We take energy for granted. We flip the switch and expect the lights to come on. When the gas gauge reads empty we expect the service station will have available fuel. Our entire modern way of life and economic prosperity as a nation depend on reliable and affordable energy to power our factories, vehicles and homes. If we want our children to enjoy the standard of living we have come to expect, we need to demand that our elected officials take a reasoned and balanced approach to energy policy. Unfortunately, that does not seem to be happening in Michigan, even while Gov. Jennifer Granholm travels to Denver to moderate a town hall meeting on renewable energy.
The following are examples of policy that will restrict supply and drive up energy costs in the state:
Decreased Competition — The Michigan Legislature is about to pass a package of bills that would decrease competition among energy suppliers. A Mackinac Center policy brief authored by Ted Bolema and Diane Katz found that: "The choice program that began in 2000 among electricity providers has yielded substantial cost savings for customers." Unfortunately the legislation currently under consideration would largely undo the deregulation that has made competition possible.
Renewable Energy Mandates — Wind and solar power are unreliable energy sources and must be backed by conventional power generation, most often natural gas combined cycle power plants that are more expensive to operate than coal fired plants. Environmental benefits from using renewable energy are questionable due to the need to use conventional sources of electric generation as backup.
Greenhouse Gas Accord — Last November, Gov. Granholm committed Michigan to the Midwestern Greenhouse Gas Accord. The agreement requires reduction of Michigan’s carbon dioxide emissions from current levels. In order to achieve these reductions, the state would participate in a cap-and-trade system for carbon dioxide. A cap on carbon dioxide emissions is a de facto energy cap. A recent study by the American Council for Capital Formation and the National Association of Manufactures estimates that if a cap-and-trade system for carbon dioxide is initiated, Michigan could expect gasoline prices to rise between $2.12 and $5.15 a gallon and residential electric costs to increase between 6.61 and 10.33 cents per kilowatt-hour by 2030 — with a resulting job loss in the range of 91,000 to 122,000.
Disincentive to Oil and Gas Development — Senate Minority Leader Mark Schauer recently stated his intent to introduce legislation that would place a moratorium on new oil and gas leases in the state until there is drilling on currently leased land. He would also require all leases be returned to the state within five years if no drilling occurs. Sen. Schauer must have little understanding of the process of exploring and developing oil and gas reserves. Oil and gas companies pay the state for the privilege of leasing land with the hope they may locate commercially developable oil and gas reserves. The economic risk rests entirely with the company. The assumption underlying his proposed bill that oil and gas is found on all leased land is unfounded. His proposed legislation penalizes companies for taking economic risk; it would be devastating to developing much needed energy supplies in the state.
Government Operated Energy Business — Senate Bill 1164, introduced by Sen. Roger Kahn, would create a government "clean energy authority" with extensive powers to borrow money for purposes of exploring, developing and acquiring oil, gas and mineral resources and alternative energy facilities. Senate Bill 1184, introduced by Sen. Michelle McManus, would require the Department of Natural Resources to give the "Green Energy Authority" the right of first refusal on state land oil and gas leases. These two pieces of legislation could have been taken directly out of the playbook of Hugo Chavez, president of Venezuela, who is nationalizing his country’s oil and gas industry. To believe that the state government can better operate future energy exploration and development than the private sector is preposterous and is a dangerous move towards socialism.
The energy policies currently being considered by Michigan’s elected officials will, at the least, lead to substantial increases in future energy costs in the state and at the worst lead to energy crises in both price and supply. A balanced approach to energy policy should include incentives for conservation and energy development from all energy sources, along with less government intervention and regulation of energy markets.
Russ Harding is director of the Property Rights Network and senior environmental analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.