The Bush administration lets a profitable energy-efficiency program lapse
As of yesterday, Oct. 1, the most successful program in U.S. history for improving energy efficiency in federal buildings is toast. The demise of the Energy Savings Performance Contracting program is no insignificant matter, seeing as how the federal government is the single biggest energy-user in the nation. Taxpayers spend $4 billion per year to power 500,000 federal buildings nationwide, from science labs to military bases.
The ESPC program grew out of the Energy Conservation Policy Act, which was enacted in 1992 by President Bush the First, whose intent was to allay problems that seem to run in the family: rising post-war budget deficits and vertiginous energy demands at a time of crisis in the Middle East. The program was slow to take off, but President Clinton recognized its merits and issued an executive order in 1999 exhorting all federal agencies to participate, spurring dramatic energy cuts across the board — and in particular at the Defense Department, which accounts for 80 percent of the federal government’s energy use.
Since its inception, the program has drawn a whopping $1.5 billion in private-sector investments in efficiency measures in federal buildings. The government itself doesn’t put the money down for energy efficiency; private companies finance and maintain the improvements. Energy consultant Jennifer Schafer, who represents Honeywell, Johnson Controls, Sempra, and other companies that implement efficiency measures at federal facilities, called the program “about as win-win as you can get.”
Payback on the $1.5 billion in corporate investments is estimated to take about five years, with savings on federal energy bills amounting to roughly $300 million per year. And since the efficiency measures last for about 20 years, the long-term savings could eventually total some $6 billion, according to Mark Hopkins, acting co-president of the Alliance to Save Energy. That’s four times the original investment — quite enough to make any bottom-liner salivate. The private companies split the savings with the feds, thereby saving taxpayers money while making a profit for themselves — not to mention cutting down on the pollution and resource consumption associated with producing electricity.
“Letting this program lapse makes no sense at all. It is simply a tragedy,” said Schafer. “There’s not a soul we have talked to on the Hill or anywhere who says, ‘God, that ESPC program really sucks. What a drag it is to guarantee savings for the federal government.’ Everybody says, ‘Wow! What a great program.'”
So what happened? It’s not that the Bush administration is opposed to the ESPC program; it’s just that the administration didn’t fight for its survival before its expiration date. As a pilot project, the original ESPC proposal included a sunset date one decade out from its start — Oct. 1, 2003. The Cheney energy plan does include a measure that would make the program permanent, but that plan has not passed Congress.
“If the White House had told Sen. [Pete] Domenici [R-N.M., chair of the Energy Committee] to move the ESPC provision forward on its own, it would have passed in a matter of hours,” said Hopkins. “But they’re refusing to separate anything from the rest of the energy plan. That way they can keep the pressure on to pass the whole enchilada.” In other words, those who support controversial provisions such as opening Alaska’s Arctic National Wildlife Refuge to oil drilling don’t want to section off the more popular measures in the Bush energy plan, like the ESPC program, because they can be used as incentives to fast-track the plan as a whole.
Bush’s willingness to let this unequivocally triumphant program languish for the sake of a political gambit is particularly discouraging given that the very circumstances that led his father to institute ESPC are again intensifying. We may be seeing repeat crises during Bush 41 and Bush 43, but we’re not seeing repeat solutions.
They’ve Got Alaska Over a Barrel
Meanwhile, the current Bush administration is focused on a very different kind of solution to America’s energy independence concerns: plundering every last oil-and-gas-filled crevice of the United States, no matter how iced-over, far-flung, or short-lived its supply may be. Although Bush’s Department of the Interior has had trouble weaseling its way into the Arctic Refuge, it has successfully steamrolled into less controversial but similarly remote, vast, and ecologically sensitive areas of the country.
On Sept. 24, amid the hubbub of Mike Leavitt’s confirmation hearings, few journalists and policy makers stopped to notice that the DOI’s Minerals Management Service put 9.4 million acres in Alaska’s Beaufort Sea on the chopping block at unusually low royalty rates. The area in question is not far from the Arctic Refuge, off the northern shore of Alaska — land of polar bears, bowhead whales, and Inupiat Eskimos who still practice maritime hunts.
Within the first few days of the fire sale, energy companies, including ConocoPhillips and EnCana (a major Canadian oil and gas company), had already snatched up 75,000 acres of prime offshore drilling plots. Estimates of commercially recoverable oil in the Beaufort Sea range from 4 billion to 12 billion barrels (compared to an estimated 3.2 billion in the Arctic Refuge), but the area features some of the world’s most hostile conditions for exploration, making it pricey to drill.
There are, of course, likely environmental side effects: Last spring, a report by the National Academy of Sciences warned that seismic exploration and offshore drilling in the area would threaten endangered bowhead whales as well as the livelihoods of traditional Inupiat hunters. Needless to say, that report was overlooked.
Although the Beaufort sale troubles many Alaskan wildlife experts, they say it’s merely one of many concerns in the region, some of them potentially far more serious. “This is just a small piece of a larger picture in which the federal government is essentially giving the resources of Alaska away for free,” said Eleanor Huffines, Alaska regional director for the Wilderness Society.
Huffines says she is realistic about the need to expand drilling, and the Wilderness Society has identified areas in Prudhoe Bay and western Alaska where it is not opposing increased development. “What concerns me is that no matter how reasonable we try to be in balancing commercial and environmental concerns, [the Bush administration's] plans show no balance at all — no regard for the seven areas scientists have identified as biological hotspots, no respect for wildlife habitat, native traditions, water quality, or any non-commercial values.”
Dirty Dealing on Clean Air?
Photo: White House.
No agency within the Bush administration has a reputation for dismissing “non-commercial values” more doggedly than the Office of Management and Budget. Last week, however, the agency and its director of Information and Regulatory Affairs, John Graham, enjoyed a sudden flow of accolades in the media for doing just the opposite, after releasing a study concluding that clean-air regulations have health benefits five to seven times greater than the costs they impose on industry and consumers.
The big news reported in major newspapers was that over the last decade, industry, states, and municipalities spent an estimated $23 billion to $26 billion on technologies to comply with clean-air standards, while society reaped gains of $120 billion to $193 billion during the same period (that is, money saved by reductions in emergency-room visits, premature deaths, and lost workdays as a result of improved air quality).
“The report provides the most comprehensive federal study ever of the cost and benefits of regulatory decision-making,” wrote Eric Pianin in the Washington Post on Sept. 27. “It has pleasantly surprised some environmentalists who doubted the Bush administration would champion the benefits of government regulations.”
Strangely enough, however, it was industry representatives — not environmentalists — who tended to see the report as a pleasant surprise. “Despite the relentless complaining about the OMB we’ve heard from environmentalists, [this report] is proof that Graham and the White House conduct balanced and unbiased analysis,” said Scott Segal, an electricity industry lobbyist clearly still giddy from the newly weakened New Source Review rules he fought for, and unconcerned that Graham’s findings would pose any practical threat to industry. After all, it’s one thing to admit that command-and-control regulations have yielded a great payoff for society; it’s another to actually support more of those protections or vigorously enforce the ones already on the books.
Indeed, more than a few environmentalists were less than happy about the findings: “Reporters picked up on a subplot of Graham’s [243-page] report, but entirely missed the dominant theme,” said Gary Bass, executive director of OMB Watch. “The bulk of the report is far more troubling; it’s about changing the rulemaking process to favor industry.” Bass says the report encourages loopholes that may further skew the results of mandatory cost-benefit analyses, the most egregious of which allows agencies to discount the lives of elderly people and those afflicted with diseases in evaluations of public-health regulations.
Wesley Warren, an economist at the Natural Resources Defense Council who worked at the OMB during the Clinton administration, sees a clear correlation between the loopholes and the findings on the benefits of federal air-quality regulations: “The [evaluation] of the air-pollution rules have been in the works for several years. John Graham has seen this high-benefit conclusion coming and that’s one of the main reasons why he’s spent the last year trying to rig the game with loopholes — so he could start ratcheting down benefit estimates in the future.”
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