U.S. Chamber Calculates the Cost of Delayed and Cancelled Energy Projects

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A "broken" regulatory process has led to the postponement or cancellation of 351 domestic energy projects, which could cost the U.S. economy up to $3.4 trillion over 20 years, according to a new analysis sponsored by the U.S. Chamber of Commerce. The study, Progress Denied: A Study on the Potential Economic Impact of Permitting Challenges Facing Proposed Energy Projects, states that renewable energy projects accounted for 45% of the 351 delayed or cancelled energy projects it studied.

In his introduction to the study, Bill Kovacs, the Chamber of Commerce's senior vice president for environment, technology, and regulatory affairs, writes: "our nation's complex, disorganized regulatory process for siting and permitting new facilities and its frequent manipulation by NIMBY (Not In My Backyard) activists constitute a major impediment to economic development and job creation."

Environmentalists often oppose proposed coal-fired power projects. However, Kovacs noted that environmental groups also have stymied many renewable energy projects: "Often, many of the same groups urging us to think globally about renewable energy are acting locally to stop the very same renewable energy projects that could create jobs and reduce greenhouse gas emissions. NIMBY activism has blocked more renewable projects than coal-fired power plants by organizing local opposition, changing zoning laws, opposing permits, filing lawsuits, and using other long delay mechanisms, effectively bleeding projects dry of their financing."

The study, released March 10, was an outgrowth of the Chamber's "Project No Project," which catalogued delayed or cancelled energy projects. Progress Denied, authored by Steve Pociask and Joseph P. Fuhr Jr. of TeleNomic Research LLC (Herndon, Virginia), estimated the direct, indirect, and multiplier costs of these delayed or cancelled energy projects.

The authors do not say that all 351 of these energy projects could have or should have been built. Indeed, if that happened, they note that labor and materials costs would have risen sharply. Pociask and Fuhr also note that not all of the projects would have been constructed, even in the absence of local, environmental, legal or regulatory opposition.

But if all 351 delayed or cancelled projects were built and operated for an average of 20 years, they would increase U.S. gross domestic product (GDP) by about $3.4 trillion with the effects of inflation removed, according to the study. In addition, those 351 energy project would create an average of 1 million or more jobs per year.

The authors of Progress Denied say this is "the first empirical study to quantify the macroeconomic and employment impact of the regulatory barriers imposed on the development and operation of so many energy projects." They note the potential challenges of a "first of its kind" analysis, including the list of affected energy projects and the methodology used to calculate the economic value of projects that were delayed or cancelled.

However, because Progress Denied did not include domestic oil exploration and production projects, as well as many gas projects, the authors claim that they have "substantially underestimated the impact of the regulatory barriers and other project impediments." The $3.4 trillion potential value is a "conservative" estimate, the authors say.

"At a minimum," the authors write, "our study demonstrates that private investors and developers are prepared to fund, build and operate energy projects that could materially increase GDP and create many jobs." But a "tortured permitting process" and "regulatory obstacles" prevent too many projects from being given a fair opportunity to secure a final permit, the study claims.

Not surprisingly, the Natural Resources Defense Council (NRDC) disagreed with the Chamber's analysis. In an NRDC staff blog post, Bobby McEnaney wrote that the real challenges facing some renewable energy projects were "relatively unproven technologies being deployed at new and larger scales than previously seen, in an incredibly challenging financing climate." Last year also saw an "exceptional growth in the permitting and authorization of new utility-scale solar and wind projects--particularly in the context of projects sited on the nation's federal lands."

McEnaney's blog post continued: "But more importantly, what is greatly undermining additional investment can be blamed on the uncertainty that now exists within the current markets. And the Chamber of Commerce should look itself in the mirror, given that they have greatly contributed to this level of uncertainty. If the Chamber truly cared about job growth for the renewables industry, (it) would be less concerned about purported red tape and would not have spent millions of dollars of their members' dues to kill climate legislation, not to mention mounting a vigorous effort against the adoption of a strong national renewable electricity standard."

Progress Denied includes a state-by-state appendix of energy projects that have been cancelled or delayed. The report also includes an estimate of jobs and economic value that could be at risk if affected energy projects cannot move forward.

The study said that the states with the most construction dollars and jobs at risk are:

• Texas: $107.1 billion in direct investment and first-year operational costs; 142,100 jobs construction per year
• Florida: $51.6 billion in direct investment and first-year operational costs; 121,300 construction jobs per year
• Nevada: $45.6 billion in direct investment and first-year operational costs; 86,700 construction jobs per year
• California: $30.6 billion in direct investment and first-year operational costs; 311,100 construction jobs per year

Here are some significant energy projects from those states that have been cancelled in recent years:

• Texas: In 2004, BP plc (NYSE:BP) (London) announced plans to build a liquefied natural gas (LNG) terminal on Pelican Island, near Galveston, which carried a total investment value (TIV) of $650 million. But "stiff opposition" from local citizens and environmental groups, as well as litigation, caused BP to cancel the project a few years after it was announced.



• Florida: The Tallahassee Renewable Energy Center wanted to build a 38-megawatt biomass power station with a TIV of $180 million, but years of opposition from local residents and the local county commissioner's office forced the owner, Biomass Gas & Electric LLC, to cancel the project in 2009.



• Nevada: A 250-mile, 500-kilovolt grassroot transmission project connecting southern Nevada with Ely, Nevada, which carried a TIV of $571 million, drew opposition from residents of Henderson, Nevada. The Henderson Planning Commission rejected the project in 2009, and NV Energy officially cancelled it in early 2010.



• California: The Green Path North Transmission Line was a proposed 85-mile long transmission line that would have brought renewable electricity from inland California to Los Angeles. Proposed by the Los Angeles Department of Water and Power (LADWP), the line was "fiercely" opposed by a variety of organizations, causing LADWP to abandon the project in 2010.

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