The American Energy Renaissance Act of 2014: Cruz/Bridenstine Revisited

“[This legislation] will prevent federal regulation of hydraulic fracturing, facilitate the expansion of domestic refining capacity, improve processes to develop energy infrastructure, stop EPA overreach and its war on coal, force Congress and the President to approve any new EPA regulations that kill jobs, broaden energy development on federal land, open offshore exploration, expand U.S. energy exports, and dedicate additional revenues to debt reduction.”

“Only a crisis – actual or perceived – produces real change,” wrote Milton Friedman in the 40th anniversary edition of his classic Capitalism & Freedom (1962, 2002). The revered free-market economist continued:

When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable” (p. xiv, emphasis added).

The crisis of interventionism is all around us. And reform is in the air with the 2014 elections resoundingly shifting Congress away from climate/energy statism–if the virus of Cronyism does not soil the voter mandate.

It is Renaissance time for the American Energy Renaissance Act of 2014 (AERA), introduced by Senator Ted Cruz (R-Tx) and Representative  Jim Bridenstine (R-Ok) last year. Such legislative reform to “embrace American energy renaissance, spark job creation” should have new life in 2015.

AERA can be summarized with three points:

1) removing barriers to develop domestic energy resources;

2) legalized building energy infrastructure; and

3) expanding trade to increase employment and assist international allies.

The press release accompanying S. 2170 and H.R. 4286 described the purpose and promise of the American Energy Renaissance Act as follows:

to empower the private sector to create good-paying, American jobs and spur economic growth by harnessing our nation’s energy resources and removing federal impediments to energy exploration, development and trade. These bills will also provide a real reset of our foreign policy so we are no longer beholden to unfriendly nations for our energy needs, and can use our own resources to exert our influence around the globe, notably in Ukraine.

The release then editorialized:

“We are on the cusp of a Great American Energy Renaissance that will create both a stronger economy and a stronger America,” said Sen. Cruz. ‘The energy revolution that is already underway can produce the jobs and opportunities that our country needs to grow. A booming new energy economy can also provide critical resources to our allies so they are no longer energy dependent on petro-tyrants, such as Russia’s Vladimir Putin. This is a win-win. The only thing the federal government needs to do is get out of the way and let Americans do what they do best: dream, innovate, and prosper.”

“Despite the Obama Administration’s hostility to fossil fuels, the U.S. is the world’s largest natural gas producer and third largest – and fastest growing – crude oil producer. The United States is poised to develop and export energy to the advantage of the American economy and permanently reduce Russia’s control over European energy markets,” Rep. Bridenstine added. “Control a nation’s energy and you control the nation. The biggest hurdle to the American energy renaissance – and European energy security – is not Moscow, but Washington D.C. Our bill frees up the private sector and gets the government out of the way.”

Eighteen Specifics

Specifically, S. 2170 and H.R. 4286 propose to:

· Leave regulation of hydraulic fracturing in state hands. Hydraulic fracturing is driving the American Energy Renaissance. States have proven they can oversee hydraulic fracturing in a responsible, safe manner, and they should be allowed to continue. The American Energy Renaissance cannot thrive if the federal government disrupts this effective framework and impedes the jobs and economic growth hydraulic fracturing is already providing.

· Streamline the permitting process for upgrading existing and building new refineries. The operating capacity of U.S. refineries has remained essentially stagnant for three decades. In order for the American Energy Renaissance to reach its full potential, barriers must be removed from expanding or constructing new refineries in the United States and the private sector jobs they will create. 

· Phase out and repeal the Renewable Fuel Standard (RFS) over five years. The RFS has proven unworkable and costly. Its mandate that an increasing percentage of renewable biofuels be blended into gasoline and diesel each year ignores the reality there are insufficient amounts of some biofuels to meet the standard. It imposes significant costs, and offers few, if any, benefits. The RFS should be phased out so producers and refiners can focus on maximizing domestic resource potential.

· Immediately approve and allow the private sector to build the Keystone pipeline. According to the U.S. State Department, constructing the Keystone XL pipeline could result in 42,000 jobs. Keystone has undergone five environmental reviews since its initial application in 2008, and none has found a significant negative impact on the environment. President Obama’s former Energy Secretary admitted that the decision as whether to approve the Keystone XL oil pipeline is a political one, and not a decision founded in science.

o Remove barriers to developing and approving additional national pipelines and cross-border energy infrastructure. The Keystone saga imposed by the federal government demonstrates the need to reform the process of approving oil and natural gas pipelines, as well as electric transmission lines, between the United States, Canada, and Mexico.

· Exclude greenhouse gases from regulation by the EPA and other federal agencies. Proposals to regulate greenhouse gases are very expensive and threaten hundreds of thousands of jobs. The authority to regulate such gases should only occur with explicit authority from Congress.

· Stop certain EPA regulations that will adversely impact coal and electric power plants. In 2008, President Obama promised to bankrupt coal.As of June 2013, there were already 288 coal units closed or closing in 32 states because of EPA policies. These 288 closures amount to a total of more than 41,000 megawatts of electricity generation no longer being available.Job losses as a result of coal units being affected by EPA regulations could amount to more than 50,000 direct jobs in the coal, utility, and rail industries, and an indirect job loss figure exceeding 250,000.

· Require Congress to approve and the President to sign EPA regulations that will have a negative job impact, rather than allowing them to hide behind bureaucrats who are assumed to be responsible for them now. Certain planned and proposed EPA regulations could cost more than 2 million jobs. Increasing regulatory restrictions more broadly could cost nearly 2.8 million jobs over the next decade.

· Expand energy development on federal lands by providing states the option of leasing, permitting and regulating energy resources (oil and gas, wind and solar) on federal lands within their borders. Onshore and offshore federal land lands have about 43 percent of America’s proven oil reserves and 28 percent of natural gas reserves, but not all of the land is available for energy development. Leasing and producing oil and natural gas on federal land could create more than 1 million jobs.

o For those states opting not to self-regulate, federal leasing, permitting, and regulating must be reformed by:

§ Streamlining permitting and expanding development on federal lands by requiring decisions regarding drilling permit applications to be made within 30 days (which can be extended), requiring an explanation for any denial, and deeming applications to be approved if no decision has been made within 60 days, unless there are existing incomplete environmental reviews.

§ Improving certainty in the leasing and development process by instituting a presumption that certain land will be leased and by prohibiting the government from withdrawing a lease for any energy project, unless there is a violation of terms of the lease.

· Expand energy development in the National Petroleum Reserve in Alaska and on Indian Lands. The mean estimate for conventional oil in the National Petroleum Reserve in Alaska is 895 million barrels of oil and 52.8 trillion cubic feet of gas. West of the Mississippi River, Indian reservations contain almost 30 percent of the nation’s coal reserves, 50 percent of potential uranium reserves, and 20 percent of known oil and gas reserves.

· Open up the Coastal Plain of Alaska (ANWR) for development. ANWR consists of 19 million acres in northeast Alaska. Its 1.5-million-acre Coastal Plain is viewed as a promising onshore oil prospect with potentially 7 billion barrels of technically recoverable oil.

· Expand the offshore areas of the Outer Continental Shelf (OSC) available for development. Despite the potential for significant oil and gas development off the coasts of the United States, the Obama Administration has severely limited access to such resources by essentially prohibiting energy exploration and development off the Atlantic and Pacific coasts.

· Streamline the permitting process for additional offshore exploration. Regulatory barriers to obtain leases and permits to explore and develop offshore areas of the Outer Continental Shelf should be removed by requiring lease sales within 180 days of enactment of the legislation and every 270 days thereafter, and requiring approval or disapproval of drilling permits no later than 20 days after an application is submitted.

· Expand LNG exports by facilitating permits. As of March 24, 2014, the Dept. of Energy had approved only seven export permits to non-Free Trade Agreement countries.  More than twenty applications are currently pending.

· End the crude oil export ban. Last year, U.S. crude oil production increased 15 percent but many American refineries cannot handle the additional crude for technical and capacity reasons. The United States is missing out on export opportunities that could produce good paying private sector jobs in the United States.

· Prevent excessively broad environmental review of coal export terminals. As the EPA makes it harder to use coal as a source of energy for electricity in the United States, there are opportunities to export coal to other nations.  Removing excessive environmental reviews can help promote coal exports that will help keep coal jobs in the United States.

· Direct all additional revenues generated by exploration and drilling on federal lands (excluding the share allocated to the states) exclusively to national debt reduction. The U.S. national debt is approximately $17.5 trillion. As we free the development of U.S. natural resources to spur economic and job growth, we should prevent revenues from being used to further expand government programs and instead use it to free taxpayers from the debt burden that hampers the nation’s incredible potential.

Politicians opposing existing law must fashion alternative law, even while in the minority, to work toward passage and enactment. Sen. Cruz and Rep. Bridenstine have taken that step, to show one and all that there is a different philosophy, a different approach than the neo-Malthusian, anti-fossil-fuel philosophy of the current party in power.

America will like what they see with the American Energy Renaissance Act, and the free-market public policy community is hard at work to add to the list of reforms, all to make the “politically impossible politically inevitable.” (For a full hypothetical proposal, see the American Energy Act authored by IER.)

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An earlier version of this post was published at MasterResource on March 31, 2014.