U.S. CHAMBER OF COMMERCE

Energy Blog

Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth he U.S. Capitol Building stands surrounded by scaffolding. The U.S. Capitol Building stands surrounded by scaffolding. Photo credit: Andrew Harrer/Bloomberg.

In March, The New York Times reported on the Obama administration's strategy of avoiding Congressional approval of any agreement that comes out of climate negotiations in Paris later this year:

To bypass the Senate -- which would have to ratify United States involvement in a foreign treaty -- Secretary of State John Kerry and other diplomatic officials are working closely with their foreign counterparts to ensure that the Paris deal does not legally qualify as a treaty.

What will this entail? According to a 2014 Times story, "[N]egotiators are devising what they call a 'politically binding' deal that would 'name and shame' countries into cutting their emissions." Such an agreement would give an international stamp of approval to EPA's carbon regulations.

With bipartisan opposition to the administration's attacks on reliable power, it's understandable why the White House wants to avoid Congress.

But the administration needs help making the case that it's fine to sidestep Congress over policies that will virtually eliminate affordable and reliable coal power and drastically reengineer the electrical grid.

Along comes the White House's favorite think tank to the rescue.

I've pointed out how the administration relies on the Center for American Progress (CAP) for staffing, policy development, and media strategy.  The think tank has delivered again by providing a rationale for why the White House can avoid Congress.

CAP staffers Gwynne Taraska and Ben Bovarnick argue Congressional approval "would be unnecessary" for an international agreement "in which the national goals themselves lack legal force" because of a previous greenhouse gas emissions agreement ratified by the Senate in 1992.

Look for CAP's argument to be echoed by administration officials and by sympathetic commentators in the media.

This gets to something bigger about the administration's efforts to implement its carbon regulations. If we step back, we see the administration's modus operandi is all about sidestepping democratic institutions.

Not only is Congress to not be allowed to approve a Paris climate agreement, but EPA can freely avoid Congressional approval of its carbon regulations. Brian Deese, a former CAP staffer and now President Obama's senior adviser on climate change, told The New York Times, "We can achieve this goal using laws that are already on the books."

Tell that to constitutional law professor Laurence Tribe, who called EPA's plan a "power grab" from Congress, states, and federal courts.

Harvard Professor Laurence Tribe on Clean Power Plan: Burning the Constitution

And tell that to Gov. Mike Pence (R-Ind.) and the 14 other states who are suing EPA.

In addition, EPA has dodged the public by not holding any public hearings in states most reliant on coal for electricity.

It's an unsettling pattern for an administration touted by President Obama as being "the most transparent administration in history."

Electricity is the lifeblood of the American economy. We can't afford avoiding Congress and the public on such a far-reaching issue. 

Read more about EPA's bad carbon regulations -- 4 Reasons Why EPA's Carbon Regulations are All Pain and No Gain.

Sean Hackbarth Four oil pumpjacks outside Williston, North Dakota.Four oil pumpjacks outside Williston, North Dakota. Photo credit: Daniel Acker/Bloomberg.

Is the U.S. the world's top oil producer?

Robert Perkins at Platts asks that question after BP's annual Statistical Review gave the U.S. the number one spot, over Saudi Arabia and Russia.

According to Perkins, if you only include crude oil and condensate--a super-light form of oil--which are most like what we think of as oil, the U.S. falls to number three.

The Energy Information Administration (EIA) is in the "U.S. is Number One" corner. With its broader definition of oil that includes crude oil, natural gas liquids (NGLs), condensates, refinery processing gain, biofuels, and other liquids, the U.S. at number one.

eia_top_oil_natgas_countries_2014.png  U.S., Russia, and Saudi Arabia petroleum and natural gas production.EIA: U.S., Russia, and Saudi Arabia petroleum and natural gas production.Source: Energy Information Administration.

More important than the ranking debate is the fact that we're having this argument at all. It shows how much hydraulic fracturing has changed the energy discussion.

Remember "Peak oil?"

When once it looked like we'd be importing energy forever, we see the federal government slowly (too slowly) allowing increased exports of liquefied natural gas (LNG) and condensate. Now, policymakers and Members of Congress are seriously considering lifting the oil export ban.

Natural Gas Liquids as Feedstocks

Going back to Perkins, he lops off most natural gas liquids in calculating U.S. oil production, because "they are not suitable substitutes for crude oil."

They're not, but that doesn't diminish their important role in the U.S. chemical industry.

Petrochemical plants use NGLs components like ethane, propane, butane, and pentane as feedstocks for plastics, fertilizers, and other products, as Mukta Shukla and Ashok Shukla explained in American Laboratory:

Petrochemicals have enabled the creation of novel materials and products in countless manufacturing industries and in other fields such as agriculture, communication, and transportation. For example, in the new Boeing 787 Dreamliner, the latest modern aircraft to be launched, modern synthetic materials comprise about half of its primary structure. In addition, most of the tools on which we depend for daily existence--such as cars, computers, cell phones, children's toys, pesticides, fertilizers, household cleaning products, and pharmaceutical drugs--are derived from petrochemicals.

According to the EIA, U.S. NGL production has increased 66% from 2008 to 2014.

Not only do plants have more basic materials to work with, they also have cheap natural gas to power the plant.

The result has been increased investment from a revitalized domestic chemical industry that's now more globally competitive. The American Chemistry Council estimates that over the next ten years, the shale boom will create 461,800 direct, indirect and payroll-induced new jobs from $46.8 billion in new investment in the plastics industry.

U.S. is Tops in Petroleum and Natural Gas Hydrocarbons Production

Let's look at the EIA chart one more time. When natural gas is included, there's no question who is the top petroleum and natural gas hydrocarbons. It's the U.S. by leaps and bounds.

But no matter where the U.S. ranks, no one can deny the incredible impact hydraulic fracturing is having. In both of Perkins' charts, U.S. oil production launches 

Here's a chart from BP that isolates U.S. production. It goes up like a July 4th firework, from around 7 million barrels per day (b/d) in 2005 to nearly 12 million in 2014. It's a stunning achievement that no energy expert or Washington, D.C. policymaker could predict.

bp_us-oil-production-2014.jpg  U.S. oil production, 2014.BP: U.S. oil production, 2014.Source: BP.

Maybe the U.S. isn't the top oil producer. While it would be a nice title to have, not having it doesn't take away the fact that we're witnessing an energy renaissance.  Energy abundance is a catalyst for investment, jobs, and growth. That's something to be impressed with.

Dan Byers Indiana Governor Mike Pence. Photo credit: Andrew Harrer/Bloomberg

We opined last week that the decisions states make in response to EPA's power plant carbon regulations will have historic implications for their economic futures. On Wednesday, Indiana became one of the first states to chart this future path, officially informing the Obama administration that it does not plan to go along with EPA's unprecedented attempt to force dramatic and costly changes to America's electricity system.

In a letter informing President Barack Obama of his decision, Pence did not mince words:

If your administration proceeds to finalize the Clean Power Plan, and the final rule has not demonstrably and significantly improved from the proposed rule, Indiana will not comply. Our state will also reserve the right to use any legal means available to block the rule from being implemented. I believe the Clean Power Plan as proposed is a vast overreach of federal power that exceeds the EPA's proper legal authority and fails to strike the proper balance between the health of the environment and the health of the economy.

As is custom, reaction to Pence's decision among EPA allies was strong and swift. The Sierra Club feigned a sudden interest in state sovereignty, stating, "We would rather have Indiana be in control of our destiny than have a federal plan imposed on us." The message heavily pushed by EPA and its supporters is that compliance with the rule maximizes flexibility and will be empowering and protective of states' rights.

This narrative has increasingly been exposed as not just a hollow promise, but in fact the reverse of what will happen. A paper released by the law firm Sidley Austin last week details how compliance with EPA's rule as proposed would weaken state sovereignty and expand state and third-party liability to lawsuits from, ahem, concerned groups such as the Sierra Club. The bottom line on "state control" from Sidley Austin:

 The unprecedented beyond-the-fence line structure of the proposed ESPS, combined with EPA's assertion that all measures in a SS 111(d) SIP become federally enforceable, would substantially expand federal authority to enable enforcement actions against States as well as third parties separate and distinct from the fossil-fueled generating sources that are the subject of the SS 111(d) rulemaking.  It also could expose States to legal action under the citizen suit provisions of the CAA by NGOs seeking to compel such enforcement actions, as well as exposing third parties themselves to citizen suits.  The net result is that, if EPA's view prevails, approval of a SIP by EPA will entail the loss of a significant portion of a State's authority to regulate power production, distribution, and consumption within the State and to adjust its energy policies as economic circumstances within the State change.

EPA would no doubt like the public to believe that Indiana is an outlier in this fight, and that objections to its rulemaking are isolated to a small handful of coal states. But like so much that we encounter with EPA regulatory processes, reality is a much different place. A recent Chamber guide to state comments on the proposed rule found that 32 states have questioned the legal basis of the rule, 32 said it threatened electricity reliability, 28 said it would have negative economic consequences, and 40 different states questioned the achievability of at least one of the "building blocks" upon which EPA's rule is based.

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In all likelihood, more states can be expected to follow Indiana's lead. In fact, led by West Virginia, 15 states have already taken the extraordinary step of suing to stop advancement of EPA's rule before it is even finalized. In addition, Governor Mary Fallin of Oklahoma has announced that Oklahoma will not submit a compliance plan to EPA, Texas Attorney General Ken Paxton said he plans to challenge the EPA rule in court after it is finalized, and a number of states (Arkansas, Kansas, Louisiana, Kentucky, Missouri and others) have passed legislation restricting the form and manner of their state response to EPA.

Governor Pence is to be commended for his leadership on this critical issue to American jobs and the economy. As EPA's power plant proposal nears finalization later this summer and states further develop and refine their positions on the regulation, there is increasing likelihood that EPA will be forced to abandon its current unworkable and illegal approach. Stay tuned.