The Trump administration is unilaterally reshaping the United States under the cover of national security.Ā TheĀ White Houseās justification for its āzero toleranceā policy of separating families at the border was based on the presidentās powers over national security.
President Donald Trumpās Muslim travel ban was justified on grounds of national security, as are his vague āextreme vettingā proposals for visa applicants. Now, his Energy Department is looking to reshape the energy industry and reverse the trend away from coal-fired power plants.Ā Their justification?
National security.
Yet in the case of the energy industry, nobody is buying the rationale, and the radical intervention into energy markets has produced an odd-bedfellows coalition of opposition that includes the oil and gas industry, renewable energy companies, and environmentalists.
On the other side, in support of the White House, stands the coal and nuclear and industry, headed up by Murray Energy and First Energy, whoāve long lobbied for just such a lifeline.
Speaking at the World Gas Conference this week in Washington, Energy Secretary Rick Perry assured the government and industry representatives present that the U.S. is working to āhonor the right of every nation to use every available fuel at its disposal. I wish I can tell you the entire developed world is on board with our vision. They are not.ā
Neither is much of the oil and gas industry that was gathered before him. Thanks to his plan to bail out struggling power plants ā a measure opposed by the likes of the American Petroleum InstituteĀ ā Perry now finds himself caught in the crosshairs between two dueling arms of the fossil fuel industry.
A Department of EnergyĀ memo first obtained by Bloomberg details the Trump administrationās plan to subsidize struggling coal and nuclear plants. The justification is that a lack of reliability in the electric grid represents a threat to national security. Itās not clear what action the administration has taken on the draft memo, but if implemented, the measure would allow theĀ Energy DepartmentĀ to activate wartime powers under the Defense Production of Act of 1950, enacted in response to the Korean War.
Ahead of the conference, Perry had been coy about how the plan would unfold, likely in an effort to avoid further backlash from the industry with which he hopes to maintain cozy ties. Attending the same event, Patrick Pouyanne, CEO of the French gas giant Total, had harsh words for Perryās vision. āThe U.S. administration tries to promote coal-fired plants, but frankly if you find an investor who wants to invest 25 years in coal-fired plants,ā he chided, āI would not buy the shares of that company.ā
he most powerful opponent of Trump and Perryās plan, however, might be from a body handpicked by the White House: the Federal Energy Regulatory Commission.
Discussing the draft measure at a Senate oversight committee hearing several weeks ago, Sen. Martin Heinrich, D-N.M., asked members of the FERC ā which is dominated by Trump appointees ā if they ābelieve that in the wholesale power markets weāre facing an actual national security emergency at the moment?ā
āI do not, senator. I think the markets ā¦ā FERC Commissioner Cheryl LaFleur started to respond before Heinrich cut her off: āAnyone want to answer that with a yes?ā
No one did.
The plan is a zombified version of one struck down unanimously by FERC earlier this year, in which Perryās Energy Department ā at the behest of Murray Energy and FirstEnergy ā proposed a new FERC rule that would mandate electric customers pay to keep coal and nuclear plants online that would otherwise be shuttered. The new version,Ā according toĀ the memo, would see theĀ department mandate that grid operators buy up power from flailing power providers for two years, driving up monthly costs for ratepayers as much as $65 million. In 2017, before Perryās proposed FERC rule change, Murray begged Trump for a comparable measure, which the administration considered but eventually rejected. Each of these measures has drawn the ire of oil and gas interests, anti-nuclear activists, and environmentalists.
This new memo, first circulated in advance of a National Security Council meeting late last month, appears designed specifically to write out a role for FERC, though energy analyst Cathy Kunkel of the Institute for Energy Economics and Financial Analysis said itās āhard to imagine that you could change the wholesale market without FERC being involved,ā given that itās the main body responsible for regulating energy markets.
Invoking wartime powers to prop up struggling energy sources is a remarkable step for the administration to take. The Defense Production Act is intended to give the executive branch sweeping powers to nationalize industries that are vital to national security or for dealing with natural disasters. It was first invoked by former President Harry Truman in 1952 to nationalize the steel sector during the Korean War, in an attempt to pre-empt a nationwide strike by the United Steelworkers of America and prove to the nation that he wasnāt āsoft on communism.ā (The Supreme Court later decided that Truman didnāt have the authority to seize private property, as the war in Korea had never been formally declared.)
As Perry himself stated last month, āThere is no free market for energy,ā and the new rule heās backing would actively intervene against prevailing trends in the energy market, where natural gas has reliably outcompeted coal over the last several years. Perry, though, isnāt wrong: The U.S. subsidizes fossil fuels to the tune of about $15 billion per year, according to a recent study from Oil Change International, and it regularly tips the scales in fossil fuel producersā favor. At most, though, the administrationās proposed bailout could only kick the can of coalās decline farther down the road. āI would not think that uncompetitive coal plants are going to be more competitive in two years than they are now,ā Kunkel said.
Sen. Maria Cantwell, D-Wash., a member of the committee, decried the memo as a āradical proposal,ā and said in her opening statement that the commissionās work āshouldnāt really be about bailing out one sector.ā Cantwell added in a separate statement to The Intercept that, āit is clear that the public servants actually in charge of grid reliability and just and reasonable rates donāt see a need for a coal bailout. I hope my colleagues will take their views seriously and oppose any radical next steps by the Trump Administration.ā
In the hearing, Cantwell also referenced a statement from representatives of the PJM Interchange ā the utility market where most of the plants that would be affected by the rule operate ā stating that no such emergency exists. As PJM CEO Andy Ott told Utility Dive after news of the memo broke, āWe donāt think thereās an emergency today. We said that very bluntly and very publicly.ā The North American Electric Reliability Corporation, the federal body responsible for power reliability, has echoed that sentiment.
Throughout the hearing, FERC commissioners shot down suggestions from Republican and some Democratic senators that coal and nuclear plants are in dire need of the proposed subsidies.
After Sen. Joe Manchin, D-W.Va., insisted that only coal and nuclear qualify as ābaseloadā power ā the kind that can offer uninterrupted power for distribution ā then-FERC Commissioner Robert F. Powelson corrected him, explaining that hydropower and natural gas both qualify, and that generation capacity for the latter has proliferated over the last several years. āWeāre tickled to death to have the gas capacity we have, which is tremendous in West Virginia, Pennsylvania, and Ohio. But it can be interruptible,ā Manchin shot back. āBut so are those other sources,ā Powelson noted, referring to coal and nuclear. He also said the measure would āthreaten to collapse the wholesale competitive markets that have long been a cornerstone of FERC policy,ā and called it the āgreatest federal moral hazard weāve seen in years.ā (Powelson, a Republican, on Thursday announced his resignation from the FERC to become the CEO of the National Association of Water Companies, a move some have speculatedĀ was spurred by the row over the bailout memo.)
Neil Chatterjee was the only FERC commissioner to offer even a tepid defense of theĀ Energy Departmentās proposal. He echoed his colleaguesā arguments that there currently is no grid reliability crisis, but added the slight caveat that the Trump administration āshould not assume that good fortune will continue.ā
The future of the measure is unclear. The open question now, Kunkel told me, is whether the Department of Energy will look to push through the measure unilaterally using executive authority. āThe implementation details are quite vague,ā she said.
Manchin and Sen. Shelley Capito, R-W.Va. ā both beneficiaries of generous coal industry campaign contributions ā supported the memo, justifying it as a way to help out struggling Appalachian communities, which have been hit hard by coalās decline. Notably, that task doesnāt fall under the mandate of either the Department of Energy or FERC, and thereās not much reason to believe the bailout would be much of a boon to struggling coalfield counties.
āWeāve had a lot of economic growth but havenāt had real development because of the nature of resource extraction,ā Ted Boettner, executive director of the West Virginia Center on Budget and Policy, told me. Most profits from extraction are funneled outside the state or to already wealthy executives within it. The U.N. Special Rapporteur on extreme poverty and human rights, Philip Alston, recently visited West Virginia while compiling a report on the U.S. and noted state residentsā startling lack of access to broadband and drinkable water.
āWest Virginia has billions of dollars in legacy costs from coal mining: deteriorating roads, pension liabilities, health care liabilities, and liabilities due to surface mining,ā Boettner said in an interview. āWe could be spending lots of money putting people to work cleaning up the mess than has been made by the coal industry.ā
Far better for West Virginia than temporarily propping up coal plants, Boettner said, would be more robust federal investment. He pointed to the RECLAIM Act ā a bill introduced last year that would release $1 billion to help reclaim abandoned mine lands, fuel investment in Appalachia, and diversify the economy away from extraction ā as an example of a measure that would help the state. Both of West Virginiaās senators have supported the RECLAIM Act, though Boettner said it hasnāt been a major priority for either of them. (The legislation has languished in the House after its passage through the House Natural Resources Committee, and a Senate version sits in a similar limbo.)
West Virginiaās traditionally low fuel prices have skyrocketed in recent years because of the stateās over-reliance on coal-fired power generation amid the rise of natural gas, Boettner explained. Remedying fuel costs and the other economic issues facing West Virginia demands changes much more far-reaching than subsidies to coal plants. āInstead of more corporate welfare for the coal industry, our stateās congressional delegation in Washington should be looking for ways to give West Virginians more energy sources,ā he said. āI think weāre sort of whistling past the graveyard of the clean energy revolution.ā
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