For President Obama, approving the Keystone XL Pipeline should have been a no-brainer. All the State Department had to do was conclude the obvious – the pipeline is in the U.S. national interest.

What other reasonable conclusion is possible? Building the 1,700-mile, shovel-ready project would create thousands of construction jobs, stimulate tens of billions of dollars in business spending, and generate billions of dollars in tax revenues. Once operational, the pipeline would enhance U.S. energy security, displacing oil imported from unsavory regimes with up to 830,000 barrels a day of tar sands oil from friendly, stable, environmentally fastidious, democratic Canada. Canada already ships us more oil than all Persian Gulf states combined, and Keystone would significantly expand our self-reliance on North American energy.

Obama had only two policy choices. He could either disapprove the pipeline on the grounds that environmental concerns over incremental greenhouse gas emissions and oil spill risk outweigh the substantial economic, fiscal, and energy security benefits of the pipeline. Or he could approve the pipeline on the grounds that its benefits outweigh potential environmental impacts.

He did neither. Instead, he punted a final decision until after the November 2012 elections. The timing of Obama’s decision not to decide – just days after 10,000 anti-Keystone activists formed a protest circle around the White House – strongly suggests that Obama’s waffle was politically-motivated.

If Obama approves the pipeline, he risks alienating the green wing of his political base. ”Sierra Club executive director Michael Brune told reporters recently that Obama’s decision on the pipeline would ‘have a very big impact’ on how the nation’s largest environmental group funnels resources toward congressional races rather than the race for the White House,” Politico reported last week. A constant theme of protest rallies since August is that Keystone is a “litmus test“ for Obama. As one green blogger put it, “if the president cannot stand with the environmental community against the pipeline, some say, why should they stand with him at all?”

If, on the other hand, Obama disapproves the pipeline, he risks alienating union labor, such as the AFL-CIO-affiliated United Association of Plumbers and Pipe Fitters. In addition, disapproval would make candidate Obama more vulnerable to GOP criticism that he cares more about green ideology than about job creation and energy security.

Former Shell Oil exec John Hofmeister nailed it: ”It’s much easier to avoid a decision than to make a decision,” and delay allows Obama to dangle the hope before each group that he’ll eventually decide in their favor.

This accountability-avoidance strategy might even induce environmentalists and labor to work harder for Obama’s re-election, the implicit deal on offer being that Obama will approve or disapprove the pipeline in 2013 depending on which group delivers more campaign contributions and votes in 2012.

All the more reason, then, for friends of affordable energy to lampoon Obama’s indecision as playing politics with the nation’s economic and energy future.

‘Clean-tech’ advocates depict China as a model for U.S. policymakers, because Beijing subsidizes the manufacture of wind turbines, solar panels, and electric vehicles.

In February, China announced plans to manufacture 1 million electric vehicles by 2015. To make green cars affordable, Beijing would pay automakers to cut the price of a battery car by $8,785 and a plug-in hybrid by $7,320. Of course, the announcement did not mention that millions of Chinese people who are still too poor to own cars would be taxed for the benefit of their wealthier brethren.

Not to be outdone by this visionary plan, President Obama, in his State of the Union Address, also called for incentives to put 1 million electric vehicles on the road by 2015.

Neither prognostication is likely to come true.

As Jonathan Watts reports in today’s UK Guardian:

But hopes that the country will also become a pioneer in the shift towards “clean car” technology have suffered a setback as the Chinese show little sign of interest in electric and hybrid vehicles despite ambitious government plans. Last year, Toyota managed to sell only one Prius – the world’s most commercially successful hybrid car – in the fastest-growing market. Sports utility vehicle sales, by contrast, are surging.

Of 13.8 million new motor vehicles sold in China in 2010, a whopping 850,000 were SUVs, and 425 were Hummers.

It’s not even clear that the one Prius sold was purchased by a consumer:

 It is not known who made that solitary purchase – industry analysts said it was unlikely to be an individual as there is little technical support for the model. “It may be a domestic rival that bought the hybrid to strip it down and see how it works,” said one industry observer who did not want to be named.

What do Beijing’s Reds and U.S. greens have in common? They refuse to learn that if a technology is commercially viable, no government support is needed, and if it is not commercially viable, no amount of government support can make it so.

I’ve been an outspoken opponent of the EPA’s war on Appalachian coal production. See here, here, here, and here.

In particular, I’ve sought to shine a spotlight on the EPA’s outrageous crackdown on saline effluent from surface coal mines. The EPA argues that this salty discharge is an illegal violation of the Clean Water Act, because it harms an order of short-lived insects known as the mayfly. The science suggests that the total number of insect species doesn’t decrease downstream of surface mines, as hardier insects readily assume the niche vacated by the mayfly. Nonetheless, the EPA alleges that the loss of the mayfly alone is sufficient to violate the Clean Water Act’s narrative (qualitative) water quality standards. The mayfly is not an endangered species.

A year ago, the EPA issued guidance for quantitative salinity water quality standards, effective immediately. According to one mining engineer, they set the bar so low that you couldn’t wash a parking lot without violating the Clean Water Act. Remember, the President had campaigned on a promise to “bankrupt” coal; this was the fruition of that promise. Even EPA Administrator Lisa Jackson conceded that new surface coal mine permits in Appalachia were unlikely under the terms of the April guidance.

Last Friday, the EPA was scheduled to issue final guidance documents for quantitative salinity water quality standards. However, Friday came and went, and nothing happened. On Saturday, EPA sent out notice that it will need more time to finalize the guidance documents. It also said that, “The Office of Management and Budget will conduct an interagency review process before final guidance is issued later this Spring.”

The OMB’s participation is interesting. It could be routine; OMB, and, by extension, the White House, has the final say on regulations. Yet, if it were routine, I don’t know why EPA would mention it.

To be sure, I don’t think that OMB’s involvement was precipitated by Obama’s concerns of overreach against coal. Rather, I guess that OMB’s conspicuous participation is meant to guard against allegations of procedural overreach. This Administration has been catching a lot of flak for using guidance docs in lieu of formal rule makings (from an administrative standpoint, the former is less cumbersome than the latter). Maybe the OMB involvement is meant to bolster the record, and thereby fend off allegations of Administrative Procedure Act violations.

Let’s acknowledge the irony here. From a copy of Obama’s prepared remarks today at Georgetown University discussing his administration’s energy plan:

But here’s the thing – we’ve been down this road before.  Remember, it was just three years ago that gas prices topped $4 a gallon.  Working folks haven’t forgotten that.  It hit a lot of people pretty hard.  But it was also the height of political season, so you had a lot of slogans and gimmicks and outraged politicians waving three-point-plans for two-dollar gas – when none of it would really do anything to solve the problem.  Imagine that in Washington.

The truth is, of course, was that all these gimmicks didn’t make a bit of difference.  When gas prices finally fell, it was mostly because the global recession led to less demand for oil.  Now that the economy is recovering, demand is back up.  Add the turmoil in the Middle East, and it’s not surprising oil prices are higher.  And every time the price of a barrel of oil on the world market rises by $10, a gallon of gas goes up by about 25 cents.

President Obama is decrying gimmicks and slogans (as he should be), noting their inability to achieve anything, with his newest slogan “Win the Future” in the background.

“WTF” indeed.

Minnesota

In 2007, then-Minnesota Governor Tim Pawlenty (R) championed and ultimately signed the Next Generation Act, which effectively imposed a moratorium on coal-fired power plants in the State. Evidently, the legislature is having second thoughts about a future without coal, because last week both the House and the Senate moved legislation that would overturn the coal ban. By a 15 to 6 vote, the House Environment, Energy and Natural Resources Policy and Finance committee passed H.F. 72, “A bill for an act relating to energy; removing ban on increased carbon dioxide emissions by utilities.” The Senate Committee on Energy, Utilities, and Telecommunications passed a companion bill, by a 9 to 3 vote.

West Virginia

Last Tuesday, the U.S. Army Corps of Engineers issued a section 404 Clean Water Act permit to a Massey Coal subsidiary for the Reylas Surface Mine in Logan County, West Virginia. The permit was originally issued in 2007, but it became ensnared in the Obama Administration’s war on Appalachian coal (click here or here for more information on that subject). In 2009, the Environmental Protection Agency recommended against granting the permit, so there is a good chance that the EPA will veto this permit. In January, the EPA exercised this authority for the first time in the history of the Clean Water Act in order to veto the Spruce No. 1 mine, which is also in Logan County. Notably, the EPA objects to these mines because they allegedly harm an insect that isn’t an endangered species. But before the EPA could act, environmentalist lawyers won an injunction in a West Virginia federal court.

Elsewhere, I’ve described two fronts the Obama administration is waging against coal production in Appalachia (see here and here).

Since the President took office, environmentalists have been urging the administration to open a third front against Appalachian coal. This one pertains to the so-called “fill rule.” Here’s how the Sierra Club describes it: “In 2002, the Bush administration changed a key Clean Water Act rule to allow mining companies to dump their waste into waterways. Known as the “Fill Rule,” it allows mountaintop removal coal mine operators to bury Appalachian streams with their waste.”

As I demonstrate below, virtually the whole of the Sierra Club’s characterization of the “fill rule” is incorrect, starting with the fact that the rule originated with the Clinton administration, not the Bush administration. In fact, the “fill rule” is a relatively innocuous regulation that acts primarily to allow the EPA’s long held definition of “fill material” to trump that of the U.S. Army Corps of Engineers.

The “Fill Rule”: A Tortuous History

The Clean Water Act prohibits all pollution discharges into navigable waters, unless the “polluter” obtains a permit. Generally speaking, there are two such variances: (1) Section 402 permits, for “point source” discharges (like a pipe), which are issued by the EPA or by a state agency whose guidelines are EPA-approved and (2) 404 permits, for “dredge and fill” projects (such as filling a swamp to create a new housing development), which are issued by the U.S. Army Corps of Engineers in accordance with guidelines set by the EPA.

The “fill rule” controversy pertains to Section 404 permits, and is based on an ambiguity in the definition of “fill material.” In 1975, the EPA adopted an “effects based” definition of “fill material.” That is, a discharge is “fill material” if its effect is to replace navigable waters with dry land.

Initially, the U.S. Army of Corps of Engineers adopted an identical definition, but in 1977, it changed its interpretation of “fill material” from the EPA’s “effects based” definition, to a “purpose based” definition. In particular, the U.S. Army Corps of Engineer’s definition excluded from the definition of “fill material” any material discharged with the purpose of waste disposal.

The diverging definitions created a problem for surface coal mining in Appalachia. When you dig up coal, the loosened dirt and rock, known as overburden, have more volume than when they were compacted. Much of this overburden is used to reconstruct the approximate original contour of the mined terrain. However, there is almost always “extra” overburden, and this excess dirt and rock is placed in the valley at the base of the mine, often resulting in the burial of ephemeral or intermittent streams. This is known as a “valley fill.” These valley fills are inherent to surface coal mining in the steep terrain of Appalachia. Furthermore, they are unambiguously authorized by the 1977 Surface Mining Control and Reclamation Act.

However, this “extra” overburden can be construed as mining waste. Under the EPA’s “effects based” definition of “fill material” the fact that overburden is “waste” is immaterial, because its “effect” is to replace water. But under the U.S. Army Corps of Engineers “purpose based” definition of “fill material,” interpreting mining overburden as “waste” means that it cannot obtain a Section 404 dredge and fill permit.

In 1986, the EPA and the U.S. Army Corps of Engineers sought to reconcile their respective definitions with a “Memorandum of Agreement on Solid Waste,” by which the U.S. Army Corps of Engineers agreed to exercise its Section 404 authority over certain “solid wastes,” despite its “purpose based” definition of “fill material.” Under the Memorandum, jurisdictional authority over valley fills would be determined on a case-by-case basis.

Importantly, the Clean Water Act gives the EPA primacy over the U.S. Army Corps of Engineers and, in 1988, the Agency conducted a formal rulemaking to affirm its original “effects based” definition of “fill material.” Moreover, the 1986 Memorandum was an ad-hoc solution, that necessitated an extra regulatory process (i.e., determining who had authority over solid waste permitting on a case by case basis). In order to clarify the Clean Water Act, and also simplify the regulatory process, the Clinton administration in April 2000 initiated a rulemaking to effectively abandon the U.S. Army Corps of Engineer’s “purpose based” test. After due process, this rule was finalized by the Bush administration in 2002.

Environmentalist Priority

Environmentalists hate the 2002 “fill rule” because it ended the definitional ambiguity on “fill material,” and, thereby ended an avenue to litigate coal. If mining overburden—the material that goes into a valley fill—can be interpreted as “waste,” then environmentalist lawyers could argue that this “waste” is excluded from the U.S. Army Corps of Engineers’s “purpose based” definition of “fill material.” As a result, these litigants would allege that the Corps doesn’t have the authority to issue section 404 permits to valley fills.

To be sure, such litigation would have been unfounded. It would require a federal judge to discard the 1986 Memorandum, and even if he/she did, then the judge would then have to ignore EPA’s primacy over the U.S. Army Corps of Engineers regarding the section 404 permitting process. However, environmentalists have proven adept at getting their court cases before sympathetic judges (for example, Judge Charles Haden), before whom law takes a backseat to ideology.

A year ago, it seemed as if the Obama administration would seek to overturn the 2002 “fill rule.” In a January 2010 interview with Rolling Stone magazine, EPA Administrator Lisa Jackson said that the Agency was working on it. However, GreenWire reported last week that the Administration is having second thoughts about reworking the rule, much to the displeasure of green special interests. It is still unclear why the administration is backing off. My guess is that a more restrictive, “purpose based” definition of fill material would cause problems for other industries in addition to coal, and that the administration wanted to avoid a head ache.