Not all is rosy for new coal-fired plants. Last year, coal-fired generation fell from 48.2 percent to 44.6 percent of total U.S. electricity generation,[iii] as low natural gas prices raised the gas share, and higher water levels and wind turbine capacity increased the renewable share. While some states remain favorable to new coal-fired generation, others are tied up in legal opposition and regulatory hold-ups for permits. Nevertheless, many folks agree that the present difficulty of putting cap-and-trade legislation through the Senate is having positive effects on new coal builds.[iv]

Past Announcements vs. Operational Units

NETL has tracked announcements versus actual construction of units over time and has noted that escalating costs and uncertainty about whether climate change legislation would pass have caused fewer coal-fired power plants to be constructed than were originally announced. NETL’s 2002 report, for example, noted that over 36,000 megawatts of coal-fired capacity were to be built by 2007, while only 12 percent of that amount (4,500 megawatts) was actually constructed during that period. The figure below shows the announcements of coal-fired plants versus actual plant construction over the past decade.

Current Status

According to NETL, in 2009, 8 coal-fired plants, listed in the figure below, came on-line in the following states: Iowa, Kentucky, Colorado, Illinois, Nebraska, Texas, and Arizona. The laboratory categorizes future plant additions as announced, permitted, near construction, or under construction. A plant in the announced phase is in the early stages of development and may be filing for permits. A plant in the permitted phase either has two or more permits approved or its fuel or power contracts have been negotiated. A plant near construction has obtained approval and received the majority of its permits, has begun site preparation, and is contracting for vendors and Engineering, Procurement and Construction contractors.

As of January 2010, NETL reported that 46 coal-fired plants were announced (26,233 megawatts), 8 were permitted (3,280 megawatts), 1 was near construction (320 megawatts), and 22 coal-fired plants were under construction (13,755 megawatts)for a total of 43,588 megawatts in the pipeline. (See table below.) While plants under and near construction are likely to come on line, NETL warns that regulatory uncertainty and industry cost increases are impacting development decisions for all projects.

The EIA is a little less optimistic. In its Annual Energy Outlook 2010, it is forecasting that between 2008 and 2035, an additional 26,400 megawatts of coal-fired capacity will come on-line; of that, 15,600 megawatts are in the pipeline.[v] EIA’s assessment reflects their beliefs about regulatory and financial uncertainty in the cost of capital for coal-fired units, and assumes a 3-percentage point increase in the cost of capital when evaluating investments in greenhouse gas intensive technologies without carbon capture and sequestration (CCS) technology. The 3-percentage point adjustment is similar to a $15 per ton carbon dioxide emissions fee when investing in a new coal plant without CCS technology. The adjustment accounts for the possibility that the plants may need to purchase allowances or invest in other greenhouse gas emission-reducing projects that offset their emissions in the future.[vi]

The International Energy Agency is a little more optimistic than the EIA in its World Energy Outlook 2009, forecasting an additional 35,000 megawatts of coal-fired capacity above 2007 levels by 2030.[vii]

Regulatory Climate

In some states, coal is essentially banned or is having a very difficult time getting permitted. In California, for example, there is a de facto ban on new coal-fired plants resulting from a performance standard that requires all new base-load generation to produce no more greenhouse gas emissions than a new natural gas combined cycle plant.[viii] Washington State also has a de facto ban on new coal-fired plants, requiring a 20 percent offset in carbon dioxide emissions from new fossil fuel plants.[ix]

In Kansas, in 2008 and 2009, then-governor Kathleen Sebelius vetoed bills by the state legislature that would have allowed Sunflower Electric Power to build two 700-megawatt coal-fired power plants that had been originally rejected by a state environmental official because of its output of carbon dioxide emissions. Once Kansas Governor Sebelius became a cabinet secretary in the Obama Administration, the atmosphere turned more favorable. The new Kansas governor, Mark Parkinson, is allowing one new coal-fired plant to be built.[x]

In Georgia, a state where coal is the primary fuel for electric generation, Longleaf, the first coal-fired power plant to be built in more than 20 years, is tied up in litigation. In late June 2008, Fulton County Superior Court Judge Thelma Wyatt Cummings Moore overturned the decision by state regulators to issue the plant an air permit, saying state environmental officials failed to take the plant’s carbon dioxide emissions into consideration. In her decision, Moore said the plant would annually emit large amounts of air pollutants, including nine million tons of carbon dioxide (even though carbon dioxide was not defined as a regulated pollutant at the time). In November 2008, the plant owners appealed the decision to the State Court of Appeals. In July 2009, the Court of Appeals overturned the decision, but left the plant’s permit invalid. In September 2009, the Georgia Supreme Court ruled that they would not hear an appeal by the Sierra Club against the previous ruling. While the Sierra Club appealed to the court to reconsider, the Georgia Supreme Court held to their prior ruling. In April 2010, the state Environmental Protection Division issued two amendments to the permit, but failed to allow enough time for public comment. The plant is on hold while the state determines when they will provide the documents for comment.[xi]

In New Mexico, the Desert Rock coal-fired power plant, whose permit was originally approved by the Environmental Protection Agency (EPA) under the Bush Administration. The permit, however, was withdrawn by the same EPA during the Obama Administration, citing inadequate analysis of environmental issues and a failure to use the appropriate technology, coal gasification combined cycle. The plant was to use supercritical coal technology and meet standards defined by the International Energy Agency for carbon capture and storage, allowing it to be retrofitted for future deployment of the coal-gasification technology when it becomes commercially available. The 1,500 megawatt plant was to serve parts of Arizona, New Mexico, and Utah, using Navajo Nation coal resources. According to the President of the Navajo Nation, the EPA is holding it accountable to higher standards than other parts of the United States. In April 2010, the power plant owner indicated that the project was not dead, but it is no longer clear what fuel the owner will use—fossil or renewable.[xii]

China’s Reliance on Coal

It is important to remember the big picture. Carbon dioxide emissions are global emissions, in that reducing them in the United States does not guarantee an absolute reduction. For example, unlike the United States, China has no qualms of dramatically increasing its coal-fired electricity generation and carbon dioxide emissions.

China currently gets 70 percent of its energy and 80 percent of its electricity from coal. China is the largest producer and consumer of coal in the world, and many of China’s large coal reserves have yet to be developed. The country currently ranks third in coal reserves, after the United States and Russia, with 13 percent of the world total.[xiii]

The EIA is projecting that those percentages will change very little in the future, despite the so-called lead that the U.S. administration says China has in green energy. By 2035, EIA expects China to get 62 percent of its energy and 74 percent of its electricity from coal. The statistical agency expects China to add 737 gigawatts of coal-fired capacity to its existing 496 gigawatts, an increase of about 150 percent. China’s coal-fired capacity in 2007 exceeded that of the United States by over 180 gigawatts and the additions that China is expected to make to coal-fired capacity by 2035 will be more than double the current coal-fired capacity in the United States. In fact, the forecasted coal-fired capacity of China in 2035 (1233 gigawatts) exceeds the total capacity of all types forecasted for the entire United States in that year (1216 gigawatts).[xiv]

The International Energy Agency (IEA) is also in agreement that China will be building a massive number of coal plants in the future. Their forecast has an additional 773,000 megawatts of coal-fired capacity being constructed by 2030 from 2007 levels, surpassing the total generating capacity in the United States in 2030. They also expect China’s electricity sector to be mainly coal fired, with coal producing 75 percent of the country’s electricity in 2030.[xv]

NETL also agrees with EIA’s and IEA’s outlook regarding construction of coal-fired capacity as the figure below indicates. During the past decade, China has been building 10 to 70 gigawatts of coal-fired capacity each year, and it has about 185 gigawatts planned.

The chart below shows the dramatic difference between the Chinese and American build-rates for coal-fired generating capacity. The blue and green bars show China’s new coal-fired capacity, built, under construction, and planned, and they are compared to the red and yellow bars for the U.S.’s coal fired capacity that are operational and under construction. The announced U.S. plants have been so tentative in the past that they are not included on the chart.

Conclusion

While the current outlook is somewhat brighter for coal-fired power plants here in the United States, their ability to compete with natural gas and renewable technologies is hampered by uncertainty over legislation and regulation, along with legal delays. Congress has had various proposals for a cap and trade bill to limit greenhouse gas emissions, but to date only the House of Representatives has passed their version of the bill. In the mean time, the EPA is planning to limit those emissions through regulation. Coal’s fate in this country is still uncertain, but China realizes that coal is its answer to economic growth, providing the energy it needs to improve the living conditions of its population.

[ii] Energy Information Administration, Electric Power Monthly, http://tonto.eia.doe.gov/ftproot/electricity/epm/02260904.pdf, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261008.pdf

[iii] Energy Information Administration, Monthly Energy Review, http://www.eia.gov/emeu/mer/pdf/pages/sec7_5.pdf

[iv] Associated Press, America’s New Coal Boom, August 17, 2010, http://www.google.com/hostednews/ap/article/ALeqM5iCjlywOJyCu1MSGH7FUqj7jD1c1QD9HL5RUO2

[v] Energy Information Administration (EIA), Annual Energy Outlook 2010, Table 9, http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

[vi] Energy Information Administration, Annual Energy Outlook 2010, http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

[vii] Organization for Economic Cooperation and Development, International Energy Agency, World Energy Outlook 2009.

[viii] Institute for Energy Research, Energy Regulation in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/california/

[ix] Institute for Energy Research, Energy Regulation in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/washington/

[x] The Washington Post, Gristmill: What’s not the matter with Kansas, July 10, 2008, http://www.washingtonpost.com/wp-yn/content/article/2008/07/15/AR2008071500930.html, and http://www2.ljworld.com/news/kansas/energy/sunflower/

[xi] Wall Street Journal, February 4, 2008, http://blogs.wsj.com/environmentalcapital/2008/02/04/wall-street-tells-big-coal-not-so-fast/?mod=WSJBlog , April 2, 2008, http://blogs.wsj.com/environmentalcapital/2008/04/02/bank-of-america-more-heat-on-coal/ , August, 13, 2008, http://blogs.wsj.com/environmentalcapital/2008/08/13/burning-cash-coal-friendly-banks-under-fire/, and http://www.sourcewatch.org/index.php?title=Longleaf

[xii] The New Mexico Independent, EPA plugs the plug on Desert Rock coal-fired power plant, April 28, 2009, http://newmexicoindependent.com/26011/epa-pulls-the-plug-on-desert-rock-coal-fired-plant , Greenwire, COAL: Extension granted for appeals of N.M. power-plant permit , August 22, 2008, http://www.eenews.net/Greenwire/2008/08/22/8, and The Navajo Times, Desert Rock not dead, April 15, 2010, http://www.navajotimes.com/news/2010/0410/040810desertrock.php

[xiii] Energy Information Administration, http://www.eia.doe.gov/emeu/cabs/China/Coal.html

[xiv] Energy Information Administration, International Energy Outlook 2010, http://www.eia.doe.gov/oiaf/ieo/index.html

[xv] Organization for Economic Cooperation and Development, International Energy Agency, World Energy Outlook 2009.

History and Projections

Just a short seven years ago, China consumed less than half the energy that the United States consumed.[iii] By 2009, China had not only caught up with the United States as far as energy consumption was concerned, but consumed almost 4 percent more energy than the United States, which was suffering from an economic downturn. According to the IEA, China consumed 2,252 million tons of oil equivalent last year, compared to 2,170 million tons of oil equivalent consumed by the United States.[iv] China’s economy and energy demand have grown at breakneck speed as it has become the world’s leading exporter, and it stands poised to overtake the United States in manufacturing output in 2011. [v]

The United States is the largest consumer of energy on a per capita basis, according to the IEA, using about 5 times the amount of energy as China per inhabitant, in part because of the much wider use of personal transportation in the United States. [vi] However, sales of automobiles in China have now outstripped those in the United States.[vii] So that U.S./China per capita ratio is not likely to continue for long.

China recorded its largest oil demand in June of 2010 at 8.98 million barrels per day, 10 percent higher than a year before, and 0.7 percent higher than May 2010, the previous record.[viii] And China is expected to build an additional 1,000 gigawatts of generating capacity, about the total U.S. electric capacity base, in the next fifteen years, according to the IEA.   In contrast, growth in U.S. energy demand has been reduced by the recession, efficiency and intensity improvements, and regulations, while supply has been constrained by opposition to all forms of non-renewable energy and its transport.

The Energy Information Administration projects that by 2035, China will have a total of 1,924 gigawatts of electric generating capacity, compared to 1,216 gigawatts for the United States, with an annual growth rate of over 5 times that of the United States. [ix] Over 60 percent of that new generating capacity is projected to be coal-fired. And while there are “clean” coal technologies for removing sulfur dioxide and nitrogen oxide, there is no commercial technology as yet for removing carbon dioxide emissions. Thus, the EIA projects that China’s carbon dioxide emissions will be over twice that of the United States by 2035, with its emissions from coal being 4.5 times as much as those in the United States.[x]

Global Carbon Dioxide Emissions

According to the  Netherlands Environmental Assessment Agency (PBL)[xi]—using data from British Petroleum (BP), the U.S. Geological Survey (USGS), and the latest version of the Emission Database for Global Atmospheric Research—global carbon dioxide emissions were constant in 2009. (See chart below.) The developed world’s recession brought about reduced fossil fuel consumption, but China and India together offset those reductions.[xii] China increased its coal consumption by 9.6 percent in 2009, and India increased coal consumption by 6.8 percent.[xiii]

According to PBL calculations, emissions from fossil fuel combustion in the industrialized countries (including those from gas flares, the burning of waste gas from oil drilling, and other industrial processes, such as the production of cement and ammonia) decreased by 7 percent owing to an attempted compliance with the Kyoto Protocol by countries that have ratified it and to the global recession. In China, despite a doubling of wind and solar energy for the fifth year in a row, carbon dioxide emissions increased by 9 percent, and in India, they increased by 6 percent.[xiv] Owing to the United Nations’ Clean Development Mechanism (CDM), the developed countries have been funding wind and solar projects in underdeveloped countries as a form of compliance with the Kyoto Protocol.[xv] China has benefited from the CDM to the point that 30 percent of its wind units are still not connected to its electrical grid.[xvi]

China’s Goals for Emission Reductions

China has set targets to reduce energy consumption per unit of economic output by 20 percent this year compared with 2005, and to reduce emissions of greenhouse gases per unit of economic output by 40 to 45 percent in 2020 from its 2005 levels.  However, it is finding it difficult to meet these targets owing to its expanding economy and its population’s desires for Western conveniences (e.g., bigger cars, more appliances).   As a result, apartment and office buildings are being constructed at a rapid pace; sales of large household appliances (such as refrigerators and washing machines) have more than doubled in the past year in rural China alone, owing to government subsidies to help peasants afford modern conveniences; and Chinese malls, which are exempt from temperature regulations, are being built throughout Chinese cities. To provide the electricity needed, last year, China built new coal-fired power plants with a total capacity greater than all the power plants in New York State.[xvii]

Further, China’s auto sales increased by 48 percent last year, surpassing U.S. auto sales for the first time, and they continue to increase.  With its economy shifting away from light industries for export (e.g., toys and clothing) and toward energy intensive industries such as steel and cement to satisfy domestic demand for goods, China has seen its efficiency gains reverse, having declined by 3.2 percent in the first quarter of this year. China uses twice as much energy per dollar of output as the United States and three times as much as the European Union. Further, manufacturing, which is energy intensive, makes up three times as much of the Chinese economy as it does the U.S. economy.[xviii]

With huge demand increases in electricity generation and steel mills, Chinese coal imports are expected to reach a record in 2010. According to Peabody Coal, China imported 70 million metric tons of coal during the first 6 months of this year, double the amount it imported through June of last year.[xix] China uses coal in its industrial processes in addition to its electricity production. In 2007, for example, China produced  50 percent of the world’s cement, more than 13 times as much as the United States.[xx]

Conclusion

As a result of its economic growth—expected to be 10 percent this year—and its citizens’ demand for Western conveniences, China’s energy requirements are increasing and it is becoming less energy efficient, contrary to its stated goals. Because most of its energy is produced from coal, China’s carbon dioxide emissions are increasing at a rapid pace. In fact, China’s carbon dioxide emissions have shown the largest six-month increase ever by a single country.[xxi] With double-digit economic growth, plus growing consumer demand and manufacturing capabilities, China is focused on supplying energy to feed its economic growth and to meet the needs of its population.  As Faith Birol, head of the IEA said when announcing China’s new status as the world’s number one energy consumer, China’s ascendancy marks “the start of a new age in the history of energy.”

[ii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec2_3.pdf

[iii] Energy Information Administration, http://tonto.eia.doe.gov/cfapps/ipdbproject/iedindex3.cfm?tid=44&pid=44&aid=2&cid=&syid=1999&eyid=2004&unit=QBTU

[iv] According to the BP Statistical Review that includes oil, natural gas, coal, nuclear, and hydroelectric power in its primary energy statistics, China was still slightly behind the U.S. in energy consumption with the U.S. consuming 2,182 million metric tons of oil equivalent, and China consuming 2,177 million metric tons of oil equivalent.  See http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

[v] “US manufacturing crown slips”, Financial Times, June 20, 2010  http://www.ft.com/cms/s/0/af2219cc-7c86-11df-8b74-00144feabdc0.html

vi The Wall Street Journal, China Passes US as the World’s Biggest Energy Consumer IEA, July  19, 2010, http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?hat_input=China+Passes+U.S.+as+World%27s+Biggest+Energy+Consumer

[vii] “China overtakes US as world’s biggest car market” The Guardian, January 8, 2010. http://www.guardian.co.uk/business/2010/jan/08/china-us-car-sales-overtakes

[viii] Platt’s Report: China’s Oil Demand in June Hits New High, Up 10% from Year Ago, July 21, 2010, http://www.prnewswire.com/news-releases/platts-report-chinas-oil-demand-in-june-hits-new-high-up-10-from-year-ago-98919164.html

[ix] Energy Information Administration, International Energy Outlook 2010, http://www.eia.doe.gov/oiaf/ieo/pdf/ieoecg.pdf

[x] Ibid., http://www.eia.doe.gov/oiaf/ieo/pdf/ieorefcase.pdf

[xi] “No growth in total global CO2 emissions in 2009″, Netherlands Environmental Assessment Agency, July 1, 2010, http://www.rivm.nl/bibliotheek/rapporten/500212001.pdf.

[xii] Financial Times, China and India, the CO2 culprits of 2009, July 5, 2010, http://blogs.ft.com/energy-source/2010/07/05/china-and-india-the-co2-culprits-of-2009/

[xiii] BP Statistical Review of World Energy, June 2010, http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

[xiv] “No growth in total global CO2 emissions in 2009″, Netherlands Environmental Assessment Agency, July 1, 2010, http://www.rivm.nl/bibliotheek/rapporten/500212001.pdf.

[xv] Institute for Energy Research, http://www.instituteforenergyresearch.org/2010/03/24/kyotos-clean-development-mechanism-is-it-producing-results-for-whom/

[xvi] Wall Street Journal, China’s Wind Farms Come With a Catch: Coal Plants, September 28, 2009, http://online.wsj.com/article/SB125409730711245037.html

[xvii] New York Times, China Fears Consumer Impact on Global Warming, July 4, 2010, http://www.nytimes.com/2010/07/05/business/global/05warm.html?_r=1

[xviii] Ibid.

[xix] ClimateWire, Coal: Peabody’s 2Q earnings surge on China’s galloping energy demand, July 21, 2010, http://www.eenews.net/climatewire/2010/07/21/3/

[xx] U.S. Geological Survey,  http://minerals.usgs.gov/minerals/pubs/commodity/cement/mcs-2008-cemen.pdf

[xxi] New York Times, China’s Energy Use Threatens Goals on Warming, May 6, 2010, http://www.nytimes.com/2010/07/05/business/global/05warm.html?scp=3&sq=China’s%20Energy%20Use%20Threatens%20Goals%20on%20Warming&st=cse

EIA’s Short-Term Forecasts

Because of the global recession and the slow U.S. recovery, the EIA expects U.S. petroleum demand to increase by only 200,000 b/d in 2010 and by 170,000 b/d in 2011, an increase of approximately 1 percent in each year. Despite the moratorium, domestic production is still expected to increase in 2010, but by only about 70,000 b/d, one-fifth of the previous year’s increase. Because of the Energy Independence and Security Act of 2007 mandating biofuel production, ethanol is expected to increase by 150,000 b/d in 2010. Together, domestic oil production and ethanol production will thus be able to meet the increased demand levels for 2010.

In 2011, however, the story is expected to be different. Although onshore oil production is expected to increase from 2010 levels, it will not be enough to compensate for the losses caused by the Administration’s drilling moratorium. As a result, EIA is projecting a decline in oil production of 26,000 b/d.  That production decline will be offset somewhat, the agency’s expects, by ethanol production that will increase 30,000 b/d from 2010 levels. Nevertheless, because petroleum demand is expected to increase, imports must compensate. EIA projects those imports to be petroleum products, which will be 190,000 b/d higher than they were in 2010, helping to not only meet the demand increases in 2011, but also to offset a forecasted decline in crude oil imports of 11,000 b/d.

The decreased production impacts from the Gulf of Mexico that are forecast by EIA in its July Short-Term Energy Outlook are higher than they were in the June Outlook. EIA indicates that it will continue to refine the estimates as more information becomes available. And more information has become available. The moratorium has now extended to 3 rigs in the Pacific, off the coast of Santa Barbara. A prolonged moratorium in the Pacific would impact more than 100,000 barrels of oil a day, resulting in even more dependence on foreign oil. It is unclear why the U.S. Department of Interior extended the moratoria to the Pacific, inasmuch as operations there differ from those that caused the oil spill in the Gulf and drilling operations there have been performed for over 40 years without a spill.[iii]

EIA’s Long-Term Projections

According to EIA, 30 percent of total oil production in the United States in 2009 came from the offshore area of the Gulf of Mexico [iv] and more than 80 percent of Gulf production was from deep water.[v] EIA’s long-term projections expect total offshore production to reach 38 percent of domestic production by 2035, increasing by 1 million barrels per day between 2007 and 2035, an annual rate of increase of 2.3 percent. That increase includes drilling off the Atlantic and Pacific coasts, owing to the expiration of the moratoria on offshore drilling that was permitted by both Congress and the administration in 2008. Of course, that was before BP’s oil spill on April 20, 2010, and the 6-month drilling moratorium enacted by the Obama administration.

The result of the Obama administration’s moratorium on deepwater exploratory oil drilling and increased offshore drilling regulations was to shut down the operation of 33 deepwater rigs and stall permits in shallow water.  It took the Federal government until July 19^th to issue a permit to drill in shallow water.[vi] In the deepwater areas, things are even more grim. Because keeping rigs idle costs their owners $500,000 a day (in the lost opportunity costs of drilling elsewhere),  2 oil rigs have left the Gulf of Mexico for foreign countries where the rig owners feel the atmosphere is more conducive to offshore drilling; the owners of an additional rig are contemplating a move. More owners may make the move if the drilling moratorium goes past November.[vii] Rep. Pete Olson (R-TX), who called for lifting the moratorium, said: “Once the rigs relocate, it could be a minimum of five to 10 years before they return.”[viii] Others are not so pessimistic, however, because of a possible surplus of newly built rigs next year. Nonetheless, there is a great deal of uncertainty as to whether the EIA’s long-term oil production forecasts will come to fruition.

That uncertainty includes whether the Obama Administration will open the waters off the Atlantic and Pacific coasts to oil and natural gas exploration. While President Obama had previously been open to such a move, the actions that are required to open those areas to exploration have been delayed by his administration.[ix]

Long-Term Impacts

Of course, if shut-downs in the Gulf were to continue, whether because of a moratorium or because of economic conditions that made drilling in the Gulf a sub-par investment, the short-term impacts noted above would get magnified over time.  A complete shut-down of deepwater drilling would reduce U.S. oil production by more than 27 percent by 2035, and oil imports would be 19 percent higher.[x] Further, employment would be reduced by 175,000 jobs (direct and indirect) each year between now and 2035, and GDP would be reduced by $500 billion ($20 billion annually).[xi]

The above estimates were based on the reference case forecasts from EIA’s Annual Energy Outlook 2010[xii] and projected development expenditures for deep water development in the Gulf from a 2009 IHS Global Insight study. A more recent analysis by Wood Mackenzie substantiated the project cost assumptions, indicating that higher drilling costs, an estimated 25 percent increase in capital costs from increased regulations and taxes, and regulatory delays would make the deepwater fields of the Gulf of Mexico sub-economic, that is, unable to achieve a post-tax internal rate‐of‐return of 10 percent.

Conclusion

With the oil spill from BP’s Macondo well essentially contained and only some tar balls left, the question is still open as to whether the Obama administration will restore drilling in the Gulf and the Pacific and lift the moratoria or at least not extend them past November so that the nation can benefit from its domestic resources, instead of competing with China and other countries for additional foreign oil supplies. Also at issue is whether oil companies will be subjected to unreasonable rules that will make offshore oil production unprofitable. Congress[xiii] is currently working on legislation to improve safety and to help prevent future oil spills from occurring,[xiv] but that legislation may prove too onerous for the industry, subjecting the American public even more to the whims of foreign countries.

[ii] BP Statistical Review of World Energy, June 2010, http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

[iii] New offshore drilling moratorium lays off dozens of local workers, July 29, 2010, http://www.vcreporter.com/cms/story/detail/new_offshore_drilling_moratorium_lays_off_dozens_of_local_workers/8107/

[iv] Energy Information Administration, Gulf of Mexico Fact Sheet, http://www.eia.gov/oog/special/gulf/gulf_fact_sheet.html

[v] Energy Information Administration, Annual Energy Outlook 2010, Table 113, http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

[vi] Reuters, U.S. issues first shallow-water drilling permit, July 19, 2010, http://www.reuters.com/article/idUSTRE66I5DG20100719

[vii] The Wall Street Journal, Exodus of Rigs Hasn’t Happened, July 21, 2010, http://online.wsj.com/article/SB10001424052748704723604575379332167380458.html?KEYWORDS=Exodus+of+Rigs+Hasn%27t+Happened

[viii] Deep Water Oil Drilling Rigs Leaving the Gulf Region, July 29, 2010, http://yoursinglesourcefornews.com/deep-water-oil-drilling-rigs-leaving-the-gulf-region/1712/

[ix] The Guardian, Barack Obama orders six-month freeze on offshore drilling and expansion, May 28, 2010, http://www.guardian.co.uk/environment/2010/may/27/obama-strategy-offshore-oil-drilling

[x] Potential Impacts of Proposed Increases in Regulations & Taxes on Deepwater Drilling in the Gulf, http://www.scribd.com/doc/34950965/Potential-Impacts-of-Proposed-Increases-in-Regulations-Taxes-on-Deepwater-Drilling-in-the-Gulf

[xi] Ibid.

[xii] Energy Information Administration, Annual Energy Outlook 2010, http://www.eia.doe.gov/oiaf/aeo/index.html

[xiii] The U.S. House of Representatives passed its version of the “oil spill” legislation (H.R. 3534)  on Friday, July 30, 2010. See http://www.eenews.net/eed/

[xiv] Bloomberg Businessweek, Congress Moves to Restrict Drilling, Shelves CO2 Cap, July 28, 2010, http://www.businessweek.com/news/2010-07-28/congress-moves-to-restrict-drilling-shelves-co 2-cap.html

AEA recently commissioned a study that showed 12,000 jobs would be lost and $2.8 billion in economic activity with it, because of the Administration’s six-month moratorium in the Gulf.

The survey also found that Americans overwhelming oppose new regulations on the energy industry and, instead, support efforts to better enforce existing laws (16%-75%).

Read the full results from AEA’s survey here.

These costs are completely independent of the costs caused by the oil spill and cleanup. These are the costs of the moratorium the Administration imposed after the spill. Mason explains:

Halting all offshore deepwater drilling in response to a likely low-probability event serves neither to address the root causes of the accident, nor to aid in the economic rehabilitation of the Gulf region. Indeed, a moratorium on offshore drilling would result in billions in additional lost economic activity in the Gulf.

The following table summarizes Mason’s findings. It shows that the Gulf area alone could lose $2.1 billion in economic activity, over 8,000 jobs, half a billion dollars in wages, and nearly $100 million in lost tax revenue.

This moratorium is causing great economic harm on the Gulf and is compounding the problems caused by the spill. Already two deepwater rigs have left the Gulf to move to countries like Egypt and Congo where they will be able to explore for oil

This economically destructive moratorium is just one more example of the Obama Administration paying little heed to affordable energy.

The complete study is available here.

In the electricity-generation market of 2009, coal generation had only a 44 .6 percent share, 3.6 percentage points lower than in 2008 and the lowest level since 1978 when it represented 44.2 percent of the market. Hydroelectric power, wind energy, and natural gas picked up most of the market share coal lost in 2009.[i] Higher water levels helped lift hydroelectric generation, while wind and natural gas boosted their generation levels by adding capacity. Natural gas was also able to compete more effectively against coal, inasmuch as gas’s price was about 50 percent lower in 2009 than in 2008.

Natural gas garnered over half the share lost by coal’s decreased generation because, unlike wind, combined-cycle generators have higher capacity factors and are dispatchable. Therefore, they are a better substitute for coal-powered electricity generation. But substituting natural gas-fired generation for coal-fired generation comes at a price to consumers, inasmuch as average coal-fired production costs in 2009 were 40 percent lower than those of natural gas—2.97 cents per kilowatt hour for coal versus 5.0 cents per kilowatt hour for natural gas.[ii]

Why is coal seeing a reduced market and what are the consequences to electricity consumers? A number of factors are responsible for coal’s lower market share, including: the possibility of further national legislation and regulation benefitting other technologies and promoting the reduction of coal-fired generation; state programs for reducing greenhouse gas emissions and increasing renewable sources of energy; a more competitive environment for natural gas production and generation; higher subsidies on a production basis for renewable sources than for traditional coal-fired generation; and regulatory reviews and legal delays that result in the cancellations of coal-fired projects. Among the consequences of increased regulatory and legislative programs are higher costs both for the substitute technologies and for compliance by coal-fired generators.

An example of what electric utility companies face with regard to coal-fired generation can be seen in a report by the National Resource Defense Council (NRDC), based on 2008 data but recently released and showing the criteria pollutants (e.g., sulfur dioxide, nitrogen oxide, and mercury) and carbon dioxide emissions of the nation’s top 100 electric generation producers. According to Dan Lashof, NRDC’s climate director, “Power companies have been on notice for more than a decade that they will need to cut their emissions of carbon dioxide and other pollutants. This report shows which companies have made smart decisions to position themselves for the transition to clean energy and which are lagging.”[iii] Three electric utility companies co-sponsored the report with the NRDC and CERES, an investor advocacy coalition[iv] that describes itself as “a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.”[v]

Federal Regulatory and Legislative Activity Affecting Coal

Various proposals are circulating for national regulation and legislation that effectively mandate less coal consumption. These include a possible nationwide renewable portfolio standard (RPS) that would require electric utilities to generate a set percentage of their electricity from qualified renewable generating technologies. Another is a cap-and-trade bill that would force the reduction of carbon dioxide emissions. Because coal generation emits twice the carbon dioxide emissions of natural gas, any cap-and-trade policy would be targeted at lowering coal’s share of generation within the electric utility sector.

The Environmental Protection Agency (EPA) just released a proposed “transport rule” that would improve air quality in the eastern United States by reducing power plant emissions from 31 states and the District of Columbia. Specifically, it would alter the limits on sulfur dioxide, nitrogen oxides, and ozone emissions that are currently in place. According to the EPA, the rule would reduce sulfur dioxide emissions by 71 percent and nitrogen oxide emissions by 52 percent from 2005 levels by 2014.[vi] EPA projects the utilities’ cost of compliance at $2.8 billion.[vii] The agency is still working on the new rule for ozone and plans to finalize it as well as revisit the transport rule in 2012.

Because the power sector has already significantly reduced its sulfur dioxide and nitrogen oxide emissions since 1990 when legislation first required a reduction in criteria pollutants, Dan Riedinger, a spokesman at the Edison Electric Institute, said “EPA’s new proposal would require dramatic reductions in power sector emissions, on top of major reductions to date, on a very short timeline.”[viii] The short timeline is likely to increase the cost of compliance because electric utility companies frequently make technology changes when they are down for scheduled maintenance. Major changes will increase that down time, resulting in less generation output and increased equipment cost to comply with the lower emissions rates. Any legislative or regulatory policy that would reduce existing coal-fired generation or further limit their emissions will almost certainly cause an increase in electricity prices.

Although the Federal government has yet to pass an RPS or a cap-and-trade program for electric utilities, some states have already enacted such programs. The Institute for Energy Research found that, in those states that have an RPS, electricity prices in 2009 were 39 percent higher than in states without an RPS.[ix]

State Programs, Generation Mix Changes, and Electricity Price Increases

In 2009, average electricity prices nation-wide increased by 1.5 percent, a small percentage, partially because of lower natural gas prices. However, some states saw double-digit price increases. For example, West Virginia had an 18 percent increase in average electricity prices, while Virginia customers saw an 11 percent increase. Coal generation in both states was lower, by 24 percent and 17 percent, respectively.[x] In the case of West Virginia, the state has an RPS that requires investor-owned utilities with more than 30,000 residential customers to generate 25 percent of their retail electricity sales from alternate and renewable energy sources by 2025. Virginia does not have a legislated RPS, but has a goal to generate 15 percent of 2007 electricity sales from renewable energy by 2025.[xi]

Several states had large percentage decreases in coal generation. One such state was Ohio. Comparing 2009 to 2008, its coal generation went down by 13 percent; its natural gas generation went up by 87 percent; and its average electricity price went up by 6.9 percent. Ohio has an RPS that requires its utilities to provide 25 percent of their retail electricity supply from alternate energy sources by 2025.[xii] North Carolina and Pennsylvania are other states with an RPS whose coal generation went down (13 and 11 percent, respectively). In 2009, their natural gas generation went up by 18 and 56 percent, respectively, and their average electricity price went up 5 and 3 percent, respectively. Pennsylvania’s RPS requires its utilities to generate 18 percent of their electricity from alternate energy sources by compliance year 2020 (June 1, 2020 to May 31, 2021).[xiii] North Carolina’s RPS requires investor-owned utilities to generate 12.5 percent of 2020 retail electricity sales from renewables by 2021, while municipal utilities and cooperatives must meet a target of 10 percent of renewable energy by 2018.[xiv]

In 2007, the Governor of Kansas rejected a permit for a coal plant due to carbon dioxide emissions. That was the first such rejection of its kind. Kansas, a primarily coal generation state, lowered its coal generation by 5 percent and raised its natural gas generation by 17 percent, with an electricity price increase of 8 percent in 2009 over 2008. Besides its rejection of a permit for a coal-fired plant, Kansas also has an RPS that requires utilities to provide 20 percent of peak demand capacity (based on the average demand from the previous three years) from renewable sources by 2020.[xv] Florida, while not an RPS state, passed legislation in 2008 that authorizes its Department of Environment Protection to develop a greenhouse gas trading program.[xvi] In 2009, Florida’s coal generation went down 17 percent, its gas generation went up 14 percent and its electricity price went up 6 percent.

Other states with a lower coal share include Alabama and South Carolina, where coal generation declined by 25 and 15 percent, respectively, in 2009. While neither state has enacted a cap-and-trade or RPS program, both states capitalized on lower natural gas prices to switch from coal-fired generation to natural gas-fired generation, reducing carbon dioxide emissions as a result.

Conclusion

In 1988, coal’s share of electricity generation peaked at 56.9 percent of the market, over 12 percentage points higher than it is today. Athough coal lost market share thereafter, its generation levels in 2009 were still almost 15 percent higher than in 1988.[xvii] During that time, sulfur dioxide emissions declined by more than 40 percent and nitrogen oxide emissions by more than 60 percent. Meanwhile, electricity prices increased by more than 50 percent.[xviii] Many factors have entered into that increase, including: increases in fuel costs; regulatory impacts from the amendments to the Clean Air Act and other legislation; state regulation and legislation affecting fuel mix, emissions output, and the pricing of electricity; and proposals by the federal government to increase regulations and enact environmental and other legislation affecting the fuel mix of electric generators.

Consumers need to realize that these regulatory and legislative policies increase the price of electricity. And with pressure from the administration to pass energy and environmental legislation this year, U.S. utility companies are on notice that actions need to be taken to reduce emissions from fossil-fired generators.

[i] Energy Information Administration, Electric Power Monthly, March 2010, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf

[ii] Nuclear Energy Institute, http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffordableenergy/graphicsandcharts/uselectricityproductioncosts/

[iii] E&E Publishing, CLIMATE: Report shows decline in U.S. utilities’ CO2 emissions, June 29, 2010, http://www.eenews.net/eenewspm/2010/06/29/5/

[iv] Benching Air Emissions of the 100 Largest Electric Power Producers in the United States, June 2010, http://www.nrdc.org/air/pollution/benchmarking/2008/benchmark2008.pdf

[v] http://www.ceres.org/Page.aspx?pid=415

[vi] Environmental Protection Agency, Air Transport, http://epa.gov/airtransport/

[vii] E&E News, Air Pollution: Power plant rules a ‘work in progress,’ EPA air chief says, July 6, 2010, http://www.eenews.net/eenewspm/2010/07/06/1

[viii]Ibid.

[ix] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/pdf/statereport.pdf

[x] All state electricity generation and price data are from the Energy Information Administration, Electric Power Monthly, March 2010, http://tonto.eia.doe.gov/ftproot/electricity/epm/02261003.pdf

[xi] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/virginia/ and http://www.instituteforenergyresearch.org/states/west-virginia/

[xii] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/ohio/

[xiii] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/pennsylvania/

[xiv] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/north-carolina/

[xv] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/kansas/

[xvi] Institute for Energy Research, Energy Regulations in the States: A Wake-up Call, http://www.instituteforenergyresearch.org/states/florida/

[xvii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec7_5.pdf , and Annual Energy Review, http://www.eia.doe.gov/emeu/aer/pdf/

[xviii] Energy Information Administration, Monthly Energy Review, http://www.eia.doe.gov/emeu/mer/pdf/pages/sec9_14.pdf

The House Energy & Commerce Committee (E&C) — chaired by Representative Henry Waxman (D- Hollywood) — continues to work overtime to make energy harder to produce, more expensive, more imported and more rare. Using the tragic Gulf spill as justification, the committee unanimously passed the “Blowout Prevention Act of 2010” on the same day BP finally achieved some success in controlling its out-of-control Macondo well. With this bill, Chairman Waxman is leaping before he looks, with serious consequences for US energy and national security, as well as for the jobs of not just the hundreds of thousands who work in the offshore energy industry, but their counterparts on land, as well. He is leaping off a cliff while holding onto America’s arm.

Rather than waiting to find out what went wrong and working to fix it, E&C passed an expansive new bill that micromanages federal offshore oil rig technical requirements, in a “shoot first and then ask questions” approach that helps explain congress’s growing dislike by the public.

Although it is common today for congress to leap before they look in an attempt to be seen as doing something, anything, about the issue du jour, it was not always so. For example, when the Space Shuttle Challenger explosion in 1986 prompted the establishment of a blue ribbon presidential commission to investigate, they discovered the problem and said this about the legislative branch of government in their report:

“Congress recognized the desirability, in the first instance, of having a single investigation of this national tragedy. It very responsibly agreed to await the Commission’s findings before deciding what further action might be necessary to carry out its responsibilities.

In today’s case of the gulf spill, the president has appointed a panel of apparently like-minded individuals so controversial that committees in both the House and Senate have passed legislation establishing an independent panel. And with the passage of this bill, congress is clearly not “responsibly await(ing) the Commission’s findings.”

But in what is the most stunning power grab of all, the bill for the first time ever requires federal permission for every onshore oil or gas well drilled in the United States, including those on state and private lands. If you’re wondering why a bill prompted by an offshore oil spill should have any effect on wells on land, you’re not alone. Washington politicians apparently think they can do everything better than states and local governments. And they also appear to never want to “let a crisis go to waste.”

Ever since Colonel Drake drilled the first well in 1859, permitting wells on private and state lands has been the responsibility of the States. Certain federal laws, such as the Clean Air Act and Clean Water Act, apply to the drilling of a well, but not the actual practice of drilling the well. The Waxman bill makes state regulation of wells subject to federal approval, and in the absence of such approval, requires operators to obtain federal permits. In other words, drilling an oil or gas well under this bill has become federalized.

Currently, there are about 1 million producing oil and gas wells spread throughout the United States, the vast majority on state and private lands. States have adjusted their permitting to meet the conditions on the ground and have a stellar track record of working to enhance and improve operational safety while minimizing environmental impacts. After all, a state’s residents are the ones who live with the consequences of bad decisions, and are best prepared to balance the costs and benefits of a particular regulation.

But under this bill Texas – with almost 250,000 operating wells and California – with over 50,000 wells, are deemed incapable of what they’ve been doing for a century unless they seek and are awarded federal approval. And while “marginal wells” (those producing 10 barrels or less per day) are exempted from the bill, it is silent on how someone can validate that a well he intends to drill is marginal before he drills it.

This is the kind of nonsense that passes for legislation today. The only thing that is certain about this bill is that it will make it harder to produce domestic energy, create uncertainty for domestic producers and all the jobs they support, and lead to making the US less competitive in energy production and more reliant on foreign sources of energy made competitive by the visible hand of government malfeasance.

If it is truly Washington’s wish to “get us off of oil” they should have the discussion out in the open, rather than hiding it behind the public’s rational concern about the spill in the Gulf. Leadership in Washington also requires them to review whether their own actions are making our energy outlook worse, rather than better. But don’t expect to see those types of hearings from a group that leaps before it looks.

Europe’s feed-in tariffs have led to higher electricity prices without having positive impacts on emissions reductions, employment, energy security, or technological innovation. In Spain, the feed-in tariff has helped create a rate deficit so great that it imperils the sustainability of Spain’s electricity system. Despite these real-world experiences, some believe we should implement the same policies in the U.S. Recently ClimateWire carried the following item, with opening language provided:

RENEWABLES: UC Berkeley’s Kammen recommends upgraded feed-in tariff (07/09/2010)

A new paper from a leading climate policy expert makes the case that California should have a feed-in tariff like the ones in Germany and Spain that have been credited with creating unprecedented demand for solar power.

Dan Kammen is a professor of energy, policy and nuclear engineering at the University of California, Berkeley, and was an adviser to President Obama on energy policy during the 2008 campaign. He is backing a state-set price for renewable energy fed back to the electricity grid. The price guarantee, known as a feed-in tariff, would promote the development of wholesale distributed generation—mainly solar, but also some wind, biogas, biomass and geothermal power.

Here is what we know about how those schemes actually worked in those countries.

First, Germany, cited by President Obama as a green-economy model— ten times we think—according to the old-line, state-supported think tank RWI-Essen. From the Abstract of “Economic Impacts from the Promotion of Renewable Energy Technologies: The German Experience”, RWI-Essen, November 2009 (emphases added):

We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country’s energy portfolio. To the contrary, the government’s support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.

From the body of the report:

While utilities are legally obliged to accept and remunerate the feed-in of green electricity, it is ultimately the industrial and private consumers who have to bear the cost through increased electricity prices. .. Overall, the level of feed-in tariffs increased nearly six-fold between 2001 and 2008….

This high support for solar electricity is necessary for establishing a market foothold, with the still low technical efficiencies of PV modules and the unfavorable geographical location of Germany being among a multitude of reasons for solar electricity’s grave lack of competitiveness… Even on-shore wind, widely regarded as a mature technology, requires feed-in tariffs that exceed the per kWh cost of conventional electricity by up to 300% to remain competitive.

[T]he system of feed-in tariffs stifles competition among renewable energy producers and creates perverse incentives to lock into existing technologies…

[A]lthough Germany’s promotion of renewable energies is commonly portrayed in the media as setting a “shining example in providing a harvest for the world” (The Guardian 2007), we would instead regard the country’s experience as a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits. . . .

[T]he commonly advanced argument that renewables confer a double dividend or ‘win-win solution’ in the form of environmental stewardship and economic prosperity is disingenuous. In this article, we argue that Germany’s principal mechanism of supporting renewable technologies through feed-in tariffs, in fact, imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation….

Second, numerous empirical studies have consistently shown the net employment balance to be zero or even negative in the long run, a consequence of the high opportunity cost of supporting renewable energy technologies. Indeed, it is most likely that whatever jobs are created by renewable energy promotion would vanish as soon as government support is terminated. . . .

How about Spain? According to a 2009 study from King Juan Carlos University in Madrid, “Study of the effects on employment of public aid to renewable energy sources”, subsidizing renewable energy was a complete disaster. In fact, the study said that for every new job depending on energy price supports, at least 2.2 jobs in other industries will disappear. Once again a key contributor was the feed-in tariff scheme:

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

Therefore, while it is not possible to directly translate Spain’s experience with exactitude to claim that the U.S. would lose at least 6.6 million to 11 million jobs, as a direct consequence were it to actually create 3 to 5 million “green jobs” as promised (in addition to the jobs lost due to the opportunity cost of private capital employed in renewable energy), the study clearly reveals the tendency that the U.S. should expect such an outcome.

At minimum, therefore, the study’s evaluation of the Spanish model cited as one for the U.S. to replicate in quick pursuit of “green jobs” serves a note of caution, that the reality is far from what has typically been presented, and that such schemes also offer considerable employment…

Here is what the Spanish government said in an April 2009 Royal Decree issued on the heels of this study’s findings:

The rate deficit, manly caused by the feed-in-tariff system to support renewable energies, “is deeply harming the system and puts at risk not only the financial situation of the electric sector companies´ but also sustainability of the system itself. This dis-adjustment turns out to be unsustainable and has grave consequences since it deteriorates the security and financial capacity of the investments necessary for providing electricity at the levels of quality and security that the Spanish society demands.”

So, by all means, let’s have an open and honest debate about how President Obama’s models for a centrally planned “green” economy have worked out, particularly in Spain and Germany and specifically their feed-in tariff schemes. Given the reality, however, you shouldn’t count on that occurring.

The Obama Administration’s offshore moratorium is already sending jobs overseas.

Last week, Diamond Offshore announced that it was sending the Ocean Endeavor rig from the Gulf of Mexico to Egypt. This week it announced that it was pulling the Ocean Confidence out of the Gulf of Mexico and sending it to the Congo.

Bloomberg reports that the Congo project is expected to generate $234 million in total revenue—revenue and jobs that should have been created in the Untied States.

Besides the actual production of oil, workers on the rigs and people that supply the rigs will be adversely affected. According to the Louisiana Mid-Continent Oil and Gas Association:

• Each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for 2 2-week shifts
• Each E&P  [exploration and production] job supports 4 other positions
• Therefore, 800 to 1400 jobs per idle rig platform are at risk
• Wages for those jobs average $1,804/weekly; potential for lost wages is huge, over $5 to $10 million for 1 month – per platform.
• Wages lost could be over $165 to $330 million/month for all 33 platforms

There are also impacts to people who supply the rigs:

• Supply boats – 2 boats per rig with day rates of $15,000/day per boat – $30,000/day
• Impacts to other supplies and related support services (i.e., welders, divers, caterers, transportation, etc.)

This is the problem with the Administration’s overly restrictive moratorium. Rigs are portable and they will go where the work is. When a rig leaves the Gulf, not only the jobs on the rig are endangered, but also the jobs of those who supply the rig. As noted above, each job in oil and gas exploration and production supplies 4 other positions.

The Administration’s policies are forcing rig owners to move their rigs out of the country. This means fewer jobs for Americans, less domestic energy production, and greater oil imports.

The White House has launched a coordinated PR campaign to argue that it is not anti-business. That is a difficult argument to make when we look at the Administration’s record on energy. Time after time the Administration has acted to make it more difficult to produce energy domestically and they are actively seeking to make energy more expensive. This only makes an economic recovery more difficult.

The Administration’s Assault on Domestic Energy Production and the Use of Energy [Partial List]

The Administration has been working around the clock to achieve President Obama’s goal of bankrupting coal companies and making electricity prices necessarily skyrocket.

Within days of taking office, the Administration cancelled 77 oil and gas leases in Utah, postponed a new 5-year plan for offshore resources, and cancelled commercial oil shale research leases. But that was just the beginning.

In the wake of the Gulf oil spill, the Administration is trying to put cap-and-trade legislation back on the agenda, calling multiple White House meetings to try to find consensus on increasing the cost of energy. And the Administration has announced a variety of other regulations that will increase the price of energy.

The most impactful new regulation is the Environmental Protection Agency’s (EPA) regulation on greenhouse gas emissions. EPA has already announced regulations on carbon dioxide emissions from automobiles. According to EPA itself, this will increase the price of automobiles by $1000 a car and reduce global temperature (the whole point of the rule) by only a maximum of 0.015 °C  90 years from now.

But that’s only one part of the Administration’s efforts to drive up the cost of producing and using energy. EPA wants to revise the Bush-era ozone rule. If EPA ratchets down the ozone level too far, many counties – even those with no industry – will fail the standard. EPA also wants to tighten particulate matter regulations and mercury regulations nationwide and it has announced a new “transport” rule to further regulate SO2, NOx, and mercury in Eastern states. Finally, the Administration is preparing a new boiler rule to regulate hazardous air pollution from boilers and process heaters.

Administration Cancels 122 Previously-Issued Permits in Texas

Besides imposing new burdensome regulations, EPA is cancelling previously-made decisions to further ratchet up the cost of doing business for domestic energy manufacturers.  In Texas, the Administration cancelled 122 previously-issued air quality permits under a program started under the Clinton Administration. E&E News reports:

According to figures touted by [Gov.] Perry and state regulators, Texas beat national averages over the past 10 years by achieving a 22 percent reduction in ozone emissions and a 27 percent drop in nitrogen oxide emissions.

…

“We are defending our flexible air permitting program because it works,” TCEQ [Texas Commission on Environmental Quality] Chairman Bryan Shaw said earlier this month. “EPA is not able to demonstrate how our program is less protective of the environment than the bureaucratic federal approach. EPA’s philosophy of more bureaucracy by federalizing state permits will not lead to cleaner air, but will drive up energy costs and kill job creation at a time when people can least afford it.”

According to industry representatives, it will cost millions of dollars for each company to change their pollution control technologies. This could cost a lot of jobs. According to a story in the Houston Chronicle:

Corporations said the decision creates uncertainty for their companies.

“Valero has six refineries operating under flex permits, employing more than 2,700 people,” the company said in a statement, noting the EPA did not object to the program when it was created. “Now, 16 years later, EPA is reversing course, and our facilities are caught in the middle, creating significant uncertainty at a time when our economy can least afford it.”

Also, one likely reason the Administration cancelled these permits now is to force these plants to get carbon dioxide permits under EPA’s new carbon dioxide regulations.

Conclusion

We need to be vigilant about air pollution, but the Obama Administration’s carbon dioxide rules, for example, have nothing to do with air pollution. The carbon dioxide regulations are supposed to address global warming, but even EPA admits (as seen above), they will have miniscule impacts on global temperature.

The President says he wants to be pro-jobs, pro-consumer, and pro-market.  If that is indeed the case, then he needs to consider holding off on his regulatory assault on the American economy. One of the reasons that unemployment rates are high and people have been unemployed for so long is because of uncertainty about future regulations and the cost of those regulations.

The American economy is hurting and this regulatory assault needs to be reconsidered for the economy to have any hope of recovering and – more importantly – for enabling the private sector to create real jobs.