federal energy subsidies

Congressman Ed Markey (D-MA), the ranking Democratic member on the House Committee on Natural Resources, along with Rush Holt (D-NJ), yesterday made a formal request to the U.S. Government Accountability Office (GAO) to examine US federal subsidies systematically across fuel sources.  The request effectively broadens a research request submitted to GAO in October by Republican Reps. Fred Upton, Ed Whitfield, Tim Murphy and Mike Pompeo that was overly narrow in scope and would have resulted in inaccurate and misleading data.

Because different fuels receive their most important subsidies via different policy instruments, research mandates narrowly focused on one or two of the subsidy methods (often tax breaks and grants) will inherently produce inaccurate results.  For example, fossil energy heavily benefits from below-market access to fuels on federal lands, and from market interventions to address supply stability.  Fossil fuels also benefit disproportionately from special tax-exempt corporate structures such as Master Limited Partnerships.  Nuclear power receives few tax breaks, but is heavily subsidized through a variety of risk transfer mechanisms related to plant finance, accident risk, and long-tail operating risks such as managing nuclear waste. 

Narrow casting research on subsidies not only skews energy policy decisions, but can also greatly understate the fiscal benefits from subsidy reform.  This would be an unfortunate outcome given the efforts now underway to address very serious fiscal imbalances in the federal budget.

In addition to the problems with the Upton research scope, Markey and Holt hope to avoid a repeat of the politicized subsidy research mandates given to the Energy Information Administration in both 2007 and 2010.  The result was a dramatic undercount of federal support levels, as well as unreliable relative support estimates across fuels.  Senator Lamar Alexander, a long-time booster for nuclear energy and ridiculer of wind carefully crafted the 2007 research terms, which were adopted by others nearly verbatim in 2010. 

Clearly, every Member of Congress is free to hold his or her own opinions on all sorts of issues, and these opinions often widely diverge.  However, ensuring that key statistical and oversight agencies of the federal government -- such as EIA and GAO -- have the full independence to conduct unbiased research is a prerequisite for a functioning government.  This is something that I hope both parties would strongly support.