Fall 2012

Resource Metrics

Poll Watch

Voter Priorities:
2008 - 2012

As economic conditions improve, voters continue to prefer a smaller government providing fewer services:

      56%   smaller government
      35%   bigger government

      55%   smaller government
      34%   bigger government

      56%   smaller government
      37%   bigger government

      55%   smaller government
      36%   bigger government

      46%   smaller government
      40%   bigger government

“Energy policy rated among the most important electoral issues in 2008 – 77% said it was very important to their vote. Today it ranks near the bottom of the voting priorities list at 55%.”

Source: Pew Research Center
September 24, 2012.




Focus: What’s Next for Carbon-Fuel Policy?

Two key Washington-whispered questions need to be put out in the open. Question 1: What will the Obama Administration do TO the natural resource energy industries now that the elections are over and Mr. Obama doesn’t have to fake support for coal and defer EPA power plant regulations to gain Ohio votes? Question 2: How can natural resource energy industries protect themselves for the next two years against an unfettered EPA?

Here are a few observations from our crystal ball:

The 2014 Congressional Elections are the only good news on the horizon, when history, political demographics, and Obama’s failed promises, predict a Republican Senate and some restoration of Washington policy focused on marketplace economics – instead of tax, spend, and suffocation of businesses with regulations. In 2014, 20 Democrats will be up for reelection, compared to 13 Republicans. 12 of those 20 Democrats come from either red states (six) or swing states (six). Only one of the 13 Republicans comes from a state that isn’t red, and that’s Sen. Susan Collins (R-Maine), whose seat is basically safe unless she retires.

Fracking will come-under more restrictive regulation, and not because of genuine environmental issues – although the Clean Water Act will be the cover story. More regulation will be proposed because fracking will produce TOO MUCH American oil and gas over the next several years, lower gasoline prices and kill Obama’s prized renewable energy projects and subsidies for electric cars. With the International Energy Administration’s and other agencies projecting of U.S. energy independence via enormous growth in domestic production, it is a universal supply and demand truth, that gasoline prices will drop. Green-pride buyers already have their electric cars. Who else will then be foolish enough to pay 30% premiums for electric cars? Not the mainstream auto buyers in a stressed economy. So, look for Obama’s mean green solution to restrict fracking – or push for an enormous increase in the federal gas tax at the pump, and according to the Wall Street Journal, the conversation is already underway. Either or both are certain corollaries to increased domestic oil and gas supply, and a fantasy fix to Obama’s trillion dollar annual deficit spending.

Two years of an unfettered EPA. Obama’s election cycle silencer on the EPA well soon be removed. The EPA, who’s building in Washington was built with concrete made with re-cycled fly ash, will still insist on blocking recycling fly-ash and label it toxic. [ See essay below. ]Once toxic, that is the beginning of the end for re-cycling. This of course reflects that nature of bureaucratic impunity. One stupid regulation begets others. What do you do with fly ash, once it is prohibitively expensive to dispose of? You don’t produce it in the first place. Which means don’t burn coal. On a related note, The Daily Caller recently reported on the Obama’s administration dramatic cut back on the approval of economically significant government regulations in pre-election October – with the Obama 2012 October, being the lowest number in history – 4. The next lowest number of OIRA-approved regulations was 33. Is anyone surprised at this cynical cover up? Now expect the flood gates to open.

Wither Coal? The new normal has arrived. Coal will hover slightly above 30% of electric power generation. The Energy Information Agency reports that 8.5 percent of total 2011 coal-fired capacity will retire by 2016 – four times the amount retired during in the last five years. There will be some effort to boost imports wherever possible. But in the same way that LNG exports are being blocked [ see article below ] – coal-haters in the Obama administration can be counted on to frustrate coal exports as well. Bankruptcies and mine closings will continue. New mining equipment sales and related industries in the U.S. will suffer continued decline. Company consolidation of recent years will not be the answer to contraction for lack of financing. What right mind would finance one coal company to buy and other? Tying two cinder blocks together does not help either one float. Small producers will just close. West Virginia will hollow-out. But stand-by for more coal-related environmental anguish. If coal companies, that had been successfully reclaiming and restoring lands are going out of business – who will pick up the reclamation tasks?

The only way to fight the EPA and win – win being defined as a tie – is with honest brute force that attacks first and sets the agenda. The best defense is an aggressive offense. We believe the best most reasonable attacking offense is a Freeze & Balance strategy [ see article below] to force EPA to Comply with the law – and do economic impact analysis before regulations can be issued. Freeze ALL regulations until they do comply – and balance America’s need for affordable energy with the diminishing returns of more and more and more environmental regulation.

— The Editors

Focus: LNG Exports

DOE Limits on Exports Violate U.S. & International Agreements

I can’t say it any better than a December 7, 2012 Wall Street Journal editorial: “In makes no economic sense to complain that foreign markets are closed to American goods and then assert that U.S. interests are served by hoarding U.S. gas.” In my view, DOE’s reluctance to issue the LNG export licenses a clear violation by the U.S. of its international agreements and an unnecessarily tortured reading of DOE’s responsibilities under the Natural Gas Act.

On December 6, 2012, The U.S. Energy Department released two long awaited reports by EIA and NERA regarding exports of liquefied natural gas (LNG) and invited comment from the public regarding pending LNG export license applications. DOE has at least 15 applications pending seeking approval to export liquefied natural gas (LNG) but so far has only issued one license permitting LNG exports to Cheniere Energy Inc. The rest of the applications have been stalled by DOE’s repeated delays in releasing the two reports it commissioned on the impact of liquefied natural gas exports on the U.S. economy and domestic natural gas prices. The NERA study strongly concluded that the net economic impact on the U.S. from LNG exports would be positive but both studies cautioned that domestic prices could rise due to exports, although to differing degrees.

But the DOE’s reluctance to issue export licenses is a clear violation of U.S. obligations under international agreement. What is more, the violation is actionable under the binding dispute settlement procedures of the World Trade Organization – the very same procedures used by the U.S. to successfully challenge China’s restrictions on exports of natural resources and currently being used by the U.S. to pursue a second challenge to China’s export restraints on rare earths, tungsten, and molybdenum.

The DOE actions to restrain and delay exports of LNG are very obviously of the same nature as China’s export restraints that led the U.S. and other countries to bring two rounds of complaints. The first round of cases against China, brought by the U.S., EU, and Mexico, successfully proved that China was violating its WTO obligations set forth in the General Agreements on Tariff and Trade (GATT 1994) Articles VII, VIII, X and XI – all of which also are obligations of the U.S. The second round of cases currently pending against China raise complaints about export restraints that are very similar or identical to those already found to violate its WTO obligations in the first round, including:

quantitative restrictions (including quotas as have been suggested by DOE on LNG);

additional requirements and procedures vis-a-vis the quantitative restrictions (leading to delays and disruption of commercial interests, as have the DOE delays on export licensing of LNG);

licensing requirements on exports (all but automatic and expeditious export licensing has been found to violate GATT obligations); and

minimum export prices and approval of export contracts (DOE’s suggestions that it could revisit the licenses it issues suggests it would interfere with long-term contracts for export of LNG).

Some commentators have suggested that DOE’s divergence from the well-established U.S. policy rejecting export restraints arises out of a conflict been the U.S. Natural Gas Act’s ambiguous standard for determining the “public interest” and the GATT 1994. However, basic rules of statutory construction resolve this ambiguity. Where a statute is ambiguous, the agency’s interpretation must be a “permissible construction” or “reasonable interpretation” of the statute and the Federal Circuit Court has held that “an interpretation of an application of [a] statute which would conflict with the GATT Codes would clearly violate the intent of Congress.” Furthermore, the Supreme Court’s Charming Betsy principle states that an “act of Congress ought never be construed to violate the law of nations if any other possible construction remains”. The Charming Betsy principle is a longstanding, well established interpretive device in Supreme Court jurisprudence which requires the courts to construe statutes so as to avoid violating executive agreements and treaties to which the U.S. is a party. A 1996 Federal Circuit Court expanded this notion by stating that an agency must convince the Court that Congress intended for a statute to deviate from the GATT to uphold the agency’s interpretation of such statute in violation of the GATT. DOE’s de facto export restraints put the U.S. government in the awkward position of committing the same type of WTO violations it has successfully opposed by China.

— Alan M. Dunn

Alan Dunn, of Steward & Stewart in Washington, D.C., is an expert on applications to DOE for exports of LNG, and represents U.S. petitioners in WTO cases against China’s export restraints.

Focus: Energy Production

America’s “Access to Energy Act”

At Partnership for America we are working to support a common-sense approach that balances environmental risks with economic opportunities in the quest for American energy independence. Can anyone disagree with that? In an era of economic stagnation and persistent domestic unemployment and amid unprecedented threats to the security of America’s access to foreign energy sources and to the security of our allies in the Middle East, America needs a new – 21st Century model – to balance to the making of domestic environmental and energy policy.

While the country is often divided along ideological lines, there is broad support for balanced economic, energy and environmental policy. The Access to Energy Act of 2012 will be an important tool in achieving that balance while pursuing the critical goal of North American energy security.

The AEA will require regulators to develop energy and economic impact statements that will force policymakers to make decisions based on science and economics, not ideology. However desirable in the abstract, government legislation and regulations often impose significant costs that may outweigh the benefits of the legislation or regulations under consideration. Congress and government agencies cannot do reliable cost-benefit analyses when they don’t have the data they need. The AEA will make certain that policymakers get that data and are in a position to understand and communicate the trade-offs which proposed legislation or regulations may involve.

The AEA will prevent vague assurances regarding energy offsets by requiring the Congressional Budget Office and federal agencies to provide detailed reports on “expected offsets from other sources of energy for projected reductions in energy supplies including the probability, total cost, environmental impact and probable timing of such offsets and the expected net impact on the total supply and price of energy in the United States. Both the benefits and costs of any new legislation or regulation must be considered before taking effect.

— Jim Wootton
President, Partnership For America

Focus: Coal Ash

EPA Threatens the Environment by Threatening
Coal Ash Recycling

Of the dozens of proposed Environmental Protection Agency regulations attacking coal, the most egregious example of zealotry and environmental hypocrisy is a proposal to designate coal ash as “hazardous waste.” This dangerous and unwarranted proposal threatens to destroy a coal ash recycling industry that has been 50 years in the making.

You would think that environmental activists and regulators would want to encourage an industry that conserves energy and natural resources, improves durability of roads and buildings, and even reduces greenhouse gas emissions by millions of tons per year. But activists and regulators are willing to sacrifice all of that in their single-minded zeal to destroy coal at any cost.

Over the past several decades, a variety of environmentally safe uses for coal ash have been developed in construction, building materials and even agriculture. Every day you come into contact with roads, bridges, and buildings made with coal ash as an ingredient.

Coal ash is used for far more than its environmental benefits. For instance, concrete made with coal ash is much stronger and more durable that concrete made with cement alone. In fact, the American Road and Transportation Builders Association estimates that the cost to the nation’s infrastructure would be more than $100 billion over 20 years if coal ash were not available.

The U.S. Environmental Protection Agency – in two reports to Congress and two formal Regulatory Determinations issued over two decades under both Republican and Democratic administrations – concluded that coal ash does not warrant regulation as a “hazardous waste.” EPA’s “Final Regulatory Determination” under the Clinton Administration in 2000 spurred a huge increase in the practice of recycling. With regulatory certainty of a “non-hazardous” determination, recycling rates soared from 29 percent in 2000 to 44 percent in 2008.

In 2009, however, the Obama Administration’s EPA re-opened the coal ash issue and developed proposed regulations that would treat coal ash as “hazardous waste” when disposed. EPA would continue to exempt ash from regulation when it is recycled, but who wants to use a material in their homes that is considered “hazardous” on the property of the person who made it?

The results have been disastrous. Recycling rates have begun to fall – dipping to 41 percent in 2010 – and the EPA rulemaking process continues unresolved while one of America’s greatest environmental success stories dies on the vine.

Visit Citizens for Recycling First to learn more and show support for federal policies that favor recycling.

— John Ward
President, Citizens for Recycling First