Other Regulatory Overreach Topics:

Energy



The Issue


A‌merica is in the midst of an energy boom because of the free market. Oil and ‌natural gas production on state and private lands is creating jobs, lowering energy bills, and generating economic activity around the country. Such success emerged from the private marketplace, not from any specific government policy to promote these technologies and processes.

At the same time, government micromanagement of a significant and ever-growing portion of the energy sector has driven this country in the opposite direction. Burdensome federal regulations have driven up energy costs and stifled new investment—all while yielding little or nothing in the way of environmental benefit and proving counterproductive to technological advancement. Furthermore, the federal government has slowed or blocked access to energy development on federal lands, and has wasted billions of taxpayer dollars funneling money to politically preferred technologies. In regard to nuclear energy, overbearing and dysfunctional policy in Washington has essentially halted the industry’s promising future.

Politicians too often say that America needs a national energy policy and suggest a strategy that assumes even more intervention in the energy sector. While reforms are necessary, America’s energy policy should rely on market forces and the private sector’s ability to innovate and meet new challenges to provide Americans with affordable energy. America’s energy policy needs to get Washington out of the way. Traditional supplies can be delivered and new supplies can be created through the private sector rather than through government-ordered mandates, regulations, and subsidies. It is important for the U.S. to liberalize the global energy marketplace and ensure private-sector innovation. Congress should focus on reducing ineffective and economically harmful regulations, opening access, and eliminating energy subsidies for all sources of energy.


Recommendations


Stop Climate Change Regulations. The Environmental Protection Agency (EPA) finalized its rule for regulating greenhouse gas (GHG) emissions (most notably carbon dioxide) for newly constructed power plants. This rule would effectively eliminate the construction of new coal-fired power plants. The EPA also finalized the “Clean Power Plan” regulating GHG emissions from existing power plants. Rather than reliability, affordability, or safety, these regulations attempt to fundamentally reengineer the electricity grid around a single criterion: greenhouse gas emissions. Along with a host of other regulations imposed by the EPA, these regulations will force coal power plants to close, driving up energy prices for American families and businesses and significantly reducing our ability to use an abundant natural resource. To make matters worse, even if one accepts catastrophic climate change, though evidence would suggest otherwise, the regulations will have no significant climate impact. Congress should permanently prohibit any federal agency from regulating GHG emissions.

Eliminate Preferential Treatment for All Energy Sources and Technologies. Energy subsidies waste taxpayer dollars, promote economic inefficiency, and create technological stagnation. Subsidizing energy sources merely shifts labor and capital away from economically viable projects and toward politically determined projects. Further, subsidies increase the incentive to lobby for more subsidies, thus perpetuating technological mediocrity by removing the incentive to innovate, reduce costs, and compete in the marketplace. Importantly, good ideas will succeed in the market. A successful subsidized company simply means taxpayers are padding the bottom lines of companies that can succeed without the handout from Washington.

Ending subsidies for all energy industries would compel companies to rely on innovation and efficiency, not American taxpayers, to remain competitive and thrive in the free market. Congress should avoid new subsidies and remove existing subsidies for all energy sources. Congress should also eliminate the Department of Energy (DOE) spending of billions of “research” dollars on technologies to reduce carbon dioxide emissions, including energy-efficient technologies, renewable energy sources, carbon capture and sequestration, clean coal technologies, nuclear energy, and alternative-energy vehicles. All of these energy sources and technologies are available today, but they are not commercially viable, whether because of burdensome regulations or simply because they are still prohibitively expensive. It is not the government’s role to force these technologies into the marketplace, and Congress should remove all funding for DOE-funded commercial activities.

Open Access to Natural Resource Development and Require Lease Sales. America is the only country that places a majority of its territorial waters off-limits to energy production. Congress should open America’s coasts for offshore oil, gas, wind, and other energy resource exploration and development. Further, Congress should open federal lands that are not part of the national park system or congressionally designated areas. Congress should also require the Secretary of the Interior to conduct lease sales if a commercial interest exists to explore in those areas.

Devolve the Environmental Review and Permitting of All Energy Resource Development Activities on Federal Lands to the States. States share the cost of the maintenance of federal lands, whether by the liability of no management, the lost opportunity of poor management, or the infrastructure needed to support development of resources. States have a proven record of successfully managing resources and already have the regulatory structures in place to do so on federal lands within their boundaries as well. Further, state governments have proven more effective and efficient in managing the oil and gas boom. Not only would new management multiply benefits for all Americans, it would also encourage better care of the environment and natural resources by putting them in the hands of people who have an immediate stake in wise management. States are in the best position to promote economic growth and protect the environment, which is why Congress should devolve the authority to state regulators to manage energy production and resources in their respective states.

Empower Families and Businesses to Drive Energy Efficiency by Eliminating Government Mandates. Washington should realize that the economy does not need government mandates, rebate programs, or spending initiatives to make businesses and homeowners more energy efficient. Consumers will make those choices by themselves, and the government should not override their choices by nudging them toward the government’s preferred outcome. Ultimately, Congress should eliminate existing efficiency mandates or restructure them as voluntary standards under which businesses and consumers can choose their level of participation

Lift Restrictions on Natural Gas Exports. The abundance of lower-priced domestic natural gas and oil has led producers to seek opportunities to export natural gas to foreign markets where the price is much higher. Despite concerns from special interests that exports will raise prices domestically, the net economic gains from exports are overwhelmingly positive. The problem is that the Department of Energy’s role in permit authorization for natural gas exports is causing unnecessary delays. Congress should remove the Department of Energy (DOE) from the export permitting process and lift restrictions on natural gas recipient countries.

Reform the Arduous Permitting Process for New Nuclear Power Plants. Permitting new nuclear plants and new nuclear reactor technologies is becoming prohibitively complex and expensive. Although the U.S. Nuclear Regulatory Commission (NRC) arguably plays an important role in maintaining U.S. nuclear plant safety, it should operate in a way that allows the industry to move forward. To do this, the current four-year permit schedule should be reduced by two years for new reactors to be built on or adjacent to existing nuclear power plants. Second, the NRC should prepare to regulate newly commercialized nuclear technologies that, absent a regulatory framework, are now effectively prohibited from entering the marketplace.

Introduce Market Principles into Nuclear Waste Management. The federal government’s inability to fulfill its legal obligations under the 1982 Nuclear Waste Policy Act is a significant obstacle to building additional nuclear power plants. Now is the time to break the impasse over managing the nation’s used nuclear fuel. Congress should first ensure that the NRC finishes reviewing the DOE’s application to construct a nuclear waste repository at Yucca Mountain, Nevada. In addition, the federal government’s responsibility for nuclear waste management should be transferred to waste producers. This would allow waste producers to seek the most economically rational methods to manage and dispose of nuclear waste. Private firms, operating under NRC guidelines, would emerge to provide those services.

End Renewable Energy Mandates in the Department of Defense. In particular, under Section 2911(e) of Title 10 of the U.S. Code, the Defense Department is obligated to generate 25 percent of its electricity using renewable sources by 2025. This mandate is forcing the Pentagon to expend increasingly scarce resources on renewable energy rather than on military capability. Congress should end it immediately. Such mandates undermine the incentive for renewable energy producers to develop competitively priced products, thereby actually impeding the availability of alternatives to carbon-based fuels. Forcing the military to purchase more expensive alternatives leaves fewer resources for training, modernization, and recapitalization, resulting in a less capable military. The federal government should ensure that energy programs for defense applications prioritize national security requirements over political interests. The Pentagon should pursue alternative energy sources (or any energy source) only if they increase capabilities or reduce costs without sacrificing performance.

Sell Off the Strategic Petroleum Reserve. The Strategic Petroleum Reserve (SPR) holds nearly 700 million barrels of crude oil to respond to supply shocks. However, the SPR has served more successfully as a political tool to boost public support of an Administration rather than as a mechanism to balance supply and demand. Selling off the SPR would not create a perception that the U.S. is without oil reserves, as America holds an abundance of privately controlled inventory and has abundant reserves. America is awash in natural resources and holds more crude and petroleum products in private stocks than it does in government-controlled inventory and can ramp up production much more quickly than in the past.

Repeal the Renewable Fuel Standard (RFS). The U.S. is halfway through the mandate to use 36 billion gallons of ethanol by 2022. This unworkable policy has been disastrous, and tinkering around the edges will not rescue it. Moreover, the federal government should not be mandating what type of fuel drivers use in the first place. Instead of attempting to reform the RFS or continually calling on the EPA to waive the mandates, Congress should repeal the RFS to protect American families from artificially higher food and energy prices and eliminate unfair subsidies that go to a small set of special interests that benefit from the mandate.

Allow the Free Market to Ensure an Effective Energy Infrastructure and Distribution System. Government at all levels—federal, state, and local—should remove unwarranted obstacles to the energy distribution system. Efficiency in electrical grids, oil and gas pipelines, and vehicle distribution systems will help keep American energy available and affordable. This should include approving the Keystone XL pipeline project, which is environmentally responsible, will not contribute to global warming, will increase the supply of oil to America’s refineries, and will provide much needed energy infrastructure.


Facts and Figures


  • Three decades ago, proven world oil reserves were 645 billion barrels; at the end of 2014, it was 1.65 trillion barrels. Despite constant cries that it is running out of oil, the world continues to use more oil, and innovative technologies have allowed increased discoveries globally. Sound policies will help the U.S. to recover our own oil.
  • Fracking has increased U.S. natural gas reserves by 78 percent from 2004–2014, and the Energy Information Administration (EIA) expects this trend to continue. Job creation in the oil and gas industry bucked the slow economic recovery and grew by 40 percent from 2007 to 2012, in comparison to 1 percent in the private sector over the same period.
  • Direct federal financial subsidies for the energy sector cost Americans over $16 billion in fiscal year 2013. In past years, federal dollars have been used by both parties to fund politically favored energy projects.
  • The average application process for a permit to drill on federal lands was 227 days in 2014, compared to the average 30 days it takes state governments to do the same. In 1988, the Bureau of Land Management, which oversees 248 million acres of federal land and 700 million acres of underground mineral resources, leased 12.2 million acres; only one-tenth of that was made available in 2014.
  • The U.S. generates almost 20 percent of its electricity (and 70 percent of its emissions-free electricity) from 99 nuclear power plants. Further, reactors routinely exceed a capacity factor of 90 percent, meaning the average plant spends only 10 percent of the year not producing electricity. With no injuries or deaths, U.S. commercial nuclear energy is some of the safest produced. Yet due to an onerous regulatory burden and the federal government’s failed strategy to manage nuclear waste, no new plants have been permitted in over three decades.

Selected Additional Resources


Kevin D. Dayaratna, Nicolas D. Loris, and David W. Kreutzer, “The Obama Administration’s Climate Agenda: Underestimated Costs and Exaggerated Benefits,” Heritage Foundation Backgrounder No. 2975, November 13, 2014.

Nicolas D. Loris, “Energy Exports Promote Prosperity and Bolster National Security,” Heritage Foundation Backgrounder No. 2931, July 23, 2014.

Nicolas D. Loris, “Energy Policy Agenda for the Next Administration and Congress,” Heritage Foundation Backgrounder No. 3048, September 10, 2015.

Nicolas D. Loris, “The Ethanol Mandate: Don’t Mend It, End It,” Heritage Foundation Backgrounder No. 2811, June 12, 2013.

Nicolas D. Loris, “No More Energy Subsidies: Prevent the New, Repeal the Old,” Heritage Foundation Backgrounder No. 2587, July 26, 2011.

Jack Spencer, “Review of the Blue Ribbon Commission on America’s Nuclear Future Draft Recommendations,” testimony before the Subcommittees on Investigations and Oversight, Committee on Science, Space, and Technology’s Energy & Environment, U.S. House of Representatives, October 27, 2011.

Katie Tubb and Nicolas D. Loris, “The Federal Lands Freedom Act: Empowering States to Control Their Own Energy Futures,” Heritage Foundation Backgrounder No. 2992, February 18, 2015.