The opening shot of the War Between the Red and Blue States may
have been fired last Friday when the Environmental Protection
Administration announced its intention to take over Texas’s
authority on issuing clean air permits to new industrial facilities
as of January 2.
It is hard to imagine a more stark confrontation between
public and private sector-oriented economies. Texas has the
strongest economy in the nation, based on its philosophy of limited
government. The Texas Legislature convenes only in odd-numbered
years is constitutionally limited to meeting only 140 days. Until
this year, Texas has had a budget surplus and still has $7.5
billion in a rainy-day fund created by voters in 1988. During 2006
and 2007, Texas created 52 percent of all new jobs in the nation,
according to a study done by the Southern Methodist University’s
Cox School of Business. People are flocking to the state so fast
that Texas will gain four seats in the House of Representatives in
the new decade.
Washington, on the other hand, has run up a
trillion-dollar budget deficit and destroyed private-sector jobs
all over the country while expanding the government and presiding
over 10 percent unemployment. The states on the East and West Coast
that adhere most closely to Washington’s philosophy are approaching
insolvency. Yet they continue to pursue dreamy energy agendas,
trying to close down existing power plants and refusing to build
new ones while planning for a world running on windmills and solar
collectors.
Now Washington is going to try to impose this blue-state
agenda on Texas. The struggle will dwarf the
Arizona-versus-Washington contest over immigration.
In fact the conflict over energy production has been
brewing for decades. As far back as the 1920s, Texan entrepreneurs
built natural gas pipelines to carry their surplus gas north, only
to run into Progressive Era reforms saying that utilities had to be
regulated as “natural monopolies.” In 1936, the Roosevelt
Administration extended this municipal regulation back to the gas
pipelines themselves, giving the Federal Power Commission authority
to fix prices across the country. Then after endless prodding from
northern consumer states, the U.S. Supreme Court finally decided in
1954 that the whole diversified collection of thousands of
wildcatters and individual well owners in Texas and Louisiana
constituted a “monopoly” that could be regulated by the federal
government. Over the next twenty years, the D.C. Court of Appeals
tried every trick imaginable to prod gas out of its Texas owners’
hands. It developed the “life of the field” doctrine saying once
gas had been put into interstate commerce it could not be
withdrawn. Even if a well owner went bankrupt, he was still obliged
to keep sending gas to northern consumers at prices fixed by
federal regulators. Still, Texas managed to keep as much gas as
possible at home. When the Arab Oil Boycott prompted thousands of
northern businesses and residences to convert from oil to gas, the
whole system collapsed in the Natural Gas Crisis of 1976, when
factories and schools closed for weeks in Ohio and Pennsylvania for
lack of gas. Meanwhile Texas was using gas to generate half its
electricity. The Carter Administration was appalled to discover
these distortions but decided to solve them in typical fashion by
extending federal price controls even further into Texas as well.
Bumper stickers sprouted all over Texas and Louisiana declaring
“Let the Yankees Freeze in the Dark.”
Fortunately, the Reagan Administration came along and
solved the problem by appointing new members to the Federal Power
Commission who deregulated gas prices within a decade. Prices fell
as new supplies gushed forth and for the first time the nation had
adequate supplies of natural gas — so much so that we resumed the
wasteful practice of burning gas for electricity after
environmentalists stymied everything else. When conventional
supplies peaked in 2000, however, prices quadrupled and
gas-dependent industries such as plastics, chemicals, and
fertilizer started fleeing for foreign shores. Once again, Texas
came through, this time through a stubborn Fort Worth oil man named
George Mitchell who spent ten years experimenting with various
techniques of horizontal drilling and fracturing hard rock until he
devised a way of “fracking” huge gas deposits out of the Barnett
Shale. Once again, Texas had rescued the nation.
The pattern continues today. Offshore drilling is
forbidden along the entire East and West Coasts and Florida’s Gulf
Coast, but continues only off the coasts of Texas and Louisiana.
This exposes residents to disasters like the BP oil spill, yet
unproductive portions of the country still refuse to shoulder any
share of the burden. California has banned everything but
ridiculous solar and wind projects while New York just cut off
access to its portion of the Marcellus Shale, the second largest
gas deposit in the world. Now the Environmental Protection
Administration will attempt to impose this no-growth strategy on
the most productive state in the nation.
Last Thursday, EPA Administrator’s Lisa Jackson announced
that, in response to the threat of lawsuits from environmental
groups, she will impose “new source performance standards” for
carbon emissions on utilities and oil refineries across the country
during the coming year. Despite the name, “new source” standards
apply to old sources as well. Their inevitable impact is to freeze
all current technologies while preventing anything new from being
built. It was this gridlock that cap-and-trade was supposed to
overcome. The next day, Jackson announced that, due to Texas’s
stubborn resistance in cooperating with the federal effort, the EPA
would take over all authority to issue permits for new facilities
beginning January 2.
The stakes could not be higher. The Texas Commission on
Environmental Quality (TCEQ) estimates there are 167 major projects
that are shovel-ready and about to begin construction next year.
Most are oil refineries and power plants but many are also major
industrial facilities. EPA’s permitting process for other
traditional air pollutants — sulfur and nitrous oxides, etc. —
has already slowed to a crawl. Adding carbon dioxide — an
unavoidable by-product of all forms of combustion — will bring
permitting to a dead halt. The future of the Texas economy — and
the nation as a whole — may be at stake. If Texas stumbles, we
could easily slip into a double-dip recession.
When the EPA issues new standards, it has always given the
states three years to draw up “implementation programs” to meet
them. In the case of carbon emissions, however, Administrator
Jackson has concluded that the global warming crisis leaves no room
for the traditional development period. Action would have to begin
January 2. When Texas responded by going to court to challenge the
accelerated schedule, Jackson responded with last week’s federal
takeover.
The court fight could take months to reach a resolution
but is likely to be overtaken when Congress convenes in January.
West Virginia Senator Jay Rockefeller, one of the most liberal
Democrats in Congress, is already spearheading an effort to head
off EPA’s headlong rush by overturning its authority to regulate
carbon emissions. A resolution sponsored by Alaska Senator Lisa
Murkowski to postpone the EPA effort came close to a majority last
year but would need 60 votes for cloture. With Republicans taking
over the House, however, the opportunities for Congressional
intervention will be numerous.
Most important, however, is that the EPA action is likely
to be the opening salvo in a protracted struggle between the
productive red states and the profligate blue states. The unequal
burden in developing the nation’s energy resources cannot persist
for much longer without reaching the breaking point. In that sense,
the new outbreak of hostilities at Fort Sumter could ultimately
benefit the nation.
