Hilton Head Island Reflections and Observations

Our family recently wrapped-up that American summertime ritual of the week-long gathering at a coastal sandbar by the ocean. For my clan, the location of choice for some time has been Hilton Head Island, specifically on the southern end in the Sea Pines community.

In the interests of fair disclosure: I am not a golfer, I spend my days in places like these trying to avoid direct sun, and I will tire of a pool or beach within half an hour. So, in many respects, the week of summer seaside fun is not the place for me. But if the kids are happy, everyone is together, and the food is good, I am all in.

Plus, as a bonus, a week at Hilton Head offers enjoyable and entertaining pursuits for me; they are just unconventional to most beach vacationers. I enjoy observing, contemplating what I see, and then expressing my thoughts through writing. The summer of 2021 and Hilton Head combined to offer up a bevy of observations.

Observation #1: Humans Taming Nature Brings Good Tidings

The first thing that always strikes me about the island is how unforgiving and unusable the place would be without human ingenuity unleashing technology to tame the environment. The place in its natural state is a humid, hot, swampy, stormy, insect-infested ecosystem that makes quick work of the weak, structures, and order. But you walk Hilton Head’s streets and ride its trails, and all you see is beauty: in the manicured lawns, impressive homes, sculpted trees, and carefully designed water features.

The irony that strikes the observer is that those who are drawn to Hilton Head Island view the natural beauty of the place as the primary attraction. Yet a simple and superficial examination betrays a carefully created and cultivated environment that retained the best that nature had to offer (local horticulture), removed the problematic aspects of nature (standing, putrid water), and insulated from the uncontrollable aspects (weather).

Looking around the island, you see the human condition rising above what nature dealt and creating something superior. That makes people happy, and me smile.

Observation #2: Without Carbon, No One Would Be Here
Hilton Head Island’s existence, and that of all tropical locales, depends on carbon. It’s a simple truth: no carbon, no Hilton Head Island.

Why? Well, first off, one could not travel from whatever northern or midwestern city serves as home. And consider the fact that just about everything consumed on the island must be grown, processed, and manufactured somewhere else. All of that requires carbon-based energy, including what it takes to transport the goods to the island.

The electricity that powers the air conditioners 24 hours a day in the summer is largely carbon-based and natural gas-fired. You would not want a wind- or solar-based power grid running climate control in the Carolina Low Country. It would mean stifling indoor temperatures, to the point where you’d be better off staying home up north.

If there is a zero-carbon world awaiting us, the last place you’d want to own real estate or spend a summer week is at a place like Hilton Head. I suspect many northeasterners who vacation down south are oblivious to such realities. Let’s hope they don’t awaken to the reality the hard way, via nonsensical policies.

Observation #3: How to Differentiate Between the 10%, the 1%, and the 0.1%

A place like Sea Pines on Hilton Head provides a quick and easy way to instantly differentiate between the 10% well to do, the 1% rich, and 0.1% ultra-wealthy. Just look at the real estate and who is there. Here is a quick breakdown:

  • If someone is renting a house in Sea Pines during peak summer season, chances are they are doing well and fall within the upper 10% of the economic crust. Weekly rates on the southern end of the island can run as high as $14,000 per week, depending on the size of the home and its proximity to the ocean. Demand is high; if you want to secure your house for your week, you better commit early (in many instances you need to commit the prior year).
  • Now, if someone owns the home in Sea Pines and rents it out during peak season, you are likely dealing with someone in the upper 1% of the wealth spectrum. Basically, the top 1% is the landlord for the top 10% weekly tenants in places like Hilton Head. Surprisingly, many homeowners in this group don’t seem to care much about the physical condition of the home; for some the home is nothing more than a revenue generator that can be enjoyed for free in offseason.
  • Then there is the 0.1% at the tippy-top of the money ladder who own the impressive estate down that is unoccupied most of summer. These are the super wealthy that don’t rent their residences out because, well, they don’t need to. Undoubtedly, the estate here is one of a number they own. So instead of heading down here in summer when its peak season, hot, and busy, they come down in the offseason to escape New York, Boston, or some other large northern city winter.

Observation #4: The Weekly Collision of Doers and Slackers

Hilton Head is typical of many seaside resort communities by offering a stark contrast when it comes to the those on the island any weekday in the summer. There are two distinct groups: those who are on vacation and do nothing but engage in various forms of relaxation and those who are intensely working to maintain, serve, or build the economic ecosystem that is the resort.

It’s always been weird for me when vacationing at these types of locales. Families on bikes, eating out, laying on the beach, and sleeping late. Versus dedicated workers building houses, maintaining lawns, running restaurants, and working 50+ hours per week. One group riding bikes and driving SUVs. The other driving pickups and vans. Both groups going about their day as if the other group is invisible.

I like the vibe of economic activity; doers showing up every day and getting it done. Earning income, providing for their families, and building a life. The local economy in the Low Country is the free market working to create value across the economic spectrum. The free exchanging of value between those who desire leisure and those who provide it. At least for the week, until the vacationers return to their jobs; creating, enabling, and serving to create value.

Observation #5: How the Drive Down and Back Covers the Spectrum of Government

The drive from Pennsylvania to South Carolina offers the opportunity to see how different states approach the role of government and the taxpayer. Toll roads serve as a great illustration.

In Pennsylvania, once a toll road is created, it lives on in eternity. And the cost of the toll continues to go up. It doesn’t matter if the initial justification was to pay for a discrete infrastructure project and now the project is paid off. It doesn’t matter if the tolls are egregious. It doesn’t matter if the road is poorly maintained. The tolls in Pennsylvania live on year after year, dollar after dollar, and mile after mile.

This is not cheap. A round trip on the Pennsylvania Turnpike between Pittsburgh and Harrisburg (spanning about 2/3 of the state’s length) will run you just under $100. Drivers were hit with yet another rate increase in 2021. And the PA Turnpike had the dubious distinction of being rated the most expensive toll road in the world. One may wonder where all that toll money ends up.

The bureaucrat’s justification for the driver extortion is to fund statewide road maintenance, yet the Keystone State’s road system remains in overall poor condition year after year. Instead, the answer, of course, is to primarily feed the bureaucracy of government and its affiliates like the public unions. In Pennsylvania, government only grows, which means tolls only rise while the condition of the roads degrade. And the number of roads that will require toll payment within the Keystone State is increasing.

North Carolina’s abuse of taxpayers and drivers is not as bad as Pennsylvania, but it is getting there. The major highways into and out of Charlotte are now split between toll express lanes and normal lanes. That means traffic congestion is self-inflicted by government on those drivers not willing to be extorted; the toll lanes are wide open and the normal lanes are clogged in traffic jams most hours of the day. Government creates the congestion to grow its revenue base, drivers pay the price directly (through the toll or longer commute times) and the economy pays the price indirectly through lost productivity.

South Carolina is a different story. The Palmetto State has a law that states once a toll road pays off its project financing, the toll booths must come down and the road becomes free and open access. That’s exactly what happened recently on Hilton Head with the Cross Island Parkway: once its final bond payment was paid, access became free and the toll booths will come down.

The drive to and from this year’s vacation illustrates the difference between government serving the people and the people serving government. The former makes you feel relevant while the latter makes you feel used.

Observation #6: Doesn’t Look Like Climate Change is a Top Concern

Up and down the island, you see a building boom. The few remaining vacant lots being staked out for massive, new homes. Older homes are being bought, torn down, and replaced with new houses having three times as much square footage as the predecessors. The closer to the water, the better.

Island real estate values seem to go only in one direction: up. The Fed’s free money policy inflates and pumps real estate values to bubble levels. Buy it, build it, remodel it, rent it, flip it. Repeat over and over (at least until the music stops).

The building boom and dizzying real estate property price increases tell you that no one believes the island is about to be submerged under rising ocean levels. Yes, hurricanes will inevitably hit the island periodically. But building codes and a few rational design features on the homes will make them quite resilient to withstand all but the most severe of storms.

The community of Hilton Head, along with so many other coastal destinations, figured out that increasing atmospheric CO2 levels made its tourism economy possible. Whatever challenges climate may serve up should be manageable over time. Permanent evacuation of the island and resettling to higher ground is not going to be necessary anytime soon. Perhaps the UN’s IPCC bureaucrats should take note.

Conclusion

Human ingenuity, technological innovation, and the free market economy make places like Hilton Head Island possible. These wonderous drivers make the useless and inhospitable valuable and inviting. The more we do to protect these quality of life catalysts, the better chance our kids and grandchildren will enjoy their fruits for decades to come.

Deiuliis Addresses 2021 PIOGA Spring Meeting

On Wednesday, May 19, Nick Deiuliis served as the Pennsylvania Independent Oil & Gas Association’s (PIOGA) keynote speaker for its annual spring meeting.

The Pittsburgh Post-Gazette covered the meeting and Nick’s remarks, writing, “They [attendees] knew what to expect when CNX Resources’ CEO Nick DeIuliis took the podium for his keynote address. He would be the one to speak for them, unapologetically…A self-styled advocate for capitalism, the middle class and for developing nations — which he says will be hurt most by a move away from fossil fuels — Mr. DeIuliis predictably went after the ‘elites’ and ‘academia’ in his speech and said the pursuit of renewable energy gives power to the Chinese Communist Party…”

Pennsylvania town saved by fracking fears Biden will kill its prosperity

CANONSBURG, PA. — Thirty years ago, Jason Capps was a young man with ambition, but when he looked around this town near Pittsburgh, where he grew up, all he saw were opportunities slipping away. The coal mines where his father worked were dying; the glass, steel and manufacturing industries were on their last legs.

In 1987, when Capps graduated from high school, the unemployment rate was at a staggering 12 percent.

“My ability to carve out a future here was limited at best, impossible at worst,” he said. “So I left.”

Capps, 51, became a chef and traveled the country honing his skills. But then an unexpected rebirth happened here in Western Pennsylvania with the discovery of the Marcellus Shale, an ancient rock bed that offers an abundant source of natural gas.

Eventually, Capps moved back to his hometown and, in 2006, he founded Bella Sera — a successful event space resembling a grand Tuscan villa — which he still owns and operates.

Energy Horror Part 3: Deep (Freeze) in the Heart of Texas

The third and final installment in the energy horror trilogy may leave viewers feeling like they’ve seen this movie before. It’s repetitive and follows the same formula of its predecessors: bad policy, hidden agendas, rigid ideology, and demotion of science. But the formula keeps producing new versions of energy horror.

Environmental ideology trumping science and engineering in energy policy may not be shocking when it manifests in California or Boston. But surely, such shenanigans would never happen in the energy soul of our nation, Texas. Well, history taught us that energy stupidity is replicable and scalable.

It is well known that Texas has the largest wind capacity in the nation, at over 28,000 MWs. The popular rationale as to why Texas has such a massive wind fleet is that the state is windy and windmills are now economically competitive. The first part of the rationale is certainly true, but the second part is tricky.

It depends on how one defines competitive.

Head-to-head, wind generation at scale is not competitive with natural gas generation. The reasons are many, but perhaps the two biggest drivers are low cost and prolific supplies of natural gas coupled with the problem of the wind not always blowing when you need it to. The intermittent, unreliable nature of wind generation requires backup, redundant generation that is, ironically, typically carbon-based. That makes wind generation costly.

Yet Texas saw its wind capacity grow by over 100% in five years while its solar capacity grew by an astounding 2,000% in the same period. Over those five years natural gas generation capacity grew a paltry 3.5%. With Texas bureaucrats and regulators betting the ranch on wind and solar, they managed to achieve the absurd: growing generation capacity while simultaneously killing grid reliability.

So, what drove Texas to install such a massive wind and solar generation footprint? The answer: subsidy. Government, from federal down to state and local levels, year after year shoveled billions of dollars in various subsidies, tax credits, and protective market incentives to allow corporations, private equity firms, and utilities to feed at the taxpayer trough. The numbers speak for themselves: over $9 billion in federal subsidy for renewables in Texas since 2006, over $7 billion in state subsidy for renewables through boondoggles like Competitive Renewable Energy Zones, over $1 billion in local subsidy since 2006 for renewables through county and school district tax abatements.

Wind turbines were not constructed to save the planet. Windmills weren’t installed to increase grid resiliency. No, this massive investment was to simply maximize profit under a rigged system. Texas experienced the same racket that governments the world over are imposing upon the citizenry. Sadly, much of the subsidy via local tax abatements is shouldered by the poorer, rural regions of Texas so that the affluent elite in Austin and other big cities can virtue signal and enjoy subsidy.

Letting government dictate capital allocation instead of the free market also ensured investment was reduced in equipment weatherization, pipeline infrastructure, and carbon-based generation. Texas didn’t just bet its grid future by incentivizing the addition of unreliable wind generation. It also did so by encouraging foregoing investment in these other critical areas of the grid.

When the state grid went from one built on a portfolio designed for reliability, cost competitiveness, and resiliency to one designed for sucking subsidy, it would only be a matter of time before bad things happened. That time came this winter when a cold front moved over the Lone Star State.

When it gets cold, equipment runs into issues. Especially equipment that is not properly weatherized for the elements. Or windmills placed hundreds of miles away from urban demand centers and linked by an exposed, extended, and vulnerable transmission line. Cold weather also increases demand for energy. So, when the windmills stopped spinning due to the cold and the demand for energy kept growing, Texas suffered a Texas-sized blackout (solar never showed up when it counted, contributing zero to the grid during the crisis).

You will hear the disingenuous blame natural gas or deregulation as the culprits of this failure. That’s a desperate attempt to shroud the true root causes: climate ideology superseding grid science, poor policy instituted by government, subsidy driving malinvestment in place of the free market capital allocation, and irrational reliance on unreliable wind and solar.

Let’s hope Texans have become wise to the game. Fool Texas once, shame on the elite. Fool Texas twice, shame on Texans.

Rumors of a Fourth?

As frightening as this energy horror trilogy is, there are rumors that policy makers and environmentalists are planning a fourth installment. Although we don’t know yet where the location will be or the specifics, we do know the tried and true plot lines. Expect them to keep going to the grid until it goes dark.

Here’s to hoping you are able to keep the lights on tonight.

Energy Horror Part 2: Boston Willingly Becomes a Putin Puppet

The second installment of the energy horror trilogy in many ways is the most disturbing.

Boston is one of the world’s great cities, both the cradle of the American Republic and a town of awesome people. But its political leadership has lost its collective mind, creating an Achilles’ heel in the form of energy insecurity. A strongman in Russia took note and is now in control.

The road to ruin began with a wider effort across the northeast, led by the dysfunctional mess known as New York. New York Governor Cuomo got things rolling when he inanely banned natural gas shale development and blocked new interstate natural gas pipelines in his state. Both moves were, of course, justified under the banner of the public good and cloaked with a faux wrapping of scientific study.

Not only did the duo of Cuomo moves create an economic dead zone in New York (while across the border, Pennsylvania’s energy industry thrived), it also cleared the path for similarly small-minded politicians and bureaucrats in other regional states and cities like Massachusetts and Boston to follow suit with policies that punished natural gas and ran to the false hopes of wind and solar.

The cumulative result of this regionally daft judgement was the eradication of infrastructure investment in pipelines and related assets needed to maintain and bolster grid and home heating reliability. The result was premeditated and desired, not accidental or unanticipated.

As the northeast and Boston were starving investment in their energy resiliency, the natural gas shale revolution in Pennsylvania and other states was rewriting the geopolitical map. The United States today sits as the largest natural gas producer in the world and probably the lowest cost producer of the product. One of the largest and lowest cost gas fields in the nation is the Marcellus and Utica formations close to Boston.

But Boston, of course, is not able to enjoy that domestic natural gas. Instead, Boston is importing liquefied natural gas (LNG) from Russia. That country is run by a man named Putin, who is not what one would consider to be woke or an eco-warrior.

Leaders in Boston, Massachusetts, New York, and the northeast are forcing their citizens and businesses to place their energy security in the hands of our adversary an ocean and two continents away. Instead of a simple pipeline linking Pennsylvania to Boston, the city’s elite chose to link the Russian Arctic to the Mystic River. Instead of relying on their neighbors in Pennsylvania to manufacture their energy, they place their faith in Putin.

Such stupidity has consequences.

One consequence will be much higher energy costs for homeowners, businesses, and consumers in Boston. Boston and New England experience natural gas prices that are more than double natural gas prices in nearby states like Pennsylvania and Ohio. High energy costs are one of the most regressive taxes known to bureaucrats, and Boston’s poor will suffer. Sad, considering the lowest cost natural gas in the world is a few states away in Pennsylvania.

A second consequence will be a less resilient grid and energy infrastructure for Beantown. That’s what happens whenever you decide to transition from a supply chain that was tight and domestic to one that is over 4,000 miles long and spans continents and oceans. And the new supply chain starts with someone who is not afraid to shut the gas valve in the dead of winter to prove a point or to exert leverage. Expect the lights and heat to go out at the worst possible times. Just ask Ukraine or Poland.

The third consequence is environmental harm. A logistics chain that spans over 4,000 miles will have a massive carbon footprint. The natural gas is sourced from a nation where the regulatory standards are largely a joke when compared to U.S. standards. Boston and Massachusetts running to wind and solar won’t help and will only exacerbate the environmental carnage, since both present massive life cycle carbon footprints at scale. Boston and the Bay State are guilty of a massive offshoring of global pollution via purchase of Russian natural gas that is extracted in ways that don’t follow anything close to best practices and subsidization of Chinese-mined and -manufactured solar and wind components that have massively harmful environmental footprints.

People outside of New England are surprised to learn that about 20% of New England households use heating oil to heat homes in winter. That’s about 85% of the U.S. households that do so. With the natural gas shale miracle in full swing in nearby Appalachia, Bostonians and New Englanders today heat their homes in a way more like Thoreau did with his cabin at Walden Pond in the 1800s than the rest of the country does in 2021.

What’s really scary is understanding that’s exactly what Boston’s anti-innovation leaders desired.