Sunday, February 26, 2012

Derailed in America

Considering that it was the railroad that help propel this country into a mega economic power and connect the west to the east, it is somewhat perplexing on why many states have stalled or cancelled projects to build high speed rail lines that connect cities throughout the state.

Last year, Florida turned down federal funding for a high speed line. The governor claimed that it was cost prohibitive based on a incomplete analysis.

California is facing funding issues for its bullet train from Southern California to the Bay Area. As a result, that program is on hold.

Now, Honolulu may be facing delay or cancellation of an elevated train project. This project has been in the making since 1968. The ex-governor of Hawaii, Ben Cayetano, is running for Mayor of Honolulu and he is against this project. He claims that it will not alleviate the increased congestion on the major highways and the $5.2 billion in funding could be spent on updating the cities water and sewage infrastructure. He has vowed that if elected, he will prevent this project from being completed. Regardless of his campaign commitments and potential victory of the mayoral seat, it is uncertain that this project can be stopped by this former Governor because of the momentum and push to get this done by other external forces. The first phase of the railway will be in service by 2015.

This does bring up a general question about America. Why do we not like having a fast efficient rail system? It can promote economic growth by reducing traffic and congestion on the highways. Many work hours are lost due to traffic congestion. It also will help the environment by offering a form of transportation that is low pollutant. In addition, it will save people money considering that gas is averaging close to $4 a gallon. Most important, we are not reinventing the wheel here. We can look to the successes in Europe, South Korea and Japan where there are efficient fast rail systems.

If we want to continue to progress and maintain our economic superpower status, we need to stop having a myopic point of view of things. It seems that we are taking steps back instead of forward. We currently have to rely on the Russians to send us into space because we have do not our own rocket ship to send our own astronauts into outer space.

I am not asking for us to shoot to the moon here. I am just asking to get me from LA to San Fran in 4 hours. Is that too much? Apparently, in this climate, it is.

Wednesday, February 8, 2012

Energy Industry: The New Job Creator

There is an industry in the US that growing jobs at an accelerated rate. It is not IT industry or the financial sector. And it is not the renewable energy sector; however, you are getting warmer, no pun intended.

The gas and oil industry is going through a major resurgence on US soil. I know that we heard about the record breaking profits of oil companies and have never heard how those profits benefit the US, especially considering the subsidies they receive and the prices at the gas pump continue to rise.

According to the Wall Street Journal, this new energy boom has helped add about 158,500 new oil and gas jobs. This is the result of new drilling techniques to tap oil and gas in shale rocks. This has created jobs in the oil and gas fields, but it also has created job at the companies that provide the equipment and machinery to this industry. In addition, it has brought in revenue to the local communities where the drilling is occurring.

So is this good for us? Clearly, it is good for the oil and gas industry. There is an initial benefit in discovering more local resources of energy. It keeps the natural gas and oil prices lower. I would argue that that natural gas prices are lower than oil prices. It can also bring in tax revenue for the states and local communities. However, in places like Pennsylvania, the have not taxed this industry until now. Even with the new legislation, it is a flat fee that the state would charge, a minimum of $190,000 a well and a maximum of $355,000. Of course, the person who owns the land and leases it to the natural gas companies will benefit from the gas and oil royalties. And as I mentioned before, companies like the ones who provide the drilling technology, trucks and even the prefab housing for the workers in the fields benefit because of the increase in purchase orders from the oil and gas companies.

On the other side, there is the potential of people being hurt We all know about the documentary, Gasland, which showed a person lighting their faucet of running water on fire. It was believed that the nearby drilling for the natural gas was contaminating the local communities drinking water. In addition, a town in Arkansas suspended drilling because of the increase in seismic activity following the commencement of drilling in the area. Also, there is a real risk of a boom and bust cycle in these small towns. They reap the immediate profits with the industry being there drilling new wells, but once all the wells are complete, these companies will leave along with the potential revenue for the local business.

I am not saying this is a bad thing. I believe it does make sense to find local energy resources. I also believe that one solution to our energy problem is not feasible. Also, natural gas as an alternative to coal make sense. It is cleaner than coal. Furthermore, drilling for more oil makes sense because oil is used in many of our products and were are never going to get completely off of oil as an energy resource in the near term. However, we have to balance all of this with smart choices, including instituting appropriate environmental controls. Also, local communities should develop a rainy day fund for when these industries go away and there should be a reoccurring tax revenue from this business to cover any aftermath expense that these companies may cause to the communities, such as water contamination or other unforeseen problems. In addition, even though Pennsylvania is providing statewide ordinance requirements, I believe it really should be left to the local communities. They know better than anyone else what local ordinances are needed.

Of course the contrarian will say that if you place all these restrictions, these company will never want to drill. The one thing you have and they don't is the natural resource. These companies are not going to give up the opportunity to make millions. Sure they can go to another town over; however, if there are certain standards set at the state level to protect communities from not sacrificing its future for short term gains and some flexibility to control its ordinances, in the end these companies will accept these regulations and taxes and not walk away. It is just good business sense.