By Stacy Washington at The Daily Caller May 20, 18
As a matter of policy, President Barack Obama set the destruction of the coal industry in his sights and was unfortunately efficient in executing his mission. In response, the Trump administration executed a directional shift towards supporting clean coal, acknowledging that over 80 percent of Americans’ electrical needs are filled by coal production.
After the Federal Energy Regulatory Commission rejected proposed rulemaking by the Department of Energy under Secretary Rick Perry, Ohio-based FirstEnergy Solutions Corp asked the DOE to use the Defense Production Act of 1950 to subsidize coal and nuclear plants in a specific market area. FirstEnergy needs these subsidies as the company is in bankruptcy.
Using DPA is feasible because it enables the president to place government orders of scarce essential resources ahead of private ones, and can nationalize critical resources through loan guarantees and subsidies. This makes sense during a wartime footing — clearly, the coal industry has experienced the brunt of Obama’s attacks on the coal industry — but the proposed usage of DPA here is a misapplication.
Conservatives rightly cried out against the auto industry bailouts, and this action would effectively rescue a very specific segment of the energy industry. Imbalances in the market would be artificially created, as just one aspect of energy production would be subject to government incentives.
A dangerous precedent would be set: when in trouble, expect the government to essentially nationalize your industry and create market forces that prohibit failure. A safety net like that could encourage reckless business practices; unintentionally creating negative outcomes for energy company shareholders and artificially increasing prices for consumers.
There is also a lack of logic present here. If coal plants are in danger of closing, are government subsidies the proper mechanism to remedy the potential losses? Government intervention will only temporarily stave off the inevitable. During the Obama Administration, natural gas production increased, making up for the loss of coal plants. Notwithstanding, the DPA has an express mandate for use during an emergency or wartime footing. None of those conditions are present at this time.
Opposition to the Energy Department’s planned use of DPA has been swift, with both R Street and The Heritage Foundation weighing in. Katie Tubb, a policy analyst for Heritage writes, “The DOE and the Federal Energy Regulatory Commission should maintain regulator discipline and not use the power of government to manipulate energy markets in favor of their preferred energy technologies or against those that do not fall neatly into place in their political narratives.”
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Nicholas Loris also of The Heritage Foundation points out that subsidies are bad for business, “If power plants are profitable, subsidies only serve to pad a company’s bottom line,” going on to say “For an administration that promised to drain the swamp, energy subsidies do the opposite.”
To his credit, this spring Secretary Perry requested a study to ascertain the reliability of America’s electricity markets. The study analyzed nine regions responsible for delivering roughly two-thirds of the electricity delivered to consumers. The resulting staff report found reliable delivery of electricity, and a need for the private sector to become more resilient in handling evolving market conditions in electric generation and utilization of additional grid resources. These are definitely not conditions that nationalizing electric producers or subsidies would help.
As much as saving coal plants benefits the workers and communities in which they operate, conservatives cannot resort to bastardizing the law to accomplish an admirable aim. The Department of Energy and Secretary Perry must stand firm in opposing government interference in the free market.