This has become increasingly apparent to me as I researched and wrote my new book, Frackopoly: The Battle for the Future of Energy and the Environment (to be released next spring). The tremendous political power of the energy industry unleashed the tragic policy decisions in EPACT 2005. In fact, their increasing pwer over the past hundred years has locked us in to dependence on fossil fuels and other dirty energy sources. Federal funding was key in developing the technologies that are used for fracking today. Removal of federal oversight of natural gas pricing and changes in the rules around the transportation of natural gas in pipes also helped eventually drive the shale gas boom. Decisions in the 1990’s concerning the deregulation of the electric industry – how electricity is generated, sold on the wholesale market and delivered to consumers – also drove the use of natural gas-fired generation.
But one of the biggest oil and gas industry giveaways happened 10 years ago this week, when Congress passed the Energy Policy Act of 2005.
This giant energy bill had massive handouts and incentives for the fossil fuel, nuclear and ethanol industries, with minimal incentives for renewables and energy efficiency. This bill was largely written by the lobbyists of the oil and gas industry and other dirty energy interests. The long forgotten shyster Kenneth Lay, of Enron fame (or infamy) was one of the leading lobbyists for deregulation of the electric industry and the giveaways to the energy industry in EPACT 2005. Lay and other Enron officials lobbied the Clinton and Bush Administrations for significant deregulation of energy markets that paved the way for fracking—and many of the policies were signed into law by President Bush on August 8, 2005.
Here are three specific ways the Energy Policy Act promoted fracking.
1. The Halliburton Loophole
This may be the most familiar tool the Energy Policy Act wielded in helping necessitate the fracking boom. Named for the company where Dick Cheney had been CEO before becoming Vice President, the Halliburton Loophole famously exempted fracking from chemical disclosure rules under the Safe Drinking Water Act (SDWA). As a result, we don’t even know the full range of chemicals used in the cocktail of fluids injected underground in the process of releasing natural gas from deep beneath the earth’s surface.
The loophole clouded the otherwise clear lines of liability for companies that contaminated water. It also makes it a nightmare for health professionals treating victims of fracking-related injuries, because they can’t get the information they need to provide proper care.
2. FERC granted power of imminent domain in siting new gas infrastructure
The Energy Policy Act gave the Federal Energy Regulatory Commission (FERC) sweeping new powers to overrule local and state governments in the siting of new pipelines for gas and new transmission lines for electricity – even when there are conflicts with other federal laws. The agency was given the power of eminent domain so that it can swoop in and take property for building this intrusive and often unnecessary infrastructure.
FERC was given the authority to approve the siting, construction, expansion and operation of LNG terminals. It was also authorized to be the lead agency coordinating compliance with the National Environmental Policy Act of 1969, one of the nation’s most important laws for protecting the environment.
Combined with the powers granted to FERC when it was created, and the fact that it is an independent agency unresponsive to politics, EPACT 2005 made certain that affected communities would be virtually powerless to fight against this unneeded infrastructure.
3. Repeal of the Public Utility Holding Company Act
The Energy Policy Act repealed anti-monopoly legislation – the Public Utility Holding Company Act of 1935, or PUCHA – that safeguarded consumers from the overreach of the oil and gas industry and banks in the utility industry. As M. Elizabeth Sanders writes in The Regulation of Natural Gas: Policy and Politics, 1938-1978, UCHA restricted the size and geographic reach of gas and electric utilities. It also restricted parent companies of utilities from cheating ratepayers by charging high fees for services to their affiliate utility subsidiaries and from speculating in risky businesses with ratepayers’ money.
Among the key consumer and investor protections in PUHCA, it prohibited non-utilities (such as oil companies or investment banks) from ownership of gas or electric utilities, and empowered the SEC to oversee the business dealings of utilities to prevent the reappearance of the huge multistate utility cartels that had previously ripped off customers and ruined investors. Utilities were required to provide the SEC with detailed financial information and to have financial transactions approved—from issuing securities to reorganizing.
PUCHA’s strong regulatory authority was replaced by giving FERC the authority to review electric utility mergers and acquisitions.
And as could have been predicted, FERC did not prevent the consolidation of the electric utility industry. The repeal of PUHCA unleashed energy market speculation and created extremely large energy companies with outsized influence on our political system. According to OpenSecrets.org, since 1998 the top 10 electric utilities, listed below, have spent $581 million on lobbying the federal government. One of the little-recognized benefits of PUHCA was in preventing corporate utilities from becoming political powerhouses. Their increased size and profits have enabled them to influence policy on a much broader scale.
Today, a handful of giant companies operate subsidiaries that provide electricity and half of them are involved in trading energy on Wall Street. Deregulatory measures have incentivized them to sell as much electricity as possible, much of it generated by natural gas. They are:
- Exelon Corp
- Duke Energy
- Southern Company
- Xcel Energy
- PPL Corp
- PG&E Corp.
- Public Service Electric & Gas
- American Electric Power
The chilling effect that Enron and the other proponents of deregulation has had on sound energy policy – by letting the market make decisions about energy choices – cannot be overstated. Energy use, according to Energy Information Administration (EIA) data, is continuing to increase at a time when conservation policies and energy efficiency solutions must be prioritized. As a result of years of lobbying and campaign contributions form the oil and gas industry, policymakers instead declared natural gas, and ultimately fracking, as the best solution for addressing climate change, with bogus cost-benefit analyses.
The 10th anniversary of the Energy Policy Act is a good reminder that it is long past time for a paradigm shift. We need localized, efficient and clean energy systems now to meet our energy needs and safely power our communities.