Planetary Ruin

By a 293-127 vote, the House of Representatives yesterday adopted a short-term extension of the federal highway bill. Fourteen Republicans voted against it, while sixty-nine Democrats voted for passage. The original highway bill, known as the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, was enacted in 2005. Yesterday’s action was the 10th extension passed by the House since the original SAFETEA-LU surface transportation law expired in 2009.

The House’s bill would extend highway funding for 90 days. In March, the Senate passed a bill that would extend it for 2 years. Next, House and Senate leaders from both parties will convene a conference committee, through which they’ll try to hammer out compromise language acceptable to both Congressional chambers.

Alas, it is extremely likely that little good will come of the Conference, at least with regards to transportation policy. The House bill only perpetuates a broken system. For more on the ills of the status quo, read these articles by my colleague Marcus Scribner. To be fair to the House, the Senate bill is much more terrible. It includes all sorts of special favors and gives-aways to special interests. Thus, the negotiating positions in the Congressional Conference are bad and worse!

The only language in either chamber’s bill that warrants ultimate passage is that pertaining to energy policy, and it comes exclusively from the version approved yesterday by the House. Indeed, these energy policy provisions are excellent.

For starters, the legislation included language that would fast-track the Keystone XL Pipeline, the $7 billion, shovel-ready project to deliver up to 830,000 barrels a day of tar sands oil from Canada to U.S. Gulf Coast refineries. Specifically, the legislation would give the Federal Energy Regulatory Commission thirty days to approve the project. This provision, if enacted, would effectively override the President’s self-serving decision* to veto the project.

The House’s bill also included an amendment that would block EPA from subjecting coal combustion byproducts, known as coal ash, to ultra-stringent regulations meant for hazardous wastes. Such a designation flies in the face of reason, given that almost 50 percent of coal ash is used to supplement cement in the production of concrete. The amendment would protect the coal ash recycling industry from becoming collateral damage in EPA’s war on coal.

Unfortunately, the Keystone language is widely understood to be a non-starter in the Senate. I’d imagine the coal ash language stands a better chance. In the past, a number of Democratic Senators have asked the Obama administration to leave coal ash regulation to the States.

*After three years of extensive environmental review, the State Department in late October, 2011, determined that Keystone XL would have “no significant impact” on the environment. This finding was the final procedural step in the permitting process. All that remained was the President’s decision, which had to be based on whether the project was in the national interest.

It should have been a no-brainer. For starters, it’s a top diplomatic priority of our closest ally, Canada. More to the point, the project would contribute more than $20 billion in new spending for the U.S. economy. This spending, in turn, would generate $585 million in state and local taxes to states along the route. Most importantly, it would create 2,000 shovel-ready jobs. In a depressed economy, Keystone XL would provide a huge stimulus, one that cost taxpayers nothing.

Unfortunately, politics complicated the matter. On the one hand, environmentalists opposed the project; on the other, unions supported it. Rather than choose between these two constituencies of his political party, the President punted. In November, 2011, he announced that he would delay a decision on Keystone until after the 2012 election. As my colleague Marlo Lewis explained, this was political expediency of the worst sort.

To its credit, House leadership has not let the issue die. Nor should they—Keystone XL is a giant political loser for the President. Poll after poll (after poll) indicates that the American public supports construction of the pipeline, because they recognize the profound economic benefits I list above. In December, House leaders negotiated hard to include language a legislative priority of the President’s—the payroll tax cut—that gave the President 60 days to make a decision on Keystone. The following month, President Obama formally denied a Presidential Permit for the pipeline. The inclusion of Keystone language in yesterday’s transportation bill indicates that House leadership intends to keep hammering away at this issue. The more the merrier, as I see it.

**Updated: 7:24 PM
Commenter Greg Cohen makes an excellent correction to my post. Amended to the House bill is language that would streamline National Environmental Protection Act permitting for federally-funded highway projects. NEPA, in a nutshell, requires varying degrees of environmental analysis for any federal action, usually permitting. It is a procedural mandate–i.e., it requires an accounting of the environmental impact, not mitigation. In practice, it’s used to tie up economic activity in the courts. By my unofficial count, NEPA the most oft-used arrow in the environmentalist/NIMBY nexus’s quiver. The House amendment, offered by Rep. Reid Ribble (R-WI), is seriously good. Most importantly, it would put a hard deadline on the NEPA process.

To recap my post, in light of this correction: All the transportation policy in the transportation bills is terrible, but the energy and environmental provisions are great.

[* This column is a lightly edited version of my post earlier this week on National Journal's Energy Experts Blog.]

You know we’re deep into the silly season when ‘progressives’ champion reverse protectionism – banning exports – as a solution to America’s economic woes. Congress should reject proposals to ban exports of petroleum products and natural gas for at least six reasons.

(1) Export bans are confiscatory, a form of legal plunder.

As economist Richard Stroup has often pointed out, property rights achieve their full value only when they are “3-D”: defined, defendable, and divestible (transferable). A total ban on the sale (transfer) of property rights in petroleum products or natural gas would reduce the asset’s value to zero (assuming no black market and no prospect of the ban’s repeal). To the owner, the injury would be the same as outright confiscation. A ban on sales to foreign customers would be similarly injurious, albeit to a lesser degree.

The foregoing is so obvious one is entitled to assume that harming oil and gas companies is the point. I would simply remind ‘progressives’ that the politics of plunder endangers the social compact on which civil government depends. Why should others respect your rights when you seek to deprive them of theirs? Every act of legal pillage is precedent for further abuses of power. Do you really think your team will always hold the reins of power in Washington, DC?

(2) The proposed bans would violate U.S. treaty obligations under the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA).

Let’s start with the proposals, sponsored by Rep. Ed Markey (D-Mass.) and Sen. Ron Wyden (D-Ore.), to prohibit the export of tar sands crude shipped via the Keystone XL Pipeline and petroleum products made from that oil. This policy violates the two most fundamental principles of the global trading system: national treatment (treat foreigners and locals equally) and most-favored-nation (treat all trading partners equally).

The national treatment principle prohibits importing nations from discriminating against a foreign commodity, service, or item of intellectual property once it has entered into domestic commerce. The moment Canadian crude crosses the border, whether via Keystone XL or any other mode of transport, it becomes part of U.S. commerce. Thus, under both GATT (Article III) and NAFTA (Articles 301, 606), it must be accorded national (equal) treatment. Since Congress does not ban petroleum product exports made from U.S. crude, the Markey-Wyden proposals are discriminatory and in conflict with U.S. treaty obligations.

The proposals also flout the most-favored-nation principle (GATT, Article I), which holds that if you grant a privilege to one trading partner, you must grant it to all. Markey and Wyden would not require OPEC crude and products made from it to “stay here.” The restriction would apply only to Canadian crude and the associated products. Wittingly or otherwise, Markey and Wyden would grant most-favored-nation status to OPEC but deny it to Canada! A more foolish way to treat our closest ally and biggest trading partner would be hard to imagine.

The rejoinder to this criticism is that Wyden and Markey don’t go far enough – Congress should ban all petroleum product exports (and natural gas exports, too). Democratic strategist John Podesta’s American Oil for American Soil proposal, for example, would ban exports of petroleum products made from oil produced on U.S. public lands and offshore.

Proposals of this sort would place domestic and national commerce and all trading partners on the same, non-discriminatory footing. Nonetheless, such policies would still be unlawful under GATT.

Article XI: 1 of the 1994 GATT states:

No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party . . . on the exportation or sale for export of any product destined for the territory of any other contracting party.

Although “duties, taxes or other charges” on exports are permissible, quantitative export restrictions such as quotas and bans are “prohibited,” argue Lode Van den Hende, Jennifer Paterson, and Herbert Smith in Bloomberg Law Reports.

There are exceptions. Under Article XI: 2, export “prohibitions or restrictions” may be “temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.” However, America is not facing “critical shortages” of finished petroleum products or natural gas. Natural gas is cheap today because it is plentiful, and gasoline is pricey not because it is in short supply but because crude oil prices are high.

Article XX(g) permits export restrictions “relating to conservation of exhaustible natural resources.” However, note Hende, Paterson, and Smith, “if there is evidence that an export restriction is designed to protect or promote a domestic processing industry, then Article XX(g) cannot be used as a justification.” Promoting domestic manufacturers who use petroleum as a feedstock is Rep. Markey’s leading rationale: “I make the amendment because I want a low price for the oil for toothbrushes, for steel, for pantyhose, for anyone that makes that product here in the United States.” Similarly, Markey argues that DOE should reject license applications to export natural gas so that feedstock prices will be lower and domestic manufacturers more competitive.

(3) Banning exports will discourage production, investment, and job creation. This is too obvious to require elaboration. The smaller the market U.S. companies are allowed to compete in, the smaller their potential sales volume, revenues, and profits. An industry crippled by exclusion from the global marketplace will attract less investment, create fewer jobs, and generate smaller tax receipts. Banning exports restricts wealth creation and undermines U.S. prosperity. Not good!

(4) Banning exports will increase the U.S. trade deficit. Indeed, how could it not? Petroleum products are now America’s leading export, with sales abroad reaching about $88 billion last year. Economists disagree on whether (or why) trade imbalances matter (see e.g., here, here, here, here, and here). Be that as it may, Wyden and Markey decry the U.S. trade deficit with China and urge policymakers to do more to ‘level the playing field.’ Yet they want to kneecap America’s biggest, fastest-growing export sector. The only ‘logic’ operating here appears to be political (that which harms oil and gas companies is good).

(5) Banning energy exports would expose America to charges of rank hypocrisy. Rep. Markey is a leading critic of Beijing’s export restrictions on rare-earth elements. Rare earths are used to manufacture the ‘clean tech’ products of which he is so fond, including hybrid and electric vehicles, solar panels and wind turbines. In March, the U.S., Japan, and EU launched a WTO case against China’s restrictions on rare-earth exports. We cannot flout the same treaty obligations and trade principles we invoke without looking ridiculous and duplicitous in the eyes of the candid world.

(6) Banning energy exports would backfire, harming those the policy supposedly aims to help. Proponents claim banning energy exports will increase domestic supply, which will lower price, which will then ease pain at the pump and make U.S. manufacturers more competitive. But if this is such a great idea, why don’t we do it for agricultural products, automobiles, or any other product made in the USA? Or, as in the anti-Keystone legislation, why don’t we insist that if U.S. products (e.g. computers, confections, pharmaceuticals) are made with imported parts or materials, those products must “stay here” for the benefit of U.S. consumers? It’s because if we banned exports from those other industries, it would bankrupt them.

For the same reason, energy export bans would backfire, harming the very consumers and manufacturers such policies are ostensibly intended to help. In the short term, banning exports might lower prices by producing temporary gluts in domestic markets. But the policy’s adverse impacts would be severe and lasting.

Cut off from global demand for their products, producer and refiner profit margins would decline. Oil- and gas-related capital, production, and jobs would migrate to countries that do not wage political warfare on hydrocarbons. U.S.-based producers would drill and frack less; domestic refiners would idle capacity and invest less in efficiency upgrades. Domestic prices would rise as domestic output fell. Domestic prices would also rise because consumers would depend more on foreign suppliers who face less competition from U.S. producers.

Conclusion

Banning energy exports makes no sense except as a strategy to harm those who frack gas and refine oil for a living. The logic behind such policies is that of party and faction, not economics. Proponents seek to deprive fellow citizens of property rights essential to their survival and success in the global marketplace. It is a sign of how far America has strayed from the constitution of liberty envisioned by the founders that Congress is debating such policies today.

President Obama and his obedient lap dogs are out in full force this week attempting to convince voters that those evil guys on Wall Street have moved on from destroying the value of their homes to artificially raising the price of gasoline. Soon they are coming for your first born. From one of Obama’s speeches this week:

So today, we’re announcing new steps to strengthen oversight of energy markets.  Things that we can do administratively, we are doing.  And I call on Congress to pass a package of measures to crack down on illegal activity and hold accountable those who manipulate the market for private gain at the expense of millions of working families.  And be specific.

First, Congress should provide immediate funding to put more cops on the beat to monitor activity in energy markets.  This funding would also upgrade technology so that our surveillance and enforcement officers aren’t hamstrung by older and less sophisticated tools than the ones that traders are using.  We should strengthen protections for American consumers, not gut them.  And these markets have expanded significantly.

Now the ability to place blame for rising gasoline prices on Wall Street (or Republicans) is good politics, but its not true. The Center for American Progress report linked to above, chillingly titled “Is Big Oil Rigging Gasoline Prices?” begins by alerting the reader to the fact that the American people, having been polled, believe that Wall Street must be behind the recent rise in gasoline prices. Apparently the average American’s opinion on financial speculation, oligopoly pricing, and their link to gasoline prices is sufficiently meaningful to include in an article not accusing Big Oil of manipulating oil prices, but just putting the question out there. I hastily blogged about that report here, as did the editors of RealClearEnergy.

Obama pulled the exact same stunt last year. He set up some sort of task force/executive agency/working group/etc. to make sure that there isn’t any illegal price manipulation going on. The agency never found anything, and its unclear if they even really did any investigating:

Pressed by McClatchy for details on how an active working group would be reconstituted, Carney said simply that rising prices are a worry now.

“What we are seeing now in the last several weeks and months is a new surge in the price of oil for a variety of reasons that have to do with the global oil market,” he said. “We are seeing then the concurrent spike in the price of gasoline that Americans pay at the pump, and the president believes that it’s important to be sure that there’s no fraudulent speculation involved in that — in those spikes in the price.”

As to why restart a working group if it didn’t find anything last year and went dormant, Carney offered that, “you don’t know until you investigate what you might find. And whatever they found or didn’t find a year ago is not dispositive towards what they might find or might not find as they investigate going forward.”

Just days earlier, McClatchy asked in a March 1 report what the task force had done over the past 10 months; the answer was, very little. Administration sources who spoke on condition of anonymity because they weren’t authorized to say such embarrasing truths acknowledged that the working group had met only five times last year, three of those soon after the April 21 formation of the inter-agency task force. The working group now has met seven times in all, the Justice Department said Thursday.

It’s less embarrassing when you realize this is nothing more than a political stunt designed to convince voters that Obama is doing something about high gasoline prices. From here we take it away to an excellent post by an economics professor/blogger on a similarly ridiculous op-ed in the NYT:

Let me close by pointing those interested in this issue to a recent survey of academic studies of the role of speculation by Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva. The authors conclude:

We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.

And another post, by Craig Pirrong, an expert in energy markets who pulls no punches:

In sum, the parts of Obama’s markets aimed at speculator-manipulators are intellectually confused, empirically baseless, and deeply irresponsible because they encourage a witch hunt atmosphere by slandering (by slimy insinuations) legitimate market actors as criminal manipulators.

Well played.  Because of all the practice, no doubt.

A few other things stand out.  First, he repeats the “we use more than 20 percent of the world’s oil and we only have 2 percent of the world’s proven oil reserves” mantra.  Hell, even he admits he says this repeatedly: “But as I’ve said repeatedly.”  Repetition of a dubious factoid does not make the conclusion it is intended to support true. Indeed, that’s a staple of the Big Lie.

Second, he continues to take credit for increased US oil output when in fact he and his administration don’t have a damn thing to do with it, except that it could have been higher yet without some of their counterproductive policies.

Third, take a look at this remark: “We’ve added enough new oil and gas pipeline to circle the Earth and then some.”  To which my first response is:  What do you mean “we” kimosabe? Again, a guy who has never done anything that would risk getting a callous taking credit for the actions of those that actually put hands to shovel and made some truly shovel ready projects realities.  Moreover, it raises the question: if building so much pipeline capacity is such a great thing, why is he doing everything in his power to stall or stop Keystone?  Is that uniquely damaging? (To the environment, I mean, not to the fortunes of Buffett’s BNSF.)

A rule of thumb to keep in mind.  Whenever Obama talks about energy generally, and speculation specifically, it is safe to conclude you are being manipulated: that’s not at all speculative.

Read the rest here. It’s definitely disconcerting that the President is denigrating a completely legitimate, and valuable, aspect of our market economy.

The European Union (EU) preens itself on being the global leader in the fight against climate change. EU politicians scold the USA for ’failing’ to ratify Kyoto Protocol and enact cap-and-trade. Within the EU, the UK champions the most aggressive climate policies. So the UK’s carbon footprint must be shrinking, right?

Not according to a new report by the UK’s Department for Environment, Food, and Rural Affairs (Defra). The UK’s total net carbon dioxide (CO2) emissions rose 35% between 1990 (the Kyoto Protocol baseline year) and 2005. Emissions declined by 9% from 2008 to 2009 due to the worldwide recession. Nonetheless, the country’s carbon footprint was 20% bigger in 2009 than in 1990. How can this be?

Defra used a life cycle analysis (LCA) to estimate the UK economy’s net emissions. The agency examined not only the CO2 emitted by households and firms within the UK but also the emissions induced by the UK’s demand for imported goods. Carbon dioxide is emitted when goods are manufactured for export in, say, China, and then again when those goods are transported to the UK.

Emissions “embedded” in UK imports are increasing much faster than emissions from domestic production are declining. From 1990 to 2009, CO2 emitted by UK households and firms decreased by 14%. During the same period, emissions from imports directly used by UK consumers increased by 79% and emissions from imports used by UK businesses increased by 128%.

The Kyoto Protocol does not “cover” (regulate) import-induced emissions. So under Kyoto’s accounting rules, UK emissions are down. In reality, the UK has outsourced a sizeable chunk of its emissions along with its heavy industry. As one blogger commented, “The UK’s outsourced emissions almost double its carbon footprint.”

Source: Defra, UK’s Carbon Footprint 1990-2009

Bait-and-switch is one of the oldest tricks of deceptive advertising. The used-car dealer “baits” you onto the lot with an ad promising low interest payments on the car of your dreams. When you get there, the dealer regretfully informs you the car has already been sold. But, no, you haven’t wasted your time, because he’s got this other great car – the “switch” — which has so many superior features and it will only cost you a little more per month.

An even less ethical variant of this tactic is employed in politics. Party A in a negotiation gives an assurance or promise to obtain Party B’s support for a law or regulation. Party A then reneges on the deal once the policy is on the books. EPA’s recently proposed “Carbon Pollution Standard” Rule is a posterchild for this tactic.

EPA is proposing a carbon dioxide (CO2) “new source performance standard” (NSPS) for fossil-fuel power plants under section 111 of the Clean Air Act (CAA). EPA has developed NSPS for numerous industrial source categories such as municipal waste combustors, solid waste landfills, medical waste incinerators, cement plants, nitric oxide plants, copper smelters, steel plants, pulp mills, coal utility boilers, auto and truck surface coating operations, and natural gas turbines.

For each source category, the NSPS ”reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.”

Okay, what does this have to do with bait and switch?

In general, NSPS are less stringent than “best available control technology” (BACT) standards — the individually-tailored emission control requirements owners or operators must meet to obtain a CAA permit to build or modify a major emitting facility. NSPS establishes the minimum emission control standard or “floor” for determining a facility’s BACT requirements. Under CAA sec. 169(3), application of BACT may not result in emissions that exceed those allowed by the applicable NSPS. The point of BACT is to push individual sources to make deeper emission reductions than the category-wide performance standard requires. In EPA’s words:

The NSPS are established after long and careful consideration of a standard that can be reasonably achieved by new source anywhere in the nation. This means that even a very recent NSPS does not represent the best technology available; it instead represents the best technology available nationwide, regardless of climate, water availability, and many other highly variable case-specific factors. The NSPS is the least common denominator and must be met; there are no variances. The BACT requirement, on the other hand, is the greatest degree of emissions control that can be achieved at a specific source and accounts for site-specific variables on a case-by-case basis.

Since an applicable NSPS must always be met, it provides a legal “floor” for the BACT, which cannot be less stringent. A BACT determination should nearly always be more stringent than the NSPS because the NSPS establishes what every source can achieve, not the best that a source could do.

As EPA interprets the CAA, new and modified major emitting facilities became subject to BACT for CO2 on Jan. 2, 2011 — the day EPA’s motor vehicle greenhouse gas emission standards took effect, making CO2 a “regulated air pollutant.” A big concern of the electric power industry was whether EPA might define BACT so stringently that a coal-fired power plant seeking to build a new unit or modify an existing unit would have to switch from coal to natural gas. (Natural gas power plants emit only about half as much CO2 per megawatt hour as coal power plants do.)

There was much angst and speculation about this in 2009 and 2010 but no definitive statement from EPA until March 2011, when the agency published a guidance document for ‘stakeholders.’ The document states that BACT for CO2 will not require fuel switching, nor will EPA ”redefine the source” such that coal boilers are held to the same standard as gas turbines:

The CAA includes “clean fuels” in the definition of BACT. Thus, clean fuels which would reduce GHG emissions should be considered, but EPA has recognized that the initial list of control options for a BACT analysis does not need to include “clean fuel” options that would fundamentally redefine the source. Such options include those that would require a permit applicant to switch to a primary fuel type (i.e., coal, natural gas, or biomass) other than the type of fuel that an applicant proposes to use for its primary combustion process. For example, when an applicant proposes to construct a coal-fired steam electric generating unit, EPA continues to believe that permitting authorities can show in most cases that the option of using natural gas as a primary fuel would fundamentally redefine a coal-fired electric generating unit.

EPA reiterates this assurance in a Q&A document accompanying the guidance:

12. Does this guidance say that fuel switching (coal to natural gas) should be selected as BACT for a power plant?

• No.
• BACT should consider the most energy efficient design and control options for a proposed source.
• BACT should also include consideration of “clean fuels” that may produce fewer emissions but does not necessarily require a different type of fuel from the one proposed, particularly when it can be shown that using another type of fuel would be inconsistent with the fundamental purpose of the facility.

Yet despite EPA’s assurance that BACT, which usually is more stringent than NSPS, will not require fuel switching or redefine coal power plants into the same source category as natural gas power plants, EPA’s “carbon pollution standard” does exactly that.

Under the proposed standard, new fossil-fuel power plants may emit no more than 1,000 lbs of carbon dioxide (CO2) per megawatt hour. About 95% of all natural gas combined cycle power plants already meet the standard (p. 115). No existing coal power plants come close; even the most efficient, on average, emit 1,800 lbs CO2/MWh (p. 134). Because carbon capture and storage (CCS) is prohibitively expensive, raising the cost of a conventional coal plant by 80% (p. 124), the only feasible way for a new coal power plant to comply is to be something other than what it is — a natural gas power plant.

As noted previously, EPA is pretending that natural gas combined cycle — a type of power plant — is a “system of emission reduction” that has been “adequately demonstrated” for coal power plants. That is absurd.

To make the “carbon pollution standard” seem reasonable, EPA proposes to redefine source categories so that coal boilers and gas turbines are both equally “fossil-fuel electric generating units.” But redefining coal power plants is exactly what EPA said it would not do in the BACT guidance document.

As should go without saying, Congress never voted to ban new coal generation. Indeed, Congress declined to adopt similar CO2 performance standards for coal power plants when Senate leaders pulled the plug on cap-and-trade. Section 116 of the Waxman-Markey bill (the American Clean Energy and Security Act) would have established NSPS requiring new coal power plants to reduce CO2 emissions by 50% during 2009-2020 and 65% after 2020. Congress did not adopt this agenda because the public rejected it. Waxman-Markey became politically radioactive soon after it narrowly passed in the House. In the November 2010 elections, 29 Democrats who voted for Waxman-Markey got the boot.

Congressional efforts to rein in EPA — particularly Sen. Lisa Murkowski’s Congressional Review Act resolution of disapproval to overturn EPA’s Greenhouse Gas Endangerment Rule and Sen. James Inhofe’s Energy Tax Prevention Act – would have gained more traction had EPA fessed up in 2009, 2010, or even 2011 that, come 2012, it would promulgate CO2 performance standards that no commercially viable coal plant could meet.

It’s an old story, but one that can’t be told too often. EPA is legislating climate policy – implementing an agenda the people’s representatives have not approved and would reject if put to a vote.

Sen. James Inhofe (R-Okla.) has vowed to kill the “carbon pollution standard” via a Congressional Review Act resolution of disapproval (Greenwire, subscription required). For those of us who still respect the separation of powers, ’tis a consummation devoutly to be wished.

Energy policy in Georgia isn’t made by the State legislature. Nor is it made by Governor Nathan Deal. Indeed, energy policy in Georgia isn’t made by any public official in the State. Instead, the most important energy decisions in Georgia are rendered by unelected EPA bureaucrats and environmentalist lawyers.

Welcome to energy policymaking in the Obama age.

Georgia is one of the fastest growing States in the nation. With more people necessarily comes higher demand for electricity. In order to meet the State’s growing need for power, a consortium of non-profit local utilities known as Power4Georgians (P4G) planned on building two 850 megawatt coal fired power plants, one in Washington County and the other in Ben Hill County.

P4G intended to build the Washington County plant first, but the project has been held in up for two years in the courts by relentless anti-coal environmentalist litigation organizations led by the Sierra Club’s “Beyond Coal Campaign.” This is demonstrated by the following brief timeline:

• On April 8, 2010, the Georgia Environmental Protection Division issued the final air permits for Power4Georgian’s proposed coal-fired power plant in Washington County. They were immediately challenged by environmentalist litigants led by the Sierra Club.
• On December 16, Georgia Judge Ronit Walker ruled in favor of the environmentalist petitioners and rejected the air permit for Power4Georgians’ proposed coal-fired power plant in Washington County.
• On November 21, 2011, Georgia environmental regulators re-issued an air permit for the proposed coal-fired power plant in Washington Country.
• On December 16, 2012 the Southern Environmental Law Center and GreenLaw challenged the Georgia Environmental Protection Division’s air quality permit in the Georgia Office of State Administrative Hearings on behalf of the Fall-line Alliance for a Clean Environment, Ogeechee Riverkeeper, Sierra Club’s Georgia Chapter, and Southern Alliance for Clean Energy.

EPA acted as a de facto intervener on behalf the environmentalist petitioners. As this blog has explained repeatedly, EPA is now waging a regulatory war on the coal industry. The Agency is imposing a series of senseless regulations that serve no public health purpose, and whose only function seems to be to price coal out of the electricity market.

In particular, the challenges brought by Sierra Club et al. relied on EPA’s ridiculous Mercury and Air Toxics Standard. By EPA’s own estimate, the mercury regulation would cost $10 billion annually, and its purpose is to protect America’s supposed population of pregnant, subsistence fisherwomen, who consume more than 300 pounds per year of self caught fish from fresh, inland water bodies. EPA fails to identify any of these purported victims. Rather, they are modeled to exist.

Earlier this week, the environmentalist obstructionists in Georgia announced that they would drop their latest legal challenge, based on the Mercury and Air Toxics Standard, in exchange for P4G’s commitment to install additional controls at the Washington County plant. In addition, P4G agreed to abandon its plan to build a second coal fired power plant in Ben Hill County.

To be sure, Sierra Club and its cohorts were not acting in good faith. They even admitted as much. In this week’s settlement, the environmentalist litigants agreed to drop its challenge predicated on the Mercury and Air Toxics Standards, but, at the same time, they announced they would continue to object to the plant based on EPA’s recently proposed Carbon Pollution Standard*. That regulation, a proposal of which was published in today’s federal register, would effectively ban the construction of new coal fired plants. In an interview about the settlement in Wednseday’s Energy and Environment GreenWire, Jenna Garland of the Sierra Club said that, “Sierra Club and our other organizations believe that Plant Washington should need to pursue carbon pollution compliance.”

To recap the madcap: In order to meet the Peach State’s growing demand, a consortium of local utilities decided to build two coal fired power plants. Twice, Georgia public officials approved air permits for one coal fired power plant in Washington County. And twice, these State decisions were effectively invalidated by environmentalist lawyers, who challenged the permits based on nonsensical anti-coal regulations issued by President Obama’s EPA. As a result of this legal wrangling, the utility consortium agreed to cancel plans for its other planned power plant in Ben Hill County. Now, the environmentalists will launch a fresh attack in the courts on the remaining plant.

President Eisenhower wisely and presciently warned against a then-gathering (and long since entrenched) military industrial complex. A similarly sinister force is fast arising in the Obama age–the anti-industrial legal complex. Legions of environmentalist lawyers, backed by EPA’s outrageous mandates, are overwhelming local authority on energy policy with endless petitions. Only a decade ago, local officials and business decided how to invest in electricity generation; today, alarmingly, those decision are made by environmental lawyers and federal bureaucrats.

*My colleague Marlo Lewis recently wrote this excellent blog on the strangeness of the Carbon Pollution Standard.

Citing “adverse market conditions,” BrightSource Energy, a wholesale solar power generator, announced yesterday morning that it would shelve a long-planned initial public offering of 6.9 million shares that the company had hoped would fetch 21 to $23 each. The canceled IPO is a blow to the company’s backers, chief among them the American taxpayer. In April 2011, the Department of Energy awarded BrightSource a $160 million subsidy, from the same program that blew almost half a billion on Solyndra. They sure know how to pick ‘em at the DOE!

BrightSource’s setback stands in stark contrast with this week’s ultra-successful IPO by Forum Energy Technologies, an oil-services provider. The company had hoped to sell 16 million shares, but demand far exceeded expectations, and almost 19 million shares were sold, at the high end of Forum Energy’s hoped-for price. Because the services provided by Forum Energy Technologies engender a product—oil—that people actually want to buy*, the company does not need government handouts.

*Unlike, say, concentrated solar power produced by BrightSource Energy, which California utilities are forced to purchase in order to comply with a Soviet-style green energy production quota enacted by the state legislature.