Misplaced authority

April 30, 2018
Some policies need killing while they’re still just bad ideas. A nasty example is a proposal that the US president act under the Defense Production Act to help the coal industry—or any other energy industry.

Some policies need killing while they’re still just bad ideas. A nasty example is a proposal that the US president act under the Defense Production Act to help the coal industry—or any other energy industry.

In an Apr. 18 letter, Sen. Joe Manchin (D-W.Va.) urged President Donald Trump to invoke the DPA “to prevent the impending retirement of numerous coal-fired and nuclear power plants that are critical to ensuring the resilience and reliability of our electric grid and the security of our nation.” The law he cited gives the president broad authority to marshal resources and industrial capability in service to national defense. Enacted in 1950, the DPA essentially revived lapsed World War II War Powers Act authorities of the Executive Branch, adapted to conditions of the Cold War and Korean conflict.

Executive decisions

The problem now is not that Manchin wants the president to address obsolete problems with an antique law. Congress, in fact, has reauthorized the DPA more than 50 times and updated it in the process. It has, for example, expanded the meaning of “national defense” to encompass interests such as homeland security and emergency management. The problem rather is that Manchin wants the Executive Branch to make energy decisions in a market not strained by pressures related to defense.

In his letter to Trump, Manchin cited the electricity shortfall that would have aggravated problems for US Northeasterners in the absence of coal-fired generation during a period of extreme cold last January. Who can argue? Demand for electric power spiked, and coal-fired generation accounted for an important component of supply.

What troubles the coal business and Manchin’s important coal-producing state, however, is not that generation capacity is shrinking as coal-fired plants retire. It is rather that coal is being replaced by other forms of primary energy—mainly solar and wind because of policy and natural gas because of competition. The market, to the extent it’s allowed to work, will boost total generation capacity as necessary to meet anticipated load with the economically optimum mix of primary energy, including nuclear and coal.

The power industry has challenges, of course. Growth of generation by intermittent solar and wind complicates grid management as electricity use rises. Regulation gyrates. Security of the delivery network needs improvement. But nothing here warrants DPA intervention, which might lead to the government’s manipulating contracts, directing purchases, guaranteeing loans, and installing equipment in private facilities. Such steps would come perilously close to nationalization of an important part of the energy business, the mere possibility of which represents a problem more menacing than any now facing the power industry.

The threat cannot be dismissed as the doomed proposal of a lawmaker defending a distressed industry important to his state. As Manchin sent his letter, Bloomberg reported that the Trump administration is seriously considering his request. According to unnamed sources, use of the DPA to help coal and nuclear energy is under active discussion at “highest” levels of government.

Oil and gas companies should find this alarming. The government always creates costly problems when it intrudes in energy markets. Its role should be limited to ensuring that markets work freely and fairly. History is clear about this.

Appalling precedent

And the use of national security as cover for political manipulation of energy markets would set an appalling precedent. An Executive Branch emboldened to dispense energy favors for exaggerated military purposes might well, under different management, deploy the authority against disfavored ones. Officials of the administration of former President Barack Obama frequently called climate change a threat to national security. From that myopic assertion might easily flow proposals for the president to control oil and gas company investments under DPA authority.

Manchin’s letter and the administration’s apparent attention to it tread on treacherous ground. Like the oil and gas industry, Congress should be alarmed. And it should act before presidential authority to manage energy under the DPA spirals out of control.