Executive order signals end to war on energy

Raymond Keating
Raymond Keating

Throughout its eight years, the Barack Obama administration was relentless in its opposition to carbon-based energy resources, leading many observers to refer to a “war on coal” and “war on energy.”

That war is coming to an end. Not only has President Donald Trump reversed the Obama White House by approving the Keystone XL and Dakota Access pipelines, but also by signing an executive order that begins the process of rolling back the Obama Clean Power Plan (CPP).

The CPP would force power plants to reduce carbon dioxide emissions by
32 percent by 2030 compared to 2005 levels. When the CPP was released in 2015, the Small Business & Entrepreneurship Council Center for Regulatory Affairs published an analysis that ran down the variety of ways the CPP would harm small businesses. As summed up: “In the same overreaching manner as the Affordable Care Act (health care) and Dodd-Frank (banking and financial services), the Clean Power Plan (CPP) will impose billions of dollars in compliance costs, ultimately borne by small businesses, threatening their competitiveness and ability to innovate and further cementing the economy’s stagnation. All of this is supposedly being done to fight climate change, yet the rule will have no meaningful impact on it whatsoever.”

In a recent editorial, the Wall Street Journal stated: “The order directs the Environmental Protection Agency to review the Clean Power Plan, which the Supreme Court stayed last year in an extraordinary rebuke. The plan essentially forces states to retire coal plants early, and the tab could top $1 trillion in lost output and 125,000 jobs, according to the American Action Forum. Also expected are double-digit increases in the price of electricity — and a less reliable power grid. All for nothing: A year of U.S. reductions in 2025 would be offset by Chinese emissions in three weeks, says Rice University’s Charles McConnell.”

The Journal added: “It’s true that market forces are reducing coal’s share of U.S. electric power — to some 30 percent from about 50 percent a decade ago — thanks mainly to fracking for natural gas. Yet Mr. Obama still deployed brute government force to bankrupt the coal industry. Mr. Trump is right to end that punishment and let the market, not federal dictates, sort out the right energy mix for the future.”

Given the dynamism of free markets and innovation, writing off U.S. coal no matter what happens with the CPP — as some who favor the CPP have been doing — amounts to either thinly disguised politics or a striking case of presumptive arrogance.

The executive order directs the attorney general to seek relief from courts over pending litigation related to the Clean Power Plan; lifts the ban on federal leasing for coal production; lifts restrictions on the production of oil, natural gas and shale energy; directs agencies to conduct a review of existing actions that harm domestic energy production and suspend, revise, or rescind actions that are not mandated by law; further directs agencies to use the best available science and economics in regulatory analysis; and disbands the interagency working group on the social cost of greenhouse gases.

That last step is important for a variety of reasons. The group established a cost estimate called the social cost of carbon to measure the benefits of reducing carbon emissions. According to a May 2013 White House document, the SCC is an attempt to estimate the monetary damages associated with an incremental increase in carbon emissions in a given year.

In comments filed with the Office of Information and Regulatory Affairs in February, 11 public policy and interest groups said the SCC can’t be discerned in either meteorological or economic data going back a century and is too speculative to serve as a basis for regulatory justification. That’s troubling, to say the least. But what’s the point? The groups noted:  “Its political function is to make renewable energy look like a bargain at any price and make fossil energy look unaffordable no matter how cheap.”

These policy changes from the Trump administration are good news for small businesses as energy consumers and as key players in energy sectors. U.S. energy is overwhelmingly about small businesses. According to Census Bureau data:

90.2 percent of employer firms among oil and gas extraction businesses had less than 20 employees.

80.7 percent of employer firms among support activities for oil and gas operations businesses had less than 20 employees.

61.5 percent of employer firms in the coal mining sector had less than 20 workers.

67.3 percent of employer firms among support activities for coal mining businesses had less than 20 employees.

The executive order is a welcome and important shift in U.S. energy and environmental policies. Other steps would include legislation from Congress that rein in widespread regulatory abuses emanating from assorted federal agencies, including the EPA. The U.S. House has passed a variety of sound bills that reform the regulatory process, make the process more transparent and inclusive  and restore other checks to bring balance and reason to how and how much the federal government regulates.