Tim McDonnell joined Climate Desk after stints at Mother Jones and Sierra magazine. He remains a cheerful guy despite covering climate change all the time. Originally from Tucson, Tim loves tortillas and epic walks.
In his State of the Union address this week, President Barack Obama gave an approving nod to the price of oil, which is now the lowest it has been in more than a decade.
"Gas under two bucks a gallon ain't bad, either," he said.
For motorists, that logic is unassailable. But depending on where in the country you live, the low oil price could come back to haunt you in unexpected ways. According to new federal data, half a dozen states with prominent oil drilling industries have taken heavy blows to their budgets. That could prompt a sweep of spending reductions and cuts to education, poverty programs, and other social services.
"It could be hugely problematic for some of these states," said Michael Leachman, director of state fiscal research at the Center on Budget and Policy Priorities.
The data show a steep drop in revenue from severance taxes, which natural resource companies pay to states when they extract oil, coal, or natural gas. When oil prices drop, oil production drops next, followed by severance tax revenue. And for states such as Alaska, Wyoming, and North Dakota, which draw a majority of their income from severance taxes, that means the budget can quickly implode. Now, policymakers in those states are scrambling to make up the shortfall in other ways and decide which state programs could face the chopping block.
Alaska's decline in revenue has been especially severe:
The Energy Information Administration report notes that Alaska's severance tax income—which provides three-quarters of the state's budget—went from $5 billion in 2012 to practically zero in 2015. As the New York Timesreported, that drop has the state's governor considering re-instating an income tax for the first time in 35 years. Meanwhile, legislators in North Dakota are considering cutting $100 million in spending after tax revenues came in nearly 10 percent lower than expected. Even though oil production there hasn't changed much, the EIA found that "total severance tax revenues fell from more than $3.5 billion in 2014 to $2 billion in 2015 as oil prices declined."
A similar story is playing out in Oklahoma, where, the EIA notes, "collections from state sales taxes and individual and corporate income taxes are also significantly affected by oil and natural gas prices":
Trying to predict oil prices far out into the future is a fool's errand, so it's hard to say how lasting the damage to these states could be. Still, there's reason to think that the oil market is in for a bumpy road ahead, thanks to a growing market for electric vehicles, increasing fuel efficiency standards, and high volumes of oil coming out of Saudi Arabia and other OPEC countries. According to Bloomberg, oil demand in the US is flatlining even as nationwide oil production increases:
The current tax crisis could signal an urgent need for oil-reliant states to diversify their tax base, Leachman said.
"There's no question it's not sustainable in Alaska," he said. Other states are at risk of following suit. "You're going to have to rethink your strategy for funding public services if you think oil and gas prices are going to stay really low levels."
During his State of the Union address Tuesday night, President Barack Obama reiterated his call to eliminate federal subsidies for fossil fuels in an effort to speed up the transition to cleaner energy sources. It's something he's asked for nearly every year of his presidency, and it hasn't happened yet. But this year, he added something new: a plan to charge oil and coal companies more for leases on federal land, to offset the damage their products do to the climate.
It was just the latest piece of bad news for the coal industry, which is the nation's No. 1 source of greenhouse gas emissions. Everywhere you look, there are signs that 2016 is shaping up to be one of the worst years coal has had in recent memory.
The onslaught started at the end of December, when China announced plans to close 1,000 coal mines as part of its campaign to reduce crippling air pollution and the world's highest greenhouse gas emissions. China also plans to reduce its share of electricity production from coal to 62.6 percent by next year, down from 64 percent now, according to Bloomberg. That's great news for Chinese citizens, who have recently been subjected to air pollution up to 40 times higher than what the World Health Organization considers safe. But it's a big letdown for coal producers in the United States, who have been increasingly desperate for new foreign markets for their product; coal demand in the United States has dropped 10 percent just in the last three years. The assumption that China's seemingly insatiable growth is a safe long-term bet for coal is vanishing—in fact, the latest official estimate is that Chinese coal consumption already peaked back in 2013.
As domestic and foreign demand dip, US coal production has also crashed to a 30-year low, according to federal data released this week. It's the latest low point of a trend that has been heading downhill since Obama took office:
That trend is being driven somewhat by electricity companies' anxiety about the Clean Power Plan, Obama's new rules to limit emissions from power plants. But even more importantly, coal is getting hammered by competition from cheap natural gas. Since Obama took office, natural gas production in the United States has jumped 20 percent, and prices have correspondingly fallen to record lows. As a result, the obvious choice for utilities is to burn natural gas instead of coal. And despite protestations from Republican legislators, coal country seems to be preparing for the fact that its historic lifeblood isn't coming back anytime soon. An editorial in this week's Lexington Herald-Leader argued that "no one should expect a revival of Eastern Kentucky coal jobs when not even Kentucky's electric utilities can afford to buy the region's coal."
Read more here: http://www.kentucky.com/opinion/editorials/article54352645.html#storylink=cpy
All of this is devastating for coal companies' bottom lines. One recent study found that in the last five years, US coal producers have lost 76 percent of their value. The latest casualty is Arch Coal, the country's second-largest coal company, which filed for bankruptcy on Monday in the hopes of eliminating more than $4.5 billion in debt. As Think Progress reported, "In early 2011, stock in Arch Coal peaked at $260 a share—on Monday, shares in Arch Coal were worth less than a dollar."
With all that said, coal isn't quite out of the game yet. Even with Obama's climate plan, the United States is on track to get 26 percent of its power from coal in 2040. And we're still a ways off from being on track to meet the ambitious global warming limit agreed to in Paris. But the year is young—there's plenty of time for coal's prospects to get even worse.
If history is any guide, climate change is likely to make a prominent appearance when President Barack Obama gives his final State of the Union address Tuesday night. He's brought it up in every one of his previous SOTU speeches, most strongly in 2015, when he said that "no challenge—no challenge—poses a greater threat to future generations than climate change."
Along with dire warnings about rising sea levels, droughts, and other climate impacts, Obama has made an evolving series of commitments to the American people and demands to Congress regarding climate action. He has called repeatedly for a cap-and-trade bill, for an end to fossil fuel subsidies, for federal investment in renewable energy, and for American leadership in the international fight against global warming.
It's safe to say that his speech Tuesday, at 9 p.m. EST, will revisit some of these ideas. Obama is likely to bring up his administration's success in shepherding the Paris Agreement—the first global pact to fight climate change—that was adopted in December. And he might mention some of the remaining items on his climate change to-do list, which include setting new emissions standards for heavy-duty trucks and fending off Republican attacks on his new regulations restricting power plant emissions.
For some clue about what we might expect to hear this year, we took a look back at the climate-related statements from Obama's previous SOTU speeches. Then we compared his proposals to what actually happened. Turns out, while Obama has pretty clearly done more on climate change than any of his predecessors, there are plenty of goals that remain unfulfilled. Watch the video above for a complete rundown.
In November, environmentalists were ecstatic when President Barack Obama decided not to grant a permit for the Keystone XL pipeline. But TransCanada, the company behind the project, was not so happy. On Wednesday, it filed a lawsuit against the federal government seeking to overturn the permit rejection. At the same time, it gave notice that it plans to pursue compensation under the North American Free Trade Agreement, to the tune of $15 billion.
In its NAFTA complaint, TransCanada alleges that "the politically-driven denial of Keystone's application was contrary to all precedent; inconsistent with any reasonable and expected application of the relevant rules and regulations; and arbitrary, discriminatory, and expropriatory."
In other words, TransCanada thinks it got misled and ripped off by the Obama administration, just to satisfy a wacky cabal of tree huggers. Now, it wants the US Treasury to cough up an apology in cash.
"It's very troubling if every time the president makes a decision in the interest of the people, he's risking an enormous liability of this sort."
NAFTA is a trade agreement between the United States, Canada, and Mexico that's meant to protect trade between those countries. One provision of the agreement, Chapter 11, allows a corporation in one country to sue the government of another country if it feels that country's regulations unfairly discriminate against it. It's a provision that has always been highly controversial with environmentalists, since it provides an avenue for corporations to contest another country's environmental policies, as TransCanada is doing now.
That strategy is unlikely to succeed, according to David Wirth, a professor of international trade law at Boston College and a leading expert on international environmental disputes. Wirth said he actually used this very question—could TransCanada win a NAFTA case against the United States?—on a recent exam, and the answer was pretty clearly no. First off, although TransCanada claims to have spent around $3 billion preparing to build the Keystone XL pipeline, it's not clear that this would actually count as an "investment" that was illegally taken from the Canadian company by the US administration.
"They knew that without the permit approval the project wouldn't go forward," Wirth said. "So any money spent in advance is purely speculative."
Second, although the complaint claims that "environmental activists…turned opposition to the Keystone XL Pipeline into a litmus test for politicians—including US President Barack Obama," it's not clear how that really constitutes a legal problem.
"The president, in making a decision in the national interest, has to weigh a variety of factors, including arguments of environmentalists," Wirth said. "Just because there was political disagreement doesn't mean the process was defective."
But most importantly, Wirth said, TransCanada's complaint doesn't distinguish between a bureaucratic trade decision that treated a foreign company unfairly—the kind of action NAFTA is supposed to prevent—and a decision made by the president for the benefit of public health and the environment.
"The intent of NAFTA was not to require governments to pay every time they take an action that's in the public interest," Wirth said. "It's very troubling if every time the president makes a decision in the interest of the people, he's risking an enormous liability of this sort."
The US has a good track record on NAFTA suits brought by foreign corporations, having lost just one of 14 since the agreement came into effect in 1994. Wirth said NAFTA tribunals have tended to set a pretty low bar for the minimum standard of treatment foreign companies should expect to receive. In other words, TransCanada would have to prove that it was treated exceptionally unjustly by the Obama administration, not just that it had a frustrating experience.
As for TransCanada's federal lawsuit seeking to reverse Obama's ruling, the odds for that aren't great either, since US courts have previously found that cross-border pipelines really are the president's decision to make, according to Reuters.
Sorry, TransCanada. Maybe try for the permit again in 2017 if a Republican wins the White House. Until then, you might be out of luck.
For billions of people around the world, the most immediate threat posed by climate change is at the dinner table, as staple crops face a steadily worsening onslaught of drought, heat waves, and other extreme weather events. The United States certainly isn't immune to these challenges; for proof, just look at California, where an unprecedented drought has cost the state's agriculture industry billions.
Still, the conventional thinking among many scientists is that developing countries, particularly in sub-Saharan Africa and Southeast Asia—where people are typically hit harder by food price spikes and generally more reliant on agriculture as a primary source of income—are the most vulnerable to food-related climate impacts.
A paper published today in Nature may add a wrinkle to that assumption. Scientists often track the impact that an individual weather disaster has on crops (again, see California), but the new research takes it a step further.
A team of scientists from Canada and the United Kingdom compiled the first-ever global tally of how weather disasters over the past 50 years cut into production of staple cereals. After merging a database of global weather records with a UN record of country-level crop production, the researchers found that, as a rule of thumb, droughts and heat waves typically cut a country's cereal production by 10 percent. That basically accords with predictions from the UN Intergovernmental Panel on Climate Change's predictions for agricultural vulnerability in the future.
But unexpectedly, the researchers also found that the impacts were 8 to 11 percent more severe in developed countries than in developing ones.
"That was a surprise to us," said Navin Ramankutty, an agricultural geographer at the University of British Columbia.
Ramankutty said it's not yet clear why droughts and heat waves tend to hit yields in the United States, Europe, and Australia harder than those in Asia, Africa, and Latin America. But he suspects it relates to how farmers set their priorities. In developed countries, the emphasis is often on maximizing profit with big monoculture farms that work great in good climates but get trashed when the weather turns sour. Farmers in developing countries, by contrast, may prioritize minimizing their risk, taking a smaller yield in exchange for better resilience.
Of course, these findings don't mean developing countries are out of harm's way. They still face major challenges from climate change, since comparatively small yield losses can have an outsized impact on local economies and food security. But Ramankutty says the new research shows that even in the developed world, farmers may be more at risk from climate change than anyone previously realized.