With the advent of the new Congress, it seems a good time to assess the good, the bad and the ugly that occurred in the waning days of the previous Congress and to look forward, to the most pressing issue that faces the 112th Congress.

First, the energy policies that were enacted (or allowed to continue) during the lame duck and most of the session that preceded it, were worse than one might have hoped, but not nearly as bad as it could have been. On the plus side, the lame duck was also unable to ram through either a national renewable portfolio standard or huge omnibus public lands bill – either of which would have robbed citizens of choice, and states of control and revenue.

On the minus side, the Republican’s seem to have learned little from the elections (I never had hope for the Democrats).  Rather than holding out for a clean bill continuing the Bush era tax cuts — something they would have gotten with the new Congress since the President would have signed such a bill rather than allow taxes for the “middle class” go back up (for which he and the Democrats would have taken the blame) — instead they allowed the Democrats to load the bill down with green pork.  In a time when it preaches the need for budgetary constraint and federal downsizing, Congress continued the foolish, bad for the environment, bad for the economy, subsidies and grants for ethanol and other so called “green” energy technologies.  These are technologies that the vast majority of people won’t choose unless forced or bribed, and thus can’t compete in the marketplace.  Rather than playing the role of “public servant,” and listening to the will of the people, Washington, once again, played the role of Lord and Master’s taking our money and giving it to industries that would largely cease to exist without government support.

And, despite an earlier commitment to Jay Rockefeller (D-WV), Senate Majority Leader Harry Reid, did not allow a vote on Rockefeller’s bill to delay EPA climate regulations.  Which brings us to the most pressing issue facing the newly minted 112th Congress.  Congress should, by hook or by crook, prevent these rules from actually coming into effect.  A frontal assault on the rules — for instance, a law prohibiting the EPA climate rules from coming into effect — seems likely to fail since President Obama has indicated he would veto such a bill.  And why not, he is using the threat of regulations to force Congress to enact his version of greenhouse gas legislation.  It’s extortion par excellence.

Instead, Congress should develop a bill that prohibits the EPA from expending any resources or funds, enacting or enforcing greenhouse gas regulations unless and until Congress, itself,  writes a law specifically addressing greenhouse gasses.  Then, rather than a stand-alone bill, it should attach this bill as a rider to every must pass piece of legislation it takes up.  It is doubtful, for example, that the President would veto an increase in the debt limit, or funding bills for various agencies, just because it contained language halting the EPA regulations.

WHAT IT MEANS FOR ENERGY

• Results
• What Will the New Congress Do?
• U.S. House of Representatives Results
  
• U.S. Senate Election Results
  
• The White House
  
• Election Results in the States
  
• Conclusion
  

RESULTS

Yesterday’s election clearly demonstrates that the American people reject President Obama’s handling of the economy. Just as the 2008 elections were interpreted as a repudiation of President Bush’s agenda (particularly with respect to foreign policy), the 2010 mid-term election shows that America does not support President Obama’s domestic priorities.

Specific to energy and the environment, one clear message from the election is that cap-and-trade, top-down, command-and-control regulations are a losing argument with the voters. Candidates who voted for cap-and-trade, with few exceptions, ran away from that vote. Voters understand that cap-and-trade is a national energy tax.

With respect to energy policy, the election results will likely yield a modest and marginal improvement. While it will certainly not be the “environmental doomsday” that the national environmental lobby claims, unless the Republicans have truly changed their stripes, it will also not be the dramatic improvement that some predict or hope.

The Good
With the Republicans in charge of the House and a narrowly-controlled Democratic Senate, massive new federal programs like cap-and-trade appear to be off the table for now. The biggest improvement we can expect is that the new Republican leadership in the House will carry out the necessary job of conducting oversight hearings and trying to rein in an out-of-control Obama Administration, whose goal from day one has been to fundamentally transform America.

Hopefully, the new Republican majority in the House will provide a counterweight to the Obama administration’s goal of making coal, oil, and natural gas more expensive and more difficult to produce domestically. In the past, Republicans have not exactly been paragons of the free-market, so it is as important as ever to continue to hold Congress and the administration accountable whenever they move towards government intervention in energy markets.

The Not-So-Good
One doesn’t have to think back long to remember what previous Republican majorities have delivered—policies such as the ethanol mandate, subsidies for inefficient and unreliable energy sources, and moratoria on oil and gas exploration and development, just to name a few. In recent weeks, leading Republicans have already pushed for a federal renewable electricity mandate, a carbon tax, utility price caps, a tax on oil imports, and a newer, larger ethanol mandate. Unfortunately, many Republicans, it seems, are willing to compromise free market principles for the sake of political expediency.

WHAT WILL THE NEW CONGRESS DO?

As noted above, there are both positives and negatives to Republicans increasing their numbers in Congress.

• “All-of-the-above” energy Republicans. With this new political landscape, President Obama will try to advance his energy agenda in piecemeal fashion. Some Republicans will be tempted to go along with the President to support misguided notions of their “all-of-the-above” energy policy. While “all-of-the-above” makes for a good rhetorical device, it is deeply flawed as an actual policy since it seeks to increase federal involvement in all types of energy production.

Instead of increasing federal involvement in energy, Republicans should move away from “all-of-the-above” and instead focus on creating a level playing field for all sources of energy. Congress should focus on removing impediments to all types of energy production so that individual Americans, not politicians, can decide which types of energy work best for their individual needs. This agenda would be much more in keeping with the renewed (and welcome) emphasis on smaller government, more freedom, and less federal involvement in all aspects of our lives.

• Oversight. We expect to see hearings on EPA’s continued and unprecedented assault on affordable energy access and use—starting with the agency’s ongoing development of greenhouse gas rules, and extending to new fuel economy mandates, ozone regulations, industrial boiler regulations, dust regulations, and others. Also expect to see hearings on the Administration’s hostility to oil and gas production, the Nuclear Regulatory Commission’s agenda for the Yucca Mountain, and analyses of the renewable energy projects funded through the 2009 economic stimulus package to name a few oversight topics.

• More benefits for nukes and electric cars. In the past, some powerful Members of Congress have supported tax credits and increased government funding for nuclear power and natural gas and electric vehicles. For example, Sen. Burr, who would replace Sen. Murkowski as chairman of the Senate Energy and Natural Resource Committee, has previously supported these policies.

• Offshore oil and gas exploration and development. The Republicans in Congress will no doubt seek to pressure the Department of the Interior to accelerate the pace of permitting for offshore energy development.

• Renewable Energy Mandate. As improbable as it seems, some Republicans lead by outgoing Senator Sam Brownback (the Governor-elect of Kansas), are talking openly about imposing a federal renewable energy mandate on electricity users during the upcoming lame duck session. Such a mandate would increase energy costs and reduce electricity reliability and result in a transfer of money from ratepayers to well-connected wind and solar companies and their lobbyists.

U.S. HOUSE OF REPRESENTATIVES ELECTION RESULTS

It is no surprise that Republicans regained control of the House. As of this writing, it appears that the Republicans are poised to pick up at least 60 seats—more than enough for a comfortable majority. The only real question is, what does this mean for energy policy?

Committee Chairmanships:
• House Energy and Commerce Committee. Under current House Republican rules, Energy and Commerce Ranking Member Joe Barton (TX) may be barred from seeking the full committee gavel in the 112th Congress, owing to term-limitations. Barton, however, will request a waiver from that rule—with a final decision likely handed down in a few short weeks. If that dispensation is not secured, next in line for the top spot is Congressman Fred Upton (MI). For supporters of less government intervention, Upton has a spotty record. For example, he has consistently voted to place more federal lands off limits to domestic energy production, was an architect of the incandescent light bulb ban, has voted for ethanol mandates, and has cast votes in opposition to oil and gas production from offshore areas.

• House Natural Resources Committee. Representative Doc Hastings (WA), the current Ranking Republican on the House Natural Resources Committee, will likely serve as its chairman in the 112th Congress. This committee plays a central role in crafting policy with respect to energy production on federal lands, both onshore and offshore. Hastings has a solid pro-energy record, which should bode well for those interested in reigning in the Obama agenda of curtailing domestic energy production on federal lands.

• Select Committee on Energy Independence and Global Warming. An important first test for the Republicans in the House will be whether or not they dissolve this toothless committee. Speaker Nancy Pelosi (CA), as a payoff to her pal Congressman Ed Markey (MA), invented this committee. It has no legislative authority. It is “feathers on a fish,” according to Democratic Representative John Dingell (MI), the dean of the House. Unfortunately, Representative Jim Sensenbrenner (WI), the Ranking Republican on the committee, has argued strongly that it not be dissolved (with him serving as Chairman, naturally) so it can focus on oversight. The fact that Sensenbrenner, regardless of his rationale, is unable or unwilling to look beyond his own parochial interests and call for an end to this charade of a committee is a discouraging sign.

U.S. SENATE ELECTION RESULTS

While all of the results are not yet in, it appears the Democrats will cling to a narrow majority in the Senate.

Senator Harry Reid is expected to retain his post as Majority Leader. He is openly hostile to affordable, domestic energy production. Senator Reid has been the President’s lead advocate in the Senate in promoting an agenda to deliberately increase the price of energy, impose additional regulations, and decrease domestic energy production.

Committee Chairmanships:
• Senate Energy and Natural Resources Committee. Senator Jeff Bingaman (NM) will remain the Chairman of the Senate Energy and Natural Resources Committee. Senator Bingaman is a lead proponent of a renewable electricity mandate. He is expected to push for this policy during the lame duck session in the coming weeks. Bingaman is hostile to offshore oil and gas production, as demonstrated by his vehement opposition to state revenue sharing of royalties from offshore energy production.

Due to the time zone difference and the complexity involved in counting write-in votes, the outcome of the Alaska Senate race remains undecided. Senator Lisa Murkowski, the Republican incumbent and current ranking member of the committee, is fighting to save her seat as a write-in candidate against the Republican nominee Joe Miller. Senator Murkowski’s record has not always been seen as a good one. For example, when she fought to pass a ban on EPA moving forward on its greenhouse gas rules, she said she was doing it—above all else—to protect the Senate’s prerogative to pass the same type of regulation; regulation that would increase costs to consumers and drive jobs offshore. If she ultimately loses, Senator Richard Burr (NC) will likely replace her as ranking member.

• Senate Environment and Public Works Committee. Senator Barbara Boxer (CA) has won reelection and will remain Chairwoman of the Senate Environment and Public Works Committee. Boxer is a darling of the anti-energy environmental lobby and will continue to use her platform as Chairwoman to serve as a foot solider in Obama’s war on affordable energy.

Senator James Inhofe (OK) will likely remain the ranking member on the committee. Inhofe has been a tireless champion in the fight against new draconian greenhouse gas regulations such as cap-and-trade.

THE WHITE HOUSE

Typically there is a shakeup in White House staff after the President suffers an electoral defeat as stunning as this election. And nowhere in the Obama Administration would a staff shake up be more welcomed than in the agencies that deal with energy and environmental issues.

But even if a shakeup were to occur, there is no reason to believe the administration will back down from its regulatory assault on affordable energy. EPA is moving full speed ahead with its offensive on affordable energy, namely through the implementation of greenhouse gas regulations. EPA will also continue forward with new regulations on dust, ozone, “conductivity” of surface water in Appalachia (in an effort to stop coal mining), industrial boilers, water-cooling intakes, and more.

Yesterday’s election, among other things, is a direct referendum of the administration’s anti-energy agenda. The administration will recognize this and switch its focus to the less democratic arenas of regulation and litigation to achieve its ends—which include increasing the costs of all traditional and reliable forms of energy and transportation.

The new Republican leadership in the House has the power to prevent this from happening by defunding the White House’s ability to implement their draconian greenhouse gas rules through the budget and appropriations process. The big question is whether they will have the resolve to take on these powerful agencies.

ELECTION RESULTS IN THE STATES

If the money spent on campaigns indicates their relative importance, the three most important races last night weren’t U.S. Senate or House races, but the contests for governor in California, Florida, and Texas. While the fight to control the House and Senate dominated the news and election coverage, the races at the state levels might be even more important than control of the U.S. Congress since the states will redraw all 435 Congressional districts for the next decade. Last night, 37 governorships and 6,118 state legislative seats were up for grabs. As of this writing, eight governorships and five state legislatures have changed from Democratic to Republican hands. Among the big three prizes, Florida and Texas appear to remain in Republican control.

California Prop. 23. California Prop. 23 failed. This proposition would have suspended the implementation of California’s Global Warming Solutions Act unless unemployment in California fell below 5.5 percent for 4 consecutive quarters. California will face some severe economic challenges because of the Global Warming Solutions Act as it tries to implement policies that have failed everywhere they have been tried.

The passage of this initiative was always a long shot, but its failure has given some momentum to the proponents of substantial energy limitation and regulation. Thanks to your efforts and support, we have given environmentalists and their allies precious little to cheer about in the past two years. They will surely cheer that they have retained the Global Warming Solutions Act for the time being.

In the future, this defeat will have little practical importance outside of California. States are not following California’s lead off the economic cliff. Instead, other states such as Florida and Maryland, which have passed greenhouse gas regulations laws have taken a much more tentative approach and will likely limit their losses during these difficult economic times.

Regardless of the fact that Proposition 23 failed, the reality of the election is that states are going to take one step back from both regional greenhouse gas initiatives (both Nevada and New Mexico have new, conservative governors who will exit the Western Climate Initiative, which in turn will hasten the collapse of its counterpart in the East, the Regional Greenhouse Gas Initiative), as well as renewable mandates (there are about a half dozen governor candidates who have explicitly said they plan on either repealing or scaling back their state’s mandates).

CONCLUSION

The election may be over, but the fight has just begun. Thanks to your support, many important battles in Congress were won on the energy front. The stakes, however, are just as high in the coming two years. The White House will continue to dictate policy, but hopefully its power will be somewhat restricted by the new Republican majority in the House. Too many times in the past Republicans have compromised important principles and imposed harmful energy policies. We must work to ensure that history does not repeat itself.

The Institute for Energy Research exists to hold Congress and the President accountable on energy issues. With your support, we can move forward with better energy policies and make America stronger. Now more than ever, we need your help in four key areas:

1. Stay informed. Closely monitor Congress and the administration’s activities. Every day we update our Energy Townhall blog, and we frequently update Twitter, Facebook, and our YouTube channel.

2. Stay involved. One of the reasons environmental groups are a powerful force in Washington, D.C. is because they have a large number of vocal activists. To successfully promote free market energy policies, we need to increase our numbers and we need to be vocal. We must hold Congress accountable for bad policies and we must support good ideas as well.

3. Recruit others. We need more activists to amplify our message. Forward this email to your family and friends. Together we can achieve real progress towards a better future.

4. Support IER. IER exists because of you. Please continue to join us in the fight for a better energy future by contributing $3, $5, $10, $20 or whatever you can afford. We must hold our elected leaders accountable for their actions.

Thanks again for your tireless commitment to liberty. We look forward to continuing the fight for freedom and prosperity for our great country.

For several days in the aftermath of Ike, several states were still experiencing gas shortages.  Motorists would drive by gas stations that were simply closed for business, with plastic bags over the pump handles.  And when motorists did manage to find a station selling gas, they often had to wait in lines of 20 or more cars, spilling out into the road and causing traffic jams.  According to USA Today:

The crunch is especially severe in the Southeast and Mid-Atlantic, which get their gas through pipelines from the Gulf region. It’s largely hitting stations and convenience stores not affiliated with big brands such as ExxonMobil.
…
In South Carolina, many stations are running dry, though the situation improved Wednesday as oil companies started drawing from gasoline reserves, says Michael Fields, head of the state Petroleum Marketers Association. Premium gasoline is especially scarce. Previously, he says, most stations could not even get regular.

“We aren’t seeing quite as many bags on the nozzles,” he says.

About half of Mapco’s 500 stations in the Southeast had no gasoline after Ike hit, says company spokeswoman Paula Lovell. Many were still dry Wednesday, but supplies have increased, she says.

In Virginia, about 15% of stations have no gas, though distributors are scrounging in other states for fuel. “People are going to Maryland, Pennsylvania and all the border states to pick up product,” says Mike O’Connor, head of the state Petroleum, Convenience and Grocery Association.

And yet, what the USAToday story failed to mention is that the shortages were the fault of price controls – either explicit or implicit.  Specifically, gas retailers had been warned in several states not to “gouge” their customers.  Gas retailers in Tennessee knew they had to tread carefully, as an AM radio news report and public service announcement made clear:

Complaints of high gas prices and gouging have gotten the attention of Tennessee officials. Now, they are going after retailers who illegally raise pump prices.

The State Department of Commerce and Insurance said it has received more than 750 price gouging complaints statewide.
…
If you suspect gas gouging and want to report it to the state you can call the division of consumer affairs at 1-800-342-xxxx.

Drivers in Missouri were also “protected” from expensive—but available!—gas by their governor, according to this news article:

Missouri Gov. Matt Blunt directed the Attorney General’s office to investigate gasoline suppliers and stations for potential evidence of price gouging in response to Hurricane Ike, the state announced on Saturday.

“I have directed Attorney General Jay Nixon to investigate concerns about potential price gouging in the wake of Hurricane Ike,” Gov. Blunt said in a statement. “We have seen price gouging in our state before, and I will not permit businesses to reap unjustified profits by using a natural disaster as an excuse to gouge Missouri families who are already dealing with high prices at the pump.”

Not to be outdone, Georgia’s governor moved to hold down market prices as well, according to this official press release from September 12:

Governor Sonny Perdue signed an Executive Order today enacting Georgia’s price gouging statute to protect Georgia consumers from unlawful increases in gas prices and other products.

“The threat of Hurricane Ike has disrupted the production of distribution of gasoline, which will have an effect on prices,” said Governor Sonny Perdue. “However, we expect the prices that Georgians pay at the pump to be in line with the prices retailers are paying. We will not tolerate retailers taking advantage of Georgians during a time of emergency.”

Citizens are asked to report any suspected incidences of price gouging to the Governor’s Office of Consumer Affairs at (404) 651-xxxx or (800) 869-xxxx.

North Carolina joined the party too, according to this report:

Governor Mike Easley declared a state of “abnormal market disruption” under North Carolina law, which charges the Attorney General with enforcing the price gouging statute.

Easley issued the following statement concerning the situation:
“As a result of Hurricanes Gustav and Ike, oil refineries in Texas and Louisiana have temporarily interrupted some gasoline supplies to the pipelines that serve North Carolina…Today I have declared a state of abnormal market disruption under North Carolina law and charged the Attorney General with enforcing the price gouging statute. This statute prohibits the charging of prices that are unreasonably excessive under the circumstances.

And the harshest words came from Florida’s governor, as this story details:

Florida’s Gov. Charlie Crist has strong words for gas station owners after receiving more than 2,000 complaints of price gouging on gasoline across the state.

When news broke that Hurricane Ike could affect the oil refineries in Texas, some gas stations responded by raising prices.

“Some people are so damn greedy,” Crist said. “They want to take financial advantage of that.”

In the Tallahassee area, some stations were charging $5 a gallon.

“It’s outrageous. Enough is enough. We’re not going to take it anymore,” Crist said.

Four gas companies are now under investigation for raising their prices, Flying J, Dodge’s Gas Stores, Valero and Pilot Travel Centers.
…
The Florida Attorney General’s Office said it has [referred] more than 1,800 complaints for review by its Economic Crimes Division. …

Meanwhile, state agriculture officials said they will serve 16 gas companies with subpoenas. Four more would be served by the Attorney General’s Office.

Businesses that engage in price gouging could face fines of up to $1,000 per violation.

If you suspect price gouging at a gas station, the state wants to hear from you. Call 800-HELPFLA…

Interfering With Market Prices Creates Shortages

The market price balances available supply with consumer demand.  Hurricane Ike disrupted the supply of refined gasoline; there were fewer gallons to go around.  The drop in supply should have led to an increase in price, because only at a higher price would consumers want to restrict their total purchases to the number of gallons Ike had spared.  But when state attorneys general and other officials threaten retailers with “gouging” – or even if there is an implicit threat or fear of massive stigma – then the retailers keep their prices at a low price, which is now unrealistic.

At artificially low prices, consumers want to buy more gallons of gasoline than producers want to sell.  Specifically, what happened in this case is that wholesale prices spiked, eating away the profit margin of independent retailers.  Because anti-price gouging laws forbade them from raising their own prices just as sharply, some retailers decided it was better to shut down, rather than lose money with every gallon they sell.

Market prices serve an important function.  Correct market prices transmit real information about supply and demand.  When the government interferes with these prices, unintended consequences always emerge.  In this case, politicians forced their citizens to wait in long lines at the pump.  What motorists may have gained in the form of lower prices is more than offset by the uncertainty (“Where can I get gas?”) and time wasted in line.

6 Months, 40 Oversight Hearings, 160 Witnesses Sworn-in, But Zero New Supplies

WASHINGTON, D.C. – Now adjourned for its Independence Day recess, the U.S. Congress has convened at least 40 hearings on the issue of skyrocketing energy prices in the first six months of 2008. At least 160 witnesses have been sworn-in and questioned. But, even as consumers suffer, the Congress still has done nothing to increase American energy supplies. Institute for Energy Research (IER) president Thomas J. Pyle issued the following statement:

“Don’t mistake activity for productivity,” Pyle said. “Members of Congress have been questioning witnesses and pounding podiums for the news cameras, but they have done nothing to increase American oil production by even one single barrel. Families are paying the price of Washington’s willful refusal to do what we all know must be done.”

“American taxpayers own the federal lands, and they own the vast energy resources that lie beneath them too,” Pyle continued. “If the federal government continues to withhold these supplies, how is it any different than OPEC? That’s something all of us should think about on Independence Day.”

More from the Institute for Energy Research (IER):

· Top Five Actions Government Can Take to Lower Gas Prices
· Speculators Fixing Oil Prices? Don’t Bet on It
· The World’s Biggest Oil Companies Aren’t American, and Aren’t Private
· Is it Price Gouging?
· Who’s to Blame for High gas Prices?

The Institute for Energy Research (IER) is a not-for-profit public foundation that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. Founded in 1989, IER is funded entirely by tax deductible contributions from individuals, foundations and corporations. No financial support is sought for or accepted from government (taxpayers).

###