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Offset Cap & Trade Compacts with a Reliable Energy Compact

William L. Kovacs

March 2023

Offset Cap & Trade Compacts with a Reliable Energy Compact

The green climate zealots have successfully formed two interstate Compacts consisting of twelve states to address the climate change issue through a cap-and-trade system. While many conservatives believe these compacts are shining examples of state overreach, excessive regulation, and wasteful subsidies, these same conservatives are silent on solutions. Last week, the state of Utah enacted an energy security law that could serve as the foundation for a Reliable Energy Interstate Compact of States (“Reliable Energy Compact”).

Led by Representative Ken Ivory and Senator Derrin Owens H.B. 45, Utah’s Energy Security Law requires the state to ensure the reliable production and distribution of energy for its citizens by promoting the use of energy resources, including fossil fuels, generated within the state.

On the electricity delivery side, it requires a reliable energy system that can supply continuous electricity at the proper voltage, frequency, and resiliency to withstand sudden or unexpected disturbances. This provision is a brilliant idea to ensure that any increase in the use of renewable energy is accompanied by the needed battery storage and transmission capacity, so the electricity generated can be continuously distributed by the grid. (This issue has been ignored by the federal government.) The legislation also promotes the development of a secure supply chain from resource extraction to energy production and consumption.

Utah’s goal is energy independence and affordable energy for its citizens.

Considering that the Biden administration, without any specific legal authority, is attempting to shut down all fossil fuel production in ten years and is pushing the growth of renewable energy beyond the limits of its storage and distribution capabilities, there is a need for new energy management ideas.

The policies contained in H.B. 45 make too much sense to remain in one state. While Utah will share its ideas through the literature, and educational conferences, a more effective option might be the formation of a regional Interstate Compact. These compacts are effectively used by environmental groups. It is time for conservatives to use them to promote their policies.

Interstate compacts are cooperative actions between states to advance specific policy issues. The compacts can be congressionally approved or non-congressionally approved agreements between states to take specific actions.

Formal, congressionally approved compacts with other states are established under Article I, sec.10, cl 3 of the U.S. Constitution. These formal state compacts range from boundary disputes to lotteries, river management, drivers’ licenses, to multi-state tax matters. Ballotpedia provides a list of approved compacts from 1785 to 2014.

The Southern States Energy Compact is a workable example of the formal, congressionally approved Compact. It has eighteen members and was created to encourage economic development among its member states through the improvement of energy, environmental, and technology policies.

Not all Compacts need to be approved by Congress. While the text of the Compacts Clause reads as if all compacts must be approved by Congress to be valid, the U.S. Supreme Court has not endorsed this reading. The Supreme Court has “…adopted a functional approach in which only interstate compacts that increase the political power of the states while undermining federal sovereignty require congressional consent.”

Relying on the court’s functional approach, nine states in the Northeast and Mid-Atlantic, and three west coast states, formed regional compacts to address climate change concerns. They set up state cap-and-trade systems. It does not interfere with federal power since there is no authority to create such systems under federal law.

The difficulty with the formal approach is that in a divided Congress and with an administration hostile to all energy sources except green energy, it is unlikely Democrats would formally approve such an effort. Conversely, it is unlikely that the Democrats could secure the votes to disapprove of an informal energy compact, especially in light of the environmentalists’ cap-and-trade compacts.

A Reliable Energy Compact, like the environmentalists’ cap and trade compacts, would be formed to ensure local citizens have the energy they can afford. Such a compact would not, in any manner by changing any political balance within the U.S. or even be contrary to any federal law since there is no federal law that prohibits the development of a state from using its resources to produce reliable and affordable supplies of energy.

Within the mountain states region, Utah would likely find receptive members in Wyoming, Montana, North Dakota, South Dakota, Oklahoma, and Idaho. While the Reliable Energy Compact would not interfere with any federal law, it would stand as a competitive policy in the marketplace to the environmentalists’ cap-and-trade compacts.

This competition between radically divergent energy policies will allow the citizens of the nation to observe comparative benefits and costs in real-time and on real people. Such a comparison will assist the American people in distinguishing fact from propaganda. For far too long, the environmental community has controlled the public space with unworkable, expensive ideas. It is time for conservatives to place their ideas into the public square to be tested alongside the claims of the environmental community.

Let the better policy win!

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and served as senior vice president for environment, technology & regulatory affairs at the U.S. Chamber of Commerce.