Will Michigan reject the coming manufacturing boom?

Politics,Beltway Confidential,Conn Carroll,Politics Digest

Cheap plentiful fossil fuels are about to turn the Midwest into a manufacturing paradise again. But Michigan environmentalists and their union allies seem determined to keep the Great Lakes state on the sidelines. The Wall Street Journal reports:

Plunging prices have turned the U.S. into one of the most profitable places in the world to make chemicals and fertilizer, industries that use gas as both a feedstock and an energy source. And they have slashed costs for makers of energy-intensive products such as aluminum, steel and glass.

“The U.S. is now going to be the low-cost industrialized country for energy,” the energy economist Philip Verleger says. “This creates a base for stronger economic growth in the United States than the rest of the industrialized world.”

Natural gas is only part of the story. The same hydraulic-fracturing revolution that is freeing gas from shale formations is being used to extract oil. U.S. oil production is up 20% since 2008, and the U.S. government expects it to rise another 12.6% in the next five years.

Pennsylvania, Ohio, Indiana, and Wisconsin are all poised to ramp up manufacturing jobs thanks to cheaper fossil fuel energy prices. But a ballot initiative supported by the Sierra Club, the American Wind Energy Association, the Natural Resources Defense Council, the United Auto Workers, and Michigan Democrats would force Michigan to keep those energy costs high. Proposition 3, better known as “25 by 25,” would amend the state constitution to force Michigan utilities to produce 25 percent of their electricity from renewable energy by 2025.

Wind, solar, and biofuels may be the energies of the future, but the fact is that they are for more expensive than fossil fuels today. And they will become far more expensive relative to fossil fuels as new technologies make oil and natural gas cheaper to produce. If the state constitution requires Michigan utilities to produce 25 percent of their electricity using much more expensive fuels, they will have to pass those higher costs onto consumers. Why would any manufacturer choose to open a new plant in Michigan when they know their energy costs could be much, much more cheaper in neighboring Indiana or Ohio?

Announcing their opposition to Proposition 3, Dow Chemicals Richard Wells wrote, “Michigan already has the highest utility rates in the Midwest, which is a barrier to attracting new manufacturing to Michigan to create jobs the state so desperately needs and to pursue the innovations that will lead to a sustainable energy future. Proposal 3 will significantly increase the cost of electricity even further for Michigan residents and businesses large and small.”

Makes one wonder if the Ohio chamber of commerce isn’t behind the initiative.

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