The Trump administration is unilaterally reshaping the United States under the cover of national security. The White House’s justification for its “zero tolerance” policy of separating families at the border was based on the president’s powers over national security.
President Donald Trump’s Muslim travel ban was justified on grounds of national security, as are his vague “extreme vetting” proposals for visa applicants. Now, his Energy Department is looking to reshape the energy industry and reverse the trend away from coal-fired power plants. Their justification?
Yet in the case of the energy industry, nobody is buying the rationale, and the radical intervention into energy markets has produced an odd-bedfellows coalition of opposition that includes the oil and gas industry, renewable energy companies, and environmentalists.
On the other side, in support of the White House, stands the coal and nuclear industry, headed up by Murray Energy and First Energy, who’ve long lobbied for just such a lifeline.
Speaking at the World Gas Conference this week in Washington, Energy Secretary Rick Perry assured the government and industry representatives present that the U.S. is working to “honor the right of every nation to use every available fuel at its disposal. I wish I can tell you the entire developed world is on board with our vision. They are not.”
Neither is much of the oil and gas industry that was gathered before him. Thanks to his plan to bail out struggling power plants — a measure opposed by the likes of the American Petroleum Institute — Perry now finds himself caught in the crosshairs between two dueling arms of the fossil fuel industry.
A Department of Energy memo first obtained by Bloomberg details the Trump administration’s plan to subsidize struggling coal and nuclear plants. The justification is that a lack of reliability in the electric grid represents a threat to national security. It’s not clear what action the administration has taken on the draft memo, but if implemented, the measure would allow the Energy Department to activate wartime powers under the Defense Production of Act of 1950, enacted in response to the Korean War.
Ahead of the conference, Perry had been coy about how the plan would unfold, likely in an effort to avoid further backlash from the industry with which he hopes to maintain cozy ties. Attending the same event, Patrick Pouyanne, CEO of the French gas giant Total, had harsh words for Perry’s vision. “The U.S. administration tries to promote coal-fired plants, but frankly if you find an investor who wants to invest 25 years in coal-fired plants,” he chided, “I would not buy the shares of that company.”
The most powerful opponent of Trump and Perry’s plan, however, might be from a body handpicked by the White House: the Federal Energy Regulatory Commission.
Discussing the draft measure at a Senate oversight committee hearing several weeks ago, Sen. Martin Heinrich, D-N.M., asked members of the FERC — which is dominated by Trump appointees — if they “believe that in the wholesale power markets we’re facing an actual national security emergency at the moment?”
“I do not, senator. I think the markets …” FERC Commissioner Cheryl LaFleur started to respond before Heinrich cut her off: “Anyone want to answer that with a yes?”
No one did.
The plan is a zombified version of one struck down unanimously by FERC earlier this year, in which Perry’s Energy Department — at the behest of Murray Energy and FirstEnergy — proposed a new FERC rule that would mandate electric customers pay to keep coal and nuclear plants online that would otherwise be shuttered. The new version, according to the memo, would see the department mandate that grid operators buy up power from flailing power providers for two years, driving up monthly costs for ratepayers as much as $65 million. In 2017, before Perry’s proposed FERC rule change, Murray begged Trump for a comparable measure, which the administration considered but eventually rejected. Each of these measures has drawn the ire of oil and gas interests, anti-nuclear activists, and environmentalists.
This new memo, first circulated in advance of a National Security Council meeting late last month, appears designed specifically to write out a role for FERC, though energy analyst Cathy Kunkel of the Institute for Energy Economics and Financial Analysis said it’s “hard to imagine that you could change the wholesale market without FERC being involved,” given that it’s the main body responsible for regulating energy markets.
Invoking wartime powers to prop up struggling energy sources is a remarkable step for the administration to take. The Defense Production Act is intended to give the executive branch sweeping powers to nationalize industries that are vital to national security or for dealing with natural disasters. It was first invoked by former President Harry Truman in 1952 to nationalize the steel sector during the Korean War, in an attempt to pre-empt a nationwide strike by the United Steelworkers of America and prove to the nation that he wasn’t “soft on communism.” (The Supreme Court later decided that Truman didn’t have the authority to seize private property, as the war in Korea had never been formally declared.)
As Perry himself stated last month, “There is no free market for energy,” and the new rule he’s backing would actively intervene against prevailing trends in the energy market, where natural gas has reliably outcompeted coal over the last several years. Perry, though, isn’t wrong: The U.S. subsidizes fossil fuels to the tune of about $15 billion per year, according to a recent study from Oil Change International, and it regularly tips the scales in fossil fuel producers’ favor. At most, though, the administration’s proposed bailout could only kick the can of coal’s decline farther down the road. “I would not think that uncompetitive coal plants are going to be more competitive in two years than they are now,” Kunkel said.
Sen. Maria Cantwell, D-Wash., a member of the committee, decried the memo as a “radical proposal,” and said in her opening statement that the commission’s work “shouldn’t really be about bailing out one sector.” Cantwell added in a separate statement to The Intercept that, “it is clear that the public servants actually in charge of grid reliability and just and reasonable rates don’t see a need for a coal bailout. I hope my colleagues will take their views seriously and oppose any radical next steps by the Trump Administration.”
In the hearing, Cantwell also referenced a statement from representatives of the PJM Interchange — the utility market where most of the plants that would be affected by the rule operate — stating that no such emergency exists. As PJM CEO Andy Ott told Utility Dive after news of the memo broke, “We don’t think there’s an emergency today. We said that very bluntly and very publicly.” The North American Electric Reliability Corporation, the federal body responsible for power reliability, has echoed that sentiment.
Throughout the hearing, FERC commissioners shot down suggestions from Republican and some Democratic senators that coal and nuclear plants are in dire need of the proposed subsidies.
After Sen. Joe Manchin, D-W.Va., insisted that only coal and nuclear qualify as “baseload” power — the kind that can offer uninterrupted power for distribution — FERC Commissioner Robert F. Powelson corrected him, explaining that hydropower and natural gas both qualify, and that generation capacity for the latter has proliferated over the last several years. “We’re tickled to death to have the gas capacity we have, which is tremendous in West Virginia, Pennsylvania, and Ohio. But it can be interruptible,” Manchin shot back. “But so are those other sources,” Powelson noted, referring to coal and nuclear. He also said the measure would “threaten to collapse the wholesale competitive markets that have long been a cornerstone of FERC policy,” and called it the “greatest federal moral hazard we’ve seen in years.” (Powelson, a Republican, on Thursday announced his resignation from the FERC to become the CEO of the National Association of Water Companies, a move some have speculated was spurred by the row over the bailout memo.)
Neil Chatterjee was the only FERC commissioner to offer even a tepid defense of the Energy Department’s proposal. He echoed his colleagues’ arguments that there currently is no grid reliability crisis, but added the slight caveat that the Trump administration “should not assume that good fortune will continue.”
The future of the measure is unclear. The open question now, Kunkel told me, is whether the Department of Energy will look to push through the measure unilaterally using executive authority. “The implementation details are quite vague,” she said.
Manchin and Sen. Shelley Capito, R-W.Va. — both beneficiaries of generous coal industry campaign contributions — supported the memo, justifying it as a way to help out struggling Appalachian communities, which have been hit hard by coal’s decline. Notably, that task doesn’t fall under the mandate of either the Department of Energy or FERC, and there’s not much reason to believe the bailout would be much of a boon to struggling coalfield counties.
“We’ve had a lot of economic growth but haven’t had real development because of the nature of resource extraction,” Ted Boettner, executive director of the West Virginia Center on Budget and Policy, told me. Most profits from extraction are funneled outside the state or to already wealthy executives within it. The U.N. Special Rapporteur on extreme poverty and human rights, Philip Alston, recently visited West Virginia while compiling a report on the U.S. and noted state residents’ startling lack of access to broadband and drinkable water.
“West Virginia has billions of dollars in legacy costs from coal mining: deteriorating roads, pension liabilities, health care liabilities, and liabilities due to surface mining,” Boettner said in an interview. “We could be spending lots of money putting people to work cleaning up the mess than has been made by the coal industry.”
Far better for West Virginia than temporarily propping up coal plants, Boettner said, would be more robust federal investment. He pointed to the RECLAIM Act — a bill introduced last year that would release $1 billion to help reclaim abandoned mine lands, fuel investment in Appalachia, and diversify the economy away from extraction — as an example of a measure that would help the state. Both of West Virginia’s senators have supported the RECLAIM Act, though Boettner said it hasn’t been a major priority for either of them. (The legislation has languished in the House after its passage through the House Natural Resources Committee, and a Senate version sits in a similar limbo.)
West Virginia’s traditionally low fuel prices have skyrocketed in recent years because of the state’s over-reliance on coal-fired power generation amid the rise of natural gas, Boettner explained. Remedying fuel costs and the other economic issues facing West Virginia demands changes much more far-reaching than subsidies to coal plants. “Instead of more corporate welfare for the coal industry, our state’s congressional delegation in Washington should be looking for ways to give West Virginians more energy sources,” he said. “I think we’re sort of whistling past the graveyard of the clean energy revolution.”