Oil and gas in the capitals

“First they came for coal; then they came for natural gas; then they came for ______.”

In early August, the Environmental Protection Agency (EPA) released its much-anticipated “Clean Power Plan” (CPP), which sets final greenhouse gas standards for existing power plants, and is more aggressive than the proposed CPP issued in June 2014. President Obama is conducting a full-court PR campaign, stating at an emotional Aug. 3 White House ceremony, “There is such a thing as being too late, when it comes to climate change.”

Reaction was instantaneous—both pro and con. The ongoing debate concerns costs and benefits; impacts on the coal, utility, and related industries; disparate regional impacts; legal challenges; and other issues. However, largely lost are the ominous implications for our industry, given recent history and the substantial differences between the proposed and final rules.

The CPP represents “final victory” in the war on coal. It will effectively prevent construction of new coal-fired power plants in the U.S. and result in closure of numerous existing plants. However, senior White House aides have been on record as stating that, to prevent global warming, the U.S. must also begin phasing out natural gas by 2020. The final CPP rule starts to do this and differs notably from the proposed rule by its increased requirements for renewables and decreased emphasis on natural gas. For example, the final rule:

• Drives a more aggressive transition to zero-carbon, renewable energy sources.
• Requires more extensive decarbonization after 2030 than the proposed rule.
• Eliminates the proposed rule’s early emphasis on natural gas. In fact, the share of natural gas is now essentially flat or declining, compared to business as usual.
• Will cause the share of renewable energy generation capacity in 2030 to be 28%, as compared to 22% in the proposed rule.
• Proposes a Clean Energy Incentive Program (CEIP), to incentivize early deployment of renewable energy and energy efficiency.

President Obama originally advocated gas as the “clean bridge fuel” to transition the U.S. from “dirty fossil fuels” (e.g. coal) to renewables, and gas was supposed to be key to his climate change rule for power plants. However, in the final CPP rule, Obama barely mentioned gas, and the White House Fact Sheet included exactly one reference to gas. The CPP now accelerates a transition from coal directly to renewables.

The proposed rule would have encouraged increased demand for natural gas because of a set of carbon reduction deadlines for states in 2020, which would be too early for many states to deploy renewables. However, the final rule extended that deadline by two years, to facilitate transition directly to renewable energy and energy efficiency, and force a more aggressive transformation to renewables. The new date, along with the CEIP, under which states earn credits for renewable installations, is designed to avoid increased use of gas.

Industry is not pleased. America’s Natural Gas Alliance stated, “The rhetoric out of the White House has been trying to send a clear message that they’re creating a shift from natural gas to more renewables being emphasized in the rule. The President presented a ‘false choice’ between natural gas and renewables.” Similarly, the American Petroleum Institute complained that, “The announcement will dramatically increase consumer cost, it will destroy jobs, and at the end of the day, it doesn’t recognize clean-burning natural gas.” Obama’s environmentalist constituents are, however, ecstatic.

Did anyone in the oil and gas industry really believe that this administration was going to stop at coal? Do they not realize that this administration is viscerally opposed to anything that emits CO₂? The CPP is just an opening salvo in the war on fossil fuels—more are coming, and the war on oil and gas has long since started.

The administration’s relations with the natural gas industry are already tense, due, primarily, to its regulatory agenda. Federal agencies have issued, or are drafting, rules for hydraulic fracturing on federal land, methane leaks from natural gas drilling, and other policies detrimental to the industry. The next phase of Obama’s radical environmental agenda has the oil and gas industry in its sights. In late August, the administration announced plans to reduce methane emissions from rigs and refineries by 40% to 45% from 2012 levels, by 2025. It also plans to tighten oversight of drilling on public lands and impose a strict ozone limit that studies have estimated could be “the most expensive regulation ever.”

Republicans and a few Democrats in Congress may yet succeed in stopping, or at least slowing, some of the regulations targeting the oil and gas industry. However, Republican leaders have little appetite for risking a governmental shutdown to oppose the regulations. In addition, the refinery and ozone regulations are both tied to court-ordered deadlines, making it more difficult for lawmakers to stop them.

The political battle is further complicated by the fact that these regulations are moving through EPA and Interior, with far less publicity or public awareness than did the CPP. Thus, the administration’s war on oil and gas is quieter, more disaggregated and difficult to monitor.

As if all of this were not enough, in December President Obama will participate in the UN IPCC circus in Paris, where he will attempt, without obtaining ratification from the Senate, to commit the U.S. to virtually phasing out all fossil fuels over the next several decades. The really bad news is that this administration and its EPA have another 16 months to expand, solidify and codify this anti-fossil fuel agenda. 

Dr. Roger Bezdek is president of Management Information Services, Inc. in Washington, D.C. He is an internationally recognized energy economist with 30 years’ experience in research and management in the energy, environmental and regulatory areas. He is the author of six books and over 300 papers in scientific journals. 

About the Authors

Dr. Roger Bezdek

Contributing Editor

Dr. Roger Bezdek is an internationally recognized energy analyst and president of MISI, in Washington, D.C. He has over 30 years’ experience in the energy, utility and environmental areas, serving in industry, academia and government. He has served as senior adviser in the U.S. Treasury Department, U.S. energy delegate to the EU and NATO, and as consultant to the White House, the U.N., government agencies, and numerous corporations and organizations. He has written eight books, has published over 300 articles in professional journals, and his work has been featured in the Wall Street Journal, the Washington Post, New York Times, Time, Business Week, Science, Nature, World Oil, and other print and digital media.