Will Natural Gas Cronyism Lead to a Post-Election Regulatory Deluge?

Veronique de Rugy documented today the degree to which the natural gas industry has captured the ear of government, receiving favorable treatment as a result:

Public outrage at cronyism and corporate welfare is growing—and that’s all to the good. But don’t expect well-connected special interests and politicians to go gentle into that good night. Especially if they think the darkness can be dispelled via energy subsidies that are supposed to lead to green jobs, lower gas prices, and energy independence.

The latest energy boondoggle on the table involves the natural gas industry and is called the New Alternative Transportation to Give Americans Solutions Act (NATGAS Act). The bill would provide subsidies for the manufacture and purchase of cars that run on natural gas, the conversion of commercial trucks from diesel to natural gas, the creation of natural-gas filling stations, and tax preferences to favor the use of natural gas over other energy sources. All told, NATGAS could end up costing taxpayers somewhere from $3.8 billion annually (according to the Joint Committee on Taxation) to as much as $14 billion a year by other estimates.

As it stands, natural gas companies are already set to benefit from regulations that hamstring competing energy sources. After granting itself the authority to regulate greenhouse gases, the EPA proposed a series of regulations apparently aimed toward eventually requiring every coal plant in America to either close shop or convert to natural gas. As one EPA administrator recently admitted, “gas plants are the performance standard, which means if you want to build a coal plant, you got a big problem.” The cost of retro-fitting existing plants to meet numerous EPA requirements—including mandated installation of selective catalytic reduction for nitrogen oxides, scrubbers for sulfur dioxide, and electrostatic filters for fine particulate matter—is big enough that the smart choice will be to retire plants sooner than would otherwise be the case. Brattle Group energy analysts estimate that approximately 20 percent of existing coal capacity will be retired rather than face the alternative of installing these and other EPA-mandated retrofits.

One EPA rule already has some coal-fired generating capacities off-line: the Utility MACT. That rule, which was finalized in December of last year, places limits on the emissions generated by coal fired electric generating units starting in 2016. However, the impact of the rule is already being felt today as plants are proactively going off-line. The EPA estimated that the rule would cost $10.9 billion in the year 2015, $10.1 billion in 2020, and $10 billion in 2030. However, according to the National Economic Research Associates annualized compliance costs could be as high as $17.8 billion.

Veronique’s report has proven timely, as news spread just the other day that the EPA may be planning a major post-election anti-coal regulation:

President Obama’s Environmental Protection Agency has devoted an unprecedented number of bureaucrats to finalizing new anti-coal regulations that are set to be released at the end of November, according to a source inside the EPA.

More than 50 EPA staff are now crashing to finish greenhouse gas emission standards that would essentially ban all construction of new coal-fired power plants. Never before have so many EPA resources been devoted to a single regulation. The independent and non-partisan Manhattan Institute estimates that the EPA’s greenhouse gas coal regulation will cost the U.S. economy $700 billion.

The point is not to trash natural gas, but to emphasize that the industry should be working to convince investors of its benefits, not soliciting favoritism from Washington. While its their own money being spent to lobby politicians, it’s taxpayers and energy consumers who ultimately suffer the consequences for cronyism.

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