Category: Law Review Articles

Energy Tradeoffs Podcast #6 – Sharon Jacobs

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For this week’s EnergyTradeoffs.com podcast interview, we have the University of Colorado’s  Sharon Jacobs talking with David Spence about her research on “Environmental Privileging.”

Sharon talks about how different actors privilege different values in energy policy and argues that scholars should be explicit about which values they are privileging. She takes the case study of privileging environmental values in energy policy and argues that while “privileging certain values and goals is not a problem,” it can create problems if it is “unacknowledged or hidden.” She shows how policymakers can be explicit about what values they are privileging and why they are doing so.

The Energy Tradeoffs Podcast can be found at the following links: Apple | Google

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Guest Blog: Monika Ehrman on Energy Realism

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Guest blogger Monika Ehrman is here to discuss her fascinating new paper on energy realism and the keep it in the ground movement, which is a coalition of groups that seeks to ban oil and gas production on federal lands, and is becoming a major focus of discussion in the Democratic presidential primary. 

In A Call for Energy Realism: When Immanuel Kant Met the Keep it in the Ground Movement, I examine the Keep it in the Ground Movement, which is a coalition of environmental groups that seek to end fossil fuel extraction by halting oil and gas development. I argue that an immediate or short-term divesting of petroleum is unrealistic and disregards the possibilities of (1) serious economic impacts with respect to domestic revenues, (2) disruptions to infrastructure, and (3) geopolitical risks tied to energy independence and regional stability. I do so while first acknowledging the importance and risk of climate change. In the article, I promote the adoption of Energy Realism, which I set forth in two forms: Pragmatic Energy Realism and Philosophical Energy Realism. Pragmatic Energy Realism incorporates the realities of actual petroleum consumption and reliance. Philosophical Energy Realism borrows philosophical concepts arising from Kant’s theories of realism. I assert that there is only one reality with respect to energy, environment, poverty, and other aspects of energy consumption and environmental impact. It is therefore impossible to isolate any single perspective without fundamentally dismissing reality and instead embracing a subjective perspective. The article also recommends that these anti-extractive movements support initiatives such as adoption of a carbon tax, increasing energy efficiency, and promoting awareness of and addressing energy poverty.

The article A Call for Energy Realism: When Immanuel Kant Met the Keep it in the Ground Movement appears in Utah Law Review and is available here: https://www.utahlawreview.org/article/9447-a-call-for-energy-realism-when-immanuel-kant-met-the-keep-it-in-the-ground-movement

Here is the article abstract:

The “Keep it in the Ground” Movement (the “Movement”) is a coalition of environmental groups that seek to end fossil fuel extraction by halting oil and gas development on federal lands. Supporters of the Movement demand a safer climate future and the transition to a renewable energy economy. However, the Movement is premised on the notion that the United States can divest fossil fuels, particularly petroleum hydrocarbons, from its energy economy and terminate oil and gas development in the near-term future. The Movement disregards the possibilities of serious economic impacts with respect to domestic revenues and infrastructure framework, and geopolitical risks tied to energy independence and regional stability. This Article examines the rise of the Keep it in the Ground Movement and analyzes the challenges that would follow its evolution and implementation if it continues to ignore the reality of American energy use and reliance. It promotes the adoption of Energy Realism in two forms. 

The first form of this realism, Pragmatic Energy Realism, addresses the realities of actual petroleum consumption and reliance. The second form, Philosophical Energy Realism, borrows philosophical concepts arising from Kant’s theories of realism to develop the theory that there is only one uniform reality of energy. Application of these theories highlights the flaws of examining the issue from solely an environmental perspective. In fact, I hypothesize that such an evaluation is not correct. Rather, this Article asserts that there is only one reality with respect to energy, environment, poverty, and other aspects of energy consumption and environmental impact. It is therefore impossible to isolate any single perspective without fundamentally dismissing reality and instead embracing a subjective perspective. This Article also proposes initiatives that the Movement could adopt to affect changes in consumer demand and energy consumption including: energy efficiency measures, implementation of a carbon tax, and addressing energy poverty. The author intends that understanding and adopting Energy Realism will provide new directions and goals for the Movement and further the necessary dialogue between stakeholders on the interrelationships between energy and environment.

Energy Tradeoffs Podcast #4 – Shelley Welton

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This week’s EnergyTradeoffs.com podcast features David Spence interviewing the University of South Carolina’s  Shelley Welton about her research on “The Distributional Impacts of Distributed Energy Resources.”

Shelley talks about how rooftop solar and other smaller sources of power are changing energy policy. The interview builds on her article on “Clean Electrification,” which was published in the Colorado Law Review.

The Energy Tradeoffs Podcast can be found at the following links: Apple | Google

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Energy Tradeoffs Podcast #3 – David Spence

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This week’s EnergyTradeoffs.com podcast features Sharon Jacobs and Shelley Welton interviewing the University of Texas’s David Spence about his research on “‘Naïve Energy Markets’ and the boundary between markets and regulation.”

David argues that both consumers and investors make decisions based on factors that often aren’t considered in simple economic models of energy markets. He discusses electricity pricing, under-investment in energy transport, and government efforts to influence the outcome of energy markets. The interview focuses on his recent Notre Dame Law Review article, which is titled “Naïve Energy Markets.” 

The Energy Tradeoffs Podcast can be found at the following links: Apple | Google

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Guest Blog: Joshua Macey on “Rate Regulation Redux”

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  • Guest blogger Joshua Macey is here to discuss his new paper on how electricity regulators and grid operators are responding to increased solar and wind power, and how their interventions raise old questions that were supposed to be resolved by electricity deregulation. You can also hear an Energy Tradeoffs interview with Joshua about his piece here.

In Rate Regulation Redux, forthcoming in the University of Pennsylvania Law Review, Jackson Salovaara and I consider whether the American system for compensating electric power generators can accommodate high levels of renewables. We find that the current market structure is ill-suited to a high-renewables world. Regulators and grid operators (grid operators are the utilities that manage the power grid), it seems, are aware of the challenges renewables pose. However, instead of developing a payment system that would preserve competition in the energy sector and allow renewables to enter the market, regulators have begun an ad hoc process of reregulation that raises rates, leads to excess capacity, and prevents renewables from competing with traditional energy sources.

For most of the twentieth century, FERC treated electricity as a natural monopoly. To ensure that suppliers met demand, regulators gave utilities exclusive franchises over their service territories and permitted them to charge rates sufficient to cover their costs. In exchange, generators agreed to provide electricity to customers in their territories and cap prices. For years, this system provided reliable electricity. Nonetheless, critics complained that it limited consumer choice, failed to promote innovation, rewarded utilities for overinvesting in supply, and reduced incentives to retire uneconomic generators.

In the 1990s, FERC began to encourage a “market-based” approach to promote competition and control costs. Under this “restructured” model, which has been adopted in two-thirds of the country, an independent grid operator determines demand for electricity, solicits bids from generators, and clears enough bids to meet demand. The grid operator clears bids starting with the lowest bid but ultimately pays every generator the price bid by the highest clearing bidder. In this system, generators bid at their marginal cost. If a generator bids below its marginal cost, it risks having to provide electricity even when it would lose money in doing so. Above-marginal cost bids risk failing to clear when it would be profitable for the generator to operate.

This system promotes competition and keeps short-run costs low, but it is ill-equipped to integrate significant volumes of renewables. Generators that are dispatched infrequently or operate on the margin cannot make a profit or recover their costs. These plants are known as “peaking plants” and operate a few times in a year when demand is high (often on the hottest days of the summer or the coldest days of the winter when Americans consume a lot of electricity). Without them, grid operators would not be able to meet peak demand.

In theory, peaking plants would be able to make enough money to operate. While generators bid their variable costs almost all of the time, that assumption does not apply to peaking plants that bid only when demand is high. In most circumstances, a generator risks losing out on profitable bids if it submits a bid above its marginal costs. Because peakers are the last plants to be dispatched, they do not need to worry that they will be outbid because there are no plants available to outbid them. They can therefore submit bids that significantly exceed their marginal costs. As a result, peaking plants can drive prices to levels that would allow them to recover their fixed costs and make a profit despite the fact that they operate only a few times a year

However, a system that relies entirely on energy markets can lead to rampant market manipulation and excessive price volatility. Peaking plants have market power. Because they are the last units dispatched, if they do not operate, there will not be enough electricity to meet demand (these incentives contributed to the California energy crisis in the beginning of the twenty-first century). Peaking plants can therefore drive prices to extremely high levels. To avoid these problems, every regulator in the United States sets a ceiling on its energy market’s clearing price.

Unfortunately, a system that imposes price caps on energy markets is ill-equipped to integrate significant volumes of renewables. Renewables have a different cost structure than other generators. While the marginal costs for most generators are above zero, wind and solar facilities have very low operating costs. As renewables provide an increasing percentage of electricity, they suppress revenues for all generators. Imagine if four generators had been providing electricity to a region. Two bid $20 MWh, one bid $40 MWh, and one bid $50 MWh. All four generators were paid $50 MWh. If, however, a solar plant replaces the $50 MWh generator and offers $0 MWh, it will reduce revenues for all generators. That is because it will drive out the $50 MWh generator, making the $40 MWh generator the clearing bid, which means that every generator would be paid $40 MWh.

The challenge with this system is that as renewables suppress prices, energy markets become increasingly reliant on price spikes to ensure that all generators receive sufficient revenue. But if regulators do not increase price caps, then energy prices will not increase enough during scarcity to allow generators to make enough money to continue to operate.

There are a few possible solutions to this problem. One would be to increase price caps, but no regulator (with the possible exception of Texas) has expressed a willingness to let spot market prices rise enough to allow generators to recover their costs. Regulators have been reluctant to allow prices to rise to extremely high levels out of fear that doing so would encourage market manipulation. 

Another option is to develop other markets that would ensure that crucial generators are able to survive. To date, most regulators seem inclined to adopt this approach. Unfortunately, the markets regulators are developing do not allow meaningful competition between energy sources and instead prevent renewables from competing with traditional generators. For example, grid operators in the east coast have begun to rely on capacity markets, which pay generators for being available to provide electricity instead of for actually providing electricity, to make sure that generators receive enough revenue to continue operating. The problem with this this system is that capacity markets do not actually reward generators for providing the services the grid needs. Not all electricity has the same value. Generators that can turn on and off quickly, that can provide electricity when it is most needed, and that provide electricity to areas that are resource-constrained should be rewarded for providing these services. Energy markets are uniquely effective because they reward generators that provide electricity where and when it is really needed. Capacity markets fail to do this. To make sure that the “right” generators are being compensated in capacity markets, some grid operators have taken steps to make it more difficult for some types of generators (often renewables and nuclear) to enter capacity markets.

Equally problematically, it is difficult for generators to exit the market once they clear a capacity markets. Generators that clear capacity markets commit to operating for a period of time (often three years). During that period, they are not permitted to exit the market unless they receive regulatory approval to do so. Thus, customers are often stuck paying for dirty electricity that is no longer necessary for the grid.

Worse still, grid operators have begun to rely on “reliability-must-run” (RMR) agreements to provide even more competition to the generators that are perceived to be critical to grid reliability. When capacity markets are not able to retain generators perceived to be critical to grid reliability, grid operators have simply bailed individual generators, and they have done so without any kind of competitive bidding procedure.

In our view, these interventions resurrect many of the principles of rate regulation. Under that approach, regulators gave generators a rate of return intended to make sure that the electricity companies would be able to meet all of a region’s electricity needs. In exchange, power companies provided service at agreed-upon rates. Today, regulators have begun identifying the generators that the grid needs, making sure those generators receive enough money to operate, and preventing them from retiring prematurely. Rather than rely on market forces to determine which generators operate, regulators shield preferred generators from competition in order to ensure that those generators are financially viable. And these generators are required to provide the services the grid needs.

A superior option, which we endorse in the paper, is to design a system based on long-term contracts that would impose penalties on generators that fail to perform as promised. Some of the problems with capacity markets are that they do not compensate generators that provide the services that the grid needs, they prevent generators from competing with each other, and they make it difficult for uneconomic and superfluous generators to exit the market.

Regulators and grid operators want to ensure that there is enough capacity to provide electricity to consumers throughout the year. A bidding process would allow utilities to purchase the electricity that they need. Utilities would have an incentive to keep cost down because doing so would allow them to lower their own costs. And, by penalizing generators that fail to provide services they agreed committed to, this approach would preserve short-term price signals that create incentives for generators to provide electricity where and when it is needed.

Energy Tradeoffs Podcast #2 – Alexandra Klass

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Our next EnergyTradeoffs.com podcast features David Spence interviewing the University of Minnesota’s Alexandra Klass about her research on “Network Infrastructure: Permitting & Eminent Domain.”

They discuss permits for interstate power-lines, liquefied natural gas (LNG), and oil pipelines, focusing on two recent articles from Professor Klass: “Future Proofing Energy Transport Law” and  “Reconstituting the Federalism Battle in Energy Transportation.” Near the end of the podcast, they discuss energy & eminent domain, the subject of my forthcoming Minnesota Law Review article with Professor Klass.

The Energy Tradeoffs Podcast can be found at the following links.

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Energy Tradeoffs Podcast #1 – Pipelines & Power-Lines

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Earlier this month, David Spence posted an introduction to our new project with Sharon Jacobs and Shelley Welton, EnergyTradeoffs.com. Our website will feature the work of researchers grappling with energy policy tradeoffs between reliability, affordability, and environmental performance as well as the other trade-offs associated with energy transitions.

The site includes interviews in which these researchers discuss their recent articles. We have already posted 27 of these conversations and will post more in the coming weeks. But if you prefer to digest interviews in podcast format, I will periodically post them.

To start, below is my discussion with David on my just published article: James W. Coleman, Pipelines & Power-lines: Building the Energy Transport Future, 80 Oh. St. L.J. 263 (2019). The interview is titled “The Difficulty of Siting Pipelines and Transmission Lines” and you can find it here. You can find the published article here: http://bit.ly/Pipelines-Power-Lines

David and I discuss why it’s become cheaper to produce oil, gas, & renewable power, and how that has shifted energy companies’ focus to energy transport: how to get these new energy sources to consumers at an affordable price. I explain that, at the same time, changing laws are making it harder to build pipelines & power-lines and offer my suggestions for legal reform.

The Energy Tradeoffs Podcast can be found at the following links: Apple | Google

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Guest Blog: EnergyTradeoffs.com

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By David Spence

EnergyTradeoffs.com is a new web site aimed at a specific audience—those who produce or read law and policy scholarship about the transition to a greener energy mix. It is dedicated to promoting a more thorough understanding of the tradeoffs associated with that transition, particularly the impacts on energy costs (and distribution of costs) and supply reliability. EnergyTradeoffs.com will feature conversations with authors of scholarly articles whose work grapples with transition tradeoffs issues, and avoids the temptation to treat tradeoffs as easy or painless, or to assume them away. We also plan to host a moderated discussion board for energy policy professionals and academics focused on these tradeoff issues.

Since this web site was my brainchild, I thought I would explain why I think its creation is a good idea. I don’t speak for other organizers here, so I hope my friends and colleagues will weigh in on this question as well.

The case for this web site in a nutshell.

We are working from four basic premises:

  1. The enormous costs of climate change necessitate a transition to an energy mix characterized by drastically-reduced (or net zero) carbon emissions.
  2. Despite technological advancements that make the transition more affordable than ever, the energy system is still characterized by difficult tradeoffs between affordability, reliability, and environmental performance.
  3. Reasonable people can disagree about how to balance those tradeoffs.  They are not simple or easy or “win-win,” at least not in every important sense.
  4. We should explore those disagreements, because if we don’t understand them we are likely to choose a policy path that turns out to be less effective or more expensive than need be.

So EnergyTradeoffs.com is intended to be a place for people who want to explore and think critically about these issues. It is not intended to be a place to debate whether climate change is real, human driven, or worth addressing (through policy change) now. Nor is it a place aimed at inspiration or political mobilization, or a place to denigrate those who ask difficult questions about the transition. There are lots of other places online to engage the green transition in those ways.

But what about the politics?

There are strategic political reasons why one might not want to talk openly about tradeoffs. Discussing the devil-in-the-details can undermine the task of building support for a policy goal. “Have your cake and eat it” narratives are attractive and easier to sell—for politicians seeking votes, businesses seeking clients, or web sites seeking clicks. This may have been part of what former New York Governor Mario Cuomo meant when he said that “you campaign in poetry [but] govern in prose.” So political strategists advise candidates to focus on ends rather than means, to adopt simpler, positive narratives, and to avoid uncomfortable truths. That idea may be part of the plan to develop and sell the Green New Deal, which articulates a vision of a desirable future state in which these energy tradeoffs have (somehow) been addressed or resolved.

Regardless of whether the political logic of avoiding discussion of tradeoffs is correct, the question of how best to reach the shared goal of a greener energy mix ought to be debatable.  A full, public exposition of the problem ought to promote a better response to it in the end. One of the quotations featured on our web site comes from Steven Spielberg’s (and screenwriter Tony Kushner’s) version of Abraham Lincoln. When radical Republicans tell a politically-cautious Lincoln that he lacks ambition and a moral compass, he responds that a compass can “show you true north,” but it cannot show you the swamps and chasms between you and your destination. In other words, simpler narratives may build support for a path to change that ultimately proves ineffective or unacceptably expensive to a critical mass of voters. Brexit, for example, was sold successfully as a “have your cake and eat it” idea, but few would argue that the UK is now better off for having bought that sales pitch. 

Those of us involved in this site are academics. Our first obligation is to help people understand all the dimensions of a problem. If we are advocates at all, we are educators first and advocates second. We should work to avoid framing these issues in ways that make our preferred outcome seem more attractive by downplaying or ignoring features of the problem. To the contrary, we should think most critically about our preferred alternatives.

Ideally, this web site will help people think about, and develop a fuller understanding of, the practical realities (including the difficulties) associated with a green transition, not to derail it but rather to make it more sustainable and durable.

Grappling honestly with these tradeoffs is uncomfortable

When the politics of a policy discussion are fraught or emotionally-charged, facing the inconvenient truths associated with the issue is difficult for everyone, including academics. But we should do it anyway.

Productive exchanges of views about tradeoffs require both intellectual humility and respectful dialogue, which are in short supply in today’s fractured, polarized and emotional political environment, particularly in semi-anonymous online platforms.

It is well-understood that caring intensely about something triggers motivated reasoning, in all of us. This manifests in all sorts of ways. We care about climate change and its effects, which makes discussing the costs of addressing it uncomfortable (cognitive dissonance). We value our own prior conclusions about and analyses of the issues (confirmation bias). We care about and value agreement with our friends and members of our social networks (cultural cognition and groupthink). These natural human tendencies sometimes lead us to suspend critical thinking about the ideas we want to champion. Since it is much easier to accept (and to recognize) that problem in others than in ourselves, we have to work at it by subjecting our ideas to challenge. 

I have disagreements with some of my very best friends in academia about some of these tradeoffs issues. Exploring how and why we disagree—making those differences explicit and discussing them—is much more valuable to our own understanding, and to the understandings of others who read our work, than burying them in our assumptions or ignoring them altogether. The kinds of insulated, parallel narratives that arise in online communities may persuade community members, but they only educate those audiences when competing narratives intersect in ways that engage the other’s assumptions and arguments fairly.

Framing and reportage

Changes in the media environment also contribute to misunderstanding tradeoffs. For the first few decades of the modern regulatory era, the three broadcast networks and local newspapers fed viewers and readers carefully-curated news, and that curation was based upon journalistic standards that emphasized verifying and re-verifying facts, and aspiring to objectivity.

Today, the very idea of objectivity is rejected by many; and those traditional sources must compete for readers and clicks with outlets that emphasize the sensational or promote a particular political ideology. Moreover, information is transmitted online through news aggregators, or links sent to friends via online social communities. This way of acquiring and digesting (socially) new information tends to skew our understanding of the world, as algorithms feed us more of what we like and less of what we dislike. 

So as political polarization increases the emotional component of policy debates, and online filter bubbles skew the set of energy information to which we are each exposed, it becomes more and more difficult to develop a complete understanding of the tradeoffs associated with a green transition.  We form and harden our beliefs much more quickly in the digital environment. In the debate about the green transition, it becomes more difficult to respectfully debate questions associated with tradeoffs, and much easier to ascribe malicious or otherwise nefarious motives to those whose policy preferences or understanding of the issues differs from ours. No doubt these trend are amplified during the ever-lengthening political campaign season.

Ideally, all of the talented writers and editors on the energy transition beat would regularly frame their stories in ways that are attentive to the seriousness and difficulty of distributional issues, and of cost and reliability tradeoffs. Sometimes writers choose a narrow angle for a story as a response to the perception that that particular angle is under-reported. But to the extent that writers and editors rely on readers to seek out a representative sample of information about energy issues, that reliance is misplaced. Indeed, in the digital environment even the most avid reader would be hard pressed to develop a complete or balanced perspective on the tradeoffs associated with the green transition. So our hope is that people will come to this site to develop a fuller appreciation for the value choices and tradeoffs that will be an unavoidable part of the green transition.

Going forward

This web site is a purely educational, non-commercial effort, one that is only just getting underway, and is operating on a shoestring budget.  We will be adding work by law and policy scholars to the site as our time and resources allow. As noted above, we also plan to roll out a moderated discussion board dedicated to the civil exchange of expert views on these tradeoffs issues, sometime in the fall of 2019. We organizers of the site hope people find it useful.

Guest Blog: Energy Policy in the Age of Emergency Governance

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By Sharon Jacobs & Ari Peskoe

We live in an age of governance by emergency. In February, President Trump declared a national emergency to build a wall on the southern border after lawmakers repeatedly denied his funding requests. Next, he declared a national economic emergency to prevent U.S. firms from doing business with the Chinese technology company Huawei. Most recently, he invoked a national emergency to sell arms to Saudi Arabia, the UAE, and Jordan without Congressional authorization.

These invocations are each significant. But they are also piecemeal, making them even more dangerous than a more comprehensive power grab. Each individual emergency declaration may appear justifiable, or at least insufficiently threatening to warrant dramatic response. Before long, however, we may find that the executive has come to rely on emergency invocation as a tool of governance in peacetime.

We fear that the electricity industry may be next in line for governance by emergency. Since early 2017, the Administration has sought to support certain unprofitable coal (and sometimes nuclear) power plants. The Administration’s justifications for bailing out decades-old power generators are a moving target, and have included reliability, a nebulous concept called “resilience,” and, most recently, national security.

Make no mistake: power system reliability is vitally important, and the electric system must be able to recover from both routine and extraordinary shocks. We do not deny that natural disasters and physical- or cyber-attacks are real threats. Our disagreement is with the Administration’s flirtation with statutory emergency authorities to remake the energy system.

In a jointly authored paper released today, we make two primary arguments. First, the electric power sector is not in crisis. Despite recent closures of coal-fired power plants, interstate power networks operate reliably, and the nation has more than enough generation capacity to meet demand.  A mix of federally regulated market rules and reliability standards, including standards related to physical and cyber security, as well as industry protocols and state oversight, keeps the system in balance.

Second, we argue that statutory emergency authority in the energy space is highly circumscribed. We look at four statutes: the Federal Power Act, the Fixing America’s Surface Transportation Act, the National Energy Act of 1978, and the Defense Production Act. With respect to the first three statutes, emergency authorities may only be invoked in the face of an actual threat to the grid. These statutes permit a narrow range of actions tied to the particular emergency, and their authorities terminate upon the emergency’s end (or, in some cases, sooner). The Defense Production Act enables government subsidy of private sector goods and services, but only where deemed critical to national defense.

One thing is clear: these statutes are not roving licenses to advantage particular types of generation. Over the past two years, the Trump Administration has attempted to invent a crisis in order to funnel support to ailing coal-fired generators. Its rationales are unrelated to the public interest and unsupported by the government’s own research. Most recently, Secretary Perry has suggested that multiple statutory authorities might be combined to achieve these ends. But as we explain in the paper, addition of these statutory authorities does not create anything greater than the sum of their parts.

Lawmakers, regulators, and industry actors are confronting genuine questions about adapting the power system to modern challenges, from introducing greater levels of renewable generation to mitigating climate impacts. These complex challenges are properly dealt with in the context of existing reliability frameworks and established stakeholder processes. They are not the sort of questions that lend themselves to effective resolution by reflexive reaction to imagined emergencies.

Eminent Domain for Exporting Energy?

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Eminent domain is the controversial exception to the general rule that no one can take your land without your consent. The Fifth Amendment to the U.S. Constitution allows the government to take your land for “public use” so long as it pays you fair compensation.

But what is a public use? Should pipelines and power-lines that help companies export energy to other states and countries count as a public use? Is it legitimate for states to let energy transport companies use eminent domain to serve the public in other states or countries?

This issue—”which public?”—is an increasing focus of litigation across the United States because many state laws and constitutions, like the federal constitution and federal laws, limit eminent domain to projects that serve a “public” purpose. At the same time, increasingly integrated North American energy markets mean that more and more electricity, oil, and gas are crossing state and national borders.

Just last Friday, the Iowa Supreme Court held that sending oil to neighboring states can count as a public use. But there is also a broad movement for a go-it-alone eminent domain policy, including court decisions in West Virginia and Kentucky that say out-of-state consumers don’t count as the “public.” And the D.C. Circuit is now considering a similar challenge to a natural gas pipeline that will allow some natural gas to be exported to Canada.

As I argue in this op-ed, it would have been a huge mistake for Iowa to adopt a go-it-alone eminent domain policy. Iowa has world-class wind power that will be most valuable if Iowa can export it to states like Illinois that have more people and less wind. A no-eminent-domain-for-export policy would have been terrible for Iowa.

More broadly, there are huge benefits from interstate and international energy trade. For decades, Canada has sent us affordable oil and cheap, clean hydropower. And states that have affordable oil and hydropower generally export to states that do not. If there was no eminent domain for export power-lines and pipelines, we all would be stuck paying more for dirtier energy.

And we need energy transport now more than ever. As I explain here, the U.S. is in the middle of three energy booms: history’s biggest oil rush plus more natural gas and more renewable power. Oil has many ways to get to market—pipeline, truck, rail, and boat—but natural gas and renewable power production depend on transport. Natural gas has environmental benefits if it can be piped to places that need to replace coal and oil. Solar and wind can provide cheap, clean energy if we build power-lines to take it to market. And new pipelines and power-lines would help American companies and landowners get more money for their gas and power. 

None of that will be possible, however, if go-it-alone state policies make it impossible to bring energy where it is needed. Landowners are rightly concerned about eminent domain and governments should reform the eminent domain process and offer more compensation to protect them as I suggest in my forthcoming Minn. L. Rev. article with Alexandra Klass. But ignoring interstate and international consumers is not a sensible reform and would cut off much of the promise of the new U.S. energy economy.

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