Congress has taken action that actually advances free markets and limits government intrusion. I was in the room when, on September 17, the House Energy and Commerce Committee–with bipartisan support–advanced legislation to lift the 1970s-era ban on crude-oil exports. HR 702, “To adapt to changing crude oil market conditions,” is expected to receive a full floor vote within a matter of weeks.
The export ban is a relic of a bygone era during which ideas like “peak oil” and “energy scarcity” were the conventional wisdom. Despite all those who cried “wolf,” the U.S. is now the world’s largest combined oil-and-gas producer.
Ending this obsolete ban would unleash America’s energy producers on the global market, increasing domestic production and creating jobs. Additionally, reports from experts at the non-partisan Energy Information Administration and Government Accountability Office, plus consultants at IHS, indicate that it will also lower prices at the pump.
Like everything that seems to happen in Washington, DC, these days, this initial victory may have a price tag that prevents its final passage.
Getting the Democrats on board with removing the barrier to exporting America’s abundance may likely require giving them something they want. Morning Consult recently reported: “Momentum is building in Congress to repeal the antiquated ban on exporting crude oil. Lawmakers and energy industry representatives are talking about other energy policies that could be swapped or combined to achieve that objective. Renewable energy tax credits are part of the equation.”
Those “renewable energy tax credits” are mainly two: the wind Production Tax Credit (PTC) and solar Investment Tax Credit (ITC). Like the oil-export ban, the wind PTC is an archaic policy that has no place in today’s modern reality of energy abundance.
Passed by Congress in 1992, the PTC pays the wind industry for every kilowatt-hour of electricity generated over a ten-year period. No other mature energy source–natural gas, oil, or coal–can claim a similar carve out based on how much product they sell. The subsidy is so lavish that wind developers can sometimes sell their electricity at a loss and still profit. The New York Times has described this as wind’s “cannibal behavior” on the power grid.
The PTC costs taxpayers like you and me billions of dollars each year. Americans pay for wind twice: first in their federal tax bills, then in their local utility bills. According to a new study, commissioned by the Institute for Energy Research, electricity generated from new wind facilities is between three and four times as expensive as that from existing coal and nuclear power plants.
The Senate Finance Committee claims a two-year extension would cost $10 billion over the next decade. After decades of subsidies and multiple PTC extensions, wind still generates less than 5 percent of our electricity.
Congressman [mc_name name=’Rep. Mike Pompeo (R-KS)’ chamber=’house’ mcid=’P000602′ ] (R-KS), who has long opposed the PTC extension, told me: “With a skyrocketing $16 trillion debt and an industry that is more than capable of standing on its own, there is no reason why the federal government should continue to subsidize the wind energy industry. Proponents of the Wind PTC continue to call for an extension-for the umpteenth time. This handout costs taxpayers billions and has caused significant price distortions in wholesale electricity markets that translate into real costs for everyday consumers. If we want a robust economy, it’s time to stop picking winners and losers in the energy marketplace and finally end the wind PTC. After two decades of pork, the wind looters need to stand on their own two feet. Most of the people in the wind industry I talk to know this, and I am confident that those individuals and others in the energy industry will enjoy many marketplace successes once we put a stop to the purely political policies that we have seen to date.”
Despite the mountain of evidence against wind subsidies-including increasing reports of health issues and concerns over bird kills–this summer, before the August recess, the Senate Finance Committee rushed through a package of expired tax provisions, including the wind PTC. Now, wind lobbyists are looking for a legislative “vehicle” to latch on to, preferably one with bipartisan support, to push through another PTC extension without a fair hearing, which is exactly why they’re eyeing the oil-export bill.
According to The Hill, Senator Ed Markey (D-MA) said he could consider lifting the ban “only if it’s tied to a permanent extension of the wind and solar tax credits.”
Swapping the PTC for oil exports is a bad deal, as lifting the ban deserves to pass in its own right. But what many don’t realize is that trading the PTC for oil exports is also a Faustian bargain that furthers President Obama’s destructive climate-change agenda.
The PTC and the president’s climate agenda are related because Obama’s sweeping new carbon regulations, known as the “Clean Power Plan”-finalized in August-require states to drastically cut carbon dioxide emissions. It does this by shuttering low-cost coal plants and building new wind and solar facilities. The problem: wind and solar are uneconomic without massive taxpayer handouts like the PTC and ITC and market-distorting mandates like state Renewable Portfolio Standards.
This scheme is the centerpiece of Obama’s climate legacy, which he hopes to cement in December at the United Nations climate conference in Paris.
These carbon regulations will inflict severe burdens on American families–especially the poorest among us who can least afford to pay higher energy prices. A recent study by the National Black Chamber of Commerce, for instance, found that Obama’s carbon rule would increase Black and Hispanic poverty by 23 and 26 percent, respectively. For all that pain, the regulations will, perhaps, reduce global temperature rise by 0.018 degrees Celsius in 2100-an undetectable amount.
Buried in hundreds of pages of “analysis,” the Environmental Protection Agency projects the wind industry will add more than 13 GW of electrical capacity each year from 2024-2030. For context, 13 GW is exactly how much capacity wind added in 2012, a record year. It is also the year in which rent-seeking wind barons rushed to build as many new turbines as possible to qualify for the PTC, which expired at the end of the year. The following year, after the PTC expired, wind additions collapsed by more than 90 percent–which highlights the fact that the wind industry cannot survive in a free market.
This makes the wind PTC vital to Obama’s carbon regulations. His plan depends on exponential wind growth, and the wind industry depends on government handouts like the PTC to avoid total collapse, let alone grow.
By not accepting a wind PTC tradeoff, Congress can deal a blow to corporate wind welfare and Obama’s carbon regulations in one shot. Congress must strip the PTC out of tax extenders and refuse to use wind subsidies as a bargaining chip. The two are totally unrelated. One is a liquid fuel used primarily for transportation. The other: a way to generate electricity, albeit inefficiently, ineffectively and uneconomically. One helps our trade deficit problem and increases revenues as FuelFix reports: “liberalizing crude trade spurs more domestic production, with a resulting boost in government revenue from the activity.” The other: a hidden tax that hurts all Americans.
By rejecting an extension of the wind PTC and lifting the ban on oil exports, Congress would end corporate welfare for wind lobbyists, deal a blow to Obama’s costly carbon regulations, and free America’s entrepreneurs to provide abundant, affordable, and reliable energy for all.
The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.