, Yee has the strongest record of environmental stewardship for co-authoring state legislation on climate change solutions and helping to block offshore oil drilling.

Yee’s endorsement comes on top of others from several unions, including the California Nurses Association and the American Federation of State, County and Municipal Employees. Avalos was given the secondary endorsement because of The City’s ranked-choice voting system, which allows voters to pick up to three candidates."

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3/26/14, "California State Sen. Leland Yee charged with promising guns, missiles from Muslim group to agent for campaign donations," NY Daily News, by Adam Edelman, Michael Sorrentino

"Yee was arrested Wednesday accused of conspiracy to deal firearms and wire fraud for promising weapons to an FBI agent in exchange for cash."...

"A California state senator has been arrested for promising shoulder-fired automatic weapons and missiles from a Muslim separatist group to an undercover FBI agent in exchange for campaign donations, according to court documents unsealed Wednesday.

In San Francisco, FBI agents have charged California State Sen. Leland Yee with conspiracy to deal firearms and wire fraud. The allegations were outlined in an FBI affidavit against Yee and 25 others. The allegations against Yee include a number of favors he requested in exchange for campaign donations, as well as performing "official acts" in exchange for donations to get himself out of a $70,000 debt incurred during a failed San Francisco mayoral bid, according to court documents.

Yee discussed helping the undercover FBI agent get weapons worth $500,000 to $2.5 million, including shoulder-fired automatic weapons and missiles, and showed the agent the entire process of how to get those weapons from a Muslim separatist group in the Philippines into the United States, according to an affidavit from FBI Special Agent Emmanuel V. Pascua.

Pascua also said in the affidavit that Yee was unhappy with his life and desired to flee to the Philippines. The promised introduction with the weapon trafficker did take place at a San Francisco restaurant earlier this month, according to the documents.

Yee is also accused of accepting $10,000 from an undercover agent in January 2013 in exchange for making a call to the California Department of Public Health in support of a contract under consideration at the agency....

Yee, 65, is best known for his efforts to strengthen open records, government transparency and whistleblower protection laws. He has served as State Senator since 2006."...
 
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3/26/14, "State Sen. Leland Yee indicted on arms trafficking, corruption charges," Mercury News, by Josh Richman, Howard Mintz, Jessica Calefati and Robert Salonga

"In a stunning criminal complaint, State Sen. Leland Yee has been charged with conspiring to traffic in firearms and public corruption as part of a major FBI operation spanning the Bay Area, casting yet another cloud of corruption over the Democratic establishment in the Legislature and torpedoing Yee's aspirations for statewide office.

Yee and an intermediary allegedly met repeatedly with an undercover FBI agent, soliciting campaign contributions in exchange for setting up a deal with international arms dealers. 

At their first face-to-face meeting in January, "Senator Yee explained he has known the arms dealer for a number of years and has developed a close relationship with him," an FBI affidavit says, noting Yee told the agent the arms dealer "has things that you guys want."

Yee, D-San Francisco, highlights a series of arrests Wednesday morning that included infamous Chinatown gangster Raymond "Shrimp Boy" Chow, whose past includes a variety of charges including racketeering and drug crimes. Targets of the early-morning raids appeared in federal court in San Francisco on Wednesday afternoon.

A 137-page criminal complaint charges 26 people -- including Yee and Chow -- with a panoply of crimes, including firearms trafficking, money laundering, murder-for-hire, drug distribution, trafficking in contraband cigarettes, and honest services fraud.

Yee is charged with conspiracy to traffic in firearms without a license and to illegally import firearms, as well as six counts of scheming to defraud citizens of honest services. Each corruption count is punishable by up to 20 years in federal prison and a fine of up to $250,000, while the gun-trafficking count is punishable by up to five years and $250,000.

The charges are particularly shocking given that Yee has been among the state Senate's most outspoken advocates both of gun control and of good-government initiatives.

"It seems like nobody knew this was coming, and everyone is astounded by the allegations," said Corey Cook, director of the University of San Francisco's Leo T. McCarthy Center for Public Service and the Common Good. "I'm just astonished...Political corruption is one thing, but this is a whole other level."

San Francisco political consultant Keith Jackson, a former school-board president, allegedly was the link between Yee and Chow, who federal prosecutors say is the current "Dragonhead," or leader, of the San Francisco-based Ghee Kung Tong organization, spelled in court documents as Chee Kung Tong.

Chow introduced an undercover agent who had infiltrated his organization to Jackson, who with his son, Brandon Jackson, and another man, Marlon Sullivan, allegedly sold the agent various guns and bulletproof vests. The Jacksons and Sullivan also allegedly conspired in a murder-for-hire scheme requested by the undercover agent, as well as other crimes including sale of stolen credit cards and purchase of cocaine.

An FBI affidavit says Keith Jackson starting last August told one of the undercover agents that Yee was "associated with a person who was an international arms dealer who was shipping large stockpiles of weapons into a foreign country." At later meetings in August and December, Jackson said Yee had agreed to help set up an arms deal; the agent first gave Jackson $1,000 cash for his help, and later cut a $5,000 check from a bogus company to Yee's campaign.

Finally, Yee and Keith Jackson met Jan. 22 with the undercover agents at a San Francisco coffee shop, the affidavit says.

"According to Senator Yee, the arms dealer is 'low-key' and has been trafficking weapons for quite a while," the document says. "According to Senator Yee, the arms dealer sourced the weapons from Russia."

"Senator Yee said of the arms dealer, 'He's going to rely on me, because ultimately it's going to be me,'" the affidavit says. "Senator Yee said, 'I know what he could do. I have seen what he has done in the past on other products and this guy has the relationships.' Senator Yee emphasized that the arms dealer took baby steps and was very careful."

Yee told the agent that the arms dealer had contacts in Russia, Ukraine, Boston and Southern California, the affidavit says, and the agent asked Yee for a commitment. "Senator Yee said, 'Do I think we can make some money? I think we can make some money. Do I think we can get the goods? I think we can get the goods.'"

The agent told Yee and Jackson he wanted any type of shoulder-fired weapons or missiles, the affidavit says; Yee asked whether he wanted automatic weapons, and the agent confirmed he did -- about $500,000 to $2.5 million worth. Yee told the agent "he saw their relationship as tremendously beneficial," the affidavit says, adding he wanted the agent and Jackson to make all the money because he didn't want to go to jail. The agent replied he would pay Yee and Jackson hundreds of thousands of dollars over time, and more immediately would pay $100,000 for the first arms deal. "Senator Yee said 'Alright, take care.' The meeting ended."

But by their next meeting on Feb. 25, Yee had grown spooked by the federal indictment of state Sen. Ronald Calderon; the two shared a desk on the Senate floor. "Senator Yee thought the other state Senator was a classic example of involving too many people in illegal activities," the affidavit says. Pressured by the agent to arrange an arms deal, Yee encouraged the agent "to start off doing small deals with the arms dealer" with Yee as an intermediary.

"Senator Yee stated he was unhappy with his life and said, 'There is a part of me that wants to be like you. You know how I'm going to be like you? Just be a free-agent out there,'" the affidavit says, adding Yee told the agent "he wanted to hide out in the Philippines."

The agent met again with Yee on March 5, and Yee discussed a new potential arms dealer named Wilson Lim. The agent said his family in New Jersey wanted to support Yee's bid for Secretary of State, to which Yee responded, "I can be of help to you for 10 months or I can be of help to you for eight years. I think eight years is a lot better than 10 months."

Yee discussed specific locations in the Philippines and Florida that might be ideal for moving the guns, which he said would include M-16-type automatic rifles.

Yee, Jackson, Lim and the agent met again March 11; Yee said the arms deal wouldn't be done until after this year's elections. "Senator Yee explained, 'Once things start to move, it's going to attract attention. We just got to be extra-extra careful.'"

Finally, they all met March 14, where they discussed how they would break up the undercover agent's money into legitimate campaign donations. The agent told Yee he was prepared to give Yee $6,800 cash and a list of weapons he wanted; Yee replied "he would take the cash and have one of his children write out a check."

Yee ran for mayor of San Francisco in 2011 and now is a candidate for California Secretary of State. But the criminal complaint likely ruins his candidacy and further threatens Democrats' efforts to restore their state Senate supermajority that already has been broken by two other lawmakers' paid leaves of absence to deal with criminal charges.

Keith Jackson and Yee from 2011 until now allegedly solicited donations from undercover FBI agents in exchange for official acts and conspired to traffic firearms, the complaint says. Starting in May 2011, Jackson solicited an undercover FBI agent to give money to Yee's mayoral campaign, including asking the agent for donations in excess of the $500 individual donation limit. The agent refused, but introduced Jackson and Yee to a purported business associate -- another undercover agent -- who they also solicited for at least $5,000.

Yee's mayoral election loss left him with $70,000 in debt, the complaint says, and so Yee and Jackson allegedly agreed that Yee would call a California Department of Public Health manager in support of a contract under consideration with the second undercover agent's purported client, and would provide an official letter of support for the client, in exchange for a $10,000 campaign donation. Yee allegedly made the call on Oct. 18, 2012, and provided the letter on or about Jan. 13, 2013; Jackson allegedly accepted the $10,000 cash donation on Nov. 19, 2012.

Yee had yet to appear before the judge as of 3 p.m., but earlier in the afternoon the judge ordered Chow be held without bail. Government attorneys called him a flight risk and danger to the community, citing his criminal history. Chow's lawyer objected saying that Chow has been fighting with immigration authorities to stay in the United States.

Chow is not a U.S. citizen. He is being represented by public defender and lives in San Francisco with his girlfriend. He has been on electronic monitoring since he's been out of prison and seeking legal immigration stays, even during the current investigation.

FBI agents and local police served arrest and search warrants throughout the Bay Area, with agents seen in San Francisco and San Mateo and Yee's Capitol office in Sacramento. One of the searches was at the San Francisco Chinatown office of the Ghee Kung Tong Free Masons and is linked to Chow's arrest.

Outside that building on Spofford Street -- a Chinatown alley between Clay and Washington streets -- FBI Special Agent Michael Gimbel would say only that "the FBI is executing numerous search warrants around the Bay Area."

San Francisco firefighters carried a heavy rotary saw into the building late Wednesday morning; neighbors said they believe there's a safe inside the building. Federal agents removed about 10 boxes of documents and several bags of material from the building at about 12:30 p.m., and the FBI left the scene soon after that.

Federal law enforcement officials have been chasing Raymond "Shrimp Boy" Chow for decades, branding him one of the longtime Bay Area leaders of a Hong Kong-based criminal syndicate called the Wo Hop To. Chow's criminal rap sheet dates back to 1978, and includes federal racketeering indictments that have alleged attempted murder, murder-for-hire, gun trafficking and other crimes....

During an afternoon press conference, State Senate President Pro Tem Darrell Steinberg, D-Sacramento, said "Leland Yee should leave the Senate and leave it now."

Yee represents San Francisco and a portion of San Mateo County. Before becoming the first Chinese-American ever elected to the state Senate in 2006, Yee was an assemblyman from 2002 to 2006; a San Francisco supervisor from 1997 to 2002; and had been a member and president of the San Francisco Unified School District board. While in the Assembly, he was the first Asian-American to be named Speaker pro Tempore, essentially making him the chamber's second-most-powerful Democrat.

That power would have been exercised this year in Yee's run for Secretary of State against state Sen. Alex Padilla, D-Van Nuys; Democrat Derek Cressman; Republican Pete Peterson; and nonpartisan Dan Schnur.

Upon pulling his candidacy papers in February, Yee issued a news release saying it was time for a Secretary of State "who will expand access to the ballot box, make our government more transparent, and strengthen California's democracy."
 
"I am committed to empowering Californians so that they can guarantee fair elections, expose special interests and prevent corruption, because it's your California," Yee said at the time.

Yee campaign spokesman Joaquin Ross declined to comment Wednesday morning, saying he would have to call back.

Yee is the state's third Democratic legislator recently targeted in corruption allegations. In February, State Sen. Ron Calderon, D-Montebello, surrendered to authorities after being indicted on bribery charges. In January, state Sen. Roderick Wright, D-Inglewood, was convicted of voter fraud and perjury stemming from a 2010 indictment.

Cressman, who until last June was vice president of the nonpartisan government watchdog group Common Cause, Wednesday morning said that charges against Yee must be "a wake-up call" given other Senate Democrats' legal problems.

"We are clearly beyond the point of looking at one bad apple and instead looking at a corrupt institution in the California Senate," Cressman said. "The constant begging for campaign cash clearly has a corrosive effect on a person's soul and the only solution is to get big money out of our politics once and for all."

Schnur, a longtime GOP campaign strategist who more recently served as chairman of the state Fair Political Practices Commission and directed the University of Southern California's Unruh Institute of Politics, said news of Yee's arrest "is yet another in a series of reminders of why Californians have so little trust in their elected officials. 

"My hope is that this will prompt the Legislature to take much more aggressive and meaningful action to fix a broken political system than they have been willing to do to date," Schnur said.

Yee emigrated to San Francisco from China at age 3; his father was a veteran who served in the Army and the merchant marine. Yee earned a bachelor's degree from UC Berkeley; a master's degree from San Francisco State University; and a doctorate in child psychology at the University of Hawaii. He and his wife, Maxine, have four children.

Rep. Jackie Speier, D-Hillsborough, served with Yee for several years in the Legislature but was never close to him. She said the senator is innocent until proven guilty but called the allegations "regrettable."

"It's always sad for all of us in the profession," said Speier, "to see individuals who lose sight of what the public trust is all about.""

================================

"Leland Yee

Born: Nov. 20, 1948 (age 65) in Taishan, China
Spouse: Maxine Yee
Residence: San Francisco
Education: UC Berkeley, San Francisco State University, University of Hawaii
Profession: Child psychologist

November 2006: Elected to California Senate
November 2002: Elected to California Assembly
1996–2002: Member of San Francisco Board of Supervisors

1988-1996: Member of San Francisco Board of Education

Honors: Yee has been named Legislator of the Year by many organizations, including the American Psychological Association; California School Employees Association; California Psychiatric Association; California Partnership to End Domestic Violence; Community College Association; San Francisco Women’s Political Committee; California Faculty Association; and the American Federation of State, County and Municipal Employees.

Of note: Since 2003, Yee has had 181 pieces of legislation passed; 138 have been signed into law.
.
Examiner Staff Writer Jessica Kwong, Bay City News and The Associated Press contributed to this report.

Leland Yee Indicted On Bribery, Corruption Charges"

Sixth crony green flop funded by Mississippi taxpayers: Twin Creeks (solar equipment), Stion (solar panels), View/Soladigm (smart windows), Silicor Materials/Calisolar (silicon), Vidia/HCL Cleantech (biofuels), and Kior (Khosla biofuel). Next likely flop is Kemper County Lignite Plant startup

"Nationally and locally, the "green" energy sector has been a hotbed for cronyism and government subsidies. Mississippi Governor Haley Barbour hailed the state's granting of loans to several green energy projects, such as solar plants for Twin Creeks Technologies and Stion and the biofuels facility for KiOR. In particular, the Kemper County clean coal plant owes thanks to its $270 million Department of Energy grant to BGR Group, the lobbying firm Barbour helped found."...(subhead, "Cronyism in Mississippi") 

2/7/14, "Another one bites the dust," Kelley Williams, Bigger Pie Forum

"Startup failures"

"Kior, a state funded green energy project, recently announced the shutdown of its Columbus Mississippi plant. It was supposed to produce gasoline and diesel from pine trees. This is the sixth state funded technology start up that has failed.

Others include Twin Creeks (solar equipment), Stion (solar panels), View/Soladigm (smart windows), Silicor Materials/Calisolar (silicon), and Virdia/HCL Cleantech (biofuels). These startups received hundreds of millions in loans and other inducements from the state paid for by taxes on existing businesses, their employees, and others - who probably could have spent their money better. Hard to see how they could have done worse.

These failures are costly and embarrassing. But they are dwarfed by the unfolding disaster at Mississippi Power's Kemper County Lignite Plant startup. This update on Kior is a warning of Kemper's looming nightmare and a wakeup call for southeast Mississippi and Mississippi Power's customers.

Kior shutdown

Kior put a hopeful face on the shutdown announcement. You know: not to worry because the shutdown is just temporary while we raise money to fix what doesn't work. Kind of like the smiley face it put on the $31.3 million loss first quarter 2013 that I wrote about last May. The CEO said then: not to worry because we are making progress and expect things to get better.

However, things got worse, not better. Losses increased and totaled $261 million at the end of Q3 2013 - more than the cost of the plant. That's a lot of money for most people. But it's chump change for Kior's creator, billionaire Silicon Valley venture capitalist Vinod Khosla. He has bankrolled Kior with help from other billionaires including Microsoft founder Bill Gates. And he may continue to do so indefinitely.

So while bankruptcy is probably inevitable, the timing is uncertain. Who knows when he will pull the life support plug? He may be hoping for a federal bailout payoff from Kior's lobbying expenses which have steadily increased along with its losses. Or he may have a state bond bill in mind like Kemper's to force customers to finance Kior's cost.

But insiders are bailing. Former Secretary of State Condoleezza Rice resigned from the board in December. The Chief Financial Officer suddenly quit without the usual "no disagreements with management" statement. An investor filed a class action lawsuit last August alleging misleading reporting. In the last few weeks one of the largest shareholders liquidated his position at prices in the $1.50 range vs the initial public offering price of $15 and high of $23.85. The stock closed recently at $1.11 per share.

Death spiral

What took so long for people to wake up? Was it the residue of the initial hype or blind trust in really smart, really rich people and experts and popular politicians? Or the silence of public agencies and organizations that initially endorsed the project but stood quietly by while it went down the drain and took state funds with it?

The company has been another dead man walking for months. The $254 million plant was completed in May 2012 over budget and behind schedule. Startup efforts and commercial operations were late due to plant changes and unexpected problems. There were scale up issues. The technology was new and not proved as represented initially. So the original design was faulty. Sound familiar - like Kemper's faulty design based on incomplete engineering?

This required more research and more design changes. Research costs to date are $86.2 million with $22 million more planned in 2014 for a process that was supposedly already commercial (like Kemper's). This is 43% of plant construction cost. If Kemper's experience is similar to this much smaller and simpler plant, it is looking at another $2+ billion research costs, major plant modifications and years of effort to achieve even partial operations.

The Kior plant has not operated consistently or at more than 70% of theoretical capacity even intermittently after almost two years of trying. Q3 2013 net loss was $43.1 million up from $38.5 million in Q2 despite higher production. The more it makes, the more it loses.

Losses included about $4 million of stock based compensation expense per quarter. Wonder if some insider departures were related to tax liabilities on stock awards greater than the decreasing market value of the stock?

Blinded by hype

The Kior plant was originally announced with great hype. However, the governor's office and the Mississippi Development Authority have been silent about the shutdown and the fate of the 1000 jobs and five plants initially promised when the legislature approved a $75 million interest free loan for the first plant. Odds are not good the state will get its (our) money back. Odds are not good that the 100 current employees mentioned in the shutdown announcement will keep their jobs.

Odds are not good that the plant's unworkable experimental technology vetted by the MDA and blessed by the blue ribbon Mississippi Energy Institute will ever work or will be a "key step toward energy self reliance for our country-- as the former governor announced. Odds are not good that the $2 million the legislature gave to Alcorn State and Mississippi State to develop methods to gather other products such as corn stalks to be turned into crude oil will have any lasting results.

But despite the odds, some people are still hopeful. The executive director of Natchez Inc. said there is nothing from his standpoint to view the measure (shutdown) as a negative regarding a planned second plant in Natchez. Seems we are almost insanely desperate for jobs. We should be sanely desperate for a sane and workable economic development policy.

Unworkable policy

Kior and Kemper are good examples of an unworkable policy. They both have a lot in common in addition to the hype. As I said before, both were negotiated in secret, vetted by agencies subordinate to their sponsoring politicians, supported by business leaders with construction contracts and other business in mind, and funded by the legislature after intense lobbying - but with little or no independent review or informed debate.

Neither appears to have been subject to open and careful review and monitoring during construction and startup. Their sponsors and the legislature seem unaware of their problems. Both are based on experimental technology and wishful thinking and concepts that violate a fundamental law of nature (Conservation of Energy).

Both involve state inducements and federal grants and preferences that apparently induced the loss of good judgment and common sense. Federal preferences force refiners to buy biofuels. This guarantees a market and price for Kior's product. But not its profitability. The Public Service Commission sets a guaranteed price for electricity. Mississippi Power’s monopoly guarantees the market. But not cheap electricity for customers.

Law of inverse hype

The initial fanfare around Kior suggests a Law of Inverse Hype: The greater the hype, the more dubious the claims - especially if they defy common sense and fundamental natural laws. Example: the hype about Kior's magic catalyst that would do in one day what Mother Nature took a million years to do. According to The Daily Journal, one legislator who voted for the Kior financial package exclaimed: "This is an unbelievable process!" Turns out he was right.

The hype for the Kemper lignite plant has been off the Richter scale. Two governors, the US Secretary of Energy, Newt Gingrich, other assorted politicians, luminaries, academics, and so on have all now being justified as a believable supply alternative to natural gas in case there is a Chicken Little event.

The flip side

The flip side of Kior and Kemper may be the recent low key announcement by the governor and company about the General Atomics expansion at Shannon, Mississippi. The company will invest $11 million and create 80 jobs there. It is not a new technology startup. It will relocate existing product lines already providing equipment and services to the defense, nuclear, oil and energy storage industries. They will locate in a vacant building in the Tupelo/Lee Industrial Park South that joins the company's existing campus according to the Lee County Courier.

There is some MDA assistance involved. But no massive state aid for "next generation plants and technology" or an "unbelievable process." My guess is the Law of Inverse Hype applies here too: the less the hype, the better the odds of success.

Assuming General Atomics knows what it is doing and saying, 80 jobs for $11 million will work out to be $137,500 per job at virtually no cost to the state. Got that? No cost to the state (that's you and me) to create 80 jobs. That's because the investment is private money - General Atomic's shareholders money.

A better policy

Wouldn't it be something if we had a state economic development policy that encouraged private investment by keeping more money in the private sector? Might be more productive than state aid and tax breaks for targeted "unbelievable processes" paid for by taxpayers - who are left with less to invest in a believable process or business of their own.

If you think individuals and businesses are more careful and efficient investing their own money than the state is "investing" yours, think about how to get individuals and businesses more money to invest. Lower taxes are an obvious way, of course. Another less obvious way is honest objective regulation that puts the public interest first.

Biggest job killer ever

The biggest investment and job destroying project in the history of Mississippi will be Mississippi Power's Kemper Lignite Plant if regulators put the company's interest ahead of its customers.

If the Public Service Commission deems the $3+ billion cost of the plant prudent forcing customers to pay for it as the company proposes, the extra cost of electricity to households and businesses will be over $400 million per year over the 40 year life of the plant. That's over $16 billion that will leave the state. That's over $16 billion that will not be invested or spent in Mississippi.

If the private sector can create a job for $137,500, and if Kemper sucks over $16 billion out of the state, then Kemper will prevent or destroy over 116,363 jobs in Mississippi over its life. That is a net loss of over 116,163 jobs assuming Kemper creates the 200 permanent jobs it has projected.

We can do better

Supporting a project that will cost over 116,163 jobs is not good state economic development policy.

We can do better."

"Kelley Williams is the former CEO of First Mississippi/Chemfirst and a Jackson resident. He can be reached at kelley@greenover.com."

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"Cronyism in Mississippi," Bigger Pie Forum

"Overview

• What is cronyism?
• How cronyism works
• Why cronyism is possible
• Welfare for the rich
• Impacts of cronyism
• Cronyism in Mississippi
• How to combat cronyism

Selected Charts and Graphs

Selected Articles

Overview

What is cronyism?

Cronyism takes many forms, but the common thread is the use of government connections to promote one's own interest in a legal way. This can be done through bailouts, subsidies, regulations, foreign quotas and tariffs, mandates, and even tax breaks. Each of these has the potential of giving an advantage to one firm or individual over another with the government's permission. Often these preferences are rationalized by the fear of market failure—the fear that bad things will happen, or good things won't occur if the government doesn't step in to help.

How cronyism works

Cronyism works in two directions: 1) Organizations lobby the government for favors; 2) Politicians favor groups that can support them politically.

Economics professor Randall G. Holcombe explains that, "Firms increase their profits through government favors, and in exchange they support the politicians who provide the favors." For example, a company may lobby Congress for special tax breaks on a certain industry. Legislators may give the breaks only to those special industries in hopes of getting financial backing in return. Unions may also lobby government agencies to pressure companies to take action like relocating production for the sake of union jobs.

Why cronyism is possible

Cronyism is possible because of government power and the natural human desire for gain. Government holds power in order to promote liberty and rule of law, but that power also allows government to hand out tax breaks, subsidies, or make laws favoring one group over another.

Conversely, the potential for government favors attracts private interests to lobby for privileges or foster profitable friendships in powerful places, rather than fairly compete in the marketplace. This set-up promotes a process of give and take between government officials and industries: government gives out favors; industry supports the officials who hand out the favors; and vice versa. Even the regulatory field (which is supposed to protect the public from unfair business practices) ends up as breeding ground for cronyism. Industries can "capture" the interest of the regulators who may raise rates or make rules that favor one group and block out others.

Welfare for the rich

Welfare is often thought of as giving to the poor. But with cronyism, welfare extends to many classes, all the way up to rich corporations getting subsidies and bailouts. There are numerous examples: Banks and car manufacturers are bailed out; subsidies go to oil companies and big conglomerates; health insurance companies get big indirect subsidies through tax breaks for employers.

Programs touted to help the less advantaged also end up providing revenue opportunities for the wealthy. JPMorgan has a niche industry supplying debit cards for the government food stamp program. Instead of helping to save the iconic small family farm, most agricultural subsidies go to the big farmer. Mortgage interest deductions may sound good for struggling homeowners, but are often more beneficial to wealthy individuals who buy expensive property--and low-income homeowners often cannot even take the deduction. In the realm of education, Federal student aid subsidies inflate college tuition and replace institutional-funded aid, meaning more money for colleges and potentially higher costs for needy students. Even in primary and secondary schools, corporations profit from contracts allowing them to exclusively supply all educational products to certain public school districts in the name of school reform. Contracts for school construction or transportation can be subject to fraud by the rigging of bids.

Impacts of cronyism

Cronyism hurts the public at large. Instead of investing in better and cheaper products and services, businesses spend time and money "rent seeking" after government favors. Increased prices also hit consumers when cronyism in the form of tariffs and foreign import quotas limits access to less expensive products. 

Instead of focusing on keeping the public safe and free, government officials cater to personal supporters. Any government subsidies, loans, or tax credits given to these special interests in turn go on the tab of taxpayers. In effect, government uses the public's money to favor one business or industry over another. Not only is this unfair to the taxpayer, it is also unfair to businesses that don't have money to spend on political connections.

More so, it is very difficult to reduce cronyism once it has a foothold. The very nature of cronyism means those opposed to losing their privileges will be able to use their crony network to stop the system from being reformed. And, businesses seeing other organizations getting favors are encouraged to lobby to get in on the benefits themselves, or at least to protect themselves from any unfair disadvantages. 

Cronyism in Mississippi

Nationally and locally, the "green" energy sector has been a hotbed for cronyism and government subsidies. Mississippi Governor Haley Barbour hailed the state's granting of loans to several green energy projects, such as solar plants for Twin Creeks Technologies and Stion and the biofuels facility for KiOR.

In particular, the Kemper County clean coal plant owes thanks to its $270 million Department of Energy grant to BGR Group, the lobbying firm Barbour helped found. More importantly, Barbour lobbied for Southern Company, the power company that owns Kemper, before running for governor. He then promoted the Kemper project while in office, a move that suggests connections and a conflict of interest typical of cronyism. BGR Group later pulled the reference to the Kemper success from its website.

A culture of cronyism also appears to exist among administrators of the Mississippi Department of Education (MDE). Questions have been raised about confidential data sharing practices for profit and the involvement of a former MDE employee in inflating public school ratings.

Other examples of Mississippi cronyism include Magnolia Ventures and the "Beef Plant." Magnolia Ventures, which started in 1994, received $20 million in state bonding money and went bankrupt after three years. One of its major lobbyists embezzled significant amounts from the company as later chairman and CEO.

Beef Processors LLC, which received a $55-million dollar taxpayer-backed loan, ended up going bankrupt in 2004, its owner convicted of embezzlement. The plant's construction oversight had made illegal contributions to then governor Ronnie Musgrove, who supported the project.

In 2012, the Handy Hardware factory, recipients of a $3.6 million state grant, decided to leave Mississippi. The company never produced the 175 jobs it had agreed to create in three years.

How to combat cronyism

In the realm of government and politics, cronyism can be combatted by limiting the power of government to play favorites in giving bailouts, subsidies, and tax subsidies. Peter Schweizer, president of the Government Accountability Institute, advocates "complete transparency" in the arena of election financing, in addition to barring large contributors from getting government grants. 

On the corporate side, businesses and industries can fight cronyism by not seeking government handouts or favoritism, but instead keeping to fair play and healthy competition, while saving lobbying for the purpose of limiting government's harmful use of power and fighting off cronyism.

The mainstream media needs to join independent journalists in watching out for cronyism. By keeping the public informed, they have the opportunity to fire up both sides of the political spectrum for the chance to shame and boycott cronies.

Selected Charts and Graphs

• This interactive chart shows that government bailouts "are only the tip of the iceberg" in American cronyism. Moving the cursor over various sections of the iceberg will provide explanations of other cronyism culprits, like monopolies, protectionism, and even tax credits.

• This chart lists the affiliations of individuals appointed to the President's Export Council in 2010. Beside each affiliation is a record of the money donated by that group in support of the president. Commenting on the plumbers union topping the list, The Heritage Foundation notes, "Now we'll wait to see exactly what the plumbers are going to export!"

• This chart lists the top 50 interest groups giving to incumbent members of Congress in 2012. It displays the amount given, the Democrat and Republican percentage of the money, and the top recipient of the money. A dropdown list allows viewers to review the data for each Congressional election cycle going back to 2000.

• In 2011, the health sector was the largest interest group lobbying the Congressional Committee on Deficit Reduction, as shown in this chart by OpenSecrets.org: "About 30 percent of these organizations -- 118 groups in total  -- were from the health sector… an area that is facing steep cuts from the supercommittee."

• Occupy Wall Street and the Tea Party movement share a similar concern for cronyism as seen in the overlap of this Diagram.

• This infographic displays the estimated amount of government money spent on various forms of energy from 2002 to 2008. Costs include both tax credits and direct spending.

• The total impact of energy-related tax preferences on Fiscal Year 2011 income taxes was approximately $20.5 billion, according to Table 1 on Page 3 of this Congressional Budget Office (CBO) brief.

• Nearly half of Mississippi state revenue in 2010 came from the federal government. Mississippi's proportion of federal grant money can be compared with that of other states on this map. Transfers of government money often create incentives for cronyism.

• Chart 2 shows the proportion of government subsidies that went to large farms over small farms in 2002. Large farms (the top 10 percent of recipients) received 65 percent of the subsidies, while small farms in the bottom 80 percent received only 19 percent of the subsidies. Heritage Fellow Brian M. Riedl states, "Farm subsidies have evolved from a safety net for poor farmers to America's largest corporate welfare program."

• This interactive map shows the amount of federal agricultural subsidies given to each state from 2003 to 2005. It also shows the amount of subsidy money given to the country's top ten farm businesses that receive those subsidies. Four of those ten are located in Mississippi.

• Mississippi offers a number of financial incentives to encourage business growth in Mississippi. The 2012 Mississippi Incentives Report provides an overview of these awards, which are overseen by the Mississippi Development Authority. The map on page 2 of the report shows the distribution of stimulus grants, disaster grants, and economic development grants and loans throughout the state in 2012.

Selected Articles

• A January 2013 Wall Street Journal article unveils the cronyism embedded in a federal tax reform bill. Tax credits include special interests, from a StarKist factory in Samoa to energy efficiency credits for consumers that will indirectly subsidize Whirlpool.

• Some companies pay much lower tax rates than others. This in-depth report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy explains who pays what, and why, and notes that some corporations pay hardly any tax.

• In this article, Bill Frezza of the Competitive Enterprise Institute contrasts crony capitalism with market capitalism. He blames the crony capitalists, those who prosper on government favors, for raising discontent against the wealthiest "1%."

• AgainstCronyCapitalism.org gives a rundown of instances where crony capitalism can crop up—instances where government intervention in a private market has distorted the market. These include banking, the car industry, farming, and lawmaking.

• Economics professor Randall G. Holcombe goes into depth on the causes of crony capitalism, summing up the problem as one of big government. He says that "even in providing 'public goods,' government can steer funds to benefit cronies, so crony capitalism is fostered by any government spending, even when the rationale for that spending has a public-interest foundation. More government spending for any reason increases the incentives for cronyism."

• In this blog post, policy analyst Nicolas Loris discusses the rise of renewable energy subsidies. Taxpayers are getting "desensitized," and businesses of course want to jump in on the bandwagon if money's going to be given away. Green energy needs help because it's too costly, but taxpayers end up suffering due to "pricier electricity."

• Blogger Charles Hugh Smith walks through an illustration of how regulations can kill small business—in this case, farmers. In his example, a super farm lobbies the government and gets subsidies. Next, regulations come that are too difficult for small farms to deal with. They don't have enough resources to fight if they get in trouble with the government, while corporate farms are too big for the government to risk bothering. Regulations continue to multiply and force out the little man. Smith thinks the only solution is to ban all private campaign funding and lobbying.

• In Three Easy Ways to End Cronyism, Peter Schweizer chides the anti-crony lip service of politicians who don't actually combat the problem. He thinks a good place to start eliminating cronyism is with election financing:

"1.    No government loans or grants to firms or entities connected to campaign bundlers and large financial supporters.
 2.    Complete transparency when it comes to campaign financiers and bundlers.
 3.    No campaign fundraising from large government contractors."

• F.H. Buckley discusses the importance of rule of law to the nation's prosperity in the July/August 2012 edition of The American Spectator. He predicts the continued expansion of corruption and cronyism with the growth of government, increased bailouts, and poor mainstream media coverage on the issue. He compares lobbying in America to the practice of bribery in poor countries.

• This video of the grand opening of GreenTech's MyCar plant in Horn Lake, Mississippi, shows former President Bill Clinton, Mississippi Gov. Haley Barbour and well known Democratic fundraiser Terry McAuliffe, acting chummy. Terry McAuliffe, then chairman of GreenTech, worked with Barbour to open the plant in Mississippi. GreenTech got a $5 million loan from the state. McAuliffe, while running for governor in Virginia, claimed his state didn't offer a competitive incentive package. He didn't mention that Virginia also had concerns about the company's business model.

• The Mississippi Baseload Act of 2008 allows electric utilities (under Public Service Commission oversight) to charge customers for power plant construction costs even if the new plant is never completed.

This opens the door to cronyism, since utility companies can take advantage of ratepayers, regardless of the plant's success, if they can gain the favor with the commissioners."
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2/15/11, "Plant closure bursts Georgia’s biomass bubble," Atlanta Journal Constitution, Dan Chapman

"The premise, and the promise, were brilliant in their simplicity: Turn tree waste into fuel, help break the Middle Eastern choke hold on America’s economy and"....

[Ed. note: The "Middle East choke hold" no longer exists. The US is a net oil exporter as of 2011. Further, "today, half of net U.S. petroleum imports come from the Western Hemisphere, and half of that (or a quarter of the total) comes from Canada. Only 12% came from Saudi Arabia last year (2010)."]

• (continuing, AJC): "bring hundreds of jobs to rural Georgia.

What wasn’t there to like?

Plenty, starting with the closing last month of the Range Fuels cellulosic ethanol factory that promised to help make Georgia a national leader in alternative energy production. Then there’s the money — more than

• $162 million in local, state and federal grants, loans and other subsidies committed to the venture.

Much of that has been spent; recovery would be difficult. Officials at Colorado-based

• Range Fuels,
  

who didn’t return calls for this story, have said they plan to eventually re-open the Soperton plant.
 
But critics — ranging from budget hawks to renewable energy experts to dispirited locals — say the shutdown is a case of

• good money thrown at unproven science and lofty promises.

“We gave those subsidies in hopes of getting something in return — jobs,” said Wallace Little, a laid-off special ed teacher from Soperton who applied for a Range job. “And we hope they come back, as far-fetched as that sounds.

• We need jobs. We need them bad.”

Over the last six years, Georgia has successfully wooed a variety of companies specializing in biomass — cellulosic ethanol, corn ethanol, biodiesel, wood pellet, wood-to-electricity — with the goal of becoming a renewable energy leader.

• Many of the companies, though, are no longer in business.

Vinod Khosla, the dot-com billionaire behind Range Fuels,

• vowed in 2007 to

• “declare a war on oil” and said “cellulosic ethanol is the weapon we need.”

State and national officials were giddy when ground was broken later that year for the $225 million ethanol distillery outside Soperton, 155 miles southeast of Atlanta.

“Range Fuels represents a new future for our country,” proclaimed then-Gov. Sonny Perdue,

• flanked by dignitaries and beauty queens.

“With Georgia’s vast, sustainable and renewable forests, we will lead the nation.”

U.S. Energy Secretary Samuel Bodman, who steered a $76 million federal grant to Range, said that “by relying on American ingenuity

• and on American farmers for fuel, we will enhance our nation’s energy

• and economic security.”

The U.S. Department of Agriculture followed up with an $80 million loan guarantee.

• Georgia officials pledged $6.2 million.

Treutlen County, one of the state’s poorest, offered 20 years worth of tax abatements and 97 acres in its industrial park. Private investors reportedly put up $158 million. In all, the project raised more than $320 million.

• It hasn’t been enough.

By now, Range had expected to produce 20 million gallons of ethanol. Seventy Georgians would have jobs, denting  

• Treutlen’s
  

• 13.3 percent unemployment rate.

• Range shut down in early January. Only a few employees in Soperton remain.

Bud Klepper, plant manager for Range Fuels, told The Soperton News that the shutdown is “not permanent,” adding that

• the company seeks additional financing.

“We’re just taking him at his word that it’s just a temporary shut down,” said John Lee, executive director of Treutlen’s development authority. “There’s nothing else we can do.”"...


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11/30/11, "U.S. Nears Milestone: Net Fuel Exporter," Wall St. Journal, by L. Pleven, R. Gold

"U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011

• for the first time in 62 years.

A combination of booming demand from emerging markets and faltering domestic activity means the U.S. is exporting more fuel than it imports,

• upending the historical norm.

According to data released by the U.S. Energy Information Administration on Tuesday, the U.S. sent abroad 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it imported 689.4 million barrels."...(remainder of article is subscription)

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