Monday, July 23, 2012

Energy Choices and the Long Conversation

By David Kay, Senior Extension Associate, Cornell University’s Community and Regional Development Institute (CaRDI)

I once was blind but now I see
American history was not my strong suit in high school. When I entered graduate school some years later, the already fading sign on my new office (an iconic slogan from the not too distant 1960s) prompted me to “Question Authority”. Since I didn’t quite understand at the time how important it was to understand authority in order to question it, I did not read this as an incitement to historical reflection.

Over the years as an Extension Associate at Cornell University, I developed a medley of insights and thoughts about rural and urban, home rule and regionalism, globalism and relocalization, community and identity. Only in the past few years have I begun to understand how these insights are deeply embedded in what some historians have called “the long conversation”.

This long conversation is about the distribution of collective authority in our democracy. About who gets to participate in and decide about which kinds of public decisions.

The conversation predated the founding of the country by more than a century (see for example, the Articles of Confederation of the United Colonies of New England, May 19, 1643). And it famously animated the debates in the Federalist Papers, that enduring treasure trove of wisdom sparked by the frictions between those who believed in dispersing versus concentrating power and authority.

The United Colonies of New England, 1643 (source).
The long conversation is, in fact, a never ending one. It has no universal, timeless conclusion. This realization has been driven home for me by my recent work on energy transitions.

Some controversies raised by our fossil fuel dependency are in no small measure debates about federalism, or the way authority is divided between central and distributed political units.

What is at stake? According to one author:
The choice of regulatory forum often seems to determine the outcome of the controversy. That may explain why Americans have traditionally shed so much metaphorical and genuine blood deciding what are essentially jurisdictional disputes between governmental institutions.
Consider three contemporary energy examples of the tensions raised.

1. High Volume Hydraulic Fracturing (HVHF) for Natural Gas Extraction
Hydraulic fracturing is a technology used to extract oil and gas from “unconventional” reserves of shale and other rocks. State authority dominates regulation of natural gas drilling, but is currently being contested by both federal and local government interests. Federal authority does apply to some aspects of HVHF and many other energy issues. However, the federal Energy Act of 2005 exempted key elements of oil and gas operations from national in favor of state regulation. This outcome is now being challenged.

The authority of states to regulate hydraulic fracturing is also being contested by local governments. In several Northeastern shale gas-rich states, state law appears to “supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries” (NYS Environmental Conservation Law §23-0303(2)).

Pennsylvania, West Virginia, and Ohio's state laws feature similar language on the issue. For example, Section 602 of the Pennsylvania Oil and Gas Act provides that municipal ordinances may not ‘“impose conditions, requirements or limitations on the same features of oil and gas operations regulated’ by the Act” (Keneally and Mathes, 2010). 

However, in New York State alone, at least two dozen communities have adopted seemingly contrary bans or moratoria. Within each state, the stage of litigation, appeal, and legal clarity on this issue differs.

2. Electricity Transmission
Power plant siting and electricity transmission rules have evolved with less media attention than hydraulic fracturing issues. But even as the Energy Act of 2005 exempted HVHF from federal review, it stipulated that a federal agency (FERC) would hold siting authority for certain electric transmission lines.

The Act was intended to reduce state and local obstacles, including procedural friction and political resistance, to transmission investment. Indeed, major upgrades in transmission infrastructure are projected as necessary to deliver new sources of electricity; most will be generated in rural areas remote from the point of use.

Supporters of grid modernization have advocated strengthening FERC’s authority further. Others remain concerned that good decisions require state and local oversight.

3. Power Plant Siting
Similar issues surround the distribution of authority over the siting of electricity generating facilities. For example, New York State recently passed legislation that shifts permitting jurisdiction for smaller commercial facilities (25-80 megawatts) to the state (i.e., away from local government).

A wind farm nearArmenia Mountain, PA.
Though not differentiated as to fuel source, the implications for wind energy have been given particular attention. Advocates and opponents alike see the legislation as an effort to facilitate the siting of new wind farms, in part by reducing the influence of localized opposition that holds greater sway under local government “home rule.”

Energy Federalism
These examples of contested regulation show some of the pressures being exerted on the status quo of federalism. What criteria, other than short-term political advantage on a particular issue, are or should be used to evaluate whether authority should be assigned to local, state, or federal government, or some combination?

In the Stanford Environmental Law Journal, Benjamin K. Sovocool (2008) offers a list of organizing principles derived from theories of “environmental federalism”. These include such competing goals as: 
  • ensuring all affected by the decision are fairly represented, 
  • promoting consistency of rules across political boundaries, 
  • avoiding unfair imbalances in political power,
  • enhancing accountability, and 
  • promoting flexibility and innovation.
Versions of these and other arguments are not hard to find in the Federalist Papers.
Americans are “spilling blood” in a jurisdictional war over whether local, state, or federal government should control the fate of hydraulic fracturing. Blood pressures have also risen over who should permit moderately sized electric generating facilities and control the siting of natural gas and electricity transmission corridors. 
Not infrequently, advocates who argue for or against federal or state or “home rule” in one context reflexively take the opposite position in another. This may make strategic sense in the heat of battle over specific policy decisions about particular energy technologies or fuels or sites. However, a danger exists for partisans and policy makers who fail to lift their line of sight above the battlefield. 
Unless principled arguments about the benefits and costs of rebalancing federalism are considered, the distribution of power and passion that lead to precedent and victory in one arena may well simply set the stage for defeat in another. 

David Kay, a Senior Extension Associate with Community & Regional Development Institute (CaRDI), was trained as an economist, works in the Department of Development Sociology, Cornell University, and focuses on land use planning and community/economic development issues. He grew up in California’s burgeoning Silicon Valley but settled in Ithaca, New York, after graduate school, not least because of his growing appreciation of the small city’s uniquely combined scale of community and pace of life.

Visit the Rural Futures Lab website here.

Monday, July 9, 2012

The Intergenerational Transfer of Wealth: A Rural Development Priority

By Jeff Yost, President & CEO of the Nebraska Community Foundation

I get asked frequently, “Why are you trying to save these small towns?” The answer is – I’m not. The only folks who can save a community or change a community are the people who live, work and sleep there.

I grew up on a farm near Red Cloud, Nebraska, the youngest of six children. My parents and two sisters still live there. I graduated from high school in 1986 with 23 classmates. Then, like many other small-town kids, I left.

I followed my five older siblings to the University of Nebraska in Lincoln, earned a B.S. in economics and agricultural business. Before joining the Nebraska Community Foundation in 1998, I spent several years working for then-Nebraska Governor Ben Nelson as a gubernatorial aide and strategic initiative manager for community and economic development. It was important work, but frustrating as well.

Politics is a zero-sum game. I prefer win-win solutions to community challenges. And that’s why I am such a strong advocate for rural development philanthropy.

Rural giving and the transfer of wealth

Right now, rural places have an unprecedented opportunity to transform their communities by harnessing the massive transfer of intergenerational wealth. In 2011, the Nebraska Community Foundation worked with the RUPRI Center for Rural Entrepreneurship (CRE) to update its original Transfer of Wealth Study conducted in 2002. That study was the nation’s first statewide county-by-county analysis. This groundbreaking work changed the mindset of philanthropic leaders across the country. Since then CRE has conducted numerous studies on cities, regions and states all around the U.S.

Young people in Shickley, NE (pop. 341) will benefit from $3 million in endowed assets and planned gifts. The community has already secured 20% of its estimated 10-year wealth transfer, and is working to build a $12 million endowment over the next 20 years.

New scenarios for the transfer of wealth opportunity in the U.S. for the period of 2010 through 2060 range from a high of $91 trillion to a low of $43 trillion. The CRE’s most likely scenario estimates $75 trillion. This wealth may be held in real estate, securities, retirement accounts and other assets.

If we set a charitable giving goal of just 5 percent, nearly $3.8 trillion in new community endowments could be built over the next five decades. Once fully capitalized, these endowments could generate nearly $200 billion annually in new grant making! With the decline in local government spending, philanthropic assets could prove to be a community’s most reliable source of funding in the future.

The transfer of wealth is of critical importance to rural places that continue to experience outmigration. In Nebraska, more than 70 percent of our 534 communities lost population in the last decade, according to the 2010 Census.

A local example

For generations, frugal Nebraskans worked hard and saved money for the future. Most lived their entire lives close to their birthplace. One family might occupy the same property, even the same home, for multiple generations. As we are well aware, this is no longer the case.

Over the next 50 years, our state will experience the largest intergenerational transfer of wealth in its history. The World War II and the Baby Boom generations own more private wealth than at any time: more than $600 billion in Nebraska.

Some of this wealth will go to taxes. Most will go to heirs. Due to outmigration, many of those heirs no longer live where the wealth was built, and may no longer feel connected to those places. Once intergenerational wealth leaves our communities, it is likely gone forever. However, if it is endowed in community funds, it stays in the community forever, with the earnings available each and every year for emerging needs and opportunities.

The exigent issue for Nebraska and other Great Plains states is timing.

In more than half of Nebraska’s 93 counties, the peak years for wealth transfer are happening now or in the next 10 years.

Andy Anderson of McCook, NE has established an endowment
through NCF to support youth entrepreneurship in his hometown.

That is why we are working so hard to promote and facilitate philanthropy in more than 200 communities across the state. We must act now to encourage charitable investment in the future of our hometowns while the window of opportunity is still open. We must teach, encourage and inspire our citizens to give back today, and include their community in their estate plans for tomorrow.

If only a small portion of our wealth transfer – just 5 percent – were given back through charitable gifts and endowed in community funds, Nebraska would have more than $30 billion within 50 years, generating millions of dollars each year to invest in hometowns where young families can prosper.

The Nebraska Community Foundation

The Nebraska Community Foundation (NCF) is helping people across the state achieve this vision.

Ten years ago, 51 communities were building endowments through NCF with total assets of $4.6 million. Today there are 121 with nearly $40 million endowed. Another $43 million in planned gifts will benefit Nebraska’s communities and organizations in the future.

These communities range in size and geography. What they share in common is local leadership committed to building a future for their hometown.

The Nebraska Community Foundation envisions our state as a place where people can reach their highest potential. Where we can live and work close to family and friends and still stay connected to the world. NCF affiliated funds are using their endowment earnings for grants that make this possible:

  • Non-traditional scholarships for adults working in the community
  • High-quality affordable childcare to help working parents
  • Small business development and transition
  • Leadership development and volunteer training
  • Value-added curriculum for K-12 schools
  • High-quality, accessible health care
  • Facilities and programs to help our seniors to age in place
  • Arts, recreation and public safety to make our communities places where young families can thrive
I am proud that my hometown of Red Cloud is part of the NCF family of community funds. And that it has launched a community-wide effort to foster leadership, entrepreneurship development, youth engagement, and philanthropy. I am especially pleased that my parents are considering their hometown as a seventh child, by including Red Cloud in their estate plan.

Harnessing 5 percent of the transfer of wealth for the future of our rural places is a reasonable, achievable goal!

For more information about NCF and community giving, visit or check out their videos on YouTube. Join the discussion on Facebook, too!

Visit the Rural Futures Lab homepage here.

Photos provided by the author.