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Free Minds & Free Markets

Donald Trump: Energy Crony

Nearly a year into his term, it's clear the president intends to flood the bog with energy mandates and subsidies.

During the 2016 campaign, Donald Trump vowed repeatedly to "drain the swamp" in Washington, D.C. Nearly a year into his term, it's clear the president instead intends to flood the bog with energy mandates and subsidies.

In October, Secretary of Energy Rick Perry urged the Federal Energy Regulatory Commission to pour funds into conventional coal-fired and nuclear electricity generation plants. Perry argued the government needs to prop up these money losers in order to stabilize the power grid. As R Street Institute energy analyst William Murray points out, this amounts to a "creative" ploy "to fulfill promises made directly by President Donald Trump to coal mine owners during the election campaign, even at the cost of free markets—a supposed core belief among Republicans and conservatives of all stripes."

Why are coal-fired plants being shuttered? A June 2017 National Bureau of Economic Research study estimates that the "declining price of natural gas relative to coal, on an energy-adjusted basis, explains 92 percent" of reduced production. Furthermore, Steve Huntoon, a former president of the Energy Bar Association, notes in the trade publication RTO Insider that natural gas power plants are more reliable than coal-fired generators with respect to ensuring grid resilience.

Coal isn't the only energy source favored by the president. During the campaign, he frequently assured Midwestern voters of his support for ethanol mandates. And in November, Environmental Protection Agency Administrator Scott Pruitt bowed to corn-state senators' demands and approved a final rule that continues the Renewable Fuel Standard, by requiring refiners to blend 19.24 billion gallons of biofuels into the nation's fuel supply in 2018. That mandate is part of the path to blending 36 billion gallons of biofuels into transport fuels by 2022, a target set out in the 2007 Energy Independence and Security Act.

The stated purpose of that law is "to increase the production of clean renewable fuels" as a way "to move the United States toward greater energy independence and security." But in the past decade, U.S. domestic oil production has soared from 5 million to 9.4 million barrels per day while the price dropped from $130 to below $60 per barrel.

Meanwhile, the ethanol mandate burns up 40 percent of the U.S. corn crop and spurs farmers to plow an area the size of the entire state of Iowa. In 2016, analysts at Turner, Mason and Co. estimated that this pushed up refinery costs by as much $15 billion. Of course, drivers must pay more at the pump to cover these expenses—even as the prices of gas and oil remain low.

Photo Credit: Trump: bananajazz/iStock. Illustration: Joanna Andreasson

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  • loveconstitution1789||

    All energy sources in the USA get subsidies, kickbacks, and other crony capitalist set asides.

    All need to be cut at the same time or you do get a skew of what is the cheapest energy source base don who politicians want. Even by cutting all energy subsidies at the same, you still have a market skewed by decades of various government schemes to pick the winner and loser energy source.

  • ace_m82||

    True, but markets are amazingly good at self-correcting. A decade or so later, the malinvestment would be mostly (not totally) gone.

  • loveconstitution1789||

    I would think so too. If only lawyers in Congress would stop trying to skew the energy market.

  • JWatts||

    I'm glad to see the subsidies shot down. Now if we can actually phase out the Production Tax Credit for Wind and Solar, as well as, the ethanol subsidies and mandates, maybe we can get back closer to a free market.

  • BYODB||

    I've never been able to figure out how making fuel out of corn is somehow 'cleaner', or why it's a good idea to produce fuel that's a net energy loss, but most of all I wish the government would stop mandating that fuel damage my engine on purpose.

  • AD-RtR/OS!||

    Boy, the last thing an energy-dependent economy needs is to stimulate the production of low-cost energy.
    What can they be thinking.

  • Enemy of the State||

    Biofuels are high cost, low demand bullshit...almost literally...

  • NotAnotherSkippy||

    I see Bailey is still pissy that coal production rebounded in 2017. No mention of the subsidies for wind and solar and the distortion of the grid they cause? I'm shocked, shocked.

  • Lester224||

    Subsidies for coal are bad. Subsidies for nuclear are bad (nuclear should need to pay for it's expended fuel disposal itself and have costs reflect that). Subsidies for wind and solar are bad. Down with subsidies.

  • Hank Phillips||

    Nothing either Kleptocracy candidate said during the campaign means anything unless it matches what's in the ridiculously lengthy party platform written for lobby attorneys alone. But the Dems did promise to do their best to make electricity either completely illegal or so expensive that most cannot afford it. Puerto Rico is today's demonstration of what their policy does. By comparison, the mystical prohibitionist party copied at least part of the LP platform.

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