Subcommittee Explores Economic Impacts of State Energy Policies

July 24, 2014

WASHINGTON, DC – The Energy and Power Subcommittee, chaired by Rep. Ed Whitfield (R-KY), today held a hearing on “Laboratories of Democracy: The Economic Impacts of State Energy Policies.” The hearing examined the economic impacts from the differing energy policies of the various states, as well as how federal policies may impact states.

“Supreme Court Justice Louis Brandeis famously described states as laboratories of democracy, and in today’s hearing we will explore this concept in the context of energy policy,” said Chairman Whitfield. “Under our federalist system, states have considerable latitude to try out different ideas. Those state-level policy experiments that are successful can be copied by other states, as well as by the federal government. And those that fail can serve as a cautionary tale and prevent others from making the same mistake.”

Dr. Bernard L. Weinstein, Associate Director of the Maguire Energy Institute at Southern Methodist University, compared the economic performance of those states that have embraced energy development with those that haven’t. He expressed, “Contrary to the commonly-held belief that only a few states are in the energy business, the Energy Information Administration reports that 24 states are currently producing commercial quantities of coal, 31 are producing crude oil, and 33 are producing natural gas. What’s more, current and prospective shale plays are found in most parts of the U.S. But the shale revolution has not been embraced by all of the states who are situated above the shale formations. In those states that have chosen to pursue energy development, output and jobs have grown faster than in most other states while their unemployment rates are well below the U.S. average of 6.1 percent.”

Montana and North Dakota are among those states that have embraced energy development, and they are both experiencing dramatic economic growth and job creation. Dr. Paul Polzin, Director Emeritus of the Bureau of Business and Economic Research at the University of Montana, explained how energy production in these states is having a multiplier effect throughout the economy that goes beyond the energy sector. Polzin said, “Its not just people in energy industries that are benefitting; workers in industries such as construction, professional services, and accommodations now have greater employment opportunities and higher wages. … The streets of Sidney and Williston are crowded with petroleum engineers, drilling managers, environmental specialists and other natural resource workers. But these high-paying specialties are not the only ones to benefit from the boom. Almost all sectors of the local economies are experiencing greater than expected growth in employment opportunities and wages due to the energy boom.”

Fred Siegel, Senior Fellow at the Manhattan Institute, highlighted the stark contrast between the growing economy in Pennsylvania, a state with thriving energy production as a result of hydraulic fracturing, and the struggling economy in New York, a state that has refused to allow this technology, which is unlocking vast new supplies thanks to recent innovations. Siegel described the anti-fracking movement as class warfare and observed, “Pennsylvania generally wanted the new manufacturing made possible by cheap energy; the New Yorkers dreaded it. Normally jobs and revenue are a winning combination, but not in a state where environmental policy is driven by gentry liberals with jobs in Gotham and summer homes in an upstate they’d liked to preserve as a vision from Currier and Ives.”

Tom Tanton, Director of Science and Technology Assessment at the Energy and Environment Legal Institute, noted the benefits of decentralized state energy policies, and explained how states can learn from others’ failures and successes. “Each state has different needs, opportunity and challenges, and may benefit from lessons learned in earlier attempts in other states (both positive and negative.) It is unlikely that what works efficiently or effectively in one state is ideal for another state,” said Tanton.

The panel also discussed what Congress can learn from state policies, and what should be copied or encouraged at the federal level. Chairman Whitfield concluded, “Washington should be learning from these state successes and applying the same pro-energy policies to federally-controlled lands and offshore areas. Unfortunately we are not doing so. … North Dakota and others have set a good example for the nation, but that example is being ignored here in Washington. It is time for that to change.”

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