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AEA Opposes Hidden Energy Taxes Within Yet-To-Be-Seen Infrastructure Bill, Issues Vote Alert

July 19, 2021 by 1 Comment

With no legislative text or details, Democrats and 5 misguided Republicans lay a path for a vote on carbon tariffs.

WASHINGTON, D.C. (July 19, 2021) – Today, the American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, voiced opposition to efforts by the White House, Democratic leaders, and a handful of Republican senators, to advance a $1.2 trillion infrastructure measure that is also linked to a $3.5 trillion budget reconciliation package. Procedural votes on the $1.2 trillion package could begin as early as today despite the fact that nobody has seen any language. Allegedly, the companion reconciliation package contains a massive new energy tax in the form of a carbon tariff and a federal renewable energy mandate.

The American Energy Alliance opposes the so-called “bipartisan infrastructure framework” and will score against the procedural motion and subsequent votes on it and other related measures.

AEA President Thomas Pyle issued the following statement:

“The so-called ‘bipartisan infrastructure package’ is a wasteful and unnecessary exercise that will make the nation $1.2 trillion poorer. Consequently, AEA opposes and will score votes with respect to this legislation and the linked budget reconciliation package, which reportedly contains massive new taxes on energy along with a pointless, yet costly national renewable electricity mandate.

“Perhaps most ridiculous part of the measure being considered is the $15 billion in subsidies for electric vehicles and charging facilities, but the package also includes tens of billions of dollars of wasted funding on passenger rail and mass transit.

“Proponents also seek to spend tens of billions of dollars subsidizing an electricity transmission build-out. We already have a grid that is robust and well-suited for reliable, baseload electricity generation. What the grid struggles to handle is the wild swings of generation from unreliable renewables like wind and solar. These sources are at the heart of the grid issues we have seen recently in California and Texas.

“The only reason there is any need at all to build long-distance transmission is because of federal and state subsidies and mandates forcing unreliable wind and solar into the electricity system. We should end these taxpayer giveaways immediately, not pile on even more of them.

“On top of all this unneeded spending, the infrastructure bill does nothing to address the biggest problems we have building infrastructure in this country — the permitting and regulatory processes that slow projects to a crawl and make American infrastructure projects far more expensive than in other countries.

“Finally, make no mistake: passing the infrastructure package makes the subsequent and far worse reconciliation package more likely to succeed. The Senate should not go along with this farce. The votes cannot be separated as a practical matter; a vote for the infrastructure package is as good as a vote for the reconciliation package, and all the energy taxes and inflation that come with it.”

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Don’t Collude In Raising Energy Prices

July 19, 2021 by 1 Comment

After many months of discussion, votes are expected in the next few weeks on some sort of infrastructure package as well as the first votes on the Democratic Party’s go-it-alone additional spending bill (beyond the regular budget), which they want to pass through reconciliation.  While the administration’s preposterous attempt to define every progressive spending priority as “infrastructure” was correctly laughed at, the infrastructure package that is currently under negotiation is still a bad deal. Even worse, by giving some bipartisan cover to some of the administration’s spending, a bipartisan infrastructure deal makes the passage of a blowout multi-trillion-dollar left-wing reconciliation package more likely.

Infrastructure Package

While the bipartisan infrastructure package has yet to be written, we do have an outline of what it contains. While more focused on actual infrastructure, the package is still a wasteful and unnecessary $1.2 trillion. Perhaps most ridiculous is the $15 billion in subsidies for electric vehicles and charging facilities. Why exactly federal taxpayers should be paying for this, rather than EV owners themselves, is not explained. 

The package also includes tens of billions of dollars for passenger rail and mass transit. While at least meeting the definition of physical infrastructure, these subsidies for unused services should be cut off. Passenger rail simply does not make sense in a country as large and spread out as the U.S.

The California high-speed rail fiasco of the last decade should have put to rest the passenger rail fantasy, but this package looks to shovel even more good money after bad. Mass transit ridership cratered during the pandemic and has not recovered, and it may never recover.

It is not smart to spend tens of billions more on something no one wants to use.  Even if ridership recovers at some point, why should federal taxpayers be subsidizing the mass transit systems of large, wealthy cities? New York and Washington, DC should pay for their own excessively expensive systems.

The package also seeks to spend tens of billions of dollars subsidizing electricity transmission build-out.  Stripped of context, this might sound like a reasonable idea, why not have “more resilient” transmission? But the context is that we already have a grid that is robust and well-suited for reliable, baseload electricity generation (which comes from nuclear, hydro, natural gas or coal).  What the grid struggles to handle is the wild swings of generation from unreliable renewables like wind and solar. These sources are at the heart of the grid issues we have seen recently in California and Texas.

The only reason there is any need to build long-distance transmission is because of federal and state subsidies and mandates forcing unreliable wind and solar into the electricity system. Taxpayers are being told to pony up tens of billions of dollars in this infrastructure package (which is only a down payment, far more will be needed) in order to “solve” the transmission problems created by government in the first place.

On top of all this unneeded spending, the infrastructure bill does nothing to address the biggest problems we have building infrastructure in this country — the permitting and regulatory processes that slow projects to a crawl and make American infrastructure projects far more expensive than in other countries.

The Reconciliation Package

While the bipartisan infrastructure package contains plenty of bad policy on its own, the deal looks even worse in the context of the reconciliation package that both President Biden and House Speaker Nancy Pelosi have insisted must pass with the infrastructure bill. The reconciliation bill, while its contents are still vague, would be a disaster for the American economy. Its provisions will drive up the cost of energy and goods throughout the country, turbo-charging already high and growing inflation and exacerbating the challenges posed by monstrous federal deficits.

According to reporting, the reconciliation bill is set to contain a Civilian Climate Corps, a “clean electricity” mandate, subsidies for electric vehicles and renewable electricity, a tax on methane (natural gas) emissions, subsidies for weatherization, and most damagingly a border carbon tax.  Most of these energy-related inclusions are designed to do one thing:  increase the cost of energy.

A “clean electricity” mandate, however defined, will increase the cost of electricity. A tax on methane emissions will increase the cost of natural gas and thus everything that natural gas is used for, like home heating. A border carbon tax would increase the cost of every good coming into the country. This tax would fall on food, clothing, construction materials like steel and wood, cars, electronics, anything and everything imported.  All of these taxes would be paid by consumers, and would damage the poor, those on fixed incomes, and local institutions like schools and hospitals the most.

The Senate Should Not Collude

Even those components of the reconciliation package that don’t directly raise energy costs are expensive or harmful as a policy matter. There is a reason that the administration is trying to jam all these provisions through in a reconciliation package.  The contents are harmful and unpopular, catering to the left-wing of the Democratic Party, not to America as a whole. These extreme policies cannot pass Congress through the regular legislative process or as stand-alone legislation, so the administration is playing this two-track game: a bipartisan infrastructure package for political cover, paired with a blowout $3.5 trillion collection of damaging left-wing policy. 

Make no mistake: passing the infrastructure package makes the reconciliation package more likely to succeed. The Senate should not go along with this farce. The votes cannot be separated as a practical matter; a vote for the infrastructure package is as good as a vote for the reconciliation package, and all the energy taxes and inflation that come with it.

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Biden Calls For More Foreign Oil While Attacking Domestic Producers

July 15, 2021 by Leave a Comment

Last week OPEC+ talks on oil production quotas for member nations stalled and, as a result, oil prices rose. The Biden administration is somewhat concerned about the increase in oil prices and in response to the OPEC+ stalemate, a Biden administration spokesperson stated, “Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward.” Instead of calling on countries like Russia and Saudi Arabia to increase their oil production through investment and hiring more people, the Biden administration could reverse its anti-energy prices in the United States and oil prices would likely decrease. Our economy might also receive a shot in the from increased production. After all, the U.S. has been the biggest contributor to the decrease in global oil prices over the past 10 years by supplying the oil market with the majority of new oil over the past decade.

From 2010-2019, 81 Percent of the Global Increase in Oil Production Came From the United States

For decades, people have not thought of the United States as an energy superpower. Too many people were stuck in the mindset that the United States could not do anything about oil prices—that we had too little oil reserves to meaningfully impact global prices. This worldview was perfectly encapsulated by President Obama, when he stated in 2012, “we can’t just drill our way to lower gas prices.” But the United States did exactly that.

From 2010 through 2019, global total petroleum (and other liquids) production increased by 12.1 million barrels a day. For the same time period, U.S. total petroleum (and other liquids) production increased by 9.77 million barrels a day. In other words, the United States alone covered 81 percent of the total increase in global oil production over the past 10 years. More supply meant lower energy prices throughout the world, and American households gave a collective sigh of relief from lower gas prices.

In fact, if you include the COVID-19-altered 2020, the increase in U.S. oil production exceeded the global increase from 2010-2020.

It is very likely that Russia and OPEC could have increased their oil production over the past 10 years and further reduced prices, but Russia and OPEC were more interested in maximizing their revenues instead of supplying the market with more oil.

U.S. Oil Production Has Helped Keep Oil Prices in Check

The impact of all of this oil production from the United States led to downward pressure on oil prices over the past 10 years. In the oil price chart below you can see what looked to be a long-term run-up in the price of oil after the 1990s stalled in the early 2010s and then decreased by more than 50 percent. A greater supply of oil, the majority of which came from the United States, is a key reason for this price decrease.

IER has as long noted how U.S. oil production has helped keep oil prices in check. For example, in 2014 we explained how U.S. oil production growth more than offset unplanned disruptions to the world’s oil supply and in 2008, we explained how ending bans on offshore drilling led to immediate price relief.  Market signals about probable government actions also drive prices sooner than the actions’ actual effect.

The United States is playing a larger role in global oil production as a result of the increase in production. This chart shows the percentage of global oil production that is produced by the United States. In 2020, the United States produced almost 25 percent of the global total.

President Biden Could Reduce Oil Prices by Ending His Anti-Energy Policies

As has been amply demonstrated over the past decade, we can drill our way to lower gas prices. We did it. But while the Biden Administration would like to see oil production increase in OPEC+ countries, they are taking action after action to hamstring domestic (and Canadian) oil production. As a result of policies such as canceling President Biden is signaling to oil markets that it will be harder for the U.S. to produce oil in the future. It’s no wonder oil prices recently hit the highest level in nearly 7 years.

If President Biden wanted to see lower oil prices, he would reverse course on his anti-energy policies. But the reality is that high oil prices would help the electric vehicle market and “nudging” more drivers into EVs is a key policy objective of the Administration.

We can expect to see additional policies from the Administration that will drive up prices at the pump while at the same time the Administration asks other countries like Russia and Saudi Arabia to produce more oil. After all, President Biden promised it during the campaign.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #44: Tom and Mike Discuss Gas Prices, Bipartisan Infrastructure, and Election Reform

July 15, 2021 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna talk about rising gas prices, the prospects of a bipartisan “infrastructure” bill, and election reform efforts from around the country.

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The Unregulated Podcast #43: Tom and Mike Breakdown the New York Election

July 1, 2021 by Leave a Comment

On this episode of The Unregulated Podcast, Tom and Mike breakdown the New York mayoral primary election.

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The Unregulated Podcast #42: Tom and Mike Discuss Recent Court Decisions

June 29, 2021 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the ramifications of recent SCOTUS rulings on American energy production and prices.

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Someone Needs to Tell Biden That Countries Are Building New Coal Mines

June 28, 2021 by Leave a Comment

President Biden’s goal is a net-zero economy by 2050. According to an International Energy Agency (IEA) report, to reach net-zero emissions by 2050, governments should refuse to approve any new oil and gas fields, as well as any new unabated coal power plants by the end of 2021, and new sales of fossil fuel boilers should be phased out by the end of 2025. It seems like Biden is intent on complying, based on his executive orders. Yet, the world’s coal producers are planning 432 new mine projects with 2.28 billion metric tons of annual output capacity—a 30 percent expansion of capacity by 2030. China, Australia, India, and Russia account for more than three-quarters of the new projects.

China is building 452 million metric tons of new annual production capacity and has another 157 million metric tons in planning for a total of 609 million metric tons. That means China’s planned new mine capacity will be 26 percent higher than all the coal that the United States produced in 2020. China already produces almost 50 percent of the world’s coal and 53 percent of the world’s coal-fired electricity—nine percentage points more than five years earlier. According to the report by Global Energy Monitor, four Chinese provinces and regions—Inner Mongolia, Xinjiang, Shaanxi and Shanxi—account for nearly a quarter of all the proposed new coal mine capacity in the country.

Source: Global Energy Monitor

Despite global coal-fired generation being on the decline since 2019, thermal coal operations still dominate the new proposed mines, making up 71 percent of the proposed new mine capacity. In North America, however, the numbers are reversed, with metallurgical coal used for steel-making accounting for 70 percent of the small increase in proposed new mine capacity.

The emissions from coal mine projects now on the drawing board are estimated to total between 5,000 and 5,800 million metric tons of carbon dioxide equivalent each year from combustion and methane leakage, which is comparable to the annual carbon dioxide emissions of the United States prior to the coronavirus pandemic—5,140 million metric tons in 2019.

New Coal Mine Capacity

The majority of the proposed coal mines in China and India are sponsored by state-owned enterprises. That is, public money continues to subsidize mine projects to fuel province and state economies. India has 13 million metric tons under construction and 363 million metric tons in planning stages. Australia has 31 million metric tons under construction and 435 million metric tons in planning and Russia has 59 million metric tons under construction and 240 million metric tons in planning. Unlike China, where 74 percent of projects are already under construction, the vast majority of proposed mining capacity in Australia (94 percent), India (96 percent), and Russia (80 percent) are in pre-construction phases and have yet to undergo the build-out of mine infrastructure.

While much of Western Europe is phasing out coal, Poland (32 million metric tons) and Turkey (22 million metric tons) continue to build new operations, accounting for 60 percent of Europe’s new mine development. Most new capacity remains under development in coal communities, such as Łódź and Lower Silesia in Poland, and Turkey’s Black Sea province of Bartin. As of 2020, 12 percent of the 453 million metric tons per annum proposed capacity in these regions is under construction, with the remaining 88 percent of capacity in pre-construction phases and subject to financial constraints or institutional and government restrictions in the future.

Mine development is also occurring in South Africa, Indonesia, and Mozambique. South Africa accounts for 65 percent of the proposed capacity in Africa and the Middle East. If all proposed mines went into operation, it would undergo a 51 percent increase in current coal production. Indonesia, the major driver of capacity growth in Southeast Asia, would undergo a 12 percent increase in production.

Stranded Asset Risk 

Coal mines and related infrastructure such as ports and railways are capital-intensive projects that cost tens of millions of dollars. The capital expenditures necessary to bring all 432 mine projects into operation is $91 billion, based on the average capital costs to open a coal mine. If planned coal mines open as intended, but are forced to lower production levels or shut down early, they represent a significant stranded asset risk, which the governments who in many cases own them are unlikely to willingly absorb.

Source: Global Energy Monitor 

Conclusion

Here in the United States—with the world’s largest coal reserves by far—policymakers, utilities and the media are pronouncing coal’s demise. Meanwhile, around the world, new coal mine development is taking place led by China, who already produces almost 50 percent of the world’s coal. While China’s government states that they will eventually take actions to reduce greenhouse gas emissions and be carbon neutral by 2060, the country’s current actions are vastly different from opening new coal mines to building new coal generating capacity at home and abroad that can operate for 40, 50 or even 60 years. Not only is China developing new coal mines, so are Australia, India, Russia, Poland, Turkey, South Africa, Indonesia, and Mozambique. The United States, under Biden, will be taking actions to reduce greenhouse gas emissions that will be costly while most of the rest of the world will develop energy industries that are less expensive and more reliable.

*This article was adapted from content originally published by the Institute for Energy Research.

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AEA Applauds Supreme Court Decision, Calls on EPA to Take Action

June 25, 2021 by Leave a Comment

With the small refinery exemption process validated, EPA must make the RFS a workable program for U.S. refiners and consumers.

WASHINGTON DC (June 25, 2021) – The American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, today applauded the U.S. Supreme Court decision in Holly Frontier Cheyenne Refining, LLC v. Renewable Fuels Association which reaffirmed the long-established understanding of the small refinery exemption (SRE) process under the Renewable Fuel Standard (RFS). As the Court correctly held, Congress intended SRE’s to be an ongoing safety valve for refiners facing economic hardship from the costs of complying with the RFS.

“With the cost of RINs [RFS compliance credits] at all-time highs and refiners still recovering from the impacts of the coronavirus shock, exemptions for small refineries are needed today more than ever. Following today’s straightforward decision, EPA must immediately take action to approve pending SRE requests sitting before them.

“The continuing need for hardship exemptions exposes the damage the RFS continues to create on the American economy and consumers. Moving forward, EPA should take action to make the RFS a workable program for U.S. refiners and consumers. With the ongoing RFS reset process and the expiration of mandated volumes next year, EPA has a golden opportunity to reorganize the RFS in a way that focuses more on protecting fuel consumers rather than subsidizing biofuel producers.”


View the full text of the decision here.

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Key Vote YES on Lee Amendment to S. 1251

June 24, 2021 by Leave a Comment

The American Energy Alliance urges all Senators to support the Lee Amendment to S. 1251 the Growing Climate Solutions Ace of 2021. Should this amendment not be adopted, AEA urges all Senators to oppose final passage.

Despite being described as “self-certification,” the certification program established by S.1251 is a de facto federalization of the environmental credits market. As has been seen repeatedly in other contexts, once the federal government sets “voluntary” standards, those standards become effective mandates as federal programs and funding become contingent on conforming to the standards and subsequent legislation and regulations incorporate the standards by reference. If the purpose of this legislation is to give farmers more information on credit markets, then it should simply give farmers more information about credit markets.

This legislation creates an unnecessary new credit certification bureaucracy in the Department of Agriculture. Like any bureaucracy, this new department will find ways to expand its remit, to increase regulation of environmental credit markets, all in the name of helping farmers. Credit trading markets and programs already exist and operate well, federal involvement is entirely unnecessary. The Lee amendment effectively addresses this problem by converting the heavy-handed certification provisions into the sort of information sharing process for farmers that the legislation’s proponents claim is their goal.

The AEA urges all members to support free markets by voting YES on the Lee amendment to S. 1251. Should the LEE amendment not be adopted, AEA urges all Senators to vote NO on the final passage. AEA will include these votes in its American Energy Scorecard.

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Key Vote NO on S.J. Res. 14

June 24, 2021 by Leave a Comment

The American Energy Alliance urges all members to oppose S.J. Res. 14, the Senate companion to H.J. Res. 34, the Congressional Review Act resolution regarding new source performance standards for the oil and gas sector, also known as the methane rule. The original NSPS permitting rules from 2016 were onerous and unworkable, especially for independent and small producers. The rule under CRA consideration attempted to reduce some of the unnecessary burden, while still regulating pollutants from wells.

The support of the oil majors for this CRA resolution and for more onerous methane regulations in general is no surprise, Big Oil supports methane regulations for the simple reason that it raises costs for their smaller competitors. The majors have plenty of money for expensive monitoring equipment and already have armies of lawyers for compliance. If the regulatory costs of production in the US grow too much, they can easily shift their investments to other countries like Guyana, Australia, or dozens of others. Small domestic producers, which provide most of the production and jobs in the industry, do not have such easy options. Congress should not do the bidding of big oil companies by voting to hobble their smaller competitors.

Additionally, using the CRA for this issue is fraught with legal uncertainty because the CRA does not allow an agency to issue a similar rulemaking. The 2020 rule under consideration affirmed and built on the 2016 rules, even as it modified parts. Thus, despite the assertions of commentators, it is not at all clear as a legal matter that passing this CRA resolution simply reinstitutes the 2016 rules. Furthermore, the Biden administration has stated that it intends to undertake new rulemakings on methane, but the legal hurdles to such rulemakings from a CRA passage are unclear. This all means that passage of a CRA resolution will introduce years of litigation and uncertainty into the methane regulatory process. The better option would be for the Biden administration to remake the regulations as it sees fit through the normal rulemaking process without injecting a CRA resolution into the process.

The AEA urges all members to support free markets and affordable energy by voting NO on S.J. Res. 14. AEA will include this vote in its American Energy Scorecard.

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