OBAMA’S ENERGY POLICY: SLOWING GROWTH HERE AND ABROAD

More dangerous in the long run to U.S. producers are artificial constraints placed on American industry by government decree; regulations that will strangle coal mining, driving up prices at home and limiting the supply of coal for export. The “war on coal” is thus a war on economic progress world-wide, and no group better understands this than the Greens.


By William R. Hawkins | October 24, 2013

As a professional staff member on the U.S. House Foreign Affairs Subcommittee on Oversight and Investigations in 2011, I was able to visit several countries to check on how the U.S. Agency for International Development (USAID) was fulfilling its many missions. On the agency’s website is the statement, “Broad-based economic growth is essential to sustainable, long-term development. It creates the opportunities impoverished households need to raise their living standards, provides countries with the resources to expand access to basic services, and—most important of all—enables citizens to chart their own prosperous futures.” Absolutely true, and not just in “developing” parts of the Third World, but in all parts of the world as “development” is an ongoing process everywhere. Even in the United States, most households still have unmet needs and family members who want to chart “their own prosperous futures.” I was proud to see so many of my fellow Americans working hard to improve people’s living conditions overseas and provide them with good examples from the success story that is the United States.

USAID is not, however, always allowed to do what is best for the people they are sent to help. In the Philippines, our delegation was told at an embassy briefing by U.S. officials that one of the factors holding back economic growth was the high cost of electricity. One of the goals set out by USAID on its website is “Improving infrastructure like roads, bridges, water supply and electrical grids, critical to lifting the limits on a country’s growth.” So when we went to the Manila USAID office, we asked what the agency was doing on energy policy. The answer was that it was helping to develop alternative energy sources, particularly solar and wind. I then asked whether these projects were lowering the cost of electricity. The USAID officials looked at each other and smiled sheepishly. No, they said, all the alternative energy projects were more expensive than conventional sources.

The same problem came up in India. USAID told our delegation that since 2009, it had been told by Washington to stop working with India on coal projects. This was after working with India on such energy technology for 20 years. India generates about 60% of its electricity by coal. Lack of USAID help on how to use coal more efficiently was not going to force New Delhi to abandon coal as a cheap, abundant energy source. Indeed, coal use is expected to expand faster than natural gas over the next few years, because India can mine and import coal faster than it can find new domestic sources of gas.

Ideology Over Practicality

Why the change in U.S. policy in 2009? That was when the Obama Administration came into office and started its “war on coal” both at home and abroad. In 2012, coal provided 37% of U.S. electricity, with natural gas second at 30% followed by nuclear at 19%. Alternate “renewable” energy sources provided only 5% of America’s electricity, with solar the least productive of them all, even after large Federal investments had tried to stimulate the industry. Remember, the Solyndra debacle left the government liable for $535 million in financial guarantees. If such projects fail in the U.S., how can they be expected to help less developed economies advance?

Policy has been based on ideology rather than on practicality. The radical environmental movement (the Greens) does not want the economy to embrace cheap, abundant and secure energy sources like coal, where America has a 500 year supply at current consumption levels. This only feeds an affluent, materialistic and dynamic society which the Greens consider immoral. Greenpeace can claim that “[w]ith current technology, renewable energy sources like wind, solar, and geothermal can provide 96% of our electricity and 98% of our total heating demand — accounting for almost all of our primary energy demand,” while failing to mention what this would cost. If these sources were less expensive, or even comparable, the market would move in that direction on its own. It doesn’t move in the Green direction because the costs are prohibitive.

The nation has seen how the market responds to new energy sources when they make sense. Between 1990 and 2012, natural gas moved from supplying only 1% of America’s energy to the current 30% due to the new technology of hydraulic fracturing (fracking). If technology advances in other areas to generate energy in useful amounts on the basis of sound economics, so much the better. Yet, the Greens will likely try to stop it, just as they are campaigning against fracking even though natural gas is a very clean energy source. The Environmental Defense Fund, for example, stated in its 2012 annual report: “Since gas emits less carbon than coal when burned, it could be one step in the shift to a clean energy economy, and it already has created hundreds of thousands of jobs. But shale gas extraction—which commonly involves hydraulic fracturing, or fracking – also can pollute air and water and despoil landscapes.” Thus, the Greens search for reasons to oppose anything that can be used to power our advanced civilization.

The debate is not really about technology, as Green propaganda constantly argues there are no technological solutions to the problems of Mankind. It is about cultural values; people need to adopt a simpler life-style and make do with less. But I have been to places around the world where people have to make do with less because they have nothing more. It is not paradise; it is poverty, where life is nasty, brutal and shorter than here. The “state of nature,” which the Greens idolize, is what the human race has been striving to rise above throughout its entire history.

Coal and International Trade

This brings the analysis back to the international aspects of U.S. policy, which are stifling cooperation beneficial to economic growth, both in America and overseas. In 2012, coal exports hit a record 185 million tons. They are down a bit this year as economic growth in Europe and China has slowed. China has been the market for half the world’s coal as its economy has rapidly expanded. Beijing has made domestic coal production a priority to reduce imports. Market fluctuations are to be expected, particularly in the current climate of global financial crises. More dangerous in the long run to U.S. producers are artificial constraints placed on American industry by government decree; regulations that will strangle coal mining, driving up prices at home and limiting the supply of coal for export. Other major exporters, such as Australia, Indonesia, Canada, Russia and South Africa, will be eager to grab market share from American firms and workers.

Growth in Asia will continue to require more energy, driving up international coal prices and stimulating mining activity again as it has in the past. As Colin Marshall, chief executive of Cloud Peak Energy, a major United States coal company told the New York Times in September, “If history means anything, the world in a few years will need more commodities, both metals and energy including coal.” According to Euracoal, “Over the last decade, from 2000 to 2010, coal use has grown more strongly than any other primary energy source (+ 28%)….. For power generation, coal plays a major role in both developed and developing countries. In 2010, 41% of global power generation was based on coal.” The “war on coal” is thus a war on economic progress world-wide, and no group better understands this than the Greens.

The White House Council on Environmental Quality has been meeting with federal regulators to assess the possible climate change impact of burning U.S. coal in Asia. The focus is both on the alleged environmental costs of operating export terminals on the Pacific Coast as well as the alleged impact on global warming of helping foreign countries use coal to generate power. Also implied is the support to the American coal industry of lucrative export markets, which would undermine the Administration’s “war on coal” agenda. Using EPA standards, the aim is to prevent any new coal mines from opening and to force many existing mines to close, along with power plants that use coal.

I have been to China and the pollution there is horrible. The first time I arrived in Beijing, I wondered if there was a fire near the airport as the air was full of smoke. The problem is not, however, inherent in the use of coal. China simply has not tried to use coal in a clean manner, but is finally taking steps to do so. There is no comparison between China and America in this regard. When I lived in Knoxville, Tennessee, the TVA’s Bull Run steam plant was only a few miles away from my house. There was never any problem from that coal-fired operation. If I did not drive by it, I would never have known it was there. The problem in China is so bad that U.S. agencies are trying to help Beijing find ways to clean up its act as there is a public health problem that is far more of a threat than any dubious theory about global warming.

I have also visited Taiwan on several occasions. This prosperous island democracy saw electricity use expand by nearly a third between 2000 and 2010. It relies mainly on coal imports. In 2012, China Steel Corp., Taiwan’s largest steel producer, announced it was buying a ten percent share of a coal mine in Queensland, Australia with additional capital going towards expansion. It is a growing U.S. coal market, up 15% in the first half of 2013 though still only a fraction of what American miners sell to the mainland. Taiwan takes 6% of total global coal imports, so there is room for American producers to expand, if Washington will allow it. The island would like to reduce its dependence on imports and has drawn up a plan to expand the use of domestic alternative/renewable energy sources. Yet, even so, the Taipei government’s target is only to generate 16% of its energy at home by 2025. So even in a small, advanced economy it is not feasible to make the wholesale shift from traditional to alternative energy sources that the Greens demand on a global scale.

The Campaign Against American Exports

Coal exports to Asia are down overall this year, mainly due to a 44% drop in the Indian market. This is not because India needs less coal. India is expected to become the largest coal importer in the world in the next 3-5 years, surpassing China. It is just that New Delhi does not consider the U.S. a reliable supplier given its hostile attitude towards the coal industry. It is taking its business elsewhere.

Also put in jeopardy by the Greens are U.S. natural gas exports. The Sierra Club decided in 2012 to complement its “Beyond Coal” crusade with a “Beyond Natural Gas” campaign. It is now demanding “Stop LNG Exports” claiming on its website, “Exporting Liquefied Natural Gas (LNG) to overseas markets is a dirty, dangerous practice that lets the industry make a killing at the expense of human health” and saying that “the LNG lifecycle is as dirty as coal.” Though U.S. exports of natural gas via pipelines to Canada and Mexico were up in 2012, LNG exports overseas were down. This was true even in trade with Japan. Tokyo increased imports of energy supplies in the wake of the Fukushima reactor incident which, in an irrational political overreaction, closed down the country’s nuclear power industry.

The Department of Energy (DOE) is holding up approval of LNG exports. The most recent approval – only the fourth this year – took 600 days to work its way through an unfriendly bureaucracy. At the current rate, it will take DOE over 30 years to process the export requests already filed. In contrast, Canada is moving ahead to lock in long-term contracts with Japan for LNG, its producers not having the restrictions found in the U.S.

Some American manufacturers have worried that LNG exports will limit the availability and raise the price of domestic natural gas. If true, this would be a matter of concern. A U.S. that is self-sufficient in energy would be advantageous in many ways, including in providing American-based industry and business a competitive advantage over foreign rivals, whose power supplies were less secure. However, numerous studies indicate that the boom in natural gas production thanks to fracking is quite adequate for both domestic and export markets; providing more jobs and income for Americans and more influence for the U.S. in world affairs.

It takes wise policy to turn the abundant potential of American coal and natural gas into national advantages. Everything we do requires energy, something we are instantly reminded of whenever there is a power disruption due to a storm or accident. We expect such disruptions to be quickly remedied and complain bitterly to the authorities when there is any delay. Yet, what happens when electricity generation is curtailed not by random events but by design? When the government, which is charged with promoting national advancement, decides progress is no longer desirable? Jobs become scarce, prices go up and living standards drop. Budget deficits are run to help people adapt to the recession rather than recover from it.

Such is the Green agenda, which has had a delirious affect on the Obama administration. The vicious Green campaign which brought the American nuclear power industry to a standstill a generation ago has now spread to coal and natural gas making this a broad-based “war on electricity.” Americans have to either turn on the Greens and drive them out of politics or turn off the lights and welcome in a New Dark Age.


William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to SFPPR News & Analysis.

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