Hofmeister’s solution to avoid the 2020–2030 chasm is to rapidly produce much more energy from new infrastructure. His means is a new federal authority, a
national energy board (NEB), to expedite government permits on public and private lands. His model is the
Federal Reserve Board of Governors (est. 1913) under which
independent appointees run the agency rather than elected officials.
Something-for-Everyone Politics
In search of broad public support, Hofmeister’s supply-side strategy mixes
pro-development and
all-of-the-above. Yet he still plays to the center. He is pro-fossil fuels but
disparages “drill, baby, drill.” He questions the scale and reliability of wind and solar power but believes we need government-enabled energies. His energy plan can be boiled down to
you-get-yours, we-get-ours.
(i)
Hofmeister’s something for everyone—and thus special favor for politically-correct,
economically-incorrect energies—will only exacerbate federal budget deficits and burden consumers. It is a recipe for continued politicization, not fundamental reform.
His (age-old) quest to centralize government for greater efficiency must confront history. In 1977, the Department of Energy was founded by President Carter to
consolidate “most Federal energy activities under one umbrella” to create “the framework for a comprehensive and balanced national energy plan.” DOE’s mission creep and bad decision-making in the last 35 years have added to, not subtracted from, energy challenges. (ii)
Fundamentally, what is to stop a NEB from supporting an
energy rationing scheme, say a carbon tax or CO
2 cap-and-trade program, to “save” the climate” or “level the playing field” for wind, solar, and other beggar energies? Hofmeister might oppose such programs, but a NEB is “independent” to do so. Anti-energy forces such as the “green lobby” and current Washington establishment will not surrender or retreat but likely become
emboldened by centralized power in a national energy board.
Federal Reserve Model
Consider the policies of the Federal Reserve Bank itself. Milton Friedman, studying the Fed’s actions before and during the Great Depression, observed:
Mistakes, excusable or not, cannot be avoided in a system which disperses responsibility yet gives a few men great power, and which thereby makes important policy actions highly dependent on accidents of personality.(iii)
After reviewing recent Fed policy, Jeffrey Rogers Hummel called “central banking … the new central planning” via manipulation of the most important price in the whole economy, interest rates.
(iv)
Hofmeister’s analogy of a NEB modeled on the Federal Reserve Board of Governors is peculiar. The Fed has a legal monopoly over its product (legal tender) and has presided over the very booms and busts it was created to prevent. The energy industry is privately owned, is competitive, and needs less, not more, politics to dampen its business cycle.
(v)
Hydraulic Fracturing
Finally, consider today’s real energy revolution, much of which has occurred since Hofmeister’s 2010 speech. Hydraulic fracturing and directional drilling on private and state lands has opened up vast energy resources. Instead of having inadequate supplies of liquid fuels by 2020, the United States will surpass Saudi Arabia and Russia this year as the
world’s largest producer of liquid fuels.
This turnaround in domestic liquid fuel production didn’t happen because of an enlightened board, but because of entrepreneurs. And, in fact, an NEB might have become a more effective battleground for anti-frac forces to stymie natural market incentives.
Still, Hofmeister’s concern about all of the red tape on federal lands is accurate. The frac revolution isn’t happening on federal land but on private and state land from red tape. Indeed,
the federal government takes 307 days to process a permit to drill compared to 27 days in Colorado and 10 days in North Dakota. State governments understand that energy production and environmental production can co-exist.
Conclusion
“If there is any lesson in the history of ideas,”
stated Thomas Sowell, “it is that good intentions tell you nothing about the actual consequences.” An NEB cannot insulate the market from government. And in our age, it could fast-track
statism in the name of stabilizing climate or balancing the budget. History, in fact, cautions against centralizing government power.
(vi)
In place of simplistic, lowest-common-denominator thinking, John Hofmeister and Citizens for Affordable Energy should educate people about the need for
depoliticizing energy. As the example of hydraulic fracturing demonstrates, the United States does not need a national energy board, a national energy plan, or an all-of-the-above energy policy.
A new message from Hofmeister, anchored on sound theory and energy reality, is needed to help replace anti-energy ideology with pro-energy, pro-market thinking outside and inside government.
