The Trump administration announced plans Friday for a regulatory bailout to prevent the closure of coal and nuclear power plants, according to Politico. The president “directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources,” according to a statement from White House press secretary Sarah Huckabee Sanders. The measure would force power companies to keep certain plants in operation even if they have become unviable economically.
The move also follows aggressive action from the administration to protect US industries like aluminum and steel, with tariffs on goods from the EU, Canada, and Mexico.
Sanders added that “keeping America’s energy grid and infrastructure strong and secure protects our national security… Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation’s energy mix, and impacting the resilience of our power grid.”
The memo was first published by Bloomberg on Thursday. It argues that while the Department of Energy works to identify critical energy infrastructure, which is likely to take years, the department should require plants to continue operating under the 1950 Defense Production Act and the Federal Power Act. Experts have suggested such an interpretation of the rarely used federal powers is likely to provoke major legal battles.
The memo cites national security concerns, saying:
“Natural gas pipelines are increasingly vulnerable to cyber and physical attacks. The incapacitation of certain pipelines through the United States would have severe effects on electric generation necessary to supply critical infrastructure facilities.”
“Federal action is necessary to stop the further premature retirements of fuel-secure generation capacity,” according to the memo.
The move is the most aggressive yet in a series of efforts to keep these sectors alive in the face of cheaper renewables and natural gas. While opposition to such a move is found across a wide breadth of the political spectrum, from environmentalists to free market conservatives to utility companies themselves, it will fulfill Trump’s campaign promises to the coal industry to keep jobs alive. Such working class support was crucial to Trump’s victories in key battleground states.
Politico analysts also note that the move directly benefits Bob Murray, a mining mogul and staunch Trump supporter, who supplies coal to a number of struggling plants. The question first gained serious attention from the administration after Perry met with Murray at the Department of Energy. Murray’s company donated $300,000 to Trump’s inauguration committee, and $1 million to Trump’s super PAC just four days after Murray asked the government to issue an emergency order to keep his company’s plants open last August. At that point, the administration did not take action.
So while it’s clear that the move will benefit some of Trump’s big donors and most politically decisive supporters, how will it benefit the country as a whole? Is America’s energy grid really facing a crisis situation?
Despite the claim that the decline of these power plants represents an emergency in need of federal intervention, power grid operators see the situation differently.
According to the PJM Interconnection, which runs America’s largest power grid, running from the Midwest to the Atlantic:
“Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers. There is no need for any such drastic action.”
“The Administration’s draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided,” according to the American Petroleum Institute’s market development group director, Todd Snitchler.
First, it’s questionable whether there is any real national security emergency calling for an intervention in the market that would clearly favor Trump’s supporters. This is, in itself, a claim that many experts and insiders have already refuted. Secondly, there is the question of whether propping up coal helps the country as a whole. Emissions from burning coal are one of the biggest contributors to climate change. Burning coal also releases harmful particulate matter, mercury, and chemicals that give rise to smog.
Unsurprisingly, environmentalists were emphatic in their criticism of the plan. A statement from Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, argued:
“This is an outrageous ploy to force American taxpayers to bail out coal and nuclear executives who have made bad decisions by investing in dirty and dangerous energy resources, and it will be soundly defeated both in the courts and in the court of public opinion.”
Coal losing the battle to cleaner energy sources is a good thing for the country, and for the world. In giving preferential treatment to voters and industry backers, Trump is ignoring his duty to the vast majority of Americans who are not already invested in coal power.
Ultimately, the plan, or at least its specifics, will likely require the approval of the Federal Energy Regulatory Commission (FERC). While most of its five members were appointed by Trump, the commission shot down a similar initiative from Perry. The commission is unlikely to support a plan that is so legally problematic, according to experts. Some commissioners have expressed ambivalence toward similar efforts due to legal hurdles, and according to John Bartlett, Reaves Utilities ETF portfolio manager, “This might just never even be taken up by FERC…Job No. 1 if you’re a FERC commissioner is stay out of court.”
The administration may be ready for a fight, as their release of the memo itself suggests. But it’s dubious whether this is because they really believe it’s what’s right for the country, or because it’s a politically expedient move ahead of precarious November elections.