Trump bailing out the coal industry creates new and unlikely coalitions
Washington — In his 20 years of promoting renewable energy in Washington, Gregory Wetstone has made common cause with a range of special interest groups: environmentalists, power utilities — even a handful of natural gas producers. But US President Donald Trump’s efforts to bail out the coal industry led Wetstone, the head of the American Council on Renewable Energy, to find a surprising new partner: big oil.
Within hours of US energy secretary Rick Perry releasing a proposal to overhaul the country’s power markets to advantage unprofitable coal and nuclear plants, Wetstone was busy pulling together a team of unlikely allies, including solar installers, oil refineries and natural-gas drillers, all of which were worried that the plan would raise electricity costs and undercut their fuel source in the power markets.
With uncharacteristic speed for a collection this broad, Wetstone’s renewable energy council joined the American Petroleum Institute and 19 other groups to submit comments that noted their unlikely alliance, slyly noting the proposal’s "power to unite". They dubbed the plan ill-defined, unwarranted and unreasonable.
"It’s not often that our interests align, but I think everyone recognises the importance of standing up together," Wetstone said in an interview. "It’s a reflection of how disruptive the policy put forward would be.
The lobbying is aimed at the US Federal Energy Regulatory Commission (FERC), which oversees the nation’s electricity markets and is set to decide by December 11 whether or how to act on the energy department’s proposal. If approved, it could help achieve Trump’s goal of putting some US coal miners back to work by giving unprofitable coal power plants an edge against more economical ones that run off cheap wind, solar and natural gas.
When he proposed his grid overhaul, Perry relied on an obscure statute to argue that regulators should reward coal and nuclear plants because of their ability to keep enough fuel on hand to operate in case of emergency. Perry has asked FERC to allow power plants with 90 days of fuel on site to charge customers more money. Coal and nuclear plants store their fuel at the plant; natural gas and renewables typically don’t.
No one is really sure how much this would raise Americans’ power bills. Estimates range from a few hundred million dollars to more than $200bn.
Perry’s proposal caught energy lobbyists across Washington off guard. One oil company executive described frantic e-mails and phone calls trying to suss out details on it the night before it was released. Energy lobbyists scrambled to prepare executives, including at least two CEOs for phone calls and face-to-face meetings with top Perry and FERC officials. Ben van Beurden, the CEO of Royal Dutch Shell, pressed the issue with Perry when the two crossed paths at an energy event in Paris.
I haven’t seen the US gas or power industry this concerned in a long time," says Orlando Alvarez, the head of BP Energy’s natural-gas and power marketing and trading business. "It’s getting attention of senior executives at many energy companies we deal with.
"I haven’t seen the US gas or power industry this concerned in a long time," says Orlando Alvarez, the head of BP Energy’s natural-gas and power marketing and trading business. "It’s getting attention of senior executives at many energy companies we deal with."
BP and other oil companies are now big producers of natural gas, and, therefore, worried about bailouts to their rivals. Cheaper, cleaner-burning gas has displaced coal at power plants around the country, and now supplies more than a third of the US’s electricity.
The proposal is upsetting the balance of power among the energy and electricity industries in Washington, creating friction among traditional corporate allies and turning old foes into (temporary) allies. It’s also created an odd match of supporters as coal miners — who reject efforts to address climate change — join with the nuclear industry, which has asked to be rewarded for the fuel’s carbon-free attributes.
The solar-and wind-energy associations faced a flurry of questions from anxious executives, alarmed by what the plan would mean for their business models.
"It was everybody panicking together," said Christopher Mansour, vice-president of the Solar Energy Industries Association.
BP, the American Wind Energy Association and others hastily formed another alliance to combat the grid rule. This new "Affordable Energy Coalition" also included the R Street Institute, a free-market think tank, and Advanced Energy Economy, a trade group representing companies such as First Solar and Amazon.com.
In naming the coalition, critics turned to a tried-and-true tactic in DC of highlighting the consumer costs of a potential policy change, rather than the corporate interests fighting it.
Coal interests in recent years used a similar approach to combat the Obama-era Clean Power Plan, by highlighting how that rule to cut carbon dioxide emissions from power plants, would hike electricity costs, picking winners (solar, wind) and losers (coal).
The proposal is upsetting the balance of power among the energy and electricity industries in Washington, creating friction among traditional corporate allies and turning old foes into (temporary) allies.
"Washington is picking winners and losers in the market, rather than letting the markets operate themselves, and that has a negative impact for consumers," Michael Steel, a spokesperson for the Affordable Energy Coalition and former House Republican leadership aide, said in an interview. The group is using op-eds, letters and local media to try and get state rate payers to weigh in with the FERC.
Tensions have also erupted among longtime allies. After Trump officials heralded a newly updated US Chamber of Commerce-backed study as justifying Perry’s proposal by asserting that losing coal-fired power plants would raise electricity costs and lead to a loss of 1-million jobs, oil and gas members of the business group revolted.
Not only were those results at odds with the energy department’s own staff analysis, but oil and gas companies were outraged that a study from a group they paid dues to was being used against them.
On a conference call, representatives of those companies took turns bashing Karen Harbert, the head of the US Chamber Global Energy Institute for promoting the study and providing a supportive quote in a news release accompanying the report, say two participants in the call. These groups lined up behind Harbert as she fought against the Obama administration’s Clean Power Plan; now they wanted the Chamber to publicly rescind its perceived support for Perry’s plan.
Harbert said her institute did not know of the proposed grid rule before it was formally released, and the updated study was completed earlier. The institute "will fully evaluate any proposed actions by the FERC to ensure our member interests are well understood", she said.
On November 30, the Heritage Foundation hosted an energy and climate forum that featured coal-magnate Robert Murray, CEO of Murray Energy, who called Perry’s coal plan the most important thing that’s been done for the power grid in 60 years.
"I met privately with President Trump on that three times," he said. "We must stop these closings of these power plants."
A few hours before Murray spoke, Heritage held a separate public event meant to highlight scepticism of Perry’s grid plan, complete with a critic from the free-market Institute for Energy Research.
"The actual subsidy structure of the proposed rule is simply unacceptable," Kenny Stein, a policy director at the institute, said at the event. "Ultimately, the answer to government distortions can’t be to introduce new distortions that just favour different companies."