U.S. CHAMBER OF COMMERCE

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Energy Blog

US Chamber of Commerce Blog

Sean Hackbarth Electrical linesPhotographer: Kevin Dooley/Flickr. Licensed under a Creative Commons Attribution 2.0 Generic license.

House Energy and Power Subcommittee Chairman Ed Whitfield's (R-KY) bipartisan bill, the Ratepayer Protection Act--which the House approved--will block EPA's proposed carbon regulations. In an op-ed in The Hill, Rep. Whitfield calls EPA's plan to reengineer the power grid, "a bad deal for the American economy, businesses, and ratepayers."

He's right.

Stephen Eule, Vice President for Climate and Technology at the Institute for 21st Century Energy, explained to a House Energy and Environment Subcommittees that EPA's carbon regulations will be all pain and no gain.

Eule made four points using the Energy Information Administration's analysis of EPA's plan:

The economy will take a big hit. Electricity rates will go up The power grid will be less-reliable Carbon reductions won't matter much in the big picture. 1. The Economy Will Take a Big Hit.

With electricity as an integral part of our economy, it's odd that EPA hasn't looked at how its proposed carbon regulations will affect the economy. "Nowhere in this document [CPP's economic impact analysis] is there any discussion of how its rule will affect GDP," said Eule.

Wait, "odd" isn't the right word; "irresponsible" is better.

Anyway, EIA did look at the CPP's economic effects and found major costs:

[C]umulative economic costs over the Clean Power Plan's 2020 to 2030 compliance period are an estimated $1.23 trillion in lost GDP, with a peak annual loss of $159 billion in 2025. This amounts to an average annual GDP hit over the compliance period of $112 billion.

epa_cpp_gdp_losses_800px.jpg  2020-2030.EIA estimates of GDP losses from EPA's Clean Power Plan: 2020-2030.Source: Institute for 21st Century Energy. 2. Electricity Rates Will Go Up

EPA admits electricity rates will be higher--"an average of 6.5% in 2020, 2.9% in 2025, and 3.1% in 2030"--but it assumes there will be so much energy efficiency that consumers will pay less.

Eule notes that EIA doesn't buy it:

[T]he price increases overwhelm these declines, leaving consumers with bigger, not smaller, electricity bills. Using EIA's data, we calculate that average household electricity expenditures will be 3.8% higher in 2020, 2.8% higher in 2025, and 1.3% higher in 2030.

In total, consumers will pay $164 billion more for electricity from 2020 to 2040. "Pursuing the Clean Power Plan amounts to placing an entirely needless burden on families--especially low-income families--and businesses still struggling with a sluggish economy," Eule said.

3. The Power Grid Will Be Less-Reliable

To add insult to injury, EPA's carbon regulations will mean consumers will end up paying more for less-reliable electricity.

EIA estimates that 31% of all coal-fired power plants will be shut down by 2030. "A change in the generation mix of this magnitude this quickly will have repercussions for ratepayers," said Eule.

Such a sudden shutdown of existing generating capacity is unprecedented, and it raises serious concerns ... about the ability of the electric power system to handle such a rapid loss of base load generating capacity.

Regional power grid operators and state officials have expressed serious worries about this.

4. Carbon Reductions Won't Matter Much in the Big Picture.

When all is said and done, under EPA's carbon regulations, the U.S. will produce 6.2 gigatons less in carbon emissions by 2030.

Sounds like a lot, right? Eule points out that it will barely be a drop in the bucket globally:

As large as it is, however, the most recent forecast from the International Energy Agency suggests that in 2030 carbon dioxide emissions from China will offset this entire 11 years of reductions in a little more than 7 months.

When you put this all together--big economic costs, higher-priced but less reliable electricity, and little global effect--you can see that EPA's carbon regulations are a raw deal for Americans.

Sean Hackbarth A worker in the control room at an oil rig site in Fort Lupton, Colorado.A worker in the control room at an oil rig site in Fort Lupton, Colorado. Photo credit: Jamie Schwaberow/Bloomberg.

A Colorado tribe is suing the federal government because the Bureau of Land Management's (BLM) new hydraulic fracturing regulations on federal and tribal lands are burdensome, redundant, and unnecessary.

The Southern Ute Indian Tribe argues that they're best able to regulate shale energy development on their tribal lands:

"The BLM was overreaching when it enacted this rule for tribal lands," [Southern Ute Chairman Clement Frost] said. "Tribal lands should be treated differently than federal lands. Some of the provisions in this new rule are just burdensome regulations that are not tied to an environmental benefit."

The tribe passed its own hydraulic-fracturing and chemical-disclosure rules.

The tribe's rules differ from the BLM's rule in two key ways, said Bob Zahradnik, operating director of the Southern Ute Growth Fund.

"The tribe's regulations provide more protection for aquifers with less bureaucratic morass," he said. "It's a win-win. Our regulations are compatible with Colorado's regulations, and they also avoid the pre-approval delays that will be caused by the BLM's hydraulic-fracturing rule."

BLM's regulations are redundant because they will require energy developers to meet both new federal requirements along with state and tribal rules.

The tribe worries that the federal regulations will be a pointless barrier to the tribe's economic development. "If it is too burdensome to do business on tribal lands, operators just take their business elsewhere," said operating director of the Southern Ute Growth Fund Bob Zahradnik.

The federal government's track record for allowing tribes to develop their energy resources isn't great. Poor management by the Bureau of Indian Affairs, "such as a complex regulatory framework," has "hindered Indian energy development," a General Accountability Office report concluded. "These shortcomings can increase costs and project development times, resulting in missed development opportunities, lost revenue, and jeopardized viability of projects."

The tribe received a reprieve. A federal judge temporarily halted the Obama administration from implementing the new hydraulic fracturing rules. But the impending regulations still beckon.

The truth is the shale energy boom is being done safely and saving Americans billions of dollars every year. New, redundant federal regulations will only keep Americans from further benefiting.

Sean Hackbarth A cat sitting in a clothes dryer.Photo credit: FelineNoir.com. Licensed under a Creative Commons Attribution-ShareAlike 2.0 Generic license.

The shale energy boom is being called "perhaps the largest single opportunity to change America's competitiveness" in a report by Michael Porter of the Harvard Business School along with David Gee and Gregory J. Pope of the Boston Consulting Group.

Two big reasons are savings for consumers and the millions of new jobs created. To further take advantage of the boom, policymakers must make it easier to export American energy.

Consumers Have Saved Money

By using the high-tech combination of big data analytics, horizontal drilling, and hydraulic fracturing, the energy industry has boosted domestic oil and natural gas production.

This abundance has lowered energy costs. The report finds that in 2014, "residential, commercial, and industrial users saved about $90 billion in natural gas and natural gas liquids (ethane, propane, and butane) fuel costs." 

All told, the report finds that in 2014, the shale boom saved consumers $780 dollars in energy costs. That's about as much as Angie's List recommends a family should spend on a new clothes dryer. 

Consumers savings from the shale boom--mostly from lower-priced goods--is expected to increase to $1,070 by 2030.

annual_household_savings.jpg Annual household savings from shale energy.Annual household savings from shale energy.Source: Harvard Business School and the Boston Consulting Group. New Jobs and Economic Growth

Another way the shale boom has fattened Americans' wallets is by generating jobs and economic growth. The report finds shale energy development created 2.7 million jobs and added $43 billion to the U.S. economy in 2014. 

The jobs created pay well: "[T]he average unconventionals production job pays nearly twice the national average salary and offers a significant opportunity for middle-skilled workers."

2014_average_shale_job_salary.jpg 2014 salaries of jobs supported by shale energy.2014 salaries of jobs supported by shale energy.Source: Harvard Business School and the Boston Consulting Group. How Far Will the Boom Take Us?

Even with weaker oil prices, don't expect the shale boom's benefits to let up. The report estimates that by 2030 3.8 million jobs will be supported it, and $590 billion added to the economy.

2014_shale_econ_impacts.jpg 2014 economic impacts from shale energy development.2014 economic impacts from shale energy development.Source: Harvard Business School and the Boston Consulting Group. Allowing Exports Will Extend the Boom

To build on the shale boom's success, the report advises that the oil export ban be lifted along with easing the federal permitting process for liquefied natural gas export facilities:

Natural-gas and crude-oil exports leverage America's strengths, increase economic growth, and benefit partner nations, without compromising our competitiveness, environmental standards, or domestic prices. Current U.S. restrictions on natural gas and oil exports are antiquated and based on historical circumstances that no longer apply.

...

Today, ample new domestic resources mean that removing these antiquated restrictions will both reduce the U.S. trade deficit and bolster the value of unconventionals to the U.S. economy, while having little if any impact on consumer prices.

Every study that has been done has found that lifting the oil export ban will not raise gasoline prices.

We're witnessing "a once-in-a-generation opportunity to change the nation's economic and energy trajectory." The shale boom has turned global energy markets upside down and opened up new opportunities for the U.S. Let's take full advantage of this moment.