Other Unleashing America’s Resources Topics:

Energy



The Issue


A‌merican families and businesses have benefited tremendously from the energy ‌boom that occurred in spite of years of the Obama Administration’s “keep it in the ground” policies. Oil and natural gas production on state and private lands is creating jobs, putting money back into the bank accounts of hard-working Americans, and making American businesses of all stripes more competitive by lowering their energy bills. Such success emerged from the private marketplace, not from government policies to promote these technologies and processes.

At the same time, years of 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 unnecessarily driven up energy costs, stifled new investment, and narrowed innovation—all while yielding little or no environmental benefit. Policies and regulations have slowed down or blocked access to energy development on federal lands and off America’s coasts. Furthermore, the federal government has wasted billions of taxpayer dollars funneling money to politically preferred technologies, proving counterproductive to technological advancement by creating a dependence on government. In regard to nuclear energy, overbearing and dysfunctional policy in Washington has essentially halted the industry’s promising future. Too often, Congress patches over the consequences of bad policy with government subsidies, exacerbating the problem.

America’s energy policy should rely on market forces and the private sector’s ability to innovate and meet America’s energy demands. 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 and subsidies. It is important for the U.S. to liberalize the global energy marketplace. Congress should focus on reducing ineffective and economically harmful regulations, opening access, and eliminating subsidies for all sources of energy.<


Recommendations


Stop the Regulation of Greenhouse Gases and the Use of Social Cost of Carbon in Cost-Benefit Analyses. The Environmental Protection Agency (EPA) promulgated a number of regulations in the name of climate change, including regulations on new and existing power plants, vehicles, and oil and gas activities. These regulations will drive up energy prices for American families and businesses and effectively eliminate Americans’ ability to use coal as an abundant natural resource. To make matters worse, the regulations will have no significant climate impact. While President Trump has rightly directed the EPA to reconsider and withdraw some of the Obama-era climate rules, the most effective approach would be for Congress to prohibit the federal government from regulating greenhouse gas emissions and clarify that the Clean Air Act never intended to regulate greenhouse gases. Furthermore, Congress should prevent any agency from using regulatory analysis metrics with the “social cost of carbon” and the “social cost” of other greenhouse gas emissions in any cost-benefit analysis or environmental review. The statistical models upon which the federal government relies to estimate the so-called social cost of greenhouse gases are not credible tools for policymaking.

Urge the President to Withdraw from the Entire United Nations Framework Convention on Climate Change (UNFCCC). President Trump kept his campaign promise to withdraw from the Paris climate agreement, but has yet to outline details as to how the Administration will implement the withdrawal. The fastest and most effective way to withdraw from the Paris agreement is to withdraw from the entire UNFCCC, the treaty underlying the Paris agreement. Under the terms of the Paris agreement, any government withdrawing from the UNFCCC “shall be considered as also having withdrawn from this [Paris] Agreement.” The process for withdrawing from the UNFCCC requires one year, which accelerates the process considerably. Moreover, departure from the UNFCCC would prevent future Administrations from using that framework to avoid obtaining the Senate’s advice and consent in the treaty process. Congress should urge the Administration to withdraw from the UNFCCC.

Eliminate Targeted Tax Credits, Loan Guarantee Programs, and Department of Energy (DOE) Funding for Energy Technologies. Energy subsidies waste taxpayer dollars, promote economic inefficiency, and create technological stagnation. Subsidizing energy sources merely shifts labor and capital from economically viable projects 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.

Congress should wind down targeted tax credits for all energy technologies and reform the tax code to encourage immediate expensing for all capital investments. Congress should also eliminate DOE spending of billions of “research” dollars to advance energy technologies. Furthermore, Congress should prohibit any taxpayer-backed loans and eliminate the DOE’s loan-guarantee program. It is neither an appropriate nor a necessary role of the federal government to conduct research and develop commercial energy technologies.

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. Rather than relying on an antiquated five-year Outer Continental Shelf leasing program, Congress should require the Secretary of the Interior to conduct lease sales if a commercial interest exists for exploring in those areas, and explore policies to give states more control over how energy resources are developed off their coasts.

Devolve the Environmental Review and Permitting of All Energy Resource Development 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 managing resources and have existing regulatory structures to do so on the federal lands within the state boundaries as well. Further, state governments have proven more effective and efficient at managing the oil and gas boom. Not only would state 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.

Empower Americans 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.

Reform the Arduous Permitting Process for New Nuclear Power Plants. The permitting process for 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.

Allow the Private Sector to Manage Spent Nuclear Fuel. 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 its review of the DOE 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 the mandates 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.

Liquidate the Strategic Petroleum Reserve (SPR). The 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, since 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 more than halfway through the mandate to use 36 billion gallons of ethanol by 2022. There is near universal agreement among energy, agriculture, the food industry, and environmental groups that the RFS is bad policy and has unintended consequences. This unworkable policy has been disastrous, and tinkering around the edges will not rescue it. Moreover, the federal government should not mandate 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 Americans 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.

Remove the DOE from Liquid Natural Gas (LNG) Permitting Decisions, and Allow States to Approve Project Permits. It should not be up to the DOE, the Federal Energy Regulatory Commission (FERC), or any federal agency, to determine what amount of natural gas may be exported, as is currently the case. Energy producers should be able to capture economic opportunities from LNG-recipient nations if they believe it is in their interest. Furthermore, the DOE’s authorization requirement is a redundant obstacle, and Congress should remove it immediately. Congress should authorize states to conduct the environmental review and permitting process for LNG import and export terminals as states already do for their own permitting processes. States already have the authority to veto LNG terminals. Rather than taking an advisory role to FERC, states should play a predominant role in authorizing the construction of the terminal. A state’s environmental review and permit approval would satisfy the federal permits necessary for building an LNG terminal. The state permit approval would satisfy all other necessary approvals required under the National Environmental Policy Act. A state regulator could use FERC’s technical or safety expertise as necessary. Export applicants would also need to meet Coast Guard security standards, as well as the requirements of the Maritime Transportation Security Act and the Department of Transportation’s Office of Pipeline Safety.


Facts and Figures


FACT: There is no shortage of energy resources, and attempts to limit access to energy only hurts Americans. Opening access and having a timely environmental review process will allow Americans to continue to reap the benefits from energy extraction and production.

  • Three decades ago, proven world oil reserves were 645 billion barrels; at the end of 2016, it was more than 1.7 trillion barrels. Despite constant cries that the world is running out of oil, innovative technologies have allowed increased discoveries around the world.
  • The U.S. is blessed with an abundance of natural resources, and is the world’s number one producer of petroleum and natural gas hydrocarbons.
  • America has nearly 500 years’ worth of coal underneath its soil at current consumption rates.

FACT: Energy subsidies waste taxpayer money and actively prevent innovative energy technologies from thriving in the market.

  • Energy subsidies cost American taxpayers over $29.3 billion in fiscal year 2013.
  • Energy subsidies prop up economically uncompetitive technologies. For instance, Solyndra received a $535 million taxpayer-backed loan opened in September 2010 and filed for bankruptcy a year later.
  • With the enormous value of the energy market (over $6 trillion for electricity and transportation fuels), any innovative technology or company that could capture even a tiny sliver of this market would be enormously successful.

FACT: Nuclear power has the potential to thrive in the United States if Washington fixed the broken permitting process and nuclear waste management policy.

  • The U.S. generates almost 20 percent of its electricity (and 70 percent of its emissions-free electricity) from 99 nuclear power plants.
  • Nuclear reactors routinely exceed a capacity factor of 90 percent, meaning that the average plant spends only 10 percent of the year not producing electricity—a better record than that of any other electricity technology.
  • With no injuries or deaths, U.S. commercial nuclear power produces some of the safest produced electricity that exists.
  • 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.

Kevin D. Dayaratna, Nicolas D. Loris, and David W. Kreutzer, “Time to Unlock America’s Vast Oil and Gas Resources,” Heritage Foundation Backgrounder No. 3148, September 1, 2016.

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, “Examining the Renewable Fuel Standard,” testimony before the Subcommittee on the Interior and the Subcommittee on Healthcare, Benefits, and Administrative Rules, Committee on Oversight and Government Reform, U.S. House of Representatives, March 16, 2016.

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

Nicolas D. Loris and Brett D. Schaefer, “Withdraw from Paris by Withdrawing from the U.N. Framework Convention on Climate Change,” Heritage Foundation Backgrounder No. 3220, May 25, 2017.

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.