Who says the members of Congress can’t work together to get things done? Why just last month, after over a year of work, the Senate passed a “wide-ranging bill to modernize energy policy” by a lopsided majority (85-12), with expressions of satisfaction from both sides of the aisle. Senate passes energy reform bill, Timothy Cana & Devin Henry, thehill.com, 4/20/16.
Sen. Lisa Murkowski (R-Alaska), chair of the Energy and Natural Resources Committee, hailed this legislation as a “broad, bipartisan and, some would suggest, long-stalled energy bill.”
Sen. Maria Cantwell (D-Wash.), the ranking minority member, spoke of “important compromises on clean energy technology, energy efficiency, [and] infrastructure,” which is “why we’ve been so persistent.” This would be, she added, the first significant energy bill since 2007.
Energy Secretary Ernest Moniz said he was encouraged by “many positive elements” of the legislation,” which would recognize “our reorganization in terms of better integration of energy and science programs” and “our increasing responsibilities in emergency response for energy infrastructure disruptions.”
As will be discussed, however, the praise for the Senate energy bill is overdone. Like the 2007 energy act, it basically represents a package of favors for special interests.
The North American Security and Infrastructure Act (H.R. 8), passed by the House in December 2015, has more to recommend it. Perhaps the provisions of the House bill will predominate in the energy bill that eventually emerges from conference; if not, let’s hope the Senate bill will be sidelined until the next session of Congress, when better legislation can hopefully be developed.
I. Unwarranted nostalgia – The basic thrust of the Energy Independence and Security Act of 2007 was energy conservation via tightened mileage standards for motor vehicles, a massive phase-in of ethanol requirements in motor fuels, and forced conversion to more efficient (and costly) light bulbs. It was passed with an unusual display of bipartisan cooperation. Note the photo of President George W. Bush shaking hands with Speaker Nancy Pelosi at the signing ceremony while Senator Harry Reid is applauding. Bush calls energy bill a “major step,” cbsnews.com, 12/19/07.
"We make a major step ... toward reducing our dependence on oil, fighting global climate change, expanding the production of renewable fuels and giving future generations ... a nation that is stronger cleaner and more secure," said the president. Mr. Bush was flanked by Democrat and Republican members of Congress who had ushered the legislation through.
The SAFE blog was only a few months old, and we didn’t want to come across as overly negative. The EISA provisions seemed out of synch with the free market system, however, and this was duly suggested in our report. Fiscal visionaries at bay, 12/24/07.
#New fuel efficiency standards for motor vehicles make it look like the government is “doing something” about global warming, but rising oil prices [which were predicted at the time] should have a similar effect with far less fuss.
#Why should the government mandate the use of ever more ethanol? Producing ethanol from corn is ruinously inefficient, not to mention its adverse effects on food prices and the environment. It may eventually be possible to produce ethanol from switch grass and such, but the technology has yet to be developed on a commercial scale.
#Compact fluorescent (CFL) electric bulbs may be the wave of the future, but why not allow consumers to figure this out for themselves vs. forcing them to make the change? Also, the legislation did not address opportunities on the energy supply side, notably steps to boost domestic oil and gas production (the fracking boom had not become evident, and conventional wisdom held that US production was inevitably declining). Bush calls energy bill a “major step,” 12/19/07.
"I firmly believe this country needs to have a comprehensive energy strategy," said Mr. Bush before signing the bill. He referred to the need for more nuclear energy and domestic oil production - issues that the new energy bill ignores.
Corn farmers, ethanol producers, and CFL light bulb manufacturers stood to benefit from the EIASA, but it was sure to prove costly for American consumers. In contrast, the claims of environmental benefits were and remain debatable – even assuming that a reduction in manmade carbon emissions could avert the catastrophic global warming that was predicted.
The fracking boom has probably done more to reduce US carbon emissions - by providing an abundance of natural gas to generate electric power versus burning coal - than all of the government’s regulatory programs put together. Yet instead of celebrating this result, climate alarmists are taking an increasingly jaundiced view of fracking. How fracking reduces greenhouse gases, Stephen Moore, Washington Times, 4/10/16.
. . . thanks to fracking and horizontal drilling technologies, we are producing more natural gas than ever before. Natural gas is a wonder fuel: it is cheap. It is abundant. America has more of it than anyone else — we have several hundred years worth of natural gas. And it is clean burning. *** Meanwhile, the left has declared war on a technology that has done more to reduce carbon emissions and real pollution emissions [e.g., sulfur dioxide] than all the green programs ever invented.
In sum, it’s hard to understand the hankering for another bipartisan energy bill when the 2007 legislation accomplished so little.
II. Priorities – The primary goal of energy policy should be abundant supplies of cheap and reliable energy. And this goal can best be achieved, we would submit, by leaving most of the decisions about energy sources and consumption to the producers and consumers concerned.
To the extent that the government seeks to call the shots, e.g., by providing mandates or subsidies to encourage the use of wind or solar energy, suboptimal economic decisions (and results) should be expected. This is not to disparage wind or solar energy, which may well be the best choice for some purposes, but simply to say energy producers and consumers should be allowed to evaluate the cost/performance tradeoffs for themselves rather than being guided to the “right answers” by government policymakers.
Government restrictions on harmful emissions (aka pollution) represent an appropriate exception to the foregoing, but only to the extent that the restrictions can be realistically justified on a cost/benefit basis. Regulators often seem to ignore the “law of diminishing returns,” which holds that each successive round of emission reductions will deliver less benefit at higher cost. Moreover, it defies reason to characterize carbon dioxide (a natural component of the atmosphere that is essential for life on Earth) as “pollution.”
Regulations in the energy sector create an economic drag effect that may not be readily apparent (as a tax on carbon would be) but is quite real. It would be economic/political malpractice not to identify and terminate (or improve) unsuitable energy regulations, and between regulations already in effect and others that are contemplated there are many candidates to consider. Here are a few of them:
•For decades, there was a ban on the export of domestically produced crude oil – subject to limited exceptions authorized by the Commerce Department. Imposing the ban was basically a way for Congress to show it was “doing something” during a period of oil shortages, and now that there are excess oil stocks the effects on hard-pressed US oil producers seem downright perverse. Ending oil export ban should be easy decision, 10/5/15. Big government fans defended the ban, however, and were able to exact a high price for its termination. Some thoughts about the omnibus spending package, 1/11/16.
•The EPA’s Clean Power Plan would require each of the states to reduce carbon emissions from existing power plants. Although supposedly justified by the powers delegated to the EPA by the Clean Air Act, its provisions seem legislative rather than regulatory in nature. SAFE to Congress: Bin the Clean Power Plan, 6/16/14. A gridlocked Congress failed to stop the EPA’s encroachment on its turf , however, and the constitutionality of the CPP is now being tested in the courts. The controversy could take several years to resolve, so it’s not too late for Congress to step in and settle the matter.
•The CPP is only one of the regulations that the EPA is rushing to implement before the current administration ends. Another big one is a tightening of existing standards for ground level ozone, which neatly illustrates the law of diminishing returns referred to earlier. The standards initially set in this area were probably appropriate, but the standards now contemplated would provide little additional benefit. EPA should rethink proposed ozone standards, Americans for Prosperity coalition letter (from 60 organizations, including SAFE) to Congress, 5/9/16.
The ozone regulation places a tremendous burden on communities across America. The result of a nonattainment designation can be disastrous and bring economic activity to a halt. Local governments risk losing federal highway funds. Oil and gas operations, with the royalty and tax revenue they bring, may cease. Manufacturers may be forced to relocate or shut down, destroying jobs in the process. Given the harmful economic effects, we ask that you consider measures to change the ozone standard and reform the rulemaking process.
•According to the head of the House Energy and Commerce Committee, many energy regulations were adopted during an era of energy scarcity and are out of step with current conditions. This creates opportunities to (a) promote natural gas pipeline development; (b) establish a more modern, flexible and resilient electric power grid; (c) expedite the approval process for exporting liquefied natural gas (LNG) to western Europe, etc.; and (d) provide manufacturers with relief from onerous federal efficiency mandates. H.R. 8 will equip energy laws for the 21st Century, Rep. Fred Upton (R-Michigan), morningconsult.com, 12/1/15.
The House energy bill (H.R. 8) was passed in December 2015 and sent to the Senate for consideration. The North American Security and Infrastructure Act (H.R. 8), Thomas legislative site (bill search).
III. Distractions - The Senate continued working on its own energy bill (S. 2012), which represented the result of months of effort and had already been approved by the Senate Energy and Natural Resources Committee. Senate begins work on energy overhaul, Devin Henry, thehill.com, 1/27/16.
The energy bill is the product of months of work between Republicans and Democrats on the Senate’s energy panel, which approved it on an 18-4 vote last summer. The legislation, [Sen. Lisa] Murkowski said on Wednesday, contains provisions from 50 different bills proposed by senators on both sides of the aisle.
A fundamental feature of the Senate energy bill was avoidance of provisions that might cause either side to block the measure. This meant there should be no major spending or new taxes (which would raise Republican ire), nor measures to free up energy markets by clipping the powers of government regulators (which would rile Democrats). Congress looks to pass energy bill for first time since 2007, Nick Cunningham, nasdaq.com, 2/2/16.
So, the bill could become law in a rare bit of bipartisan consensus precisely because it includes only small-bore energy provisions. But that is just about all the bitterly divided Congress can stomach.
As noted earlier, the Senate energy bill was passed in due course. Energy Policy Modernization Act of 2016 (S. 2012), 4/20/16, Thomas legislative site (bill search). It runs 796 pages, nearly three times the length of H.R. 8, with scores of provisions on a wide variety of subjects.
A detailed analysis of S. 2012 would be a tedious and time-consuming project, so let’s cut to the chase. What feature(s) of this legislation would represent significant progress towards what we perceive to be the primary goal of energy policy (section II, supra), namely ensuring abundant supplies of cheap and reliable energy? And would any provisions in this bill have the opposite effect?
One observer argues that there would be a big payoff from the provisions re the export of liquefied natural gas (LNG). Energy bill would strengthen US economy and global energy security, Drew Johnson (Taxpayers Protection Alliance), Washington Examiner, 3/12/16.
Overall, easing restrictions on natural gas exports could create nearly half a million jobs and add $73.6 billion to U.S. GDP over the next 20 years. Exporting LNG would also help ease geopolitical tensions. *** If the United States could sell more natural gas to European countries, we could limit Russia's grip on our allies in the area. Similarly, if U.S. companies are able to sell natural gas to China, it could ease tensions in the South China Sea and promote greater stability in the Asia Pacific region.
To us, the LNG export provisions seem rather pedestrian. First, S. 2012 requires the Energy secretary to decide on LNG export proposals within 45 days after studies of such proposals are completed, but it doesn’t specify time limits for the studies. (Let’s see, how many years was the Keystone pipeline application under review?) Second, S. 2012 directs the Energy secretary to conduct a “study of the State, regional, and national implications of exporting liquefied natural gas with respect to consumers and the economy” and report back to Congress within a year, but with no assurance that the secretary’s recommendations will favor LNG exports.
Aside from the LNG export provisions, there is precious little support for fossil fuel operations in S. 2012; the prime thrust is promoting alternative energy and energy conservation. Congress looks to pass energy bill, nasdaq.com, 2/2/16.
The bill would include an acceleration of federal approvals for LNG export terminals. It would update energy efficiency standards for the first time since 2007. It would also update standards for the electric grid, address some cybersecurity concerns, and expand conservation funding. But the bill will largely steer clear of issues relating to fossil fuels, renewable energy, or climate change. In years past, those latter issues dominated the debate, causing previous efforts to go nowhere.
Energy is sure to be less abundant and more expensive as a result, with resultant drag on the economy and reduction in employment opportunities. Senate energy bill will only increase government cronyism, Nicolas Loris, dailysignal.com, 3/1/16.
Harmful provisions include taxpayer handouts for workforce training programs, targeted tax credits for hydroelectric production, demonstration projects for geothermal energy and hydrokinetic energy, a recycling program for critical minerals, nudging businesses to be more energy-efficient with government programs, increasing bureaucratic interference in the housing market, and empowering Washington to own and control land, among other problematic ideas. None of these activities is the role of the federal government.
Compounding the damage, a last-minute amendment will require the Federal Housing Administration to count projected savings from “energy efficiency” investments in a home towards the borrower’s income for a prospective mortgage. The borrower can qualify for a larger government-backed loan as a result, with taxpayers getting stuck with the resultant risk. GOP-passed Solyndra subsidies use Enron-style accounting to fuel federal housing, Daniel Horowitz, Conservative Review, 4/20/16.
Folks, you can’t make this stuff up. This is a mix of Solyndra, Freddie Mac, and Enron accounting all in one.
IV. One more thing – Considering that Republicans control both houses of Congress, their failure to pass some constructive energy legislation is disheartening. By settling for legislation Senate Democrats won’t filibuster, the GOP is practically ensuring government control over the economy will keep growing – sometimes fast, sometimes slow, but never stopping – as it has been for over 100 years.
And we’re not the only ones who have noticed. An economist [Walter Williams] explains why America is moving toward totalitarianism, dailysignal.com, video (4:27), 5/5/16.
Isn’t it time for conservatives to find a positive strategy rather than merely trying to slow the big government express down?