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Energy Blog

Thomas J. Donohue Thomas J. Donohue, U.S. Chamber of Commerce

Americans sent the clear message to lawmakers on Election Day that they want a new direction. The 114th Congress, which will convene in January, has the opportunity to show them that it can get things done—and do the right things for our economy and our country.

Trade would be a good place to start. President Obama and leaders in Congress have signaled that trade is ripe for bipartisan progress. Priority one should be passing Trade Promotion Authority (TPA), which would strengthen the hand of U.S. negotiators and help them get a good deal for American companies and workers.

We need to be ready for the major trade deals that are moving forward, including the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. These deals would boost our economy and add millions of jobs for U.S. workers—but we won’t be able to secure them without TPA. Congress must also extend the Export-Import Bank’s charter so that more businesses can sell their goods abroad.

Energy should be another area of focus. It has been one of the few bright spots in our economy. Congress and the administration should take the needed legislative and regulatory steps to produce more American energy in all forms and in an environmentally responsible manner—and sell this energy around the world.

The long fight for approval of the Keystone XL pipeline hit the six-year mark this fall. Last week the House passed a bill to force the president to authorize the pipeline, but the Senate defeated it. The incoming Senate majority has vowed to revive these efforts, and we’re counting on these lawmakers to finish the job.

Writing and passing a fiscally responsible budget would also help restore Americans’ confidence in the ability of lawmakers to govern. It’s one of the most basic but important duties that Congress holds. The next budget should lay the groundwork for entitlement reform, tax reform, and long-term surface transportation and aviation bills.

Lawmakers can smooth the way for a new direction in the next Congress by addressing some immediate priorities during the lame-duck session now under way. They should take a government shutdown off the table by passing appropriations bills to fund government operations. And they should move quickly to renew critical policies that are due to sunset at the end of the year, including expiring tax provisions and the Terrorism Risk Insurance Act.

Unless lawmakers heed the voters’ call for responsible action on the right policies, they will deepen public distrust and squander a rich opportunity to do good things for our country. It’s time to get down to business.

Sean Hackbarth Drilling for oil and natural gas in Texas' Eagle Ford Shale.Drilling for oil and natural gas in Texas' Eagle Ford Shale. Photo credit: Eddie Seal/Bloomberg.

The shale energy boom continues to drive improvements in America’s energy security risk, but federal policies attacking coal will lead to future declines, a new report finds.

The U.S. Chamber’s Institute for 21st Century Energy annually releases its Index of U.S. Energy Security Risk, a collection of 37 different energy metrics such as energy prices, price volatility, net energy imports, energy expenditures, and energy efficiency. America’s energy security risk dropped to 87.4 in 2013, its lowest level since 2004 and 5% below 2012.

Index of U.S. Energy Security Risk, 2014Index of U.S. Energy Security Risk, 2014

The shale oil and natural gas boom get much of the credit. In 2013, the U.S. experienced the largest annual percentage increase in oil production since 1940, and there was a record-level of natural gas production.

America's energy security risk has improved.America's energy security risk has improved.

“Given continued geopolitical uncertainty, rising U.S. oil and gas output couldn’t come at a better time, and has helped insulate our nation from instability,” Karen Harbert, president and CEO of the Energy Institute said in a statement.

U.S. oil production.U.S. oil production.

However, not all the shale energy news is positive. Oil and gas production on federal lands is expected to continue to fall, the report notes:

Consider that all of that additional production is coming from, and will continue to come from, on federal onshore lands. In fact, the Energy Information Administration’s (EIA) 2014 forecast shows lower oil production from federal offshore areas and Alaska than its 2008 forecast. The trends are similar for natural gas. What this means is that while the rest of the country will enjoy an oil and gas boom, federal lands will continue to experience an oil and gas bust because of federal policy that locks out four-fifths of them from exploration and production. Under these kinds of restrictions, energy-rich public lands won’t contribute as much to U.S. energy security as they should.

As you can see in the first chart, the report warns that while energy security risk is falling, it’s expected to climb upwards in the next few years as the effects of EPA’s attacks on coal-fired power plants are felt:

Unprecedented levels of regulation covering fossil fuel-fired power plants and changing market dynamics are expected to increase electric power sector risks by decreasing generation diversity.

Federal environmental regulations targeting coal plants and to a lesser extent greater competition between natural gas and coal in the power sector are primarily responsible for the loss of generation diversity.

For instance, EPA’s mercury regulation is expected to shut down nearly 50 gigawatts of coal-fired electricity production, reducing energy diversity and making the power grid less resilient. Power grid reliability organizations have warned that EPA’s proposed greenhouse gas regulations will increase the risk of power outages.

This chart below on electricity generation diversity shows how reduced diversity affects energy security risk. Steve Eule, the Energy Institute’s vice president, said in a statement, “Our index found that risks related to electricity generation diversity will rise to an all-time high by 2040, due largely to planned federal regulations targeting coal plants."

U.S. electricity diversity capacityU.S. electricity diversity capacity

The Energy Institute has an interactive tool to see how the Index of U.S. Energy Security Risk has changed over the years.

Index of U.S. Energy Security Risk

Sean Hackbarth Blackout in New York City's East Village.New York City's East Village. Photo credit: Dan Nguyen. Licensed under a Creative Commons Attribution 2.0 Generic license.

The more power reliability experts look at EPA’s proposed carbon regulations the more they don’t like what they see.

The Electric Reliability Council of Texas (ERCOT), the Lone Star State’s power grid watchdog, warns that by driving out coal-fired power plants EPA's carbon regulations “could result in transmission reliability issues,” such as an “increased risk of rotating outages as a last resort.”

ERCOT estimates that proposed carbon regulations and other proposed EPA regulations, could mean the retirement of “between 3,300 MW and 8,700 MW of coal generation capacity.” That’s “up to half of the existing coal capacity” in the region.

Natural gas will replace coal as the primary fuel for producing electricity. Such a reduction in energy diversity threatens the power grid:

Though ERCOT is not currently affected by natural gas supply issues, the increased use of natural gas nationally could lead to increased market dislocations, such as seen in the winter of 2013-2014. Depending on the magnitude of these issues, there could be implications for maintaining reliable natural gas supply in ERCOT.

As for adding more solar and wind, ERCOT finds that EPA's plan “will require major improvements to ERCOT’s transmission system, posing significant costs not considered in EPA’s Regulatory Impact Analysis.”

Simply put, it takes significant time, money, and land to build electrical towers and other infrastructure. “It takes at least five years for a new major transmission project to be planned, routed, approved and constructed,” the report states. In one instance, a project to connect renewable generation to the grid took 10 years to construct at a cost of $6.9 billion dollars. Under EPA's plan, states must submit plans for reducing carbon emissions by June 30, 2016.

A similar analysis by the North American Electrical Reliability Corporation (NERC) warns that the carbon regulations increase the “potential for wide-scale, uncontrolled outages.”

In addition to worries about electricity reliability, the ERCOT report finds that EPA’s carbon regulations “will also result in increased energy costs for consumers in the ERCOT region by up to 20% in 2020, without accounting for the costs of transmission upgrades.”

Driving coal out of America’s energy mix will result in less-reliable and more-costly electricity. That’s not good for creating jobs or generating economic growth.

The deadline to submit your comments on the EPA’s proposed carbon regulations is December 1. Click here to add your voice to the debate.

Sean Hackbarth Laborers' International Union of North America (LiUNA) hold up signs in support of the Keystone XL pipeline. Photographer: Andrew Harrer/Bloomberg.Laborers' International Union of North America (LiUNA) hold up signs in support of the Keystone XL pipeline. Photographer: Andrew Harrer/Bloomberg.

A close vote on approving construction of the Keystone XL pipeline is expected in the Senate this week.  Last week, the House of Representatives passed a bill that would approve construction of the pipeline.

The simplest action would have been for President Obama to approve the pipeline ages ago. Instead, he insists that the “independent process” “play out.”

Well, that process has taken over six years—longer than building the Golden Gate Bridge, the Hoover Dam, and the Pentagon.

Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century said it should have never gotten to this point:

The administration has played politics with this project for too long at the expense of America’s economy and our relationship with Canada, one of our most important allies in this era of geopolitical instability. It is unfortunate that Congressional action is even needed to move Keystone XL, but with strong bipartisan support in Congress, further delays in approving the pipeline are unacceptable.

The votes in Congress give pipeline opponents another chance to spread misinformation about the pipeline, but on the flip-side it let pipeline proponents explain why the Keystone XL pipeline should be built.

I'll use Jack Holmes' piece at The Daily Beast which is is two parts trolling and one-half part analysis. He calls the Keystone XL project, the “Pipeline from Hell,” and writes that it’ll be only “a few billion dollars kicked the U.S. economy’s way.” This typifies the arguments of many pipeline opponents like the New York Times editorial board

Holmes ignores most of the State Department’s examination of the project. Here’s what he doesn’t tell you are the State Department estimates of the economic benefits from the Keystone XL pipeline:

42,100 new jobs. $2 billion in earnings. $3.4 billion added to U.S. GDP.

Holmes—like the President—disparagingly call the thousands of construction jobs the pipeline will support “temporary”—tell that to workers eager to work on the pipeline. Despite the rhetoric, they’re real and valuable.

The truth is thousands of jobs have already been supported where the pipeline has been built. Southern Methodist University found that construction alone of the 485-mile southern leg of the Keystone XL pipeline supported “more than 11 million hours of labor completed by 4,844 workers in the United States of America.” The 1,179 miles of pipeline left to be built from Alberta to Steele City, NE is sure to support as many if not more jobs. This is why unions have endorsed the Keystone XL pipeline.

Jobs also will be created to support the influx of workers along the construction route. These workers will work at local hotels and restaurants. And jobs will be created to manufacture materials for the pipeline.

Add them all up and the State Department projects 42,100 jobs created by the pipeline.

Another benefit unmentioned by Holmes is the $55 million dollars in property tax revenue for Montana, South Dakota, and Nebraska during the first full year of the pipeline’s operation. This fall, local residents told me how that revenue will help build schools and infrastructure in their communities.

Holmes also neglects to mention that oil from the Bakken in Montana and North Dakota will be transported through the pipeline with Canadian crude. Residents in Baker, MT where the Keystone XL will link to Bakken oil fields, hope the pipeline will turn the town into a regional energy hub.

As for the environmental effects, not only did the State Department determined that the pipeline will have minimal impact, the Keystone XL pipeline will produce the least amount of greenhouse gasses than any other alternative transportation method. Holmes doesn’t mention that.

Finally Holmes ignores the fact that oil transported through the Keystone XL pipeline from our friendly neighbor to the north will replace oil from countries like Venezuela who don’t like us all that much.

To sum it up, the Keystone XL pipeline will create thousands of jobs, boost state and local economies, and improve the United States’ energy security.

Throughout this debate, the administration and pipeline opponents have chosen ideology over facts, commonsense, and what’s in the nation’s national interest. The Senate should pass the bill to approve the Keystone XL pipeline, the President should sign it, and let’s be done with this debate.

Send a letter to your Senators telling them to support the Keystone XL pipeline.

6 Massive Projects Completed Faster than the Keystone Pipeline's 6 Year Permitting Process from U.S. Chamber of Commerce
Sean Hackbarth Light bulbPhoto credit: remography. Licensed under a Creative Commons Attribution-ShareAlike 2.0 Generic license.

Unlike the U.S.-China greenhouse gas emissions agreement full of vague intentions, EPA’s proposed carbon regulations are where the rubber meets the road. And to stretch this metaphor too thin, it could run the economy into the ditch.

The North American Electrical Reliability Corporation (NERC)—the independent organization responsible for ensuring safe and reliable grid operations—worries that EPA’s proposed carbon regulations puts power grid reliability at risk.

EPA’s plan is designed to shut down coal-fired power plants. Natural gas and to a much lesser extent, solar and wind will have to pick up the slack. NERC warns that the energy infrastructure for both isn’t in place.

First, NERC cautions that the pipelines needed to transport natural gas haven’t been built, making the power industry “increasingly vulnerable to risks from natural gas supply and transportation issues”:

While several gas pipeline construction projects are underway to address deliverability issues in the Northeast, the shift toward additional natural gas consumption, as outlined in the proposed Clean Power Plan, would create additional pipeline needs. Sufficient lead times (more than three years) will be needed to plan and build new pipelines.

The power grid will be vulnerable to extreme weather like the 2014 polar vortex, where coal power was crucial to keeping the lights on.

Second, the infrastructure isn’t in place for EPA’s push away from always-on coal-generated power to variable power from solar and wind:

To support such variable generating capacity increases, the power industry would need to invest heavily to expand transmission capacity to access more remote areas with high-quality wind resources. This further highlights the need for a resource mix with sufficient essential reliability services that support integration and reliable operation. Given the natural wind variability in remote locations, these incremental wind project resources would have relatively low capacity factors that would require substantial new transmission.

Together, NERC has stated that these pipeline and transmission constraints, combined with the rushed compliance timelines of the proposed carbon regulations, would “increase the use of controlled load shedding and potential for wide-scale, uncontrolled outages” [emphasis mine]. Echoing NERC’s concerns, FERC Commissioner Philip Moeller has called for a detailed review of reliability concerns posed by EPA’s regulations:

Just as the Commission does not have expertise in regulating air emissions, I would not expect the EPA to have expertise on the intricacies of electric markets and the reliability implications of transforming the electric generation sector. Hence I reiterate my call for a forum to publicly discuss the extent of reliability challenges under the proposal and potential solutions to these challenges

These are serious concerns from respected authorities.  Yet, EPA has refused to support undertaking a more thorough review. 

By picking energy winners and losers, EPA’s carbon regulations threaten the reliability of the power grid--all-important to an economy reliant on a consistent flow of electricity. Coal has been and can continue to be an abundant source for generating reliable amounts of electricity. It has to be part of the energy mix.