That’s why Missouri is challenging California egg protectionism:

Missouri’s attorney general has asked a federal court to strike down a California law regulating the living conditions of chickens, setting up a cross-country battle that pits new animal protections against the economic interests of Midwestern farmers. 

The lawsuit by Missouri Attorney General Chris Koster takes aim at a California law set to take effect in 2015 that prohibits eggs from being sold there if they come from hens raised in cages that don’t comply with California’s new size and space requirements.

If the law goes into effect, it will limit competition for California egg producers, allowing them to raise prices on California consumers.

Federal courts will decide the issue. The key section of the U.S. Constitution is the Commerce Clause, which grants only to Congress, not the states, the power “to regulate Commerce with foreign Nations, and among several States, and with the Indian Tribes.”

Even states’ rights proponents, who favor returning power to the states in most areas, don’t disagree on this one. The Constitution is clear and, despite some deviations over the years, the Commerce Clause has allowed mostly open free trade among the several states.

There are some exceptions, but only for special reasons. For example, California mandates special formulas for automobile gasoline. But that’s allowed because of the state’s unique problems with pollution in the Los Angeles basin. Such exceptions have nothing to with markets for common commodities.

So once again, California’s politicians could end up with egg on their faces.

“Cindy Vinson and Tom Waschura are big believers in the Affordable Care Act. They vote independent and are proud to say they helped elect and re-elect President Barack Obama,” the Mercury news said. “Yet, like many other Bay Area residents who pay for their own medical insurance, they were floored last week when they opened their bills: Their policies were being replaced with pricier plans that conform to all the requirements of the new health care law.”

Vinson, a 60-year old retired teacher will pay $1,800 more a year for her individual policy. Waschura, 52, self-employed engineer, will have to pay $10,000 more for insurance for his family of four.

This isn't funny, although the irony is. We at CalWatchdog, along with many in the new media, have been warning about the impending fallout of Obamacare. Our critics accused us of everything from being doom-and-bloomers, to wanting poor people to die.

CalWatchdog stories provided data, numbers, facts, studies, and quoted health care experts. But as is the case with so many, people apparently need to experience things first hand in order to learn.

Surprisingly, even with the painful reality of the significant health care cost increases, the San Jose Mercury News called media stories warning about Obamacare-induced cost increases, “political rhetoric.”

“For years, the nation has been embroiled in the political rhetoric of 'Obamacare,' but this past week the reality of the new law sank in as millions of Americans had their first good look at how the 3 1/2-year-old legislation will affect their pocketbooks,” the Mercury News said.

Obamacare facts page says, “In exchange for the new rights and protections most Americans must obtain health coverage by 2014, get an exemption, or pay a fee.”

Covered California spokesman Dana Howard defended the “winners and losers” under Obamacare. “Some people will see an increase who are already on the individual market purchasing insurance,” he said, “but most people will not,” Howard said.

Covered California, the state's health insurance exchange, claims on its website, “Your destination for affordable health care.”

I guess that depends on who you ask.

The list of who won't have to pay for health care under the Affordable Care Act is long. “The shared responsibility payment (IRS penalty) should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time,” according to the U.S. Department of Health and Human Services.

The list of exemptions to the payment of Obamacare exempts just about everyone except the middle class and those who pay income tax.

“I really don't like the Republican tactics, but at least now I can understand why they are so pissed about this,” Waschura said. “When you take $10,000 out of my family's pocket each year, that's otherwise disposable income or retirement savings that will not be going into our local economy.”

“I was laughing at Boehner — until the mail came today,” Waschura said, referring to House Speaker John Boehner, and the Republicans' charge to defund Obamacare.

But it was okay that the $10,000 health care cost was going to come out of someone else's pocket.

By WAYNE LUSVARDI

Trade war!

The newspaper headlines last week read, “California Low Carbon Fuel Standard Blocked in Court.” It was a component of California’s AB 32, the Global Warming Solutions Act of 2006, which was scheduled to be implemented on Jan. 1, 2012.

But did the headlines tell the whole story?  Did the low-carbon fuel standards imposed by the California Air Resource Board, which implements AB 32, involve reducing air pollution emissions? Or was it an interstate trade war?

That must have been the question that ethanol producers were asking.  After all, they were being told by California that the amount of ethanol in gasoline was being increased from 5.7 to 10 percent to reduce air pollution. Simultaneously, they were being told that interstate trade of ethanol was being banned under AB 32.

Last week’s ruling was by U.S. Federal Judge Lawrence O’Neill, a native Californian. He ruled that California couldn’t “balkanize” the commercial market for low-carbon fuels such as ethanol as part of its strategy to reduce greenhouse gas emissions.  He said the part of California’s AB 32 dealing with low carbon fuel standards was unconstitutional and violated the Interstate Commerce Clause.  The Commerce Clause gives the federal government sole jurisdiction over interstate trade.

America’s Founding Fathers put it in the Constitution to prevent states from fighting trade wars against one another. A key to American prosperity has been that the whole country is a vast free-trade zone.

In essence, CARB wanted to go back before the Constitution and set up its own sovereign governmental rules as if California were a separate country. But the court didn’t buy the environmental rationale and ruled it was both unconstitutional and an interstate trade issue.

The low carbon fuels standard part of AB 32 would have allowed California corn farmers to have an oligopoly on ethanol production. But California corn growers also sell ethanol to other states and out-of-state ethanol producers import to California.  This resulted in a lawsuit brought by both in-state and out-of-state farmers that ended up in O’Neill’s courtroom. California is the largest ethanol market in the country.

The lawsuit was brought by the Rocky Mountain Farmers Union, the Redwood County Minnesota Corn and Soybean Growers, Penny Newman Grain Inc., Growth Energy Renewable Fuels Association, farmer and rancher Rex Nederend, the Fresno County Farm Bureau, the Nisei Farmers League and the California Dairy Campaign. The lawsuit was joined with another suit brought by the National Petrochemical and Refiners Association, the American Trucking Association, the Center for North American Energy Security and the Consumer Energy Alliance.

Ethanol Always Politicized

Ethanol use always has been controversial in the United States.  Going back to 1840, ethanol was used as a fuel in lamps before the advent of electricity.  But a tax was levied on alcohol during the Civil War, rendering it uneconomic.  In 1906, the tax was eventually repealed.

Henry Ford’s Model T automobile originally was fueled by ethanol or gasoline until 1908. When Prohibition of alcohol was enacted in 1920, ethanol sellers were accused of being moonshiners. Prohibition was more than just a moral crusade.  It involved a trade war.

When a mass market for ethanol was created, it resulted in it becoming a sort of currency.  Ethanol competed with cheaper gasoline as a commodity.

MTBE and Ethanol Mandates

Beginning in the 1970’s, ethanol began to be required to be blended with gasoline to reduce air pollution as part of the Federal Clean Air Act. The Federal minimum standard was a 5.7 percent ethanol blend to meet the 2 percent oxygen requirement of the Act. The maximum standard was a 10 percent ethanol, 90 percent gasoline blend.

However, California instead chose to use MTBE -– methyl tertiary butyl ether — as an additive to gasoline.  MTBE is derived from methane and isobutylene.  Methanol is made from natural gas and butane comes from crude oil or natural gas.  In other words, MTBE comes from fossil fuels.  California’s choice of MTBE denied Midwest corn growers the California fuel additive market.  But California ended up banning MTBE after it was found that it infiltrated groundwater supplies by leaking from underground gas station fuel storage tanks.

MTBE is an oxygen additive or fuel booster that results in lower gasoline consumption. As California inadvertently contaminated groundwater basins with MTBE, it concurrently was mandating the cleanup of perchlorate — also an oxygen additive — from groundwater supplies.  Perchlorate is dubbed a “rocket fuel booster” due to its use in rocket and missile fuels.  The proverbial left hand of California bureaucracy didn’t know what the right hand was doing.

By 1999, California banned MTBE.  In 2003, it chose to use ethanol instead, but only in the minimum amount of 5.7 percent to meet federal clean air standards. Apparently, California wasn’t concerned that much about air quality in 2003 to raise the ethanol standard to 10 percent.

By 2012, California was scheduled to shift to a 10 percent ethanol blend in its gasoline. Concurrently, it was apparently hoping to corner the increased market on ethanol through the low-carbon fuel standard part AB 32. Judge Lawrence O’Neill’s injunction put a stop to this.

Ethanol cannot feasibly be shipped through pipelines, as can liquid hydrocarbons such as gasoline or gaseous hydrocarbons such as natural gas.

Congress Kills Ethanol Tax Credits and Tariffs

Is it coincidental that last week the U.S. Congress decided to allow the tax credit for ethanol producers to expire?  Back in June 2011, even the Democratic Party-controlled U.S. Senate voted 73 to 27 terminate the 45 cent per gallon subsidy and the 54 cent per gallon tariff on ethanol imports. The law was set to expire in any event.

But this doesn’t kill the federal mandate to use a minimum amount of ethanol each year as a fuel additive.  Fifteen billion gallons must be used in 2015, rising to 36 billion gallons by 2036.

Reportedly, the ethanol subsidy costs taxpayers about $6 billion each year. It has ended up transferring $45 billion to ethanol producers over the past 30 years.

So the government-created market for ethanol will continue, but without tax credits and tariffs.  Brazil can produce ethanol cheaper from sugar cane than U.S. growers can from No. 2 corn.

Context

Last week’s newspaper accounts about a federal court striking down the low-carbon fuel standards section of AB 32 were accurate.  What they lacked was sufficient context to understand it.

Apparently the low-carbon fuels part of AB 32 was an attempt to buy off California’s corn farmers as well as ethanol blending refineries.  But they couldn’t be bought off.  They sued.  This is why AB 32 is often seen as a protection scheme with few real environmental benefits.