EPA Regulation: Unjustified and Punitively Burdensome

Does anyone remember President Obama’s executive order requiring that regulations be justified and not unduly burdensome? It would be hard to find a better  example of the vast gap between requirement and reality than in Michigan v. EPA, before the Supreme Court Wednesday, March 25.

At issue is the EPA’s new nationwide rule slashing mercury and other emissions that would put coal- and oil-fired power plants in the cross-hairs of what industry representatives describe as the EPA’s “most costly rule” ever under The Clean Air Act. Unfortunately, the very political “science” behind the EPA’s claim of far greater benefits than the 10-digit annual compliance costs comes nowhere close to justifying the policy.

Power plants emit only a tiny fraction of the mercury released into America’s air. The EPA reported that in 1995, total U.S. emissions from all human activity (158 tons) was about 3 percent of all mercury released to the air from all sources (5,500 tons). And power plants are only part of that total. Eliminating so little mercury will not save many thousand lives, as the EPA asserts. But it will dramatically raise the cost of coal-powered electricity.

Perhaps most troubling has been the EPA’s use of selective science to transform small effects into massive benefit claims. For example, it ignored the fact that CDC surveys show blood mercury levels for American women and children falling and already below the levels found safe by both the EPA and FDA, and well below the standard set by the World Health Organization.

The EPA could have used evidence from a University of Rochester study of the Republic of the Seycheles, whose residents consume types of fish — the primary “carriers” of methylmercury from atmospheric deposition to humans — similar to American diets. But the Center for Science and Public Policy found that the study of high-dose exposure, which followed the same children from six months to nine years of age, found “no observable health effect effects associated with fish consumption in which methylmercury is present.”

Instead, the EPA based its criteria on a study of Faroe Islanders. Not only do they eat more fish, their diets include a great deal of pilot whale meat and blubber. That gives them not only far higher doses of mercury, but also of PCB. Further, they ingest little selenium (which limits conversion to methylmercury), or fruits and vegetables. Given that in epidemiology, one of the most basic rules is that “the dose makes the poison,” their circumstances are virtually irrelevant to Americans. As the Center for Science and Public Policy concluded, “The Faroe Islands study should not be the sentinel study upon which assessment of methylmercury inake via should be gauged.”

The proposed EPA mercury restrictions on power plants, despite a massive PR campaign to the contrary, would have very small effects on human exposure to mercury, at a very high price. And there is no need for a nationwide command and control “solution.” The EPA has found that only “between 1 and 3 percent of women of childbearing age (the group of most concern) eat sufficient amounts of fish to be at risk from methylmercury exposure.” And the FDA and most states already issue advisories for citizens to limit their intake of contaminated fish.

Mandating massively expensive policies on everyone is not justified because a small fraction of women of childbearing age are potentially at risk from mercury ingestion, out of fear some of them may not sufficiently heed existing warnings. That is particularly so when there is so little evidence that substantially higher exposures than in America impose measurable damage. Rather than being “justified and not unduly burdensome,” the EPA mercury rule is unjustified and punitively burdensome.

Gary Galles is a Professor of Economics at Pepperdine University

California Chemical Laws Fail Science Test

Every day, we make choices that carry a degree of risk. Car crashes are the leading cause of death for those under 44, but that doesn’t stop us from getting behind the wheel. While we can’t completely reduce our risk of a crash, we can lower it by avoiding risky behaviors like speeding recklessly or texting.

Yet despite the potential deadliness of an automobile crash, car makers aren’t required to put a safety label on vehicles. And even if they did, it’s unlikely that we’d see a dramatic decline in the number of car crashes. It’s curious then that California law requires warning labels on products that pose dramatically less risk.

When California citizens went to the polls in 1986, it probably seemed like a no-brainer to vote for a law that required manufacturers and businesses to warn consumers when they might be exposed to chemicals that could cause cancer or developmental defects. The law, known as Proposition 65, sounds like an excellent public health initiative in theory. In execution, however, the law has created warning label overload.

There are myriad problems with the law. But in a new paper on Proposition 65, I’ve identified two fatal flaws with Proposition 65’s procedures: the threshold for determining whether a chemical poses a health risk is incredibly low, with no way of explaining to consumers the degree of risk exposure to the chemical poses, and the process for determining which chemicals require warning labels is alarmingly unstandardized.

For starters, a chemical earns a place on the state’s list of dangerous chemicals if California regulators find that exposure causes one excess case of cancer in 100,000 individuals over a 70 year period.

To put that in perspective, roughly one in 100,000 people will die from running or playing soccer. At the same time, research has shown that exercise can lower the risk of heart disease, cancer, diabetes, and a number of deadly health ailments.

This is precisely why Proposition 65 warning labels are ridiculous — there’s no context for what level of exposure poses an actual risk and when a chemical might actually have health benefits.

Take seafood for example. Researchers have suggested that consuming fish and shellfish has numerous health benefits. They contain a number of essential nutrients, including omega-3 fatty acids, but almost all fish contains at least a small amount of mercury. In fact, recent research suggests that consumption of fish by pregnant mothers might actually boost brain development and has no impact on prenatal development.

Mercury is listed as a carcinogen under Proposition 65. Therefore fish in California comes with a warning label.

Scaring consumers away from fish flies directly in the face of U.S. Food and Drug Administration’s advice that “Fish and shellfish are an important part of a healthy diet.” According to the FDA, “for most people, the risk from mercury by eating fish and shellfish is not a health concern.” Yet California’s Proposition 65 warnings indicate otherwise to consumers — research suggests the prominent warning labels in restaurants and markets where fish is sold have resulted in a dramatic decline in fish consumption.

This begs the question: How are California’s regulators determining which chemicals are harmful? Unfortunately, as I’ve explained in my new paper, there appears to be no consistent or standardized testing protocols for what constitutes sufficient evidence to label a chemical as either carcinogenic or causing developmental harm. That’s why the state’s chemical decisions can contradict opinions rendered by the FDA, EPA, and other regulatory agencies across the globe. Chemicals are listed even if the scientific consensus isn’t on the state’s side.

To truly make Californians healthier, the state needs to develop a standardized process, ideally with input from outside experts, for determining which chemicals should be listed and explaining the actual risk to consumers. After all, it’s more likely that taking car rides will have you swimming with the fishes than eating fish will put you six feet under.

Dr. Joseph Perrone, Sc.D., is the Chief Science Officer at the Center for Accountability in Science, a project of the nonprofit Center for Organizational Research and Education. CORE is supported by a wide variety of businesses and foundations, including those in the hospitality, agriculture, and energy industries.

Pain-Pill Abuse Can Be Curbed Through Private-Sector Innovation

Picking the proper medication for our patients is a delicate nuance that is part of the art of medicine.  Cook book medicine does not often make a very good cake. Of late, government regulations have made it more difficult to find the right recipe for our patients particularly when they need pain relief.

Pain is a common problem.  Pain may be chronic or acute and may take on a life of its own particularly if it is not managed properly   I have seen patients with the kind of pain that makes living a normal life nearly, if not completely, impossible. Simple daily functions that most of us take for granted, such as walking or sleeping, can become insurmountable tasks.  Many of these patients unquestionably require the use of pain medication.  For them it is not a choice, it is a necessity.

Opioid pain relievers are almost never a first choice. The side effects are overwhelming particularly for the elderly. But, they can literally be lifesaving for these patients.  Unfortunately, the opioid abuse is a billion dollar industry and the government has decided to come in with an iron fist and impose regulations that neither curb the abuse or establish a means of reasonable accessibility for those who need the medication.

More than 60 people die every day in the United States from prescription drug overdoses.  6.5 million people abused prescription drugs in 2013, more than double that of heroin, cocaine and hallucinogens, combined.

According to a 2010-2011 government survey almost 1.5 million Californians, ages 12 and over, were estimated to have abused painkillers in the previous year. Seven percent of adolescents ages 12 to 17 in California used pain relievers for nonmedical reasons in the previous year, according to 2009-2010 figures.

Taxpayers are left on the hook for increased medical and policing costs, and abuse can also wreak economic devastation by reducing productivity.  Misuse and abuse of opioids is estimated to cost the U.S. $56 billion annually.

The opportunity to find a better means of administering opiods opened the door to the American entrepreneurial spirit and private industry has answers. By utilizing “abuse deterrent formulations” for opioid painkillers, we can significantly reduce the abuse of these drugs.

Breakthrough abuse deterrent formulations provide patients with the same pain relief as conventional opioid medications, but protect against abuse by making crushing, cutting and dissolving for injection extremely difficult and blocking the euphoric effect of the pills when manipulated.

While there are many contentious issues among those in the healthcare field, the facts in this situation are clear: pain management is a necessity for millions of people and non-medical use of these drugs is a medical, ethical and public safety problem that must be addressed.

The Food and Drug Administration considers the development of abuse deterrent formulations a high public health priority, and those of us in the medical community, along with policymakers in the Capitol, should as well.

Research on the relatively new abuse deterrent formulation of OxyContin, the first opioid approved by the FDA to make abuse deterrent claims, found that inhalation and injection abuse dropped from 70 percent to 40 percent, and poison control center calls declined by 32 percent.

It is estimated that utilizing abuse deterrent formulas can save hundreds of millions of dollars in medical and criminal justice costs.   These are dollars that would be far better spent elsewhere, as we struggle to rebound from the worst economic downturn most of us have ever seen.

Abuse deterrent formulations have received widespread support as part of a comprehensive effort to combat prescription drug abuse and promote appropriate pain management, including from the Office of National Drug Control Policy, the Community Anti-Drug Coalitions of America, members of Congress and the National Association of Attorneys General.

The California Medical Association approved a resolution in December 2014, supporting the FDA’s ongoing efforts to evaluate and label abuse deterrent technology and opposing the imposition of administrative deterrents that decrease access to and coverage of prescription drugs with abuse deterrent properties.

Our regulators need to open the doors for these new formulations rather than developing regulations that only hurt those patients who legitimately need these meds.  It is time that healthcare professionals, patient advocates, stakeholders and policymakers move forward to improve access to this new technology.  I welcome this rare opportunity where private industry can work productively with government to help America’s patient find a productive pain-free day.

Marcy Zwelling, MD, is Vice Chair, American College of Private Physicians 

New Studies: CA Has 4th-Highest Taxes and 3rd-Worst Business Climate

The newest figures just released by the Tax Foundation show California continues to be one of the highest-taxes states in the country. According to “Facts & Figures 2015: How Does Your State Compare?” the Golden State now ranks fourth-highest for taxation. The only states with higher taxes are Connecticut and New Jersey, tied for the highest; and New York in third place.

A big problem was pointed out to CalWatchdog.com by Esmael Adibi, A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University: Three of our Western States competitors make the Top Ten list of the least-taxed states: Nevada in third place, Utah in 9th and Texas in 10th.

Overall, the state with the least taxes is Louisiana, followed by Mississippi, South Dakota and Tennessee.

Adibi pointed out that California’s high rank derives largely from it having the highest personal income tax in the country, 13.3 percent at the top marginal rate after voters passed Proposition 30 in 2012. “Prop. 30 really pushed us over,” he said.

He added that, despite the Proposition 13 tax limitation measure, California ranked only 14th-best for property-tax collections. If property here cost less, then California would rank much higher. “But property is so expensive, the taxes paid equal the tax rate times the amount you pay for the property,” he calculated.

California also scored low on the overall 2015 State Business Climate Index, with third-worst business climate. Worst of all was New Jersey, followed by Connecticut.

That’s similar to the finding of CEO Magazine’s survey of CEOs, who have ranked California the worst state in which to do business for eight straight years.

And the Kosmont-Rose Institute Cost of Doing Business Survey found, “California dominates the list of the most expensive cities, with a total of 12 cities – nine in Southern California and three in the San Francisco Bay Area. Los Angeles and the San Francisco Bay Area are the two most expensive metropolitan areas in the western United States.”

Leaving the Golden State

California net population outflow“There’s no question high taxes at least affect some people on whether to stay in California or move to a state with lower taxes,” Adibi pointed out. He provided CalWatchdog.com a chart showing “Net Population Outflow and Destination” for California. “Net” means both those coming into the state and those leaving.

From 2005 to 2013: 279,000 Californians left for Texas, 222,500 for Arizona, 157,200 for Oregon, 153,200 for Nevada, 98,300 for Washington State, 76,900 for Colorado and 59,500 for Utah; all other states were 217,500.

Rankings

Some other rankings from the Tax Foundation “Facts & Figures”:

  • Sources of California state and tocal tax collections: 28.1 percent from property tax, 22.3 percent general sales tax, 30 percent individual income tax, 4.3 percent corporate income tax and 15.3 percent all other taxes.
  • Federal aid as a percentage of general state revenue: 25 percent. The national average is 30 percent. That is, California is a “donor state,” it pays more into the federal government than it gets back.
  • State individual income tax receipts per capita: $1,750, ranking fourth; Connecticut was highest, at $2,174.
  • State and local sales tax rate: 7.5 percent, highest of any state. (Some local governments add to that.)
  • State gasoline tax rate per gallon: 45.39 cents, second highest. Pennsylvania is highest, at 50.50 cents.
  • State spirits excise tax rate, per gallon: $3.30, 39th highest; California is Wine Country. The highest was Washington State, at $35.22.
  • Like most states, California exempts groceries from the sales tax. The highest grocery sales tax is Tennesse’s, at 5 percent.
  • California does not have a state inheritance tax, or “death tax.” The highest state rate is Washington State, at up to 20 percent.
  • California state and local debt is $11,094 per capita, 8th highest. At the top is New York, at $17,405.

Originally published by CalWatchdog.com

4 Online Poker Bills Square Off in CA Legislature

This year could bring gambling to Internet users in California. For years, online poker has been legal in the United States, but not in the Golden State. Now, amidst a host of competing interests, a spate of new bills has emerged in the hope of changing that.

Four pieces of legislation have been put into play: AB9AB167, and two identical bills, AB431 and SB278. Of these, AB9 and AB167 have attracted the most attention.

Lawmakers have hesitated to act boldly, unsure which constituencies should be treated most favorably. But after so much wrangling, some kind of consensus has seemed inevitable: as analysts have agreed, the money in online gambling is too big to ignore.

Tough choices

The market for Internet poker has grown large enough that its would-be masters haven’t hesitated to push and pull for influence in Sacramento. As U-T San Diego reported, legislators still disagree strongly, however, about how to choose among “card clubs, Indian tribes, race tracks and out-of-state gaming companies,” all of which want to play a leading role:

“Lawmakers and these groups have failed for nearly a decade to craft rules for who should control state-regulated poker sites and how much they should pay to do so. During this time, thousands of California poker players have migrated to playing online through unauthorized, often untrustworthy sites based overseas, letting industry and tax money slip away.”

Much of the uncertainty in the Legislature revolved around the way the law should treat California’s Indian tribes, some of which have proven especially eager to get in on the action. That question, in turn, has long been tangled up with controversies over federal policy.

Attention has focused around America’s biggest online poker website, an out-of-state business called Pokerstars. Because it has been working with California’s Morongo Band of Mission Indians and San Manuel Band of Mission Indians, Pokerstars has a vested interest in taking a robust share of the online poker business under a new regulatory regime.

But as the Sacramento Business Journal noted, a rival group of Indian interests, including the Pechanga Band of Luiseno Indians and the Agua Caliente Band of Cahuilla Indians, has accused Pokerstars of raking in illegal profits between 2006 and 2011, when Congress briefly had outlawed online poker as a matter of federal law.

Rival tribes, rival bills

As a result, divisions on legislation have gathered around the battle lines set by the tribes. Pechanga and Agua Caliente have sided with AB9 — authored by Assemblyman Mike Gatto, D-Glendale — because it contains a so-called “bad actor” clause, barring Pokerstars from entering California’s online gambling market.

Morongo and San Manuel, meanwhile, have rallied around AB167, introduced by Assemblyman Reggie Jones-Sawyer, D-Los Angeles. In lieu of a bad actor clause, that bill would punt to the state Department of Justice on which companies could and couldn’t participate.

In an effort to break the impasse, yet another alternative was recently introduced by State Sen. Isadore Hall, D-South Bay, and Assemblyman Adam Gray, D-Merced. Their identical bills are AB 431 and SB 278.

In a statement, the two allies played up their potential to reach a consensus through their legislative authority:

“Hall and Gray serve as Chairmen of each legislative house’s policy committee that oversees gaming within the state and are best positioned to lead a productive dialogue on an iPoker regulatory framework. By working together, their legislation seeks to build consensus on a public policy matter that has eluded California for years.”

Persistent challenges

Despite the substantial market, the lack of movement on online gambling has been attributed to several stubborn factors. As Gatto explained at the recent iGaming Legislative Symposium, legislators have proven risk-averse, and Californians haven’t exactly pushed them to action:

“If we pass a great bill, this isn’t going to make my career in terms of the voting public, and if we don’t pass a bill it’s not going to break anyone’s career. If you went to the average person on the street, I don’t think they’d even have an opinion on this and they would just want to know am I going to see some tax dollars go to my school and my neighborhood.”

Last year, Gatto noted, no more than five constituent emails out of 57,263 sent to him concerned online poker.

Originally published on CalWatchdog.com

Get Ready for Higher Electricity Bills

Is Kevin de León trying to kill off what’s left of California’s manufacturing?

He must. The leader of the California Senate a couple of weeks ago introduced a package of bills that call for a 50 percent reduction in petroleum use by cars and trucks and a 50 percent increase in energy efficiency in buildings, and demands that 50 percent of the electricity generated in the state must come from renewable sources, all by 2030.

All this earns him the warm applause of his base – he was accompanied by environmentalists, union folks and renewable energy entrepreneurs at his press conference – as he pushes the state’s businesses out into the cold.

Look, Californians already pay 50 percent more than the national average for electricity. Industrial customers, including many manufacturers, pay 79 percent more. As a result of that and California’s other high costs, the state has languished with about 1 percent annual growth in manufacturing jobs since the recession while the rest of the country has boomed at close to 7 percent.

And if these bills pass, electricity rates are bound to become shocking, making the state look even uglier to manufacturers. Of course, the effect doesn’t stop with much higher electricity costs.

“This proposal…is an attack on the petroleum industry,” said Tupper Hull of the Western States Petroleum Association. “It will be extraordinarily expensive and coercive. I mean crushingly expensive.”

How expensive no one seems to have calculated. (Why isn’t legislation like this required to submit an economic impact statement?) But whatever the cost is, Californians may well be all alone in bearing these self-inflicted shots.

“We’re going to oppose this very vigorously and not be apologetic about it,” Hull said.

California already has the highest gasoline prices in the continental United States but hey, maybe we can be twice as high as No. 2. Or three times as high. That’d be great for the economy, no?

Originally published by Fox and Hounds Daily

Cap-And-Trade Costs California Businesses $1 billion

California businesses paid a whopping $1 billion this year buying permits to comply with the state’s cap-and-trade law — the largest sale recorded since the state began regulating carbon dioxide in 2012.

Even with record permit sales, the $1 billion raised was well below market expectations. But environmentalists sold the auction as a huge success, because now oil and gas companies have to buy permits.

“Despite the oil industry’s fear mongering, the sky did not fall,” said Merrian Borgeson, a senior scientist at Natural Resources Defense Council. “California’s carbon market continues to hum along as expected, with this auction’s price right in line with previous auctions.”

Carbon emissions permits for 2015 only sold for $12.21 per metric ton, and permits for 2018 sold for $12.10 per ton. In total, the state sold 73.6 million permits for emissions in 2015 and 10.4 million permits for emissions in 2018.

“We are making progress toward a cleaner future,” Borgeson said. “Our clean energy policies cut dangerous emissions, boost the state’s economy, and drive investment in our most disadvantaged communities.”

But the record permit sales may not be the harbinger of good news that environmentalists and state regulators argue. As of this year, California expanded its cap-and-trade system to cover transportation fuels — meaning oil companies will have to buy carbon credits for the fuel they sell.

Before that, the state’s cap-and-trade law only covered several hundred industrial companies, like food processors, cement makers and other energy-intensive industries. Basically, the state forced more companies to buy permits and expanded the pool of permits — which means prices are lower than they would have been otherwise.

Also, California’s cap-and-trade system has been linked to Quebec’s emissions trading scheme to limit the economic impacts pricing carbon dioxide has on California residents. California officials are trying to convince other states to join their cap-and-trade plan to further disperse costs.

California passed its cap-and-trade law in 2006 under Republican Gov. Arnold Schwarzenegger. The point of the law is to reduce carbon dioxide emissions to 1990 levels by 2030. The law went into full effect in 2012, when the first carbon permit auctions were held.

State regulators are still in the process of implementing a second prong of the 2006 global warming law: a low-carbon fuel standard. This requires oil companies to reduce carbon emission from gasoline 10 percent by 2020 — though the rule is being rewritten in the wake of legal challenges.

But that’s not all. California lawmakers are intent on halving the use of petroleum in the next 15 years. State Democrats have proposed a highly contentious law which would remove 8 billion gallons of fuel from state markets.

The oil industry has come out swinging against the legislation, saying it’s nothing more than an attack on oil companies and jobs.

“Legislative mandates to force reductions in gasoline use are not climate change policies,” Catherine Reheis-Boyd, president of the Western States Petroleum Association, said in a statement. “They are attacks on an important industry in California designed to create conflict and controversy.”

“Achieving so radical a goal in so short a time will require the removal of 8 billion gallons of gasoline and diesel from our fuel supply – with no guarantees that something will be available to replace them,” Reheis-Boyd added.

Originally published by the Daily Caller News Foundation

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Weight Loss Nudges: Market Test or Government Guess?

As we edge further into the new year, many Americans have already fallen off the wagon and are back to their old eating habits they resolved to break this year. There is no shortage of hucksters who use New Year’s resolutions to promote their fad diets to Americans, but researchers have yet to provide a clear understanding of obesity, let alone how to cure or prevent it.

Some behavioral economists have suggested that well-designed “nudges” can steer individuals toward weight loss. Those who decide the direction in which people will be nudged, choice architects,” are believed able to promote healthier consumption by individuals suffering from various psychological, social and emotional factors that cause them to be obese.

Some nudge theory advocates believe that nudging individuals toward healthy choices is often best left to governments since markets give companies irresistible incentives to exploit – for profit –human frailties to overeat. However, evidence suggests that market nudges work best.

The obesity rate has doubled over the past three decades, with some projecting that 42 percent of Americans will be at least 100 pounds overweight by the year 2030. The association with diabetes, stroke, heart disease and certain cancers has made obesity a public health concern – and a personal concern for the 51 percent of Americans who want to lose weight, according to a recent Gallup poll.

Despite the good intentions of government choice architects, they fall prey to widely-held weight loss beliefs that simply are not supported by science.

For example, in the Department of Agriculture’s “Choose My Plate” suggests eating more fruits and vegetables to promote weight loss even though a recent study in the American Journal of Clinical Nutrition found that although fruit and vegetable consumption has demonstrable health benefits, weight loss is not one of them unless individuals also reduce intake of other foods.

Past experience with government nudges supporting low-fat diets also suggests caution since promoting diets rich in complex carbohydrates such as breads, cereals, rice, pasta, potatoes and other starches may have unintentionally promoted obesity.

Markets nudge all the time, but unlike the government, receive direct feedback from customers.

Markets hold significant advantages over governments. Consumers directly signal to sellers which products are ineffective. They simply stop buying them. Harmful products might yield costly lawsuits directly aimed at businesses. Businesses read these signals routinely because they threaten their financial health.

Government nudging suffers from higher hurdles in getting nudges “right.” Their nudges do not have to withstand consumer scrutiny, nor do revenues do not rise or fall to signal the good from the bad. Government employees typically are not fearful that failed products place their jobs in jeopardy.

While many Americans’ crash diets may not have even made it through the first month of the New Year, a majority of them do want to lose weight and nudging plays an important role in helping them do so.

But, nudging consumers toward healthier eating is best left to the private market, not the government.

Michael Marlow is professor of economics at California Polytechnic State University in San Luis Obispo. His paper “Market Test or Government Guess? Are Government Efforts to ‘Nudge’ Us to Lose Weight Really Based on Science?” appears in the current issue of the Cato Institute’s journal Regulation.

Tesla Challenges Dealership Laws in Various States — Including Texas and Arizona

California’s Tesla Motors Inc. is proving as revolutionary in selling cars as making them. It’s challenging states that mandate new cars be sold only through dealerships by pushing to offer its premium electric vehicles directly through company showrooms.

The two sides raced each other recently in a debate sponsored by the Texas Conservative Coalition Research Institute. The verbal drag-race pitted Ricardo Reyes, Tesla’s vice president of communications, against Bill Wolters, president of the Texas Automobile Dealers Association.

Each side maintained the other was upholding a monopoly. Reyes insisted the Texas law, by preventing Tesla from selling cars directly, erected a monopoly consisting of state dealers. Wolters said the opposite was true: That Tesla, by cutting out the dealers and selling cars only by itself, was monopolizing the market.

Interstate Commerce Clause

At issue was the Interstate Commerce Clause of the U.S. Constitution, which gives Congress alone the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” It established a vast free-trade zone among the 50 states, a keystone of American prosperity.

The debate was reported in the Texas Tribune.

“How does a manufacturer of a product that owns every retail outlet benefit a consumer or the state of Texas?” Wolters asked.

Reyes responded, “All we’re asking to do is be allowed, unfettered, to compete.”

According to the Tribune, Reyes called his company the “underdog.”

Reyes insisted that Tesla just wants to sell directly to its customers. Currently, Tesla sells no cars in Texas, but in 2015 plans to sell 55,000 nationally and abroad, Fortune reported yesterday. That’s a fraction of total expected U.S. vehicle sales of more than 17 million, according to Automotive News.

Also yesterday, Reuters reported on the company’s financial problems, “Tesla Motors Inc missed fourth-quarter sales targets and analysts’ profit expectations, but Chief Executive Officer Elon Musk on Wednesday said by 2025 Tesla’s growth trajectory could take its market value to $700 billion, matching that of Apple Inc.

“It was a glimmer of optimism capping a difficult quarter that saw the electric-car company struggle with production and delivery issues on several fronts, notably in China.”

Although perhaps utopian, it’s that promise of Apple-like success that concerns dealers in Texas and elsewhere. Musk did not attend the debate.

Wolters addressed the replacement threat directly at the debate. “If we didn’t have franchise laws, the manufacturers, as they should, would focus on their shareholders and only have dealerships in the most profitable, highly populated areas of our state,” he said. “Do we want to jeopardize two-thirds of the dealerships in our state?”

Reyes said, “It is odd to me that the only thing consumers can’t buy direct is booze and cars in this state. Imagine the Girl Scouts having to sell through a distributor network. Imagine Apple having to sell through a distributor network.”

Prohibition

The alcohol example is interesting because it involves a quirk in the Constitution. Alcohol Prohibition, “the Noble Experiment” from 1920-32, was imposed with the 18th Amendment, which banned manufacturing or importing alcohol except for medicinal or religious purposes.

It was enforced through the Volstead Act and other federal laws.

However, when Prohibition was repealed, the 21st Amendment allowed the states to carve out their own distribution laws for alcohol. It reads, “The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

Note the clause, “in violation of the laws thereof” — meaning state laws.

That’s why California has very liberal alcohol laws. But in Pennsylvania, as Forbes recently reported, “If you want to buy beer, you have to go to a beer store or distributor. If you want to buy spirits, you have to go to a state-run liquor store.”

But there’s no 21st amendment for anything besides alcohol.

Foie gras

Ironically, California itself is challenging the Interstate Commerce Clause in its controversy over foie gras, insisting that a state ban on the culinary delicacy’s production and use includes banning importing it from other states and countries.

State restaurants have retorted that, although the state can ban specially fattening a goose — the way it’s made — it can’t ban importing foie gras.

As CalWatchDog.com reported, Attorney General Kamala Harris is appealing a January ruling by U.S. District Court Judge Stephen Watson that federal law preempts state law on importing foie gras.

Arizona

Texas’ action also is somewhat ironic, given its boast of having fewer regulations and a more pro-business environment than California.

Tesla is faring batter in the Grand Canyon State. Reported the Arizona Republic:

“House Bill 2216 would effectively upend the decades-old system that prohibits manufacturers from competing with dealerships through direct sales. Tesla is pushing a bill similar to one that failed a year ago in hopes that a new governor and Legislature are more open to what it sees as free-market principles.

“Standing in the way are the state’s car dealers, a group that directly employs about 24,000 Arizonans and accounts for $2 billion in sales taxes, a crucial element of the state’s revenue. They see Tesla as seeking an exception that would allow it to establish monopoly powers that threaten the state’s broader economy.”

But Tesla owners, by definition an upscale group able to purchase a $101,500 car, may have the last say. Mark Rohde told the Republic, “As a consumer, I don’t need a dealer to take care of me. I don’t need a middle man. If you believe in free-market economies, then you better get behind free-market economies.”

Originally Published on CalWatchdog.com

Political Attacks on Gasoline Designed to Create Conflict

The Western States Petroleum Association is strongly opposed to legislative or regulatory mandates designed to force a 50 percent reduction in gasoline and diesel use in California by 2030.

Mandates to force reductions in gasoline use are not climate change policies.  They are attacks on an important industry in California designed to create conflict and controversy.

A mandate to reduce petroleum consumption by 50 percent is an impossibly unrealistic goal.

SB 350 by Sen. de Leon gives the unelected California Air Resources Board open-ended authority to adopt mandates by regulation to achieve unrealistic cuts in gasoline and diesel use.

History tells us two things; mandates designed to achieve a goal of this magnitude will require unacceptably coercive restrictions on our mobility choices and will be crushingly expensive.

Achieving so radical a goal in so short a time will require the removal of 8 billion gallons of gasoline and diesel from our fuel supply annually – with no guarantees that something will be available to replace them.

This proposal is a major distraction from the much more important work that must be done to move California’s climate change agenda beyond the 2020 horizon established by AB 32.

California’s petroleum producers and refiners will be participants in shaping those policies so we can continue the progress we have made toward achieving greenhouse gas reduction targets.

It is one thing to establish goals like those identified in the Governor’s inaugural address and to use those goals to measure the effectiveness of climate change policies.  It is another thing entirely to empower an unaccountable regulatory agency the authority to impose regulations to achieve those goals.

We look forward to working with the Governor and the Legislature to develop serious climate change policies and programs that will move us toward a lower carbon future.  We urge legislators to reject Sen. de Leon’s proposed policy as quickly as possible so that we can get back to work on the real tasks at hand.

Catherine Reheis-Boyd is President of the Western States Petroleum Association

Originally published by Fox and Hounds Daily