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Research & Commentary: Virginia Bill to Ban Fossil Fuel Development, Establish Renewable Energy Mandate Is Economically Harmful and Unnecessary

December 10, 2018

Bill Includes Fracking Ban By 2020, Mandates 100 Percent Renewable Energy Generation By 2036

A bill introduced in November 2018 in the Virginia House of Delegates would, among other things, enact a moratorium on fossil fuel development, including hydraulic fracturing, and increase the commonwealth’s renewable energy mandate to 100 percent in 2036.

If passed, the bill would establish a moratorium in 2020 “on approval by any state agency or political subdivision of any approval required for (i) electric generating facilities that generate fossil fuel energy through the combustion of a fossil fuel resource; (ii) import or export terminals for fossil fuel resources; (iii) certain maintenance activities relating to an import or export terminal for a fossil fuel resource; (iv) gathering lines or pipelines for the transport of any fossil fuel resource that requires the use of eminent domain on private property; (v) certain maintenance activities relating to such gathering lines or pipelines; (vi) refineries of a fossil fuel resource; and (vii) exploration for any type of fossil fuel.”

Hydraulic fracturing—commonly called “fracking”—enables the cost-effective extraction of once-inaccessible oil and natural gas deposits. These energy sources are abundant, inexpensive, environmentally safe, and can ensure the United States remains a leading energy producer well beyond the twenty-first century.

A just-released report from the Consumer Energy Alliance shows that natural gas prices were one third lower in 2016 in Virginia than they were a decade prior, largely due to the fracking revolution, leading to $4.5 billion in savings over that period for residential consumers. This is significant because roughly 870,000 Virginians live in poverty, and the average Virginia resident at or below the poverty line spends around a quarter of their take home pay on energy costs. Additionally, commercial and industrial consumers saved $6.4 billion during the same period.

The report also notes the Virginia Manufacturing Association estimates the commonwealth “is home to more than 5,000 manufacturing facilities that in total employ over 200,000 residents. These facilities contribute $34 billion to Virginia’s gross state product and account for over 80 percent of the commonwealth’s exports to the global economy.”

Moreover, the oil and natural gas industries supported more than 125,000 jobs in Virginia in 2015. These vital industries produced more than $6.9 billion in labor income and accounted for $11.97 billion in economic impact, according to a 2017 American Petroleum Institute study prepared by PricewaterhouseCoopers.

The bill would also expand Virginia’s Voluntary Renewable Energy Portfolio Goal, which was passed in 2007 and seeks for utilities to generate 15 percent of their electricity from renewable sources by 2025, to a full-fledged mandate. (Virginia is also federally required to produce 6 percent of its electricity from renewable sources by 2025.) Under the new mandate, utilities would have to generate 80 percent of their electricity by 2028. Starting in 2036, all electricity generated by Virginia utilities would have to come from renewable sources.

Renewable energy mandates—often referred to as “renewable portfolio standards”—force expensive, heavily subsidized, and politically favored electricity sources such as wind and solar on ratepayers and taxpayers while providing few, if any, net environmental benefits.

A study by the liberal Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent, and replacing conventional power with solar power triples electricity costs.

Unsurprisingly, in states with renewable power mandates, energy rates are rising twice as fast as the national average and states with renewable mandates had electricity prices 26 percent higher than those without one. “By raising retail prices for electricity [in Virginia],” the report notes the renewable mandate increases “consumer electricity bills and the costs of providing goods and services in the Virginia economy … Annual losses in Virginia value added range from $1.9 billion in 2016 to $3.5 billion in 2025, and remain over $2.5 billion per year out to 2040. Employment levels are 14-26 thousand below employment in the base case without renewable energy portfolio standards after 2020.”

Virginia policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Old Dominion State’s robust economy.

The following documents provide more information about hydraulic fracturing, renewable energy mandates, and fossil fuels.

Affordable Natural Gas Saves Virginia’s Energy Consumers Billions
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/11/CEA-VA-Report-FINAL-111318.pdf
This report from the Consumer Energy Alliance examined how the shale revolution across the United States  has provided benefits to residents of the Old Dominion by boosting disposable income, revitalizing communities, and saving residential users $4.5 billion and commercial and industrial users $6.4 billion from 2006 to 2016.

Debunking Four Persistent Myths about Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/debunking-four-persistent-myths-about-hydraulic-fracturing
This Heartland Institute Policy Brief by Policy Analyst Timothy Benson and former Heartland communications intern Linnea Lueken outlines the basic elements of the fracking process and then refutes the four most widespread fracking myths, providing lawmakers and the public with the research and data they need to make informed decisions about hydraulic fracturing.

Evaluating the Costs and Benefits of Renewable Portfolio Standards
https://www.heartland.org/publications-resources/publications/evaluating-the-costs-and-benefits-of-renewable-portfolio-standards?source=policybot
This paper by Timothy J. Considine, a distinguished professor of energy economics at the School of Energy Resources and the Department of Economics and Finance at the University of Wyoming, examines the renewable portfolio standards (RPS) of 12 different states and concludes while RPS investments stimulate economic activity, the negative economic impacts associated with higher electricity prices offset the claimed economic advantages of these RPS investments.

Ten State Solutions to Emerging Issues
https://www.heartland.org/publications-resources/publications/ten-state-solutions-to-emerging-issues-2018
This Heartland Institute booklet explores solutions to the top public policy issues facing the states in 2018 and beyond in the areas of budget and taxes, education, energy and environment, health care, and constitutional reform. The solutions identified are proven reform ideas that have garnered significant support among the states and with legislators.

The Local Economic and Welfare Consequences of Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/the-local-economic-and-welfare-consequences-of-hydraulic-fracturing
This comprehensive study published by the National Bureau of Economic Research says fracking brings, on average, $1,300 to $1,900 in annual benefits to local households, including a 7 percent increase in average income, a 10 percent increase in employment, and a 6 percent increase in housing prices.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://www.heartland.org/publications-resources/publications/climate-change-reconsidered-ii-fossil-fuels---summary-for-policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).

What If … Hydraulic Fracturing Was Banned?
https://www.heartland.org/publications-resources/publications/what-if-hydraulic-fracturing-was-banned
This is the fourth in a series of studies produced by the U.S. Chamber of Commerce’s Institute for 21st Century Energy. It examines what a nationwide ban on hydraulic fracturing would entail. The report’s authors found by 2022, a ban would cause 14.8 million jobs to “evaporate,” almost double gasoline and electricity prices, and increase natural gas prices by 400 percent. Moreover, cost of living expenses would increase by nearly $4,000 per family, household incomes would be reduced by $873 billion, and GDP would be reduced by $1.6 trillion.

The Status of Renewable Electricity Mandates in the States
https://www.heartland.org/publications-resources/publications/the-status-of-renewable-electricity-mandates-in-the-states?source=policybot
The Institute for Energy Research finds states with renewable electricity mandates have on average 40 percent higher electricity rates than those without such mandates. 

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s director of government relations, at john@heartland.org or 312/377-4000.