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  Cap and Trade: Unexpected FRIEND to Gas Industry

Grand Jct, CO Chamber of Commerce Energy Briefing June 2009

June 20, 2009
by Craig Severance

GRAND JUNCTION, CO --  You can see it in the faces of those gathered to hear the latest news on the natural gas industry:  Anxiety.  Anger.  Fear of losing everything they have. Frustration that there seems nothing anyone can do. 

The rigs are down.  Here in Western Colorado and nationwide, the drilling rigs that employed thousands in well paying jobs are down.  Where just a year ago this region was bustling with new drilling activity, rig counts are now down 74%.  Across the nation the story is the same:  74% down in W. Texas/NM; 68% down in Green River Basin (WY); 50% down in Arkoma Basin; 49% down in E. Texas/N. La.  The gas resources are still there, but new drilling activity is being curtailed. 

Local Economy is Hurting.  When the rigs go down, so goes the local economy of a gas-producing region.  In Western Colorado,  $3.2 - $3.5 Billion less investment by the natural gas industry is expected in 2009 versus 2008.  Housing prices are down and unemployment is rising. Retail sales have fallen drastically, stressing merchants and local governments.  The flow of dollars coming from elsewhere into the local economy has dropped off a cliff.  When natural gas -- a domestic energy resource -- goes down, it is not Saudi oil sheiks but American gas workers and the communities where they live that feel the impacts.   
        

Source: Energy Information Administration

Natural Gas Was High Priced & Unreliable.  Just a year ago, in June 2008, the average U.S. wellhead price for natural gas was $10.82 per thousand cubic feet, (about $10.50 per Million BTU, or MMBTU).  Electric utilities, concerned about the volatility of natural gas prices and worried about its reliability of supply, were beginning to explore high priced alternatives to natural gas, even considering reviving a nuclear power industry that had been dead for over 30 years. 

Then, everything changed almost overnight.

39% Increase in Total U.S. Natural Gas Resources. High natural gas prices, together with relatively new "fracturing" technologies to free gas from shale deposits, prompted massive gas exploration efforts nationwide. These resulted in discoveries of major new natural gas resources, which became apparent before the end of 2008. 


On Thursday, the nonprofit Potential Gas Committee industry group, assisted by the Colorado School of Mines, released the results of its 2008 assessment, indicating a total increase of U.S. natural gas resources of 39% since its last assessment, for 2006.  The report notes the new natural gas resource estimate is the "highest resource evaluation in the Committee's 44-year history" -- indicating the U.S.has far more resources of natural gas than previously considered. 

"Furthermore, new and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources—especially ‘unconventional’ gas—which, not all that long ago, were considered impractical or uneconomical to pursue.”  noted Dr. John B. Curtis, Professor of Geology and Geological Engineering at the Colorado School of Mines and Director of the Potential Gas Agency there, which assists the Committee.

“Consequently, our present assessment demonstrates an exceptionally strong and optimistic gas supply picture for the nation.”, Curtis concluded.

Foreign Liquified Natural Gas Now Entering U.S. at Low Prices.
In an article titled "Who Knew? Looks Like We're In for an LNG Glut", the April 2009 issue of Electricity Journal noted  "In early 2000, the conventional wisdom was that U.S. domestic production capacity was on the decline, requiring massive imports of liquefied natural gas (LNG) from overseas."   

In response to this outlook, a number of major LNG terminals were constructed to import LNG from producing countries overseas, where natural gas is often an unused byproduct of oil production.  Those projects are now coming to fruition -- at exactly the wrong time for the U.S. natural gas industry. 

Electricity Journal noted " there is now broad agreement that a U.S. LNG import surge is coming."  The article noted three new U.S. terminals came online in 2008, after a record-setting LNG import total of 770 billion cubic feet in 2007. 

Most distressing for the U.S. natural gas industry is that LNG imports are being sold at incredibly low prices. With a glut of LNG terminal and tanker capacity, foreign producers now have the LNG loaded and ready to sell, and often are merely trying to cover their marginal costs of operation.  The article noted "Setting aside the need to recover massive fixed investments, the LNG itself can be sold for as low as $3 per [MMBTU], including transportation costs".

"Why would anybody sell LNG at such a low price?  Because, as Zach Allen, head of Pan EurAsian Enterprises, says, 'Some cash is better than none', especially for low-cost producers such as Qatar or for others where natural gas is a byproduct of extracting oil.", the Electricity Journal article concluded.    

Natural Gas Prices Have Crashed.  With a new abundance of resources both domestic and foreign now flooding the market, U.S. natural gas prices have crashed.  
 

Data Source: Energy Information Administration, Office of Oil & Gas

Price Not High Enough to Support Drilling.
   While good in the short term for consumers, natural gas prices this low have now largely curtailed new drilling and exploration activities.  It is generally accepted that new drilling costs from $6.00 to $7.50 per MMBTU, so until prices can rise high enough to cover those costs, the rigs will stay down.

Little Hope On Horizon. Gas producers are looking at a very bleak outlook for 2009 and expect prices to remain depressed until increased demand for natural gas catches up with the very plentiful supplies now available.  "The worst is yet to come, '09 activity is down 70-75%", stated Carter Mathies of Arista Midstream Services LLC during his presentation at the Grand Junction, CO Chamber of Commerce last week.      
 
Enter "An Inconvenient Truth" --  for COAL.
   Unexpected help to the natural gas industry may come soon, and just in time, through a "Cap and Trade" bill to limit emissions on carbon dioxide production from electric power plants.  This is a major piece of legislation that proposes to change the energy sources we use to generate power -- and the outcomes would greatly favor natural gas.  

Scientists worldwide have concluded that the raising of carbon dioxide (CO2) levels in the atmosphere is having severe impacts on our climate.  They say fossil fuel emissions must be controlled to prevent flooded coastal cities, dust bowls from Kansas to California, destruction of coral reefs and low-lying island nations, among other catastrophic effects. (See here for a good summary of the science.)

The major culprit, they say, is the burning of coal to produce electric power.  Our nation's top climate scientist, NASA's Dr. James Hansen, argues "coal is the single greatest threat to civilization and all life on our planet".  (See Hansen's full remarks here.)

Natural Gas is Winner When CO2 is Regulated.  While natural gas is also a fossil fuel and produces carbon dioxide when it is burned -- it has a major advantage over coal.  The best natural gas power plants produce less than half as much carbon dioxide per kWh of electricity as coal fired power plants.

Natural gas combined cycle gas turbines (CCGT's) are very efficient because they use two cycles to recover heat (hence the name "combined cycle").  These gas turbines are also far less costly to build than a new coal fired power plant. 

Click here to read full Article.

"Architecture 2030" Plan to Revive Economy
 

June 17, 2009
by Craig Severance

Message to Washington: You're not getting it - we're still out of work.  WInd farms and energy efficient public buildings are important, but what about the housing industry?   The recession started with the housing industry -- and can end if we bring back construction -- so lets focus on the real problem.

That's the heart of the message to Congress and the Obama administration from a group of architects and builders who are promoting a plan to end the recession by revitalizing America's housing industry.

Architecture 2030, founded by renowned architect Edward Mazria, is advancing a "One Year 4.5 Million Jobs Investment Plan" to help Americans build new energy efficient homes and renovate our existing homes to make them more energy efficient.  

Private Construction Key to Economy.  Mazria says the private building sector is "the key to reviving the U.S. economy", as building construction alone accounts for approximately 10% of U.S. GDP. 

The construction industry creates demand in every sector of the economy, from wholesale to retail, distribution, manufacturing and construction to professional services, banking and development.  Products used include steel, lumber, rubber, glass, insulation, caulking, appliances, heating and cooling equipment, windows, metal, tile, fabrics and paint.  Many of these supporting industries employ large numbers of American workers (as opposed to relying upon imports), so when construction goes down, the impact is felt all across America.

Building Sector Reeling.  Architecture 2030 notes "in March 2009, construction of residential buildings was down 48% from March 2008 and a staggering 66% down from March 2007, with no end in sight."

According to the U.S. Bureau. of Labor Statistics, over 1.7 million construction workers are still out of a job.  Mazria notes construction unemployment rates are running at an alarming 20% -- more than double overall U.S. unemployment.  These were well paying jobs, as the average salary for a residential construction worker is around $35,000,  Many more job losses have also occurred in all the supporting industries to the construction industry. 

Stimulus Bill Missed the Boat.  Except for a temporary tax credit for first time homebuyers, the massive $787 Billion Stimulus Bill passed in February did little to help the housing industry.

Click here to read full Article.



Now Can Subscribe to Energy Economy Online Updates

June 14, 2009

Energy Economy Online now has a Blog Page, with subscription features that now will allow readers to receive notices automatically when a new Entry is posted to the Website, either through RSS (Really Simple Syndication) or via e-mail notices,  You will no longer need to manually log onto the website to find out if something new has been posted -- we can notify you directly.  The Blog Page now also offers the ability to easily post Comments about new Articles.

Know When New Articles are Posted.  From this date forward, all new Articles on the Energy Economy Online website will also be posted as a New Entry on the Blog Page, which will link to the full Article on the Energy Economy Online main website.  This will be similar in style and length to the Home Page entries on the main website (i.e. it will include the title and enough of the Article to get a feel for the Article, then a link to read the full Article).

RSS (Really Simple Syndication) -- PREVIEW the New Article in a Feed Reader That Tracks Your Favorite Websites.  On the sidebar for the Blog Page are several "RSS" buttons.  A reader can Subscribe to the appropriate RSS Feed they wish to use to follow the site.  "RSS Feed Readers" are available as a free download to your computer from any number of websites,  (Most  include their own site as a default site to follow, though you can obtain generic Feed Readers from such sites as Google Reader , FeedReader, etc.)  Your Feed Reader will track websites you select and notify you when they have been updated.  (For instance, a list of your tracked sites may appear on a sidebar in the Feed Reader and when updated, a site's name would show in bold letters.)  Very cool is that the update will Preview in a window on your Feed Reader (i.e. you can actually see it).  This is an easy way to follow your favorite websites -- now including Energy Economy Online!

Follow Articles Only or Also Follow Comment Updates.  It is important to pick the right RSS "Button" on the Blog Sidebar to subscribe to the Update Notification you desire.  For instance, if you only want to be updated when there is a brand new Entry (new Article), then you should pick the "Entries" RSS button.  If you also want to be notified when a new Comment is posted, pick the "Comments" RSS button.   Energy Economy Online does not currently do Podcasts.

Subscribe to E-Mail Notices.  Another method you can choose either instead of, or in addition to, subscribing to an RSS Feed is to enter your e-mail address in the "Subscribe" box on the sidebar of the Blog, and hit  the "Submit" button.  This simply adds the e-mail address to an automated list that will receive a notification e-mail whenever a new Entry is added. 

Post a Comment to the Blog.  The Energy Economy Online blog will now accept Moderated Comments on most Articles, allowing an online "forum" to develop around Articles.  This feature will be available exclusively on the Blog Page.  Since the full Article text is actually on the main website, readers should read the full new Article text first, then return to the Blog Page if they wish to post a comment on that new Article.  "Moderated" means that all Comments will first be previewed by the Editor (to filter out spam, porn, "comment-flooding campaigns:, outrageous commercialism, etc.,) before being permitted.  Since I don't do this as a full-time job, please allow up to 48 hours for posting of Moderated Comments.  (This is not going to be great for running conversations, but those are the current limitations of this site.)  Note that if an individual abuses the civility of the Comments feature they will be blocked permanently from posting any Comments.

Structure of the Main Website Unchanged.  The main Energy Economy Online website structure will not change as a result of the addition of the Blog Page.  Thus, readers who like the logic of the main website structure will find it still works.  For instance, it will still be possible to very easily read Articles just in one topic area, and to find all the Articles that relate to just that topic area.  Many of the ways the main website functions exist because it is a "website, not a blog page".  I have found it necessary to add the Blog Page to gain the other features readers desire such as syndication, subscription, and an easy structure for posting Comments.  The meld of both formats will thus allow the full range of features offered by both technologies, so we can "have it all" now on Energy Economy Online.



Keeping Cool Part 1: Put Your Shades On

Eric Severance

Keeping The Sun Out In the First Place

June 5, 2009
by Craig Severance

As Congress considers new energy building codes to require a 75% decrease in energy consumption for new buildings by 2032, many wonder how this can be done without expensive new technologies.


Getting better buildings, however, begins with remembering simple things we may have forgotten.   These simple things don't cost much, but can make us more comfortable and achieve very large energy savings.  

40% of Cooling Load.  Roughly 40% of our cooling load comes from direct sunlight coming through windows. That's an average number.  However, many "stupid buildings" are built so thoughtlessly that major window areas face the summer sun, causing well over half of total summer heat gain. 

Keep the Sun Out.  The most important simple thing to keep us cool in hot weather is to keep powerful sunlight from streaming in through windows.  I don't mean closing the drapes -- because once the sun has already come in through the window, most of the heat is going to stay in the building (though a white surface on the outside of drapes will help reflect back some of the visible light).

Simple methods -- on the outside of windows --  can reduce summer sunlight through windows by up to 80%, cutting our total cooling needs over 30% (with more savings if you live in a "stupid" building with a lot of glass facing the summer sun). 

Click here to read full Article.



We're Coming Down ... to the Ground
 
Wall-E by Pixar Animation Studios, Walt Disney Pictures
Coming Back to What We Forgot

June 3, 2009
by Craig Severance

I saw Wall-E again this week, and was struck once more by the message of the film -- regardless of how advanced we are, we can make terrible choices if we forget where we came from.

If you are one of the few hundred people who have not yet seen this amazing film, rent it, buy it -- see it now.  If you've already seen it, it's worth seeing again.  It's basically a fun family film, but much more.

The film presents a vision of a future where humans have completely destroyed the planet, and have parked in space on giant cruise ships while robots (such as Wall-E) are left behind to clean up the mess. 

As we are now actually facing the prospect we may soon cause massive desertification of now productive farmland, acidification of the oceans, and mass extinctions of up to half the species on the planet, this vision seems eerily close to reality.


Walt Disney Pictures

Stupid People?  The humans in Wall-E were not stupid in the traditional sense.  They were very smart, having developed technology to provide everyone with the comforts of life in a society powered by highly automated systems. 


Walt Disney Pictures

As we race to oblivion ourselves, we too are occupied with technologies to entertain us and provide comforts on our ride over the cliff.  (If you think you are not tied into this, try going a week without your cell phone, television, and internet.) 

Click here to read full Article.



Better Buildings Soon?
Energy & Climate Bill Would Set National Energy Codes
 

May 26, 2009
by Craig Severance

It's important to "get things right" when a new building is constructed.  More so than perhaps anything else we create, new buildings will be with us for a very long time. 

Mistakes We Have to Live In.  Our gas guzzler cars and trucks will rust away to the scrap heap in little more than a decade.  Appliances and machinery share a similar fate.  This quick turnover assures us our mistakes of the past will not stay with us very long. 

Not so with buildings -- an energy hog building will likely still be around a hundred years from now.  Thoughtlessness in design and orientation of buildings creates inefficiencies that are often impossible or prohibitively expensive to fix.  As energy costs rise, such buildings will be a burden to their owners and renters.

Almost Half of Our Energy Use. While it is fashionable to talk about wind farms and hybrid cars, buildings are the "elephant in the room" seldom discussed, though they are responsible for almost half of U.S. energy use. 

Climate scientists have concluded we must cut global warming emissions by at least 80% within just 40 years, or face catastrophic climate disasters.  If we don't start making better buildings now, we have no hope of meeting this goal. 

Stop Doing Things Wrong.  For all of these reasons, strong measures are urgently needed to stop new buildings from being built the wrong way, when we know how to build them right.  

I know many builders who would like to build better, more energy-efficient houses.  They don't do it, because "the builder down the street" is not doing it.  Most energy efficiency measures are literally invisible. Since the added advantages don't "show well", they are not perceived by buyers to add value. No builder can add extra features without recovering the cost, so we keep "building stupid buildings" even though we have known for 30 years how to build smarter.

Getting All the "Builders Down the Street" On Board.  The way improvements in building technology achieve widespread adoption is through building codes.  If everyone has to do it, everyone does it.

When the Waxman-Markey comprehensive energy & climate bill (which is also known for its "Cap and Trade" program for greenhouse gases) was first introduced as a Discussion Draft on March 31st, many criticized its failure to take strong action on buildings.   Though the draft called for a national "model" energy building code that states should adopt, it had no teeth. An arduous campaign would have ensued for adoption in all 50 states, where special interest lobbying campaigns would likely stop or delay many.  If someone like Alaska Governor Sarah Palin wanted to grandstand and oppose requirements for better energy efficiency in buildings, there was then nothing in the bill that could be done about it.  Pockets of America would continue with no advancements in building energy codes. 

This might be acceptable if there were no overarching national and global crisis. However, global warming now threatens to inundate our coastlines and turn vast stretches of fertile American farmland into dustbowls. 

The Committee "got it" and strengthened the bill.  The bill (H.R. 2454) that passed the full House Energy & Commerce Committee last week  no longer speaks of a national "model" energy building code.  Instead, it establishes enforceable "national energy effficiency building codes" for new residential and commercial buildings.  States and local governments will be required to adopt the new national codes, or codes that achieve equal or better energy savings.  Noncompliance will result in loss of significant funding.  If they still do not do so, the Federal government itself will step in and enforce the national energy efficiency building codes.  (Nobody actually wants that to happen, but you have to be willing to do it to enforce compliance.)


Click Here to read entire Article



Pardon Me -- Your Stimulus is Showing

                                                  Photo: Solylunafamilia  
May 18, 2009
by Craig Severance

I've been very busy lately, too busy to write a new article here for 10 days.  When today I contemplated getting together a new story, I realized the busyness IS the best story.  In just the last 2 weeks, my activities have included:  

 

  • Helping an energy conservation firm prepare for a major expansion
  • Analyzing the cents/kwh a local courthouse would need to pay for a a solar electric system installed with 3rd party financing
  • Writing a memo for an investor on tax credits in the Stimulus Bill, in preparation for a possible clean energy business
  • Working with another businessman on a strategy to move the local economy in his area toward energy efficiency and clean energy

A year ago, none of this was happening.  Now, it's hard to keep up with it. 

Click here to read entire story.



The Wind does NOT Blow "Only 1/3 of the Time"

May 8, 2009
by Craig Severance

There are some things that "Everybody Knows" because we have all heard them from (parts of) the popular media:

  • "Everybody Knows" Barack Obama is a Muslim Socialist. [He's a Christian, locked in an FDR-like struggle to save capitalism.]
  • "Everybody Knows" America has all the oil we need, and environmentalists have kept us from drilling for it.  [America's production of crude oil in the lower 48 peaked in 1970-71  because of geological limits predicted in advance by renowned oil company geologist M. King Hubbert.]
  • "Everybody Knows" the wind only blows one third of the time.

Right.

The phrase "the wind only blows one third of the time" has been repeated so many times in blogs and interviews by nuclear hawks and Big Oil apologists, it has become "common knowledge". 

I have even seen this phrase creep into articles written by proponents of clean energy.  A cacophony of voices is now lamenting the intermittency of wind energy, leading many in the public to believe wind cannot offer a serious contribution to U.S. energy needs.      

20% of U.S. Electricity Needs Can Be Met by Wind by 2030.  This was the conclusion not of some Hollywood celebrity, but of the Bush Administration's Department of Energy, in a landmark study published in July 2008. 

DOE projects that U.S. wind energy can grow from installed capacity of 11.5 Gigawatts (1 GW = 1 million Kilowatts) supplying 0.8% of U.S. electricity in early 2007, to a total of 305 GW of capacity by 2030.  These wind farms would supply 20% of projected U.S. electricity needs in that year.   

The remarkable thing about the DOE study was that it envisions a major expansion of wind energy without any advancement in "energy storage" technology to "make up for" the intermittency of wind by attempting to store it for later use.

How can we do this when everyone knows "the wind does not blow all the time"?  Won't the lights go out on a calm day? 

Click here to read entire Article.



Beltway Blindness Hampers New Energy Plan



Photo: ricoeurian

May 5, 2009
by Craig Severance

All of us are familiar with the story of the group of blind men who encountered an elephant.  None of them could see the whole picture, so each of them described the elephant from his own perspective.

Blindness has also habitually been a problem for those we send to Washington, D.C.  "Beltway Blindness" is now clearly hampering the discussions about the new Energy & Climate legislation working its way through Congress.  It is easy to believe that solutions you are exploring will work, if the only people you hear from are Washington think tanks, law firms, and lobbyists.  Examples:

Click here to read entire Article.



Now is the Time for Energy Makeover

They're Handing Out the Money - Time to Get In Line 

April 30, 2009
by Craig Severance

Thinking about a title for this story was difficult.  Every title I could think up that expresses the true spirit of what I want to say sounds like one of those junk e-mails we all get.  You know:

  • Get Your Stimulus Money Now!
  • The Time Has Never Been Better!
  • Sign up for Your Rebate Now!
  • Best Loan Terms Ever!

You see what I mean.  All of the above actually applies to this story, so please don't tune out..  The factors coming together right now are making this the best time ever to do a Total Energy Makeover on your home.  I will spell out exactly how all this can work. 

Lower Your Overall Housing Costs Per Month.  Very importantly,  refinancing your home loan at today's very low interest rates can be a big cost saver,  This presents a unique opportunity to do a major Home Energy Makeover -- i.e. get everything done -- and that Energy Makeover will drastically cut your utility bills. 

The Energy Makeover -- which will increase the value of your home significantly -- can produce lower total monthly housing costs than you are paying right now, PLUS give you thousands of dollars in up-front Federal Tax Credits. 

Perfect Package.  In the middle of the Perfect Storm for our economy, government and utility companies have now responded by creating a host of incentives that add up to a Perfect Package for homeowners:

  • Lowest Mortgage Interest Rates in Decades
  • Utility Rebates for Energy Conservation Measures
  • Utility Rebates for Solar Energy
  • Federal Tax Credit for 30% of First $5000 for Energy Saving
  • Federal Tax Credit for 30% of Cost of Solar Hot Water Heating
  • Federal Tax Credit for 30% of Solar Electric

They are literally "handing out the money" right now, for a brief period  to stimulate the economy and encourage people to save energy.  Most of these incentives will expire after a set time period. 

Where Else?  Another reason to invest in your own home right now is to shore up the home front against the economic storm, by cutting your overall housing costs.  Preventing future energy cost increases from affecting your family may be one of the best things you ever did.  Cutting your tax bill also lowers your family budget.

How To Put This All Together.  The key to making the cash flow work for a major Energy Makeover is to finance the improvement.   Refinancing your home mortgage, and including the Energy Makeover costs, converts the cost into a monthly payment.  The goal is  utility bill savings that are bigger than any increase in mortgage payments --
so your total housing costs actually go down.

Click Here to read entire Article.



Smart Grid - "Enabler of the New Energy Economy"

                                                                                  Today's Grid --  not so Smart  Smart People Say......

THE SMART GRID CAN DELIVER!!
    Graphic
: U.S. DOE

April 27, 2009
by Craig Severance

Over the last couple decades we have seen a revolution in communications with the Internet, digital cell phones, GPS, YouTube, and a host of applications the digital era has enabled. 

However, your electric utility still has to count on customers calling in to let them know about power outages, and still has to send meter readers to know how much you have used each month.  

As an electric customer you are equally in the dark.  You have no idea how much your refrigerator or air conditioner consumes, or what would be the most effective way to cut your electric bill.  If you use power at night when it costs the utility far less to generate, you don't get a discount because your meter has no clock.  All you or your utility know is the total kWh's you consumed each month -- long after the fact, when it is too late to do anything about it.

Because customers receive no price signals that consuming electricity at peak times is very expensive, utilities are forced to build new power plants, just to have enough capacity available for a few dozen hours per year of peak demand.  All utility customers now pay this huge cost as part of average rates. 

The need to use renewable sources of power is also a major problem for today's electricity grid.  One of the largest and cheapest renewable power sources -- wind energy -- produces electricity only when the wind blows.  The windiest locations are also hundreds of miles away from large cities, where the power is needed most.  Bringing power from these remote locations, and finding ways to store it for use when needed, are challenges to expanding renewable's share of electricity production.

Change is Coming.  This is all about to change, spurred by the push to use more renewable energy and implement energy efficiencies, and with help from billions in the Economic Stimulus package.  Utilities are now poised to begin a massive upgrade of electric meters and the electricity transmission and distribution grid, with a number of technologies collectively referred to as the "Smart Grid".  While this upgrade is expected to cost billions of dollars to implement nationwide, it will save even more.

Click here to read the full Article.



She's So...HEAVYYYYYY!
How Congress Forces Businesses To Buy Heavy Trucks
  


April 8, 2009
by Craig Severance


Its tax time again, and as a CPA I see what my small business owners (which includes just about every contractor, realtor, lawyer, doctor, wildcatter, you name it) have purchased for their businesses last year. 

Despite $4/gallon gas in 2008, once again I see that all of the  businesses that bought a vehicle last year have purchased a HEAVY TRUCK.  Why am I not surprised?  Congress has made it very clear that is the only kind of vehicle they are supposed to buy. 


You thought Congress was pushing for energy efficiency, hybrids, better fuel economy standards, and cutting greenhouse gas emissions?  Not so much.  

Consider these choices for business owners:

Choice A:  Buy a Fuel-Efficient Auto or Light Truck.
  Pay $30,000 for a new fuel-efficient auto or light truck or van to be used 100% in my business.  How much of that can I deduct from my business income?  Because my vehicle choice is NOT HEAVY, it is automatically considered by Federal tax law to be a "Luxury Automobile" subject  to very low annual deduction limits.  I cannot use ANY immediate tax write-off ("Section 179 expense") to try to write off the purchase price.  Instead, I must write it off over 5 years -- and the first year limit is (normally) only $2,960 for an auto, or $3,160 for a light truck or van.  (In  2009 these first year limits are temporarily increased by $8,000,). 

Here is the real kicker -- over those 5 years,  if I buy a fuel-efficient car or light truck or van, the normal  "Luxury Automobile" deductions total to only about half of what I actually paid for the vehicle:  $14,160 for autos or $15,060 for a light truck or van.  The rules actually f
orbid businesses who buy a fuel-efficient vehicle from deducting the full cost of those vehicles!

Choice B:  Buy a Heavy Truck
.  Pay $40,000 for a new heavy truck with all the options.   How much of that can I deduct from my business income?  ALL of it!  Strictly BECAUSE the truck is HEAVY (more than 6,000 lbs loaded Gross Vehicle Weight) it is not subject to tax deduction limits.  The business can write off the entire cost the first year, if it uses the "Section 179" deduction.  If it chooses instead to write it off over 5 years, it can actually write off the full purchase price with no artificial limits.

If you were a business owner faced with the above rules -- what would you do?  Almost certainly, you would buy the heavy truck -- whether you need one or not.  Its a straightforward business decision.*  

Click 
here to read the entire Article. 



How to Get Bankers to Fund Green Buildings


April 1, 2009                                photo: boltron
by Craig Severance

A "comprehensive" Energy and Climate bill discussion draft was released by House Energy and Commerce Chair Henry Waxman (D-CA) and Energy and Environment Subcommittee Chair Ed Markey (D-MA) Tuesday.  The full bill draft is here and a summary is here.

The Bill is still very weak on how buildings will really be brought up to a higher efficiency standard, because the money is really not there.  Most of the goals set in this Energy and Climate Bill depend on you and me and the neighbor down the street finding the money to build better (but more expensive) new buildings, and to spend money to retrofit our existing homes and businesses.  Almost half of the energy consumed in this country is from buildings.

The Stimulus Package passed earlier this year provided funds for retrofitting government buildings and low-income housing.  Beyond that, however, "its my house, and I have to fix it."  (There's not enough Federal money -- even with wild Deficit Spending -- to even think of the government paying for all this. Nor should it.)

The Waxman/Markey Bill takes a stab at providing Federal funding for some nice grants to states for "building labeling" programs and some demonstration projects. (Just wait a few years for all that to roll out.)  It promotes innovative "property tax" or "utility bill" financing of building energy improvements -- those will be real popular in the Berkeleys and Boulders of America.  

There is no mention in the Bill of how Americans actually buy buildings and fund building improvements.  We use mortgages!  We have to go to bankers for those mortgages, and if we ask for too much money, we don't get the mortgage. 

This is why builders are afraid of (and will fight!) the new "model" building codes that would require more energy-efficient (but more costly up-front) houses and commercial buildings.  If bank lending processes remain the same, a more expensive building means fewer buyers can qualify -- and fewer buyers translates into lower prices, and an inability for a builder to recoup the extra up-front costs for a more energy efficient building. 

This is also why most homeowners have yet to ask their banker for a "Home Energy Makeover" refinancing package.  If it is time to refinance to build a new kitchen, what will your banker say if you also ask for funds for a Home Energy Makeover?  What do you do if the banker says you have to choose between the kitchen remodel, or the energy improvements?  

Sure, the energy saving upgrades for either a new home or a refinancing will pay for themselves.  They typically save more than the extra loan payments needed to fund them.  Is my banker required to include that fact in qualifying me for the loan?  There are some  "Green Loans" out there that do this, but these are now more of a "boutique" lending product and are not normal lending practice

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