'National Security' Coal Bailout Collapses

by Daniel Farber

October 17, 2018

Cross-posted from LegalPlanet.

In its desperate effort to save the failing American coal industry, the Trump administration promised to use emergency powers to keep coal-fired power plants in operation even though they're not economically viable. That would have been the kind of disruptive change that Trump promised to bring to Washington. But the effort seems to have gone aground, according to Politico. This outcome tells us something about the gap between Trump's promises of committing regulatory mayhem and the realities of modern governance.

The Trump plan, which originated with a coal industry magnate and major Trump donor, would have required an extraordinary stretch of the statutes in question. The plan was to use one or more of a trio of emergency provisions. The first is a section of the Federal Power Act that authorizes the Department of Energy to order generators to run during wars or other emergencies, including grid emergencies. Both DOE precedent and a D.C. Circuit case say this doesn't apply to fuel supply issues. The second statute, which traces back to the Korean War, allows the president to prioritize performance of defense contracts over civilian contracts and allocate materials, services, and facilities to promote the national defense. But it doesn't seem to provide authority to force companies to buy these items. It also contains loan and subsidy provisions, but they seem to be limited to $50 million in any one year. The final statute, another section of the Federal Power Act, authorizes DOE to issue emergency measures in response to a grid security emergency. These measures last only 15 days at a time.

The biggest single issue with any of these provisions is that they require some kind of emergency or threat to national security. The purported emergencies are that coal might be needed as a power source during a polar vortex and that a cyber attack might interrupt the supply of natural gas. But the factual basis for these claims was thin.

Why did the effort to hijack national security to save coal grind to a halt? According to Politico, Rick Perry kept pushing the plan, but it was unable to overcome some crucial stumbling blocks. The White House national security and economic teams were opposed, probably because the national security justification was bogus and the plan was an assault on free markets. The flimsy national security argument also surfaced in another way: Perry was unable to convincingly identify specific coal plants whose operation was crucial to grid resilience. But the most basic reason the effort failed was that someone would have to pay to keep those plants operating, probably electricity consumers. There was zero political appetite for that.

As the Politico story warned, you can never be sure of anything in Trumpworld. Trump might suddenly remember – or Fox and Friends might remind him – that he supported this plan and demand that it be implemented. But for now, at least, the plan seems to be dead.

The bigger lesson is about the extreme difficulty of making radical changes in a governance system as complex as ours. It's so complex for a reason: there are many actors, with varying goals and interests, and the problems it addresses are themselves deeply complicated. Presidents like to cultivate the illusion that they can solve problems with a wave of the pen. The reality is quite different.

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Daniel A. Farber is the Sho Sato Professor of Law and Director of the California Center for Law, Energy and the Environment at the University of California, Berkeley.

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