Cap-and-Trade Survives Attack From Oil Companies

Aug 25th, 2014 | Posted by

Earlier this year oil companies began spinning up a new attack on AB 32 and the state’s wildly successful cap-and-trade system. They convinced a few moderate Democrats that applying cap-and-trade to fuels this coming January would ruin their political chances this November, as it would supposedly cause gas prices to soar. Those Democrats wrote a letter asking for the state to delay subjecting fuels to the cap-and-trade system.

Today the Legislature rejected those claims and killed a bill that would have delayed including the fuels in cap-and-trade auctions:

Assemblyman Henry Perea, D-Fresno, warned that the change would hurt residents of inland districts where unemployment hovers above the state average and long commutes are commonplace. His Assembly Bill 69 would have delayed bringing transportation fuels under the cap-and-trade program. Numerous moderate Democrats signed a letter supporting the concept.

Democratic leaders and environmentalist allies pushed back, saying California must stay the course if the law is to achieve its purpose of curtailing the emissions blamed for global warming. Now Senate President Pro Tem Darrell Steinberg, D-Sacramento, has all but ensured the change will proceed as planned, saying in a letter to Perea that AB 69 will not receive a hearing before the Aug. 31 end of the legislative session.

“I share your concern about the costs of combating carbon emissions. But the cost of doing nothing is much greater,” the letter reads.

Steinberg is absolutely right to point out that the cost of doing nothing is indeed much greater for the Central Valley and the state as a whole, especially as the drought continues to worsen. Kudos to him for killing this terrible bill.

The high speed rail project is one beneficiary of Steinberg’s move, as it and other sustainable transportation projects are counting on billions in cap-and-trade revenues. Had fuels been exempted, that would have meant even less money would be available for HSR and other important transit projects.

It’s possible that Perea will try again in 2015, but he will have far less leverage. Democrats won’t be quite as scared of their electoral prospects, as the November 2016 election would be nearly two years away and in a presidential cycle as well. Never say never, but I would be surprised if this threat ever materialized again.

  1. Donk
    Aug 25th, 2014 at 22:44
    #1

    Can you please qualify your statement that CNT is “wildly successful”? Do you mean that it is raising more money than expected? Or that is will have a significant impact on the environment?

    Ted Judah Reply:

    Wildly successful at hurting sales tax revenue, is more like it.

    The policymakers seem not to acknowledge that higher consumer prices for gasoline depress sales tax revenue which in turn hurt public transit and local governments dependent on that revenue. It hurts poorer cities and transit districts disproportionately. Perea probably figured this out and wanted to not create another policy that exacerbates California’s growing inequality.

    This isn’t a progressive tax, so it’s always hard to understand why progressives rally behind cap and trade so much. (Oh wait, no it isn’t…)

    BruceMcF Reply:

    So the argument is that putting a price on carbon that is a small fraction of the cost imposed by dumping the CO2 into the atmosphere is regressive because doing so reduces the effectiveness of a regressive tax?

    StevieB Reply:

    So your argument is that increasing gasoline prices will depress sales tax revenue because people will drive less and gasoline consumption will go down. This will hurt transit because they get a small amount of funds from sales tax. A bizarre argument. How much is this small sales tax revenue offset by increased farebox collection from automobile drivers riding transit or the benefits from lower vehicle miles traveled reducing pollution and congestion? Would the decrease in gasoline demand reduce the price at the pump?

    Ted Judah Reply:

    Cap and trade is more sophisticated than that. It’s basically asset backed securities/derivatives/sub prime mortgages that are bought and sold like trading cards on the assumption that pollution is cheaper than conservation or compliance.

    Having not spoken to Perea or his people directly, my guess is that because Fresno (where he represents) has no carbon neutral mass transit or really any mass transit, he knows his constitutes get 100% of the cost and 0% of the benefit. And he knows the Democratic supermajority hangs by a thread in Legislature while Brown can win reelection without the CV.

    As fort why higher pump prices undercut sales tax revenue, you are missing the obvious connection. The largest component of sales tax revenue is from the sale of new vehicles themselves. Higher gas prices encourage buyers to purchase more efficient, cheaper cars. Some families might hold off and not even buy a second car or new vehicle.

    Meanwhile, any decrease in gas consumption doesn’t drive prices down especially in California because the margin is shipped to China instead.

    Personally, I have realized the person who figures out how to synergize electric cars and HSR is California’s next billionaire. We need to realize if we don’t produce green technology domestically, no one else has an incentive to do so. We can’t have it both ways, building regulations around technology that doesn’t exist.

    Jonathan Reply:

    Personally, I have realized the person who figures out how to synergize electric cars and HSR is California’s next billionaire.

    Ted, you *really* need to stop taking whatever-it-is that Synonymouse is taking.

    JCC Reply:

    Ted, that disease is called “Syn in mouth disease”.

    synonymouse Reply:

    Perea is worrying about the political consequences of a sudden rise in gasoline at the pump prices in California.

    From my limited observations it seems auto use is markedly up, at least in my part of NorCal. One would think simplistically that would favor higher prices in time. Add the cap and trade gas tax and you have the prospect and problem of unhappy voters.

    Joe Reply:

    Simplistically.

    Realistically no. It’s a global market.

    synonymouse Reply:

    In the global market a lot of gasoline is being burned. tuk-tuk here; tuk-tuk there

    Alon Levy Reply:

    So far, the people doing car-based synergies are existing billionaires… which is to be expected. Websites you can develop on basically no capital, so you can become a billionaire from scratch. Transportation systems are insanely capital-intensive, so they’re built by people who are already rich, large corporations, or governments.

    Ted Judah Reply:

    Websites can’t create wealth though, they can only transfer economic rents from one place to another….

    I recognize that manufacturing is capital intensive, but I think that for the amount of technology already developed, the US can’t be satisfied with imitating what the French and Japanese already build. We need a technology that can act as the catalyst for carbon-neutral automobiles and airplanes.

    For example, I got laughed at by many here for proposing an HSR design that would charge electric cars while aboard to maximize range. And what about using regenerative braking on trains to generate electricity back into the grid?

    Alon Levy Reply:

    Regenerative braking on trains isn’t all that new.

    And websites/apps totally can generate wealth. Many of the more socially disruptive ones – Craigslist, AirBnB, Uber – match buyers to sellers in a way that cuts most of the middlemen and reduces search costs. Google, Wikipedia, etc. make it easier to find information.

    nslander Reply:

    “Cap and trade is more sophisticated than that. It’s basically asset backed securities/derivatives/sub prime mortgages that are bought and sold like trading cards on the assumption that pollution is cheaper than conservation or compliance.”

    Not really. The derivatives scheme as we know it is not “asset-backed”. If you were permitted to charge a fee for placing bet on a business in which you had zero interest to fail in the cap and trade market, then maybe.

    jimsf Reply:

    Its simple. If gas prices go up, people have less money to spend on other things which just hursts other areas of the economy – and the realted sales tax ravenue

    Alon Levy Reply:

    On the contrary: fuel doesn’t pay sales tax in the US, but other goods do. So shifting consumption away from fuel and toward other goods and services mean more sales tax revenue rather than less.

    Paul Druce Reply:

    California has sales tax on gasoline actually. Currently 2.25%, used to be 8.25% before they decided to screw with it for accounting weirdness (excise tax now varies to match the 6% so they can use it in different places). Diesel is taxed at 9.25%, jet fuel 7.5%

    http://www.boe.ca.gov/sutax/strf.htm

    Jonathan Reply:

    There you go again, making shit up out of whole cloth. Or are you quibbling about “sales tax” versus “excise tax”? I’m curious: do you also claim that VAT is not a sales tax?

    Fact: in California,”gasoline” incurs both a sales tax and an excise tax. Schwarzenegger juggled the balance between the two (sales tax used to be half again the excise tax) under a formula designed to keep the total price to consumers the same as before the re-juggling. Go check CA.gov, and stop making shit up to support whatever arbitrary position you take. Some people would call that “lying”.

    Alon Levy Reply:

    I am in fact quibbling about it. The excise is deeded to roads, no? At least, that’s how I understand this. The importance of this is that if excise tax revenues go down because people are driving less, than to a first-order approximation the need to spend money on roads decreases proportionately. Normal-country VATs are different, since they’re not directly deeded to roads.

    More to the point, are those various transit sales taxes even levied on fuel?

    Alon Levy Reply:

    …did I just say “than” when I meant “then”?

    It’s 6 am here. I’ll look at the vitriol after I wake up in what is hopefully going to still be early afternoon.

    Jonathan Reply:

    Alon, some US states pay both *sales tax* and *excise tax* on “petrol”. Fact. I genuinely understand why you make such blatant asertions of non-facts, when they are trivially checkable. I also genuinely cannot fathom where you dredge these non-facts up from. It’s … like believing everything Rush Limbaugh says about liberals, is true. WhichI regard as the exact equivalence of your asserting “what French politicians and pundits say” is a more accurate source than. .. official OECD data.

    Alon Levy Reply:

    At least the excise tax is deeded to roads, so it’s not the same as the sales tax you pay on furniture or toothbrushes or eating out. (I’m not sure about the sales tax, although it appears to go into dedicated programs a well.) It may be called a sales tax, but it’s not; it’s a dedicated program with a lockbox. In particular, loss of excise tax revenue – and I think also sales tax revenue – due to reduced fuel consumption is not going to affect general government finances.

    Jonathan Reply:

    Alon,

    Fact: some US states pay both *sales tax* and *excise tax* on “gasoline. California is one such state.

    I really don’t understand. Why do you *habitually* lie about simple, easily-established facts which could be checked by spending 30 seconds doing a Wikipedia search? Are you pathologically dishonest? A reasonable person could certainly reach that conclusion.

    Alon Levy Reply:

    You’re repeating the same comment over and over, as if I’m not actually responding, without actually addressing what I’m saying. Don’t be like Robert Allen.

    Jonathan Reply:

    and, Alon: if you don’t like so-called “vitriol”, then quit it with the bigoted, and occasionally *deeply* offensive, untruths.

    Ted Judah Reply:

    That is the problem:

    Demand for gasoline is highly inelastic because you can’t just up and move. Most US petroleum consumption is non-discretionary…so higher prices just curtails spending elsewhere.

    Jonathan Reply:

    Oh, really? And yet “transit-oriented development” advocates — the very same lunatics who think people *want* to live right next to an HSR train station — keep assuring us that people *will* just up and move. To “transit-oriented development” on top of, or right next to, a noisy rail station. Complete with its FRA-compatible ~110 dB horns, and bells, in all likelihood.

    Ted Judah Reply:

    Apples and oranges, my friend.

    If you create new housing stock that has transit in its backyard, then a certain number of people will switch over time, (figure 5-10 years)

    But in the intervening years, gas prices can fluctuate a lot. Every week in fact. And because refiners can curtail production to meet declining demand, the only thing that changes is that more people live in transit oriented development after you build more, but the other problems stay the same.

    Jonathan Reply:

    If you create new housing stock adjacent to an airport runway, then a certain number of people will move there? Yes or no?

    Ted Judah Reply:

    Do they commute to work on an airplane? Is it a nice design? Are the people deaf?

    Airports are not a magnet for housing but they are for commercial property.

    StevieB Reply:

    http://www.aviationhomes.com/

    StevieB Reply:

    http://www.aviationacres.com/

    Alon Levy Reply:

    That’s in the short run. In the long run, it’s more elastic, which is why Saudi Arabia tends to push for more oil production – it doesn’t want high short-term prices to make consumers look for alternatives.

    But think about it another way. Fuel taxes, including extra costs coming from cap-and-trade, are always going to make people spend less money on fuel exclusive of taxes. The taxes shouldn’t count in your calculation, since they just get plugged back into the economy; the things the state is spending the cap-and-trade money on it would’ve raised other taxes to fund.

    Jonathan Reply:

    there are a number of unsubstantiated assertions here.

    * elasticity of consumer spending on fuel. Ted asserts just about the exact opposite, due to inelasticity of residency and jobs. What is the “long term”? (“in the long term, we are all dead”. Frightenlngly appropriate, today.)

    * Taxes (at least on fuel) “just get plugged back into the economy”. That is *far* from obvious. Especially given the very high (by world standards) costs for construction in California. Are you *really* claiming that “monopoly rents” going to the Transportation-Industrial Complex are growth-positive? I can’t see the difference between that and what George HW Bush called “voodoo economics”.

    * California would have created new taxes, to pay for the things which politicians decide to spend Cap-and-Trade on. That is *highly* dubious and contentious, to say the very least.

    Alon Levy Reply:

    * What I mean by long-term is the effect of high fuel prices on a scale of more than a few years. Hence, Saudi Arabia’s push for higher production quotas at OPEC most of the time. (I don’t remember the citations now, but can go look for them if you’re feeling ornery.)

    ** Since we both agree that the cap-and-trade revenue is going to go to low-efficiency uses like public construction, the question boils down to whether, absent cap-and-trade, California would’ve funded the same projects by other means. My belief is that it would have. The reason is that with or without cap-and-trade, California doesn’t have enough money to complete the system on a reasonable schedule, and yet politicians act like it’s a done deal; it suggests that they’d scrounge various tax sources to pay for it, just as they’ve commandeered part of the cap-and-trade revenue. It might not be a straight tax, but could come in flavors like tax increment financing, voluntary contributions by big corporations that happen to need to buy political goodwill, or local taxes paying for what’s supposedly just local connectivity but in practice includes core parts of the system. Yes, it’s contentious. But it’s not outlandish.

    Donk Reply:

    Jonathan is by far the angriest person on this blog.

    Jonathan Reply:

    you need to meet me in person.

    Donk Reply:

    Is this you?

    https://www.youtube.com/watch?v=NliooKg12yE

    Jonathan Reply:

    Not at all. I’m very affable and easygoing and a good host.

    jimsf Reply:

    raising gas prices does not shift consumption away from fuel towards other things. Most peoples fuel costs are fairly fixed, they have to drive to do. So to make up the difference, they cut out luxuries like eating out, movies, family trips etc.

    Jonathan Reply:

    jimsf:
    Yes. this “have to drive”, resulting in “fairly fixed” fuel costs” (by volume), is an example of “inelasticity”.

    Richard Mlynarik Reply:

    Bizarre, no, but par for the course.

    A carbon tax (or CNT or anything, anything) would be “wildly successful” if and only if it reduced emissions by more than, say, 70%. Did that happen while I was sleeping? Because it sure would be nice if the planet, the entire planet, weren’t utterly doomed.

    jimsf Reply:

    The planet isn’t doomed. People may eventually be doomed. But the planet will continue to be a big rock chunk of rock hurtling through space. The planet is surely not concerned whether or not people are trampling around on it. People act like the planet is an abandoned kitty cat that needs all kinds of love and attention. Meanwhile so long as the changes happen slowly enough, humans, using technology, will adapt as needed.

    jimsf Reply:

    In the 70s the “scientists” were telling us we were headed for another ice age, just a matter of time. personally Id prefer ice age as I like winter.

    Jonathan Reply:

    You are misinformed. In the 70s I was hearing about where sea-level would be, if the Western Antarctic ice-sheet melted. You don’t even want to hear about estimates of sea-level if the Eastern Antarctic ice-sheet metls.

    Don’t conflate what the *media* tells you, with what scientists are actually saying.

    jimsf Reply:

    Well it wasnt the media, it was the school teachers.

    jimsf Reply:

    in 72,73,74

    Alon Levy Reply:

    I had school teachers who weren’t fully aware of the difference between the ozone hole and climate change, in 1999, years after the Montreal Protocol. This does not mean the scientific community was unaware.

    The 1970s ice age bit is a media scare stories coming from something some scientists – very far from the consensus as the one today about climate change – said, to the effect that if global warming weren’t happening, the Earth was about to enter a glacial period again, on a geologic timescale.

    Reality Check Reply:

    You don’t even want to hear about estimates of sea-level if the Eastern Antarctic ice-sheet melts.

    I recently did some research into what the sea-level rise would be if all the Earth’s ice melted using The Googles. The consensus among multiple credible-seeming sources was in the range of 200 to 220 feet, with the median appearing to be around 216 feet.

    Mattie F. Reply:

    Although of course the median consensus for the next 100 years is about a foot.

    jimsf Reply:

    This would have some benefits. Granted it would be an inconvenience. But isnt everything. For instance a two hundred foot rise would restore californias inland sea. imagine the sacramento and san joaquin valleys fill with water and ringed with great beaches all along the edges of the foothills, most of the current resevoirs are in that elevation range, well a little above around 400 feet.. It would be a different california, but still very spectacular

    Joey Reply:

    Who cares if your mortgage is underwater when your entire house is underwater.

    jimsf Reply:

    Of course the state would have to plan for it and it wouldn’t happen over night, But in a future world california it would be nice to have the sea.

    jimsf Reply:

    oh and SF would become a cluster of islands!

    jimsf Reply:

    judging by this list a great deal of Sf would do very well

    la probably not so much.

    joe Reply:

    Not when it’s too hot for humans and mammals. There are physical limits to what we can endure and we’ll start seeing those limits with a hot Earth.

    Mattie F. Reply:

    Simply by observing the range humans and other mammals inhabit, even the worst-case scenarios offered by the IPCC over the next 100 years of 8-degree increases (about 5-times what we’ve seen over the last 100 years) aren’t going to make SF uninhabitable. It wouldn’t even make SF as hot as LA is now.

    Alon Levy Reply:

    Sorry, but no. The beauty of coastal environments is associated to stable coastlines. Coastlines that formed from recent flooding are going to be very ugly, with flotsam, puddles, and uprooted trees. The scenery you see after a hurricane or flood is never pretty; there’s a reason. In the very long run the flotsam will clear and things will look nice. And in the long run, people can recover from the loss of half the population to a plague.

    This is also why capitalists who mock environmentalists by urging them to invest in property that’s going to become waterfront after sea levels rise are so wrong. Climate change is going to make valuable things like farmland at the cold edge of habitability (in the Bolivian Andes, climate change is opening new land to quinoa production), trade routes using the Northwest Passage, and natural resources buried under glaciers. Some people are buying land in Greenland that has natural resources that can’t be extracted now, but will become extractable once the edges of the ice sheet start going away. But new waterfront property? Meh.

    joe Reply:

    Planet hot enough to have melted all ice sheets would be unfriendly to humans.

    The problem is that we cannot survive if our skin temperature exceeds 35 °C for more than a few hours. Although many people live and even work in temperatures of 45 °C or more, sweating keeps their skin cool as long as it’s not too humid.

    Put in technical terms, human survival depends on a wet-bulb temperature of less than 35 °C. This is the temperature recorded by a thermometer covered in a wet cloth and kept well ventilated.

    “The wet-bulb limit is basically the point at which one would overheat even if they were naked in the shade, soaking wet and standing in front of a large fan,” Sherwood told USA Today.

    At the moment, virtually nowhere on Earth has a wet-bulb temperature of more than 30 °C. But with a global rise of 11 °C, huge areas would have wet-bulb temperatures of more than 35 °C for part of the year. According to the climate model used by the team, these regions would include much of the eastern US, the entire Indian subcontinent, most of Australia and part of China.

  2. Roger Christensen
    Aug 26th, 2014 at 07:18
    #2

    Does this mean no more “Hidden Tax” ads?

  3. JJJJ
    Aug 26th, 2014 at 07:59
    #3

    If Henry Perea is concerned about long commutes, he should work harder to limit sprawl.

    synonymouse Reply:

    You mean like no base tunnel to Mojave?

  4. les
    Aug 26th, 2014 at 10:58
    #4

    Finally American politicians willing to bite the bullet and do what is necessary. Republicans will never capitulate and California is the only hope this country has. A couple of researchers once again proved the latest climate change deniers wrong. Higher earth temps have not been taking a hiatus the last 20+ years but have been unknowingly occurring deep in the Atlantic. Not only are we screwing up the air but doing quite a number on sea life. I hope the C&T revenue is quick to alleviate the strain on those who are required to make the greatest modifications in order to accommodate the higher gas prices.

    Alon Levy Reply:

    Finally American politicians willing to bite the bullet and do one fortieth of what is necessary.

    Corrected.

    (California estimates it’ll raise about $11/t; the estimates coming out of the Stern Review point to a social cost of nearly $500/t.)

  5. Reality Check
    Aug 26th, 2014 at 15:19
    #5

    Woman uses 100dB “train horn” to get signatures for SMART quiet zone

    Janet Shirley, of San Rafael Meadows, said quiet zones are needed to keep people from being constantly inundated by the noise of the train horns sounding at each of the 10 public crossings in San Rafael included as part of the first phase of the project, which will run from Santa Rosa to San Rafael.

    “The train horn sound is 96 to 110 decibels, which is very loud. Louder than a jackhammer,” Shirley said. “There’s going to be severe noise impact.”

    She said the residents of Vista Marin, San Rafael Gables, Contempo Marin, San Rafael Meadows, Los Ranchitos, Redwood Village and Lincoln Hill will be subjected to the sound of four trains passing through the city each hour during peak hours.

    In an effort to educate the community, Shirley has borrowed a train horn from a friend that sounds at 100 decibels and runs off a car battery. She and a group of neighbors are taking the horn to each crossing in San Rafael and demonstrating the noise.

    “We felt without the physical presence of a train horn, everything is abstract for most people,” Shirley said. “People generally don’t get it unless they hear it and experience the level of noise pollution.”

    She said residents are generally shocked by the sound.

    “When they hear those horns, they run out of their houses and ask what the heck is going on,” Shirley said. “We’re circulating a petition to ask the city for a quiet zone and several hundred people have already signed it.”

    synonymouse Reply:

    Four trains an hour? Won’t take long to blow thru their operating funds stash.

    Put together no horns and some Bugatti Doodlebuggies, some yuppies in Beemers and and some cowboys in semi’s. Murphy’s and Darwin’s Laws.

    Alon Levy Reply:

    I like the idea of actually demonstrating noise on the spot, and I think it should be a standard part of any public outreach meeting, including for grade-separated HSR: “stand on the white line in the back of the room while I play a calibrated recording of HSR noise as heard 30 meters from the tracks.” There could of course be multiple recordings, corresponding to different distances from the tracks, and to outdoor noise vs. indoor noise with triple-glazed glass, which the HSRA is of course going to offer to pay for.

    Clem Reply:

    The problem with this approach is that it leaves out the frequency of occurrence of noise events, and decouples the new noise from the ambient sound environment to which it is added (which varies by time of day). All these parameters factor heavily into the perceived noise impact. You can’t really disembody a noise, even with a well-calibrated playback system.

    Eric M Reply:

    I read SMART was already making all intersections quiet zone ready and the cities need to pay to complete crossing to be that way with curbs and dividers. The close proximity of some houses in downtown San Rafael to the tracks should get quiet zone crossings. Like here.

    Reality Check Reply:

    San Rafael residents urge city to move forward with SMART quiet zones
    Quiet zones urged, but officials concerned safety could be jeopardized

    A crowd of more than 100 people gathered Wednesday night in San Rafael to voice support for the creation of quiet zones along the Sonoma-Marin Area Rail Transit train line that is scheduled to be operating in 2016.

    Residents met at the San Rafael Community Center on B Street to hear a presentation about quiet zones and submit comments to Mayor Gary Phillips and Councilwoman Maribeth Bushey, who comprise the city’s SMART subcommittee. Those who spoke expressed concerns about the amount and level of noise they would experience from train horns, encouraging the city to move forward with quiet zones.

    […]

    When asked by the public why the city isn’t simply moving forward with the quiet zones, [Mayor Gary] Phillips said there are risks associated with having a quiet zone. He said he’s looking to the community for help in deciding whether to establish them.

    “I’m worried about the kid on a bike with a headset,” Mayor Gary Phillips said. “I’m not completely comfortable assuming that risk.”

    […]

    PHOTO: San Rafael resident Ken Dickinson demonstrates an air horn before a meeting about SMART train quiet zones at the San Rafael Community Center in San Rafael on Wednesday. Dickinson says his home-built air horn simulates the volume of a train horn.

    Michael Reply:

    Um, flashing lights and gates, to the mayor’s concern about the kid on a bike…

  6. Reality Check
    Aug 26th, 2014 at 17:41
    #6

    Two firms drop out of bidding for Valley’s high-speed rail work

    Two would-be contenders for a contract to design and build the second stretch of a high-speed train line through the San Joaquin Valley have dropped out of the competition, leaving the California High-Speed Rail Authority with three contractors chasing the job.

    The withdrawal of the two contracting teams potentially reduces the competitive pressure on the remaining firms bidding for the 65-mile job from Fresno to the Tulare-Kern county line. The state estimates the project’s value at between $1.5 billion and $2 billion.

    […]

    synonymouse Reply:

    Go Team Tutor

    Rah Rah Rah

    Drunk Engineer Reply:

    Meanwhile in Seattle:

    Costs are racking up. The contractor is now asking for an additional $188 million to cover unexpected expenses, much of which the state refuses to pay, so it looks increasingly likely that the contractor could sue the state—or, if costs rise too much, possibly abandon the project.

    Two of the top donors to the campaign to approve the tunnel were also—wait for it—THE TWO COMPANIES WITH A CONTRACT TO BUILD THE TUNNEL. Funding a campaign to pay yourself to build your own project is the political equivalent of a snake eating its own tail. How did they do it? Seattle Tunneling Partners (STP), which got a $1.1 billion contract for the project, is made up of two corporations, Tutor Perini and Dragados USA. They each gave $25,000 to the Let’s Move Forward campaign, election records show.

    STP didn’t answer questions about whether the company was taking responsibility for the mess, if its campaign tactics pass the smell test, if it would sue the state to collect $188 million that it claims the state owes them for additional costs, or if it would abandon the project. A spokeswoman said on their behalf: “STP will not be providing answers at this time.”

    Eric M Reply:

    Que the insurance claims.

    Robert Cruickshank Reply:

    That tunnel is such an awful, horrible, ridiculous waste. I don’t blame the contractors for these problems though. This is solely on the state and the politicians who insisted on building this tunnel despite having the risks pointed out to them on numerous occasions.

    Richard Mlynarik Reply:

    That XXX is such an awful, horrible, ridiculous waste. … This is solely on the state and the politicians who insisted on building this XXX despite having the risks pointed out to them on numerous occasions.

    Words to live by, Robert. Words to live by.

    XXX

    Eric Reply:

    Yeah, I can’t see the difference between this tunnel and Tehichapi, except that one is for cars and one is HSR.

    Alon Levy Reply:

    From the perspective of rail riders, Tejon is better than Tehachapi. From the perspective of drivers, replacing the Alaska Way Viaduct with a tunnel is better than replacing it with a boulevard. So in Seattle it’s a question of whether to spend so much money on cars, whereas in California it’s a technical question of what the best alignment is (and Tejon is almost Pareto-better than Tehachapi).

    Mattie F. Reply:

    And that’s why we love you.

    Elizabeth Alexis Reply:

    Say it isn’t so
    http://cal-access.ss.ca.gov/Campaign/Committees/Detail.aspx?id=1305068&session=2007&view=late1

    Clem Reply:

    Of the three remaining, this one:

    Golden State Rail Partnership, composed of OHL USA Inc., a subsidiary of Spain’s Obrascón Huarte Lain S.A., and Samsung E&C America Inc., a U.S. subsidiary of South Korea’s Samsung Group.

    ain’t got no chance of winning the golden ticket. They ain’t from around these parts, I reckon they’re just ferners hiding behind front companies.

    Mattie F. Reply:

    I think it would be interesting if different builders build technically-similar segments throughout the central valley, so that the quality of their work could be compared to each other and used as a criteria in future construction packages.

    Richard Mlynarik Reply:

    That’s an interesting theory.

    It explains a lot of why Spain’s construction costs are low.

    Unfortunately that’s not the way it works in the land of crony monopoly capitalism and total vendor capture of “public” agencies.

    Here the bigger the failure and the more brazen the lies the bigger payout, the more token the “competition”, and the more gigantic the next scam.

    We’ve seen POQD/Bechtel/Tutor-Saliba BART to SFO $2 billion of proven unambiguous outright fraud involving fraudulent costs, fraudulent ridership, fraudulent schedule and miserable product quality rewarded by PBQD/Tutor’s $10 billion BART to SJ fraud and by PBQD/Tutor $100 billion HSR to Palmdale and Los Banos fraud. The sky truly is the limit, and no “different builders” nor evaluation of product is ever going to get in the way of a mafia operation robbing the public blind.

    Lewellan Reply:

    DOT insiders also hand out favors to oil/auto/port interests who view passenger-rail as competition to their disposable car sales to the car-dependent consumer markets. “Not to worry, the self-driving car is on it’s way. Then everything will be just great!” Google has more money than it knows what to do with, apparently. The more expensive and faulty the passenger-rail product, the more assured next quarter profits. Buy an NEW CAR today! Buy NOW, pay less. This perspective most times colors my chagrin in dark shades. The Bertha bore tunnel project may be kaput. The consistently extended restart date meant only to keep the public trust (in that state’s miserable/ass DOT crew of total screwups) dog and pony show going. Wsdot is a national disgrace. Seattle is in greater need than CAHSR, believe me. I have recently concurred that Palmdale is a decent option with more ridership potential for the 1st Phase. Hanging in there with Altamont electrified. Still possible, therefore CAHSR is on track.

    Alon Levy Reply:

    Gah.

    Still, interesting to see what the final winning bid will be. $2 billion for 100 km is normal but below-average for at-grade HSR in Europe. As far as I know, $1.5 billion, even excluding electrification and systems, was last seen outside Spain on the LGV Est’s first phase, which opened in 2002.

    Point being: if costs are on the high side of this range, or even a bit above it, it’s normal. Anything below $2.5 billion should be good enough. To put things in perspective, if the final unit costs are $25m/km at-grade, $60m/km on viaducts, and $125m/km underground – including electrification and systems – then via Tejon and Altamont/SETEC you’re coming in below the original 1A budget, and even suburban grade separation pain is basically within budget.

    Jonathan Reply:

    Alon, isn’t this just another civil-works contract? No track, no ballast, no signalling, no electrification…

    And, quite possibly insufficient civil-works to support actual HSR operations (regular inspection, rail grinding, etc; sites for electrification equipment; road access to same). Unless PBQD had the experience to write all that into the requirements (snort, cough, choke), those aren’t going to be on the contract.

    Add electrification and signalling at Peninsula cost-per-km (CalMod, less trainsets) and what do you get? I can only expect that HSR catenary will cost more than ~160-200 km/hr catenary, which has been mature technology for more than 50 years now.

    Alon Levy Reply:

    As far as I remember, California HSR’s cost estimate for electrification is $2 billion for LA-SF (about 700 km), and the cost estimate for systems and signaling is similar. The Peninsula costs are very special, in every conceivable way. On the Northeast Corridor, Amtrak’s New Haven-Boston electrification was a bit under $3 million/km, so maybe $3.5-4 million/km in today’s dollars depending on whether the headline numbers were YOE or constant 2003 (see p. 21 here); this is for 200-240 km/h, but the constant-tension catenary is supposedly good for any speed, and it’s the track geometry that’s problematic. And of course in Europe, HSR-capable catenary in the 250 km/h+ range is mature technology too, going back 30+ years.

    Track and ballast are different, yeah. Still second-order (I vaguely recall that the estimate for trackwork on the entire ICS is $1 billion), but these second-order effects stack, and if at-grade civils are 60-70% of the total cost then $1.5 billion is reasonable rather than unusually low.

    Elizabeth Alexis Reply:

    Budget also doesn’t include land costs, which are getting up there ($800 million for CV).

  7. Neil Shea
    Aug 26th, 2014 at 22:52
    #7

    OT: Mr. Allen says he’s earned lifetime free BART rides
    http://www.mercurynews.com/news/ci_26414109/bart-discusses-ending-lifetime-free-travel-perk-board

    Reality Check Reply:

    Former BART Director Robert Allen of Livermore, however, supported lifetime privileges for board members with eight years in office.

    “One who has passed the grueling tests of running and winning two elections to the BART board and serving two full terms merits being treated as a career employee,” Allen wrote.

    Reality Check Reply:

    BART not so safe, Mr. Allen?
    Derailment in February, losing a wheel flange and tearing up an interlocking today:
    BART track damage near Pleasant Hill snarls commute

    A piece of a wheel called a flange apparently came off the train, damaging both the third rail and the track. Because the damage was near a crossover, it was impossible to single-track trains through the area and all service was stopped, Trost said.

    BART recovering after track damage halts commute in Contra Costa County

    A train was taken out of service at 5:10 p.m. Tuesday near the Pleasant Hill station after damage to the track and third rail was spotted. The damage was at an “interlocking,” which impacts both sides of the tracks.

    Trost described the damage as “extensive.”

    synonymouse Reply:

    Apparently an earlier wreck, wheel related, resulted in junking two BART cars:

    http://www.mercurynews.com/breaking-news/ci_25251974/bart-derailment-investigators-focus-train-clear-driver

    I assume these are the infamous Bechtelian aluminum hub-steel tyre wheels. Remember BART’s job #1 to protect and disseminate the IBG zeitgeist. Long live the proprietary and the idiosyncratic.

    Robert Cruickshank Reply:

    Everyone should get to ride BART for free.

    Ted Judah Reply:

    …and pay nothing to attend the University of California…

    Alon Levy Reply:

    …and pay nothing for anything else. Markets are oppressive; The People’s Government should decide all production quotas and assign goods and services to people by vouchers.

    Ted Judah Reply:

    Conservatives in the US only started to get bitchy about the size of government as more and more captains of industry became rent-seekers through the service sector and left manufacturing behind. They don’t like the idea of efficient government operation and lower costs and barriers to access getting in the way of profit market.

    Your response is typecast neoconservative talking points. Public utilities are not a gateway drug to socialism.

    Alon Levy Reply:

    To Robert, they are. General free-transit people run the gamut between people who think of transit as a public good and people to whom it’s a Trojan horse.

    (The reality is that transit is like electricity: it’s a natural monopoly, but not a public good, especially not in major cities, where it tends to be the most extensively used.)

    Reality Check Reply:

    pub·lic good
    noun public good plural noun public goods
    1. a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization.
    2. the benefit or well-being of the public.

    Alon Levy Reply:

    In economics, the term public good has a more specific meaning of a good that’s non-rival and non-excludable. Street lights are the classic example. Transit is both excludable (via a fare) and, except in small cities, rival (if you get on it, you’re adding to my crowding level).

    Ted Judah Reply:

    Remember though, in government, monopolies can be geographically assigned. Thus, you can have a public school that is both non rivalrous and non excludable.

    Alon Levy Reply:

    No, schools are both rival and excludable: you can deny a seat to people who don’t pay (as happens at private schools, or tuition-charging universities), and having more people in a class makes it harder to teach. The reason they’re free in your average first-world democracy is not that they’re a public good, it’s that they exhibit other market failures: massive positive externalities, principal-agent problems (parents would pay, but children would benefit), benefits that occur in the very long term (in which classical rationality assumptions are weaker), asymmetric information. Universities also have natural monopolies outside the largest cities (Gothenburg, a metro area of a million people, has one university).

  8. Nadia
    Aug 27th, 2014 at 11:09
    #8

    Off topic silliness but had to share:

    This video pokes fun at the One Bay Area plan.

    I thought some of the arguments might sound familiar to this crowd….

    https://www.youtube.com/watch?v=K3chclV4i-w

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