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Congress Should Lift Oil Export Ban; Reject Green Subsidies

September 21, 2015 by Leave a Comment

As Congress begins to tackle a plethora of legislative issues this fall, one particular issue has garnered broad support on both sides of the aisle: lifting the decades-old ban on oil exports. Representatives across the country have realized that the ban not only inhibits economic growth, but also prevents free trade and does nothing to advance energy security both at home and abroad. Rep. Barton has introduced H.R 702, which would end the ban on oil exports, and other measures are being considered as well. Lifting this outdated law is something Congress can, and should, do.

However, some politicians have floated the idea of using the export ban as a bargaining chip for other legislative prerogatives, such as reviving and extending the wind Production Tax Credit and solar Investment Tax Credit. This should not happen: American energy prosperity and security should not be a part of Congress’ political games. Lifting the oil export ban should be passed as a stand-alone measure, not subject to congressional horse trading.

Lifting the Ban will Benefit Americans

When the current restrictions on oil exports were initially introduced in the 1970s, lawmakers were concerned that the U.S. might run out of oil and natural gas. Over 40 years later, that fear has been disproven, and the U.S. is now experiencing a dramatic boom in oil and natural gas production from shale reserves. What is left is a distortionary federal policy that is holding back further industry development and economic benefits for American families and businesses.

As Institute for Energy Research Senior Economist Dr. Robert Murphy has explained, allowing American producers to export oil is good economic policy that would benefit the country, while keeping the ban in place would harm consumers. Further, as a society that values free trade and open markets, we should allow producers and consumers to trade oil on the global market. As a basic principle, American goods and services should be able to compete with foreign companies, thus benefitting U.S. businesses and lowering prices for consumers. Average Americans don’t purchase oil, but they often buy gasoline. When more oil is put onto the global market, it pushes down prices both for oil and gasoline.

Studies Confirm Benefits

A number of credible analyses have demonstrated the practical benefits of lifting the oil export ban. A study by IHS concluded that a free trade policy toward oil would result in increased average oil production of 1.2 to 2.3 million barrels per day, an average decrease in gas prices by 8 to 12 cents per gallon, and total fuel cost savings of $265 to $418 billion during the 2016–2030 time period.

The Brookings Institution also conducted a report that supports oil exports, estimating that oil production in the Gulf Coast could increase by 1.1 to 1.5 million barrels a day and gas prices could decline by 9 cents per gallon in 2015. They also found that lifting the ban would greatly enhance national energy security and establish the U.S. as a global leader in energy distribution and trade.

The independent U.S. Energy Information Administration recently released an analysis of the impacts of repealing restrictions on oil exports. In their two cases that assume high oil and gas resources, U.S. oil production would rise and gasoline prices would either be unchanged or fall slightly. Various other studies—including reports from ICF International, Columbia University, the American Petroleum Institute—have also concluded that removing the ban on oil exports would be beneficial not only for the U.S., but for the global economic community as well.

Conclusion

Even though there is substantial evidence supporting an end to the oil exports ban, some lawmakers are attempting to use the issue as a bargaining chip to pass other initiatives. Unfortunately, some of these policies, such as renewing or extending the wind Production Tax Credit and the solar Investment Tax Credit, are harmful for Americans. Studies have demonstrated that wind power is an expensive energy source and undermines the reliability of the electricity grid. Congress should consider the merits of oil exports and realize that removing the ban is positive in and of itself. Rather than tying passage to harmful subsidies, the ban should be lifted on its own or as part of a legislative package that excludes controversial energy subsidies.

Filed Under: Energy Development Tagged With: , , , , ,

Clinton’s Ethanol Plan Harms Rural America

September 21, 2015 by Leave a Comment

Last month, presidential candidate Hillary Clinton released her “Plan for a Vibrant Rural America.” Despite Clinton’s claims, her plan will harm rural families. Moreover, by mandating expensive transportation fuels, Clinton’s plan amounts to a national gas tax.

Clinton Flip-Flopped on Ethanol “Gas Tax”

As a Senator, Clinton once adamantly opposed an early version of the Renewable Fuel Standard (RFS), which requires refiners to blend rising amounts of biofuel into gasoline. At the time, she said a renewable fuel mandate would raise gasoline prices at the pump. In a 2002 letter penned with three other senators, she even went as far as to call it “the equivalent of a new gasoline tax.” However, during her 2008 presidential run, Clinton flip-flopped and began supporting ethanol mandates—quite possibly in an attempt to curry favor with Iowans.

Clinton had it right the first time. The RFS functions as a tax on gasoline by mandating the use of expensive fuels, such as cellulosic ethanol. Her so-called “improvements” to the RFS will only make the mandate worse, hitting poor families hardest. Ultimately, it’s Americans that are paying for Clinton’s politically convenient “change of heart.”

Low Carbon, High Cost Fuel Standards

The ethanol portion of Clinton’s “Rural America” plan is summarized on her website:

“Strengthen the Renewable Fuel Standard so that it drives the development of advanced cellulosic and other advanced biofuels, protects consumers, improves access to E15, E85, and biodiesel blends, and provides investment certainty.”

This plan is backwards. The RFS already requires the use of cellulosic ethanol. Congress thought that cellulosic would be cost-effective by now and mandated the use of billions of gallons of it, but reality has proven Congress wrong. Clinton wants to double down on Congress’ inability to predict the future.

For example, in 2010 and 2011 no cellulosic biofuel was produced, despite Congress’s mandate. In 2012, only 20,069 RINs [a RIN is a “Renewable Identification Number” and is equivalent to a gallon of ethanol] cellulosic were produced and in 2013, 422,740 RINs were produced. While that sounds like a lot, it pales in comparison to the 1.75 billion RINs mandated by the RFS. Worse, cellulosic production crashed in 2014 back to 44,168 RINs. For 2015, the RFS calls for the use of 3 billion gallons of cellulosic ethanol, but so far, only 1.6 billion gallons of cellulosic biofuel have been produced and 227,000 gallons of cellulosic diesel.[1]

With cellulosic biofuel, there is a clear history of failure. This is an expensive fuel, but Clinton wants to further require the use of it. This is a recipe for higher fuel prices.

Clinton also extolls the virtues of E15 and E85 (E15 is fuel that is 15 percent ethanol and E85 is fuel that is 85 percent ethanol). The problem is that most cars on the road are not certified by the automakers as being able to safely use E15 and the majority of the time, E85 is more expensive (on an energy equivalent basis) compared to regular gasoline. Sometimes, E85 makes economic sense to use in a flex-fuel vehicle, but not all of the time. It is simple economics—if there was demand for E85, the federal government would not need to subsidize it as Clinton wants.

By favoring costly, non-existent cellulosic biofuels over corn-based ethanol, Clinton’s fuel mandate would resemble California’s Low Carbon Fuel Standard (LCFS). This would impose enormous costs on American motorists. As AEA previously explained:

Not only is an LCFS another inefficient and political mandate, but it is costly as well. According to a study by Boston Consulting Group on California’s LCFS, the program could increase the price of gasoline by more than $2.50 a gallon. SAIC looked at a possible Northeast/Mid-Atlantic LCFS and found that it would cost 147,000 jobs and reduce GDP by $27 billion. Moving from an RFS to an LCFS means that American motorists will pay more for fuel and suffer job losses and slower economic growth.[2]

Clinton’s Plan Would Hurt Rural Americans

Ironically, Clinton’s proposal could actually hurt many rural farmers by shifting the mandate from corn-based ethanol to advanced biofuels that aren’t derived from corn. Essentially, Clinton’s plan will disadvantage corn farmers and raise gasoline prices across the board, hitting rural Americans the hardest, especially those who log the most miles in their vehicles. In a way, this option is the worst of both worlds. Not only will it increase fuel prices, but her plan will hurt many of the “rural Americans” she claims to help.

Clinton’s proposal is similar to efforts in Congress aimed at repealing the corn-portion of the RFS. As discussed above, this would establish a LCFS that props up expensive, non-existent biofuels at the expense of corn farmers while burdening all Americans with gas prices that look like California’s—among the highest in the nation. This is why Congress should reject current partial-repeal proposals and eliminate the RFS entirely.

Conclusion

Clinton’s plan is framed as a boon to rural America, but one of its key facets—a modification to the RFS—will harm many rural families. Before she flip-flopped to pander to voters, Clinton was right to label renewable fuel mandates as a gas tax.

The economic realities are still the same. Mandating ethanol and advanced biofuels will lead to higher gasoline prices for motorists. In addition, the Clinton plan will turn the RFS into a California-style Low Carbon Fuel Standard, resulting in even more economic harm. In the end, the RFS is broken beyond repair and Clinton’s plan will only make it worse. Only a full repeal of the law will truly improve the lives of all Americans.

[1] See EPA, 2015 RFS2 Data, http://www3.epa.gov/otaq/fuels/rfsdata/2015emts.htm. Note, last year EPA changed the definition of cellulosic biofuel to include renewable CNG and renewable LNG as cellulosic biofuel. We are not counting those volumes in this because this isn’t the fuel Congress contemplated when it created the updated the RFS.

[2] Daniel Simmons, “Why Congress Should Fully Repeal the RFS,” American Energy Alliance, May 27, 2015, https://www.americanenergyalliance.org/2015/05/27/corn-ethanol-only-repeal-makes-the-rfs-worse/.

Filed Under: Renewable Fuel Standard Tagged With: , , , ,

Game Changer: The Federal Land Freedom Act

September 18, 2015 by Leave a Comment

Thanks to developments in hydraulic fracturing and horizontal drilling, America is experiencing a modern energy renaissance. Oil production is at its highest levels in nearly twenty years, and natural gas continues to surge at a near-record pace. America currently produces more petroleum and natural gas than any other nation.

Unsurprisingly, the vast majority of this innovation is taking place on non-federal lands. Since 2010, oil and natural gas production on non-federal lands has increased 89 percent and 37 percent, respectively. Meanwhile, over the same period of time, production on federal lands decreased 10 percent and 31 percent, respectively. Further, overall fossil fuel production on federal lands has declined 16 percent since 2008. This is largely the result of a federal permitting process that takes much longer than on private lands: average wait time for the Bureau of Land Management to approve a drilling permit was 292 days from FY 2009-2013, compared to just a few months – even days – at the non-federal level.

Clearly, the federal government is holding America back from fully unleashing its energy potential. Fortunately, two pieces of legislation seek to undo this trend: Rep. Diane Black introduced H.R. 866 and Sen. Jim Inhofe introduced S. 490, both titled the Federal Land Freedom Act of 2015.

These identical bills have several strong provisions that would promote American energy growth, security, and independence. First, they allow states with pre-existing natural gas and oil permitting and leasing programs to assume federal duties for the processing of applications and the regulation of drilling activities. This would not only expedite the approval process, but would return regulatory responsibilities to the states, as they should be. States have a better knowledge of the lands within their borders and should be responsible for administering the energy production process within their borders.

Second, the bills protect states from federal overreach, exempting states from specific federal regulations that would otherwise be used to undermine or usurp state control over the natural gas and oil exploration and development process.

Finally, the legislation ensures the fair distribution of royalties and fees. Royalties that are collected from the leases and permits and are deposited in the same federal account as they would have been under a federally-administered lease or permit. However, states are entitled to collect lease and permit fees, allowing fair compensation to both state and local and federal entities. Since the legislation would increase the number of approved leases, these changes would likely result in significant increases in royalty payments to the federal government.

Rep. Black and Sen. Inhofe should be commended for authoring these important pieces of legislation. All Members of Congress should consider supporting the Federal Land Freedom Act of 2015.

Filed Under: Energy Development Tagged With: , ,

States Show Best Path to Reject Obama’s Carbon Rule

September 17, 2015 by Leave a Comment

President Obama recently announced the EPA’s final “Clean Power Plan,” the cornerstone of his radical climate agenda. The plan forces states to reduce carbon dioxide emissions by closing down coal-fired power plants and generating electricity from more expensive sources. The administration has called on states to submit implementation plans indicating how they intend to meet emission targets, while many states plan to sue on the basis that federal bureaucrats have no right to dictate state energy choices.

Now, states are faced with the choice of whether or not to submit a plan to the EPA that will raise the price of electricity, increase job losses, and transfer authority over the energy grid from states to the federal government. Six governors have already indicated they do not intend to submit a plan, while more than 25 states have introduced bills creating legislative hurdles.

Obama wants states to believe the choice is between submitting a state plan or having a federal plan imposed on you. This is false. The real choice is whether to prematurely implement this costly regulation before the courts decide its fate. States that take the “wait-and-see” approach protect their citizens from federal overreach, while those who rush to help Obama implement the regulation are handing over control to the federal government.

The Danger of Premature Implementation

Rather than helping the Obama administration implement this costly regulation, states should exercise their right not to submit a plan until the legal challenges are resolved. This is well within a state’s right under the Clean Air Act—EPA does not even dispute this point. Recently, the heads of three state think tanks—Brett Healy at the MacIver Institute (Wisconsin), Rea Hederman at the Buckeye Institute (Ohio), and Kevin Kane at the Pelican Institute (Louisiana)—emphasized this point in an op-ed titled “A State Plan to Defeat Obama’s Climate Agenda”:

“Given the shaky legal ground on which the rule rests, President Obama knows that success or failure hinges on whether states submit plans or wait. To that end, in its final rule EPA promises to “reward” states that submit early plans with emission credits they can bank or sell in a cap-and-trade system… [this] will also commit states to costly investments that cannot be reversed, even if the courts invalidate the rule down the road…

…In the coming months, states will face pressure from EPA and special interests to sign on the dotted line, as if they have no other choice. But it doesn’t have to be this way. As our leaders have shown, refusing to submit a plan until the courts weigh in is a state’s legal right under the Clean Air Act. Divided the states fall, but united in opposition to Obama’s costly carbon agenda, the states can protect their citizens from federal overreach and higher utility bills.”

The Obama administration knows that states have the option to submit a plan at any point in the process, even after courts have made a decision. The administration’s hope is that rather than adopting a “wait-and-see” approach, states will develop plans early and begin implementing them before courts have had a chance to issue a ruling. This would render any legal victory meaningless, as was the case in the recent ruling on mercury regulations.

Michigan: A Case Study of How to Help Obama

Recently, Governor Snyder (R-MI) directed the state environmental agency to develop an implementation plan for Michigan. Snyder called the decision the “best way” to ensure Michigan “retains control of its energy future.” In fact, this rush to regulate will cede control to federal regulators and put Michigan families at risk for dramatically higher energy bills. As Professor Christopher Douglas of the University of Michigan-Flint highlights in an op-ed for The Detroit News, implementing Obama’s carbon regulation prematurely “invites a federal energy takeover”:

“Beyond its legal infirmities, the rule is an economic disaster. Implementing it will require Michigan to uproot our electricity system, replacing low-cost coal that comprises almost half of our power with more expensive sources. An economic analysis of the proposed rule found it would raise electric rates on Michigan households by 12 percent, or about $140 per year. The final rule is even more severe, so costs will likely be higher.

By rushing to help Obama implement his rule, Michigan has little to gain but much to lose. It will ensure Obama’s EPA gets to mandate its favored energy sources while inflicting huge economic costs on Michiganians that cannot be undone if the courts later invalidate the rule.”

Conclusion

Now that the carbon regulation is final, states are facing pressure from EPA to submit plans by Sept. 2016. States should resist this temptation—acting now comes with definite costs, but there is no penalty for waiting. Michigan’s rush to help Obama implement his carbon regulation invites federal bureaucrats into state affairs, while the actions of states like Ohio, Wisconsin, and Louisiana to reject premature implementation preserve state sovereignty. Instead of offering support to EPA by submitting state implementation plans prematurely, state leaders should join with those who oppose Obama’s costly carbon regulation and refuse to submit a plan until all legal challenges are resolved.

For more information on what state leaders are doing to protect your interests, click here.

Filed Under: Emissions Standards Tagged With: , , , ,

Scorecard Groups Urge End to Wind PTC

September 16, 2015 by Leave a Comment

WASHINGTON — Today, the American Energy Alliance joined with Heritage Action for America, Club for Growth, and Americans for Prosperity in opposition to the Wind Production Tax Credit (PTC). In a letter to the House Ways and Means Committee, the groups urge against extending this taxpayer-funded subsidy and explain that the PTC will be an important factor as the groups consider whether to include final passage of the extenders package in their respective legislative scorecards.

Below is the text of the letter:

In advance of your upcoming consideration of tax extenders legislation, we, the undersigned organizations with legislative scorecards, would urge you not to extend the Wind Production Tax Credit (PTC).

For decades, wind subsidy proponents have claimed that the wind industry is on the cusp of competitiveness and that it would only need federal support for a few more years. Yet each time the subsidy faces expiration, the wind lobby clamors for yet another extension. Since the wind PTC was enacted in 1992, it has been extended 9 times. This is unnecessary given the wind industry’s repeated claims that wind energy is booming and is currently cost competitive. It is time for this subsidy for a large, mature, multi-national industry to come to an orderly end.

Ending this subsidy is more important now than ever. While not immediately apparent, the wind PTC is critical to President Obama’s recently finalized carbon regulation. One of the “building blocks” used to determine state targets includes significant increased installation of renewable energy—especially wind. In fact, EPA assumes the wind industry will more than double its total capacity in just eight years. Without taxpayer subsidies like the PTC, the President will be unable to achieve his arbitrary renewable energy target.

By hiding the true cost of wind energy, the PTC makes the President’s carbon agenda appear less costly than it actually is. Wind energy is one of the most expensive sources of electricity: power from new wind resources is nearly four times more expensive than from existing nuclear and nearly three times more expensive than from existing coal. Perhaps the most significant thing this Congress can do to protect ratepayers and taxpayers from the damage of the President’s carbon regulation is preventing another extension of the wind PTC.

Further, if the committee is serious about tax reform, ending the PTC would send a strong signal to the public that Congress is ready to tackle this important challenge. For years, this committee has touted the economic benefits of reforming and condensing our bloated tax system. The economic benefits of ending the wind PTC are apparent, as wind energy raises electricity costs compared to existing sources. We recommend the committee stand up for American taxpayers by letting the subsidy remain expired.

Your colleagues in the Senate have already passed a tax extenders package that includes the wind PTC for another two years. The House now has a chance to take a different path by rejecting corporate welfare and business-as-usual tax policy that is hurting our country. The committee’s treatment of the wind PTC will be an important factor as we consider whether to include final passage of tax extenders on the House floor as part of our organizations key-votes for our collective scorecards.

Click here to view the full letter.

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Filed Under: Press Releases, Wind Tagged With: , , ,

Survey: Americans Don’t Want to Pay for Neighbor’s EV

September 15, 2015 by 1 Comment

WASHINGTON – Today, the American Energy Alliance released a new survey examining voters’ attitudes toward transportation policy, specifically government support for electric vehicles. The results show that Americans are deeply skeptical of government making decisions for them with respect to vehicles or fuels—for example, when it comes to using tax dollars to subsidize electric vehicles. MWR Strategies conducted the nationwide survey with a sample of 1013 likely voters (margin of error, 3.1%).

The survey found:

  • 76 percent of respondents said those making $150,000 a year or more should not receive a $7,500 federal tax credit when purchasing an electric vehicle.
  • 74 percent of respondents said that electricity ratepayers should not be compelled to pay for charging stations used by owners of electric vehicles.
  • 83 percent of respondents said they do not trust the federal government to decide what kind of cars should be subsidized or mandated.
  • 83 percent of respondents said utility ratepayers should not pay for the electricity used by the owners of electric cars.

“Americans are overwhelmingly opposed to government involvement in their energy and transportation choices, and electric vehicles are no exception,” said AEA President Tom Pyle.

“While subsidies for electric vehicles benefit a privileged few, they come at the expense of taxpayers everywhere. The message from the public is clear: it is time to end these regressive policies and let the electric-vehicle industry compete on its own merits.”

MWR Strategies President Mike McKenna issued the following statement:

“The most striking finding to me is that despite being aware of potentially positive aspects of electric vehicles, voters are steadfastly unwilling to pay for electric vehicles purchased by others. Almost 7 in 10 said they would be unwilling to pay anything to support the development of electric vehicles. You have to think that that intensity of sentiment is eventually going to be reflected in government policy.”

The results of this survey are especially relevant as states like California face backlash for lavishing huge subsidies on wealthy electric-vehicle owners. They also cast doubt on public support for policies designed to finance EV charging stations on the backs of taxpayers and ratepayers.

Click here to view the results of the survey.

Click here to read a summary of the survey.

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Filed Under: Electric Vehicles, Press Releases Tagged With: , , , , ,

Black Leaders Fight Obama’s Ozone Rule

September 14, 2015 by 1 Comment

The Environmental Protection Agency (EPA) is facing opposition from minority groups as it prepares to finalize costly new ozone regulations, according to a recent article in Politico. Black elected leaders at both state and local levels have come together to push back against the new ozone rule, stating it will disproportionately harm poor and minority communities and manufacturing centers.

The new regulation, which EPA will finalize by Oct. 1, seeks to cut ground-level ozone from the current level of 75 parts per billion (ppb) to between 65 ppb and 70 ppb. However, state and local officials have recently said they are still struggling to comply with the current 75 ppb standard and that the new rule will make compliance even more difficult. As explained below, this poses an especially big threat to poor and minority communities that are disproportionately affected by higher energy prices and economic downturns.

Minority Leaders Speak Out

Democratic Missouri State Sen. Jamilah Nasheed is among those leaders opposing the new ozone rule. In a recent article, she is quoted as stating that further lowering the ozone threshold would make things worse for a city like St. Louis that is “still feeling the pain of the 2007-2009 recession,” and that it could “create new hardships for already struggling low-income urban families.”

Mayor Karen Freeman-Wilson of Gary, Indiana understands these hardships more than most. Originally, Mayor Freeman-Wilson was in favor of tightening ozone restrictions, believing they would reap health benefits that could outweigh the high costs of implementation. However, the closure of a U.S. Steel Coke plant and the resultant layoff of 300 workers and lost tax revenue gave the mayor and Gary residents a first-hand glimpse of the harm this rule could cause to their community. In a recent op-ed for The Indianapolis Star, Mayor Freeman-Wilson said Obama’s ozone regulation “would impair economic recovery in a city that has long trailed the rest of the country.”

Black business owners agree that EPA’s ozone rule would harm economic growth. Testifying before Congress earlier this year, National Black Chamber of Commerce (NBCC) President Harry Alford explained, “Lowering the ozone standard, particularly to the levels suggested by EPA, will almost certainly cause economic harm to the [NBCC] members and will shut off huge parts of the country from economic development and job growth…We should not be piling on yet another rushed and unreasonable regulation on the backs of American businesses.”

Ozone Rule Harms Minorities

President Obama’s ozone regulation is designed to improve public health by reducing air pollution that contributes to respiratory illnesses such as asthma. However, as we have documented before, asthma rates are rising even as ozone emissions are falling. This casts doubt on Obama’s claim that further ozone restrictions will do anything to improve public health.

Screen Shot 2015-09-14 at 2.20.00 PM

To make matters worse, in designing the rule, EPA ignored the link between health and wealth. In short, when you make people poorer, they tend to become sicker. Therefore, Obama’s new ozone rule, which could be the costliest regulation ever, may actually harm public health—especially in poorer communities.

Under the new rule, counties that are not in compliance with the lower standard will be required to submit plans outlining how they intend to comply. This could trigger a variety of costly new measures, which EPA calls “unknown controls.” These “additional costs” on “urban areas” could be “significant,” according to EPA. A recent op-ed in The Detroit News by Anastasia Swearingen goes into more detail:

To comply with EPA’s mandate, cities have considered a number of expensive new penalties on drivers, including taxes on parking spaces, tolls that get more expensive during peak congestion time, and higher insurance rates for car owners who travel more miles. If you have an older car, own multiple vehicles, or put a lot of miles on your car every year, you may pay higher vehicle registration fees.

If these new penalties become a reality, Obama’s ozone regulation will amount to a regressive tax on the poor and minorities. The burden of complying with Obama’s new rule will fall disproportionately on families that can least afford to pay more taxes and fees.

Conclusion

Obama’s new ozone regulation will harm low-income and minority families, but fortunately local minority leaders are speaking up on behalf of their communities. The new regulation will harm economic growth, increasing unemployment and poverty across the country, but especially in vulnerable communities still struggling to recover from the Obama economy. Instead of further tightening ozone levels at high cost and for dubious benefits, EPA should keep the existing standard.

Filed Under: Ozone Rule Tagged With: , ,

Study: Divestment Hurts College Students

September 10, 2015 by Leave a Comment

National environmental lobbyists are ramping up campaigns at college campuses urging the “divestment” of natural resources from university endowments, falsely equating investments in energy production to profiting off of environmental “wreckage.” Members of the radical movement are convinced that cutting oil, natural gas, and coal out of universities’ portfolios will hurt energy companies financially and advance their climate change agenda. In reality, these tactics are more likely to make it harder for low-income students to attend college.

Affordable energy provided by America’s abundant natural resources forms the foundation of modern society and facilitates economic growth. As such, the energy industry represents an important component of the $400 billion in U.S. university endowment assets. A new study by Dr. Bradford Cornell confirms that divesting from energy resources would cost universities hundreds of millions of dollars, negatively impacting student life, research funding, and financial aid.

The report, commissioned by the Independent Petroleum Association of America, estimated the cost of divestment for five universities: Harvard, Columbia, Massachusetts Institute of Technology, New York University, and Yale. The study reconstructed each school’s endowment performance from 1995 to 2015 by modeling portfolios with natural-resource investments compared to divested endowments. The study found that the current shortfall for Harvard would be $108 million, Yale $51 million, Columbia $14 million, NYU $4 million, and MIT $18 million if the colleges had divested from fossil fuels in 1995.

Divestment would have left these elite universities with almost $200 million less to invest in scholarships, financial aid, and academic programs for thousands of young college students. This underscores the irony of the “divestment movement”—their leaders, dominated by national lobbying groups, flock to college campuses to make students the face of a cause that actually harms students.

Another irony, as the study explains, is how divestment may hinder the development of alternative energy sources:

“When a company faces an increase in its cost of capital, the response is to forego investment in marginal projects. At major energy companies, those marginal projects are unlikely to involve the bread-and-butter business of producing carbon-based fuels. Instead, what is more likely to be cut is research and development into more speculative investments, such as those involving alternative energy. In this way, divestment advocates might actually accomplish exactly the opposite of what they hope to achieve.”

Divestment will have an immediate negative impact on scholarship and student life at colleges across the country. If the movement achieves its stated goals, it will result in the opposite of what the activists hoped to achieve and still have no effect on global climate change.

div-button-revised

Filed Under: Divestment Truth Tagged With: , , ,

North Carolina Energy Mandate Hurts Real Job Growth

September 4, 2015 by 1 Comment

On top of federal support for renewable energy, a number of states have implemented Renewable Portfolio Standards (RPS), which require utilities to purchase a certain portion of their electricity from renewable sources. In North Carolina, a push to freeze the state’s Renewable Energy and Energy Efficiency Portfolio Standard (REPS) at 6 percent of retail sales has been met by opposition. One common argument in defense of North Carolina’s REPS is that it—like other renewable energy mandates—creates jobs. In reality, this argument falls flat. Policies like the REPS hurt North Carolinians by increasing energy prices, decreasing household incomes, and stagnating job growth.

REPS Favors Special Interests over Families and Businesses

Renewable energy mandates force utilities to purchase a certain amount of their electricity from renewable sources like wind and solar. A key problem is that the cost of renewable energy is more expensive, but utilities must purchase it anyway. Since electricity from renewable energy sources like wind power is nearly three times more expensive than electricity from existing coal and four times higher than existing nuclear, energy prices end up being higher under RPS laws. As the Environmental Protection Agency has previously admitted, higher costs end up being passed on to households through rising residential electricity prices.[1]

A study conducted by Strata Policy, in conjunction with the Institute of Political Economy at Utah State University, analyzed North Carolina’s RPS and found that it “will raise electricity prices significantly across all sectors, with the brunt of the costs falling upon the commercial sector.”[2] That means that the REPS will weaken the competitiveness of North Carolina’s commercial base and threaten small businesses that rely on affordable energy to power their economic activities.

The study also assessed that renewable energy mandates decrease real personal incomes in the long run by 3.6 percent. In 2013, the figure comes out to a $3,870 loss of income per family. In a letter to the North Carolina Utilities Commission, Gene Nichol, a University of North Carolina law professor, explained that higher residential electricity prices negatively impact poorer households and adversely affect their ability to afford necessities like utilities. In general, policies that raise electricity prices disproportionately harm low-income and minority communities, as even EPA Administrator Gina McCarthy recently admitted.

Renewable Mandates Damage Job Creation

Closely connected to the idea that the REPS will damage families and businesses in North Carolina, the renewable energy mandate will also have negative long-term employment impacts for the state. The Strata study’s empirical analysis determined that “North Carolina had 23,769 fewer jobs than it would have had without the RPS” through 2014.[4] In the long run, the state unemployment rate increases by 9.6 percent, according to the analysis.[5]

Even on a theoretical level, the argument that state RPS policies create jobs is dubious. Many of these claims narrowly focus on how many jobs are added but don’t consider what jobs are destroyed as a result of renewable energy mandates. For example, increasing electricity prices for businesses and decreasing families’ disposable incomes don’t occur in a vacuum—they have broader economic effects that impede job growth. Other studies have demonstrated that policies focused on creating “green jobs” rely on a number of myths and have unintended consequences.

Furthermore, merely enlarging the number of jobs does not necessarily increase productivity if the resources used to create those jobs are not allocated efficiently. In other words, a mandate that requires one industry to grow (particularly if it expands directly at the expense of another industry) will not create economic growth; but rather, siphon away resources from more productive activities. If the only thing of importance were the mere number of jobs, then “employing” people to dig ditches and fill them back up would be enough to grow the economy.

Conclusion

Since 2008, North Carolinians have been burdened by a state REPS, which props up renewable energy at the expense of households and businesses. Even though current efforts are attempting to minimize the negative effects by freezing the REPS levels, proponents of the law are claiming that it creates jobs and benefits the economy. Overall, North Carolina’s REPS—and renewable energy mandates in general—have a number of negative economic results, including stunted job growth. Energy mandates “create” jobs in unproductive industries at the expense of long-term, sustainable jobs that benefit both households and businesses. It’s time for North Carolina’s representatives to reject this harmful mandate once and for all.

[1] U.S. Environmental Protection Agency, Regulatory Impact Analysis for the Clean Power Plan Final Rule, EPA-452/R-15-003, August 2015, p. 3-36, http://www.epa.gov/airquality/cpp/cpp-final-rule-ria.pdf.

[2] Randy T. Simmons, Ryan M. Yonk, Tyler Brough, Ken Sim, and Jacob Fishbeck, Renewable Portfolio Standards: North Carolina, Strata Policy Final Report, February 2015, p. 3, http://www.strata.org/wp-content/uploads/2015/03/FINAL-RPS-North-Carolina.pdf.

[3] Simmons et al., p. 11.

[4] Simmons et al., p. 11.

[5] Simmons et al., p. 11.

Filed Under: Renewable Energy Mandates Tagged With: , , ,

10 Myths Behind Submitting a State Implementation Plan (SIP)

September 3, 2015 by Leave a Comment

Now that the so-called “Clean Power Plan” is finalized, the EPA is pressuring states to develop implementation plans (SIP). States should not submit implementation plans. Attorneys left and right believe EPA’s carbon regulations are likely illegal. Therefore, before saddling their residents with higher electricity costs and consigning their states to a federal energy takeover, states should wait for the courts to decide the legality of this regulation before filing implementation plans.

The Supreme Court’s decision about EPA’s Mercury and Air Toxics rule shows what happens when states comply with a regulation before courts have had their say. The Supreme Court found flaws with the regulation but more than 40 gigawatts of power generation, (enough to power the homes of over 30 million people) had already closed to comply with the regulation. States do not lose any options by waiting for the courts, but there are huge costs to developing plans prematurely.

Below, we shed light on some of the myths EPA supporters have offered about state plans:

Myth #1: Filing a SIP protects states’ rights.

Fact: Filing a SIP locks the state into complying with the SIP.

Rushing to file a SIP leaves states with less control over their energy future. If EPA’s regulation is overturned, costly actions taken to comply with the SIP cannot easily be reversed. Moreover, the history of the Obama Administration shows that submitting a SIP is not the end of the story. On 52 occasions, the Administration has rejected state plans, said they aren’t good enough, and turned them into federal plans. The previous three Administrations did this only 7 times.

Myth #2: The choice is a state plan or non-compliance.

Fact: This is a false choice—the real choice is whether to implement a legally dubious rule before the courts have a chance to decide its legality.

States have at least three options: 1. File a SIP. 2. Wait for EPA to impose a Federal Implementation Plan (FIP). 3. Wait for EPA to impose a FIP, but then file a SIP later if the courts uphold the rule. The Clean Air Act grants states the legal right to submit their own implementation plans or not. The governors who have stood up to fight implementation are acting well within their legal right and protecting their most vulnerable citizens from Obama’s illegal rule.

Myth #3: Filing a state plan will be a backstop if the court challenge fails or the new Administration stands by the Carbon rule.

Fact: Waiting to submit a SIP preserves options; rushing to file forecloses options.

States can submit a SIP even after EPA’s accelerated deadline and even after a federal plan has been imposed. As a matter of practice, EPA strongly prefers that states implement their own plans. It’s also worth noting that the imposition of a federal plan is a lengthy process that can involve litigation and requires participation from several interested parties. 

Myth #4: State plans can be tailored to a state’s needs.

Fact: States must pick from a limited menu—and all the options are bad.

All states need affordable, reliable electricity. EPA’s regulation is designed to increase the cost of generating electricity. It relies on building massive amounts of new wind and solar electricity generation, sources that are at least three times as expensive as existing average coal generation. This means the plan will unavoidably drive up the cost of electricity—regardless of the need for affordable electricity. 

Furthermore, the plan limits state’s options. There is a reason Laurence Tribe charged the EPA proposal with “treating [states] like marionettes dancing to the tune of a federal puppeteer.” The ultimate objective (and result) of the carbon rule is the same under a state plan or a federal plan: Take affordable energy off the table and create a national energy policy dictated by Washington bureaucrats.

Myth #5: Submitting a state plan is the best way to protect state residents.

Fact: As designed, the rule will make prices rise under any state or federal plan—the only chance to avoid this fate is to resist implementation.

President Obama’s promise that electricity prices would “necessarily skyrocket” did not refer just to a federal plan. Under a state plan, states will see dramatic increases in energy costs and lose control over their ability to use the most affordable energy sources. The illusion of state control will not save states from higher energy costs. 

Myth #6: Submitting a state plan preserves future options for a state.

Fact: Submitting a state plan closes doors and gives EPA the keys.  

As we witnessed with the MATS rule, submitting a SIP before its legality is determined virtually guarantees the regulation will be implemented. It puts states on an irreversible course that undercuts the lawsuit and discounts the value of waiting for the next Administration, which could withdraw or stay the rule.

Myth #7: Submitting a state plan does not undermine legal challenges.

Fact: The regulation is illegal, but that doesn’t matter if states begin implementing before the courts decide its fate.

As many experts point out, the rule is illegal under both the Clean Air Act and Constitution. EPA has no basis calling on states to implement this illegal rule and no authority to impose a federal plan. For this reason, the most prudent stance for states to take is to not submit a SIP until legal resolution.

Myth #8: State plans are an economic opportunity for a state.

Fact: Shutting down the most affordable and dependable energy options will have devastating consequences.

The rule will unambiguously raise electricity rates. Replacing our reliable, affordable generation with politically preferable—and more expensive—energy sources will leave consumers and low-income communities with less disposable income to pay for basic necessities like housing and health care.

Myth #9: Governors and their agencies have sole authority over this decision.

Fact: The regulation requires a fundamental restructuring of the power grid, which cannot be done without new legislative input.

The carbon rule requires state regulators to do more than they currently have authority to do. This means, in most cases, new statutory authority will be needed from state legislatures to submit a SIP. Emphasizing this point, the final rule relies heavily on emission reductions from renewable energy sources, yet refuses to grant credit to states for these “emission reductions” if they are not codified (read: mandated) by state law. State legislatures should protect their constituents from higher energy prices by rejecting attempts to expand regulators’ statutory authority.

Myth #10: Submitting a plan is the responsible thing to do.

Fact: There is nothing responsible about rushing to implement a legally dubious regulation that will burden your state residents with job losses and higher energy bills.

Prudence dictates a wait-and-see approach. State leaders have a duty to protect their constituents from federal overreach. At this point, refusing to submit a state plan is the only way to retain state control and ensure continued access to affordable, abundant, and reliable energy.

Filed Under: Emissions Standards Tagged With: , , , ,
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