EPA to States: ‘Flexibility’ Means Many Ways to Fail

One way to tell if someone is lying is if they tend to excessively repeat words and phrases. As a case study, the Environmental Protection Agency can’t stop saying the word “flexible.” The EPA uses it to describe its so-called “Clean Power Plan” forcing states to impose strict carbon dioxide reductions, with some variation of the word appearing 163 times in the proposed rule. The gist of the claim is that “each state will have the flexibility to select the measure or combination of measures it prefers in order to achieve its CO2 emission reduction goal.”

As we have explained before, the EPA’s claim doesn’t reflect reality. The emission reductions are so severe that the rule pressures states to adopt costly policies that were either too politically unpalatable for President Obama to pass when his party controlled Congress (cap-and-trade, carbon tax) or are being rolled back in states that enacted them (renewable energy mandates).

In case you had any doubt that EPA isn’t sincere about its flexibility claim, consider this recent opinion piece in The Wall Street Journal. In it, Ben Zycher at the American Enterprise Institute explains how the EPA’s key “building blocks”—which EPA touts as evidence of its flexibility—are “mutually inconsistent” and unworkable.

In other words, the EPA’s “Clean Power Plan” is flexible in the sense that it gives states numerous ways to fail. Here we excerpt Mr. Zycher’s piece at length to explain how the building blocks conflict:

FERC and those in the industry it regulates seem to realize what the EPA does not: that the agency’s “building blocks” are mutually inconsistent. The recommended 6% efficiency improvement for coal plants is prohibitive in cost because their individual operating characteristics—the types of coal they use, operating pressures, emissions equipment, etc.—are predetermined in their designs and extremely difficult to change. Few if any owners of coal plants will be willing to make that huge investment. Moreover, the recommended increase in the capacity utilization of natural gas combined cycle (NGCC) turbines to 70% from roughly 45% today means reduced output and a smaller market share for coal.

The coal-efficiency path is made even more difficult by the EPA’s recently implemented Mercury and Air Toxic Standards. Compliance with this new rule requires the installation of costly scrubbers and other equipment that reduce operating efficiency.

The increase in the utilization of natural-gas plants also conflicts with the increase in wind and solar power. Because renewables are unreliable, they must be backed up by coal- and gas-fired plants, which must be cycled up and down depending on whether the wind is blowing or the sun is shining. This cycling reduces efficiency for the backup coal and gas plants in much the same way as stop-and-go driving cuts automotive fuel efficiency, and this will make it more difficult for gas plants to achieve higher capacity utilization.

The “energy efficiency” path means a reduction in demand for both coal- and gas-fired power, again inconsistent with investment in improved coal efficiency, and with the envisioned increase in the utilization of gas plants.

No one knows how this demand reduction will affect power consumption at peak periods relative to off-peak ones. This will exacerbate the uncertainties regarding investment in new power plants, which will again increase costs and create significant risks to the reliability of the grid.

The operators of electricity systems have always used the cheapest power first and then more-expensive power as demand increases through a given day. How will costs and reliability change when they are forced to adopt a convoluted system combining operating cost and greenhouse gas considerations? No one knows.

Resistance Gaining Momentum in States

States that don’t want to accede to the EPA have a way out: don’t submit a state plan. Already several states are realizing that working with the EPA is more trouble than it’s worth:

  • In April, Oklahoma Governor Mary Fallin signed an executive order preventing her state’s environmental regulators from developing and submitting a state plan.
  • Texas Governor Greg Abbott believes the rule will result in “grave consequences” for Texas, offering his “full support” to Senate Majority Leader Mitch McConnell, who has encouraged states that want to resist to refuse to submit plans to EPA.
  • Wisconsin Gov. Scott Walker recently called the EPA’s plan “unworkable” for the Badger State, highlighting the rule’s many “inaccuracies, questionable assumptions and deficiencies.”
  • Newly elected Chairman of the Texas Railroad Commission, David Porter, said last week after his election, “Perhaps our greatest challenge comes from EPA regulations brought on by Obama’s war on fossil fuels.”
  • Former North Dakota Public Service Commissioner Tony Clark has testified that the rule forces states into “a comprehensive ‘mother may I?’ relationship with the EPA that has never before existed.” Clark is currently a member of the Federal Energy Regulatory Commission.

These statements are in addition to bills proposed in several other states that would require legislative approval before a state agency can submit a compliance plan to the EPA. For states that want to retain their flexibility, resistance isn’t futile—it’s necessary.

Conflict of Interest: EPA’s Ozone Rule vs. the CPP

The Environmental Protection Agency (EPA) is pursuing an aggressive regulatory agenda so sprawling that at least two of its major regulations seem to conflict with one another, undermining the agency’s stated goals. EPA has proposed severe reductions in ground-level ozone levels, but complying with that rule could hamper states’ ability to comply with the EPA’s so-called “Clean Power Plan.”

EPA’s ozone limits would likely restrict natural gas production in key shale gas regions. Yet using more natural gas is a crucial “building block” of the EPA’s CO2 rule—EPA Administrator Gina McCarthy has even called natural gas a “game changer” in this regard. If using more natural gas were off the table due to new ozone limits, many states would likely find it more difficult and expensive to comply with EPA’s CO2 regulation.

The bottom line: EPA’s regulatory agenda contradicts itself while imposing enormous economic costs on Americans, all while air quality continues to improve without further federal intervention. For these reasons, EPA should withdraw its ozone and carbon dioxide rules.

How EPA’s Ozone Rule Conflicts with “Clean Power Plan”

EPA has proposed cutting the National Ambient Air Quality Standards (NAAQS) for ozone from 75 parts per billion (ppb) to between 70 and 65 ppb (the agency will accept comment on as low as 60 ppb). Setting aside the dubious science EPA uses to justify further lowering the ozone standard, if EPA sets the standard at 65 ppb, it would put vast swaths of the country in so-called “nonattainment.” (According to an analysis by NERA Economic Consulting, that could make the rule the single costliest regulation in U.S. history.)

A nonattainment designation forces states to implement various pollution control measures, some of which EPA hasn’t even defined. These controls could impact a variety of manufacturing activities, including natural gas production. According to the National Association of Manufacturers (NAM), “New oil and natural gas production could be significantly restricted in parts of the country classified as ‘nonattainment’ areas, limiting supplies of critical energy resources and potentially driving up costs for manufacturers and households.”

Below is a map of area NAM predicts would be deemed in nonattainment under a 65 ppb ozone standard.

Areas Expected to Violate 65 ppb Ozone Standard

NAM 65 ppb

Source: National Association of Manufacturers and American Petroleum Institute

If the above map is accurate, areas with some of the largest shale gas plays in the country could be deemed in non-attainment under EPA’s ozone rule. These shale formations represent half of all U.S. natural gas production and are responsible for almost all of recent production growth that is powering America’s domestic energy boom. In the below map from the American Chemistry Council, note the overlap between potential nonattainment areas and U.S. shale plays:

U.S. Natural Gas Areas Threatened by 65 ppb Ozone Standard

U.S. nat gas areas 65 pbb

Source: American Chemistry Council

As the map shows, large swaths of almost every shale gas formation, including six out of the top seven plays, could fall into nonattainment under EPA’s proposed ozone rule. Those six shale formations—the Marcellus, Eagle Ford, Haynesville, Permian Basin, Niobrara, and Utica—accounted for close to 100 percent of domestic natural gas production growth over the last three years.

EIA shale plays

Source: Energy Information Administration

If EPA’s ozone rule curtails natural gas production in these key shale areas, it could complicate compliance with EPA’s so-called “Clean Power Plan.” EPA has proposed cutting carbon dioxide levels by 30 percent by 2030. One of the four “building blocks” on which EPA’s CO2 rule rests is shuttering coal-fired power plants and replacing them with gas-fired plants. This fuel switching, and being able to do it without dramatically higher electricity and natural gas prices, depends on our ability to continue producing large amounts of natural gas from shale formations—many of which are threatened with “nonattainment” under EPA’s ozone rule.

Notably, threatened areas include nearly all of the Marcellus shale, which produces twice as much natural gas as the next two largest formations combined. The below map shows the overlap between Pennsylvania’s Marcellus shale and expected ozone nonattainment areas:

marcellus-shale-mapIER

The same is true for the other shale plays above, including Colorado’s Niobrara, Texas’ Permian Basin and Eagle Ford, Louisiana’s Haynesville, and Ohio’s Utica. Most of Colorado’s natural gas output, for instance, is concentrated in the northern Front Range, much of which NAM expects to receive a nonattainment designation under a 65 ppb ozone standard. That could jeopardize Colorado’s thriving energy industry, whose dramatic growth has made the state the sixth largest natural gas producer.

It’s worth noting that EPA is also clamping down on methane emissions, which could also curtail natural gas production.

Natural Gas Key ‘Building Block’ of EPA’s CO2 Rule

Increasing natural gas use is critical to EPA’s costly CO2 rule. But if EPA’s ozone rule constrains natural gas production, it could limit states’ options for complying with EPA’s CO2 rule—despite EPA claiming its CO2 rule offers states “flexibility” to choose how to comply. Even Gina McCarthy admits that natural gas is crucial to EPA’s CO2 agenda: “natural gas has been a game changer with our ability to really move forward with pollution reductions that have been very hard to get our arms around for many decades.”

If less affordable natural gas is available, compliance costs for EPA’s CO2 rule would likely skyrocket. EPA talks about using renewables like wind and solar, but these sources are not substitutes for natural gas because wind and solar cannot be counted upon to produce electricity when it is needed. The other building blocks—heat-rate improvements at coal plants and energy efficiency mandates—can only go so far. Without natural gas as a “game changer,” states’ options for compliance will be significantly more limited and costly.

Conclusion

EPA’s regulatory agenda has become so expansive that the agency’s own rules conflict with one another. EPA’s ozone rule undermines the foundation of EPA’s CO2 rule. While EPA’s CO2 rule drives the use of more natural gas at the expense of coal, the agency’s ozone rule could restrict natural gas output in key shale formations right when states need more natural gas to comply with the CO2 rule. EPA could simply exempt shale-producing regions from its ozone rule, but that fails to address the more fundamental problem: EPA’s out-of-control agenda.

EPA’s regulations impose huge costs for small benefits. The agency’s ozone rule could be the single costliest regulation in U.S. history, even though ozone emissions have declined 33 percent since 1980. Meanwhile, EPA’s CO2 rule will impose double-digit electricity rate hikes for residents of 43 states, but limit global warming by just 0.02 degrees Celsius. The solution is for EPA to withdraw its proposed ozone and CO2 rules.

This post originally appeared on the Institute for Energy Research blog

AEA Applauds WV Delegation & Rep. Cramer for Standing Up to EPA

Recently, several members of Congress have taken the initiative to fight back against the EPA’s proposed Clean Power Plan. The rule, to be finalized sometime this summer, will shutter roughly 90 GW of coal-fired electricity, according to the Energy Information Administration. This will threaten the reliability of the grid and cause electricity prices to skyrocket.

In March, Sen. McConnell urged states to protect their sovereignty over state energy policy by refusing to submit a State Plan to the EPA. Rep. Kevin Cramer has followed this lead and urged legislators in his home state of North Dakota, as well as Governor Dalrymple, to resist sending a State Plan to the EPA.

In his letter to Governor Dalrymple, Rep. Cramer calls the EPA’s bluff on the CPP:

It is my belief the president’s administration is aware of this and hoping enough States will voluntarily cede their rights by proposing CO2 reduction plans beyond the fence in order to meet their given goals. If you are to submit a plan to the EPA, I urge you to only consider commercially feasible improvements within the fence of an emitting source. I am aware this will not likely reach EPA’s goal, but it’s an unreasonable goal given the timeline of infrastructure construction, the availability of commercially feasible and reliable low-carbon power, and again, ceding States’ rights to the Federal government. I believe in the ingenuity of Americans and North Dakotans to achieve a lower-carbon economy if they so choose, but this is not the plan to do it for many reasons beyond those I have touched on here.

Similarly, the West Virginia Delegation sent a letter to Governor Earl Ray Tomblin, urging him to also resist the EPA’s power grab:

The EPA is trying to compel states to do more themselves than what the agency would be authorized to do on its own. Therefore, we urge you to join your fellow Governors of Texas and Oklahoma by refusing to submit a SIP to the EPA and subjecting West Virginians to this overreaching plan. By declining to submit a plan you will give the courts the necessary time to rule on whether the EPA’s proposed rule is legal while also giving Congress a chance to address its concerns with the plan.

Despite the loud rhetoric from proponents of the rule, compliance in the form of a state plan could have severe ramifications as written about here and here. State elected officials would be wise to heed this advice and take action ensuring they are part of any decision that subjects their constituents to the EPA’s costly federal energy takeover.

The American Energy Alliance applauds Rep. Cramer and Reps. McKinley, Mooney, and Jenkins and we urge all Members of Congress to take similar action to support their states in the fight against the EPA’s unworkable rule.

Critics Flunk Lobby Group’s Bogus Air Quality Report

Nearly 40,000 fitness enthusiasts enjoyed Pittsburgh’s annual marathon last month, with dozens of professional athletes and runners as old as 85 participating in the weekend-long event. Despite the marathon’s ranking as one of the best in the world due to its scenic routes and ideal conditions for distance running, the American Lung Association gave the city an “F” for its allegedly filthy air in its recently released 2015 “State of the Air” report.

Pittsburgh’s air has remarkably improved since 2011—the Allegheny Institute noted that fine particulate matter has dropped by 13 percent in the area, and in 2013, none of Allegheny County’s 11 air monitoring stations averaged pollution levels above the Environmental Protection Agency’s (EPA’s) standards.

Oddly, the Lung Association, which also uses EPA data for its report, smeared the entire Pittsburgh metro area—a three state, 12 county region—as one of the most polluted in the nation—a distinction the Association has repeatedly awarded to the city over the last several years. In order to get to this predictable conclusion, the Association relies on old pollution information and cherry-picks data to ensure the dirtiest possible readings for the city. The Allegheny Institute labeled the “bogus” report’s evidence as “junk science,” and the Pittsburgh Post-Gazette editorial board noted just a few examples of the Association’s flawed methodology:

“[T]he association uses the reading of the single dirtiest pollution monitor to represent the air quality of the entire region. In Pittsburgh’s case, that is usually the monitor at Liberty, which measures the air near U.S. Steel’s Clairton coke works, one of the most polluted spots in the nation.

But the Liberty monitor’s readings do not reflect air quality across Allegheny County, let alone the other 11 counties, three of them in West Virginia and Ohio. For instance, eight monitors are situated across Allegheny County to measure fine particulate; three are placed in different locations to gather data on ozone. Overall, the 12 counties in the Pittsburgh metro have 20 pollution monitors, and none of them records the kind of readings taken near the nation’s largest coke plant.

Given this level of statistical malpractice, it scarcely matters that the lung association this year ranks the 12-county region as 10th most polluted in the nation for short-term particulate, ninth worst for year-round particulate and 21st worst for ozone. The truth is that only the region’s dirtiest monitor — one out of 20 — has those rankings against the dirtiest monitor of every other region.”

To read the rest of the editorial, click here.

To learn about the dubious science behind federal air pollution policy, click here.

AEP Closes 5,588 Megawatts of Coal Capacity

Coal-fired electricity generators that once powered 5.5 million homes have closed permanently, according to a recent announcement from the Columbus, Ohio-based electric utility American Electric Power (AEP). The 5,588 megawatts (MW) of coal capacity located across Appalachia and the Midwest are the latest casualties in the continued assault on affordable, reliable power by the Environmental Protection Agency (EPA) under President Obama.

Specifically, AEP’s announcement says the utility closed coal-fired units at 10 power plants in five states—three in Ohio, three in West Virginia, two in Virginia, one in Indiana, and one in Kentucky. The closures are a direct result of EPA’s Mercury and Air Toxics Standard rule (MATS), which was proposed in 2011, finalized in 2012, and took effect this year.

The coal plant closures were expected but unfortunate nonetheless. In 2011, the New York Times published a story foretelling the closure in 2015 of an estimated 6,000 MW of AEP coal capacity due to the rule. Shutting down the reliable, affordable production of electricity from coal plants not only causes problems on the grid but also leads to higher electricity bills for everyone.

More Closures Expected

These 5,588 megawatts of coal capacity represent only 40 percent of the 13,000 MW of coal capacity that the Energy Information Administration (EIA) estimates will retire in 2015. The AEP closures underscore the broader effects of the Obama administration’s anti-energy policies, which threaten to erode the reliability of the power grid, increase the cost of electricity, and displace workers.

AEP is just one utility. Nationally, we estimate that 72,000 MW of reliable electricity from coal-fired power plants will be shut down due to regulations from the EPA, including MATS and the early effects of EPA’s carbon dioxide regulations. The 72,000 MW estimate is based on actual policy-driven closures announced by utilities, as well as EPA’s own estimates of future closures. Our conservative estimate should be considered the lower bound for power plant closures.

According to the EIA, the non-partisan data arm of the Department of Energy, EPA’s carbon dioxide regulations on existing power plants (to be finalized later this summer) will raise the total number of coal-fired capacity retirements to 90,000 MW. That figure includes closures directly caused by regulations such as MATS and the new carbon dioxide rules, as well as some closures that were not primarily driven by regulations.

Buyer Beware

Replacing existing coal-fired power plants with any new source of electricity generation is incredibly costly, even when a relatively low-cost new source such as combined cycle natural gas-fired plants is built. As we highlight in a forthcoming policy report, the levelized cost of electricity from the existing coal fleet is about $38 per megawatt-hour. In contrast, the levelized cost of electricity is about $73 from new combined cycle natural gas plants and $113 from new wind turbines.[1] Hence, closing coal-fired power plants and replacing their output with that of natural gas or wind plants doubles or triples the cost of the replaced electricity.

In AEP’s case, coal plant closures coincide with increased rates. AEP’s regulated fleet of generators—that is, power plants whose costs are recouped automatically through state-regulated rate formulas that include a guaranteed return on investment for new plants—actually becomes a moneymaker in the presence of costly regulations from the EPA. That is because the increased costs of complying with EPA rules pass through directly to consumers.

The West Virginia Public Service Commission, for example, recently awarded AEP an overall 9 percent increase in rates, which translates to a $123 million increase in revenue. For residential customers in West Virginia, their electricity rates will increase more than 16 percent. Simply put, AEP is doing fine while American families pick up the tab. Perhaps that is why AEP does not necessarily oppose EPA’s regulation of carbon dioxide emissions from power plants, but only opposes the timelines EPA has given to implement the regulations.

Conclusion

Reliable electricity generation has been a cornerstone of the American way of life for over a century. Recent EPA regulations—such as the mercury rule that took effect this year and the carbon dioxide regulations that are being finalized now—are a very real threat to the reliability and affordability of electricity in the U.S. Adding insult to injury, the costs of EPA’s regulations ultimately fall on American families. As we have seen with previous EPA rules, regulated utilities simply pass the increased costs on—and in many cases actually increase profit—while the bill goes to the rest of us through rate increases.


[1] The Levelized Cost of Electricity from Existing Generation Resources, Institute for Energy Research (forthcoming).

EPA’s Allies Telegraph Plan to Force States into Cap-and-Trade

Recently, two organizations sympathetic to the Environmental Protection Agency’s proposed carbon dioxide restriction on existing power plants published separate papers detailing options for states to comply with the new rule. The papers are certainly illuminating, but perhaps not in the way the authors intended—both reinforce how costly, convoluted, and unworkable EPA’s proposal is. They also confirm critics’ worst fears: that the proposed rule pressures states to impose by regulatory fiat the familiar, failed policies of cap-and-trade, carbon taxes, and renewable energy mandates—despite EPA insisting otherwise. And finally, they serve as a reminder that states should refuse to submit an implementation plan, lest they become willing participants in EPA’s plan to drive up electricity costs for Americans. Despite all their rhetoric about flexibility, these papers shine a light on the stranglehold EPA threatens to have over states through its carbon dioxide regulations.

NACAA’s Menu of Mandates

The first paper, released by the National Association of Clean Air Agencies (NACAA), is a 465-page “menu of options” states could choose to comply with EPA’s rule. While allegedly designed to “help states develop plans” to comply with EPA’s rule, in reality, the paper reveals EPA’s goal of pressuring states to “voluntarily” adopt costly tax and regulatory schemes that the American people have rejected year after year. Consider the following chapters:

  • Chapter 16: Renewable Portfolio Standards: “Purchase obligations imposed on utilities and retail suppliers by state governments have been arguably the most successful legal and regulatory policy mechanism for spurring growth in clean energy technology deployment.”
  • Chapter 24: Cap-and-trade: “The cap-and-trade approach demonstrates the value of allowing regulated entities the flexibility to meet requirements in a manner that best suits their specific needs.”
  • Chapter 25: Carbon taxes: “Pricing mechanisms can be an important element in any effort to reduce electric-sector greenhouse gas (GHG) emissions. Pricing will be most effective when combined with related policies to encourage the use of other, less carbon-intensive resources.”

These policies raise energy costs, limit energy choices for American families, and do not have enough support from Americans across the country to have any chance in Congress. NACAA would like us to believe these are cutting-edge policies when, in fact, each has been proposed and has failed to gain traction on the federal level, while RPS’s are being rolled back in states.

First, Renewable Portfolio Standards (RPS) require utilities to purchase electricity from renewable sources—regardless of whether the energy is wanted or needed. And it often isn’t: several states, including Ohio, North Carolina, Kansas, Texas, and West Virginia, have taken steps toward freezing or repealing their renewable mandates. EPA’s rule would effectively force these states to reinstitute policies they would rather do without. There is currently no federal RPS, despite repeated failed attempts from Members of Congress such as Senator Ed Markey.

Second, cap-and-trade is a political albatross and a practical failure. Federal legislation instituting a national cap-and-trade scheme was unable to pass a Democrat-controlled Senate in 2010, even though it was a priority for President Obama. Where regional cap-and-trade has been tried, it’s failed. Consider the Regional Greenhouse Gas Initiative, a multi-state emission-trading compact. While NACAA claims that RGGI “has produced positive economic impacts while administration of the RGGI program has proceeded smoothly,” the reality is that electricity prices in RGGI states have risen faster than the national average—52 percent since 2005, according to EIA data. Meanwhile, California’s cap-and-trade and RPS policies have helped make the state’s electricity prices among the most expensive in the country.

Third, a tax on carbon dioxide emissions is another plan that has failed to attract any interest from the American people. A carbon tax would not only be an unprecedented federal intrusion into all Americans’ livelihoods, but more disturbingly amounts to a regressive energy tax on the poor. Low-income households, minorities, and those on fixed incomes spend a higher percentage of their household budgets on energy, which means any tax on energy hits them harder than the rest of the country. A recent CBO report that modeled the effects of an implied $20 per ton carbon tax found that it would drain $1.2 trillion out of the economy over the first decade, but reduce U.S. CO2 emissions by just 8 percent.

States have always been free to concoct their own combination of these policies, or none at all. The simple facts that RPS’s are facing repeal, cap-and-trade regimes are causing ill effects, and carbon taxes are non-starters should give readers pause each of the 65 times they come across the word “flexibility” in NACAA’s report. EPA’s carbon dioxide regulations are neither flexible nor federalism—they are brute force.

AEE’s Cap-and-Trade 2.0

The second paper comes from Advanced Energy Economy (AEE). AEE’s white paper urges EPA to design a Federal Plan that encourages interstate cap-and-trade schemes. Such a system would have utilities purchase emission reduction credits from “advanced” energy sources, including the wind and solar companies that comprise AEE’s membership.

This is clear rent seeking on AEE’s part. AEE is a lobbying group whose board is stacked with executives from renewable energy companies that stand to gain financially from EPA’s rule—apparently nobody thought this was worth mentioning given recent griping over disclosure. While EPA’s rule will be a big win for the wind and solar companies that AEE represents, renewables would benefit the most—and Americans hurt the most—if EPA designs a federal plan that calls for cap-and-trade, as opposed to reducing carbon dioxide emissions at existing facilities.

AEE makes no effort to hide the fact that it’s seeking preferential treatment. In the executive summary, AEE urges EPA to “leverage advanced energy for maximum benefit in implementing” the CO2 rule. However, it isn’t clear that EPA has the legal authority to design a federal plan that includes a cap-and-trade system. EPA and AEE appear to have their fingers crossed that state policymakers will walk into such a scheme of their own free will.

Beyond its dubious legal basis, there are serious policy flaws with AEE’s cap-and-trade scheme:

  • It turns the concept of electricity resource management on its head. Currently, utilities choose energy sources based on the economic value to the power system. This new scheme would incentivize utilities to choose sources that maximize the value of their carbon dioxide credits, to the detriment of the customers—every day families—they serve.
  • It pressures states to adopt or expand renewable energy mandates even as some states are curtailing their RPSs. AEE lists such mandates among “complementary policies” states could pursue in conjunction with cap-and-trade to achieve emission goals. Here, AEE echoes NACAA’s guidance on using a carbon tax “combined with related policies.”
  • It discriminates between states. States with higher emission rates and significant renewable mandates stand to gain because they can generate more renewable credits and sell those credits to other states with less renewable generation. Again, this creates the incentive for utilities to focus on profiting not by delivering higher quality service at affordable prices, but by exploiting the carbon-trading scheme. If Enron were still around, its executives would be salivating over the potential for trading in and gaming a carbon dioxide permit scheme.

The AEE white paper also suffers from the same delusion of EPA flexibility as the NACAA report. In its 16 pages of text, the AEE white paper mentions “flexibility” 17 times, sometimes glowingly:

AEE applauds the Clean Power Plan’s proposed approach of providing states the flexibility to choose between designing a compliance plan to meet an EPA-determined rate-based interim and final goal or to elect instead to translate those into mass-based goals.

This is not flexibility. This is EPA’s attempt to convince states to shackle themselves with unwise policies that EPA lacks the authority to impose on its own. 

Conclusion

These new papers from NACAA and AEE reinforce Senate Majority Leader Mitch McConnell’s argument that states should refuse to submit a state plan. NACAA and AEE, both of which support the proposed rule, have revealed EPA’s true agenda: to impose by administrative diktat the same costly RPS, cap-and-trade, and carbon tax policies that are either dead on arrival in Congress or are being repealed in the states. States that submit compliance plans to EPA will be complicit in the Obama administration’s federal energy takeover.

This post originally appeared on a blog for the Institute for Energy Research. It was authored by AEA Economist Travis Fisher and Policy Manager Alex Fitzsimmons.

AEA to Congress: Fully Repeal the RFS

WASHINGTON – Today, the American Energy Alliance launched the first phase of a six-figure advocacy initiative urging Congress to repeal the Renewable Fuel Standard. The initiative begins this week with print and online ads in CQ Roll Call and a series of online ads in Louisiana, North Carolina, Oklahoma, and Texas.

The ads are the first step in a sustained initiative urging lawmakers to pursue full repeal of the RFS.

“We’re sending a clear message to Congress that the only way to fully fix the problem they created is to fully repeal the Renewable Fuel Standard,” said AEA President Thomas Pyle. “Lawmakers need to understand that cherry picking parts of this law is a step in the wrong direction and will further harm consumers, not help them.”

Pyle continued:

“Half measures, such as the Toomey-Feinstein bill, make the RFS worse by focusing the mandate on cellulosic biofuels that are too expensive to be produced in commercial quantities. This would result in California-level gas prices exported to the rest of the country. As the powerful biofuels lobby ratchets up its efforts to continue this broken policy, we urge Congress to do what is in the best interest of the American people and fully repeal the RFS.”

Below are links to the various ads:

Roll Call Print

CQ Roll Call online onetwo, and three

Facebook ads onetwo, and three

Click here to read how half measures that fall short of full repeal make the RFS worse.

Click here to read seven reasons to repeal, not reform, the RFS.

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State Renewable Mandates Falling Like Dominoes

States that have enacted renewable energy mandates in recent years are beginning to have buyer’s remorse. Last week, Kansas Governor Sam Brownback signed into law legislation repealing his state’s renewable energy mandate and replacing it with a voluntary goal. Kansas joins a growing chorus of states that have either repealed or frozen their renewable mandates.

Kansas’ decision to repeal their renewable energy mandate is important for several reasons: the vote was bipartisan, reflecting widespread discontent with the state’s energy mandate; Kansas is a major wind producing state; and the vote comes on the heels of other states that are similarly fed up with costly renewable mandates.

Kansas RPS Repeal: A Bipartisan Affair

In 2009, Kansas passed the Renewable Energy Standards Act, which requires utilities to generate 20 percent of their electricity from renewable sources in 2020. Renewable mandates were popular at the time, passing the state House by a vote of 103-18. But last week, lawmakers repealed the mandate they enacted just six years ago by an even wider bipartisan margin, 105-16.

The vote was not a symbolic gesture from a conservative state—Kansas is a huge wind producer, with the 9th most installed wind capacity in the nation. Rather, the Kansas vote reflects growing disillusion with the high costs and illusory benefits of renewable energy, notably wind and solar.

Consider a recent study from the Institute of Political Economy at Utah State University. Researchers found that Kansas’ RPS reduces incomes, increases energy costs, and destroys jobs:

  • “Ratepayers in Kansas will pay $171 million more than they would in the absence of RPS.
  • An average family in Kansas made $4,367 less in a single year due to RPS mandates.
  • There were 5,500 fewer jobs in Kansas at the end of 2014 than there would have been without RPS mandates.”

While RPS mandates impose enormous costs, they are also an expensive and inefficient way to reduce carbon dioxide emissions. The California Air Resources Board estimates that it costs $133 per ton to reduce carbon dioxide emissions through RPSs—that’s four times higher than even the Obama administration’s $33 per ton estimate of economic damages associated with CO2 emissions.

Momentum Growing for Repeal

Faced with huge costs and slim benefits, several states that have imposed RPS mandates are beginning to recognize the error of their ways. Below is a list of states that have taken recent action to curtail or eliminate their renewable mandates:

  • Last June, Ohio froze its RPS for two years and is now holding hearings to consider full repeal.
  • West Virginia repealed its “alternative energy standard” in January, becoming the first state in the country to repeal an enacted RPS. The repeal bill passed unanimously in the Senate and 95-4 in the House.
  • Texas, New Mexico and Colorado all passed bills to repeal or revise their RPS out of one chamber.
  • North Carolina is moving on legislation to freeze its renewable mandate.
  • On May 28, Kansas became the second state to repeal its mandate.

Conclusion

Many states enacted renewable energy mandates in recent years with the goal of reducing carbon dioxide emissions, creating jobs, and lowering utility bills. Just a few years later, states are realizing that the wind and solar lobbyists who made these promises sold them a bill of goods. These mandates raise household energy bills, destroy jobs, and do little to reduce carbon dioxide emissions. As RPS mandates continue to fail, even more states will realize that markets—not mandates—are the best path to energy prosperity.

EPA Mandates New Volume Requirements for Unicorns and Pixie Dust

Actually, it was for Cellulosic Ethanol, but those Projections are Equally Unrealistic

WASHINGTON — American Energy Alliance President Thomas Pyle issued the following statement on EPA’s proposed volume requirements for the 2014, 2015, and 2016 Renewable Fuel Standard:

“Once again, EPA has deluded itself into thinking it can simply mandate the commercial cellulosic biofuel industry out of thin air. EPA’s unrealistic projections for cellulosic biofuel underscore the incompetence of federal bureaucrats and the arrogance of Washington politicians who think they know what’s best for the economy and the American people.

“The RFS has been broken from the beginning. It distorts the market, raises gasoline prices, and does nothing to help the environment. Recent efforts by Senators Feinstein and Toomey to repeal only the implied corn mandate will actually make the RFS worse by focusing on cellulosic fuels that are much too expensive to produce. Congress should own up to their mistake and repeal the RFS mandate entirely.”

Click here for 7 reasons why full repeal is the only solution for the RFS.

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WOTUS Rule Infringes on Private Property Rights

WASHINGTON — American Energy Alliance President Thomas Pyle released the following statement on EPA’s finalized “Waters of the United States” rule:

“EPA’s Waters of the United States rule is an attack on individuals’ private property rights under the guise of protecting our country’s waterways. In reality, the rule isn’t about protecting waterways or wetlands. It’s about increasing the size and scope of the federal government and giving Washington bureaucrats more control over what American citizens do on their own property. The WOTUS rule goes far beyond the scope of the Clean Water Act and the Constitution as it usurps the states’ regulatory control over waters within their borders. EPA should withdraw this overreaching and unconstitutional rule.”

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