REGULATION AND THE NEW POLITICS OF (ENERGY) MARKET ENTRY.

Author:Spruce, David B.
 
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INTRODUCTION

The regulation of market entry changes the way markets allocate the costs and benefits of economic activity. For example, society chooses to regulate entry into the medical profession and the introduction of new pharmaceuticals to the market in order to protect patients from harm or the marketing of new securities in order to protect investors from fraud. And so it is with the energy industry: we regulate entry into the energy sector by way of siting regimes (1) for new energy infrastructure; these regimes, in turn, steer private capital toward investments that ensure the wide availability of a more reliable, affordable, and cleaner energy supply. (2) These siting regimes are part of a broader energy regulatory system that aims to control the behavior of monopolies (public utility law), (3) to prevent a wasteful tragedy of the commons (oil and gas law), (4) and to force companies to internalize the externalities of energy production (environmental law). (5) Each of these bodies of regulation represents a social choice to intervene in the market--one born of public dissatisfaction with the market allocation of the costs and benefits of energy production. Importantly, these regulatory regimes are twentieth-century creations, products of the regulatory impulse that supported the so-called "New Deal consensus. " (6)

Bipartisan support for that kind of lightly regulated capitalism is weakening in the twenty-first century. Today the two major political parties have become ideologically more homogenous and distant (from one another) than at any time in the modern regulatory era. The Republican Party, also known as the Grand Old Party (GOP) has moved sharply to the ideological right, and has grown hostile to most regulation--a phenomenon that began in the late twentieth century; by contrast. Democratic Party support for the regulatory state remains firm, and the party's progressive wing may have an appetite for stronger regulation. (7) At the same lime, the rise of instantaneous digital communication is increasing the speed at which people can be mobilized for political action and the speed at which ideas (good or bad, true or false) are transmitted through the polity. These twenty-first century changes in the political environment are profound, and together they suggest the possibility that conflict over the siting of energy projects is getting more intense and more frequent over time.

Understanding this new politics of market entry matters because the American energy system depends upon private capital to serve the public's changing energy needs. Atypically among nations, the American government has never taken primary responsibility for providing energy infrastructure; (8) government has instead used regulation to invite, and to steer, private investment in energy services. Historically, that regulation encouraged the investments necessary to bring reliable, affordable energy to consumers. Today's energy facility siting regimes seek to balance the general public's interest in a reliable, affordable energy supply against the interests of locals and others who bear most of the social and environmental costs of hosting energy facilities. How regulators strike that balance implicates fundamental "government vs. market" and "national vs. local" divides that feed partisan ideological polarization. (9) Furthermore, as climate science implies an increasingly urgent need to transition away from fossil fuels and toward a cleaner energy mix, (10) the operation of energy facility siting regimes will influence the speed at which that transition occurs. Any clean energy transition will produce identifiable winners and losers as jobs and their economic ripple effects move from old to new industries and locales. (11) For all these reasons, it makes sense that the siting of new energy infrastructure would provoke increasingly intense conflict.

Understanding how nongovernmental organizations (NGOs) participate in siting proceedings for new energy infrastructure today can illuminate ways in which the regulatory environment is changing. The idea that regulation is a rigged system, dominated by business and unfriendly to NGO perspectives, seems to be more widely held among twenty-first century populists. (12) However, that view is belied by a substantial empirical literature that paints a more qualified and nuanced picture of business influence over policymaking and regulation. (13) While businesses enjoy certain resource and organizational advantages in the contest to shape policy, those advantages do not always or systematically translate into probusiness outcomes. (14) By contrast, NGO participation in siting proceedings and other regulatory processes is less well studied. An existing literature examining "not in my backyard" (or "NIMBY") groups (15) suggests that local opposition to the siting of" polluting facilities has implications for how society regulates and prioritizes risks, as well as environmental justice implications, and that politically weak groups have been disadvantaged by siting regimes. (16) However, much of that work predates the era of extreme partisan ideological polarization, heightened urgency over climate change, and instantaneous digital communication in American politics. Therefore, we might ask how these more recent trends affect today's siting conflicts. How is the new politics of market entry different? Does it create stronger or weaker barriers to entry for fossil fuel infrastructure? For new clean energy infrastructure?

Understanding the differences between local and national NGOs can help answer these questions. For example, because local opposition to all kinds of energy projects can be rational, siting conflicts involving clean energy infrastructure pose particular strategic dilemmas for national environmental NGOs. On the one hand, an environmental NGO's public stance in favor of a decarbonized energy mix suggests that it ought to support new wind farms, solar farms, and the transmission lines that facilitate clean energy development, even in the presence of local opposition. On the other hand, the growth of the modern environmental movement in the 1960s and 1970s was built around local opposition to new infrastructure. (17) The seminal cases in modern environmentalism--cases like Sierra Club v. Morton, (18) Citizens to Preserve Overton Park, Inc. v. Volpe, (19) and Scenic Hudson Preservation Conference v. Federal Power Commission (20)--involved opposition to infrastructure projects and demands that local environmental impacts be given greater weight in decisionmaking. That history may make environmental NGOs instinctively reluctant to actively support energy projects--even clean energy projects--over local opposition. This phenomenon may explain cases like the Sierra Club opposition to utility scale solar farms in the Mojave Desert (21) and the Northern Pass Transmission Project which would have transmitted Canadian hydroelectric power into New England, a region woefully lacking in wind and solar generation. (22)

For all of these reasons, this Article examines the dynamics of NGO opposition to proposed energy infrastructure in the twenty-first century, specifically the tactics and issue arguments used by NGOs to oppose new energy infrastructure. The analysis is built around a data set comprising information more than four hundred NGOs whose missions include active opposition to one or more of nine different types of energy projects, including various types of fossil fuel infrastructure, renewable energy facilities, and smart grid technology.

Part I of this Article explains the legal context in which NGOs may challenge the approval of new energy projects. Siting regulation typically hands federal or state energy regulators broad discretion to approve or disapprove new projects, but also requires most projects to secure any of several ancillary, issue-specific environmental approvals. Thus, NGOs opposing energy projects can contest siting decisions on a variety of grounds in a variety of regulatory settings (given sufficient expertise and resources). Part II describes the data set at the heart of this analysis, which includes information about (1) the tactics each NGO uses to oppose energy projects, such as litigation, direct lobbying, mobilizing public participation in siting proceedings, protests, or economic boycotts, and (2) the issue arguments advanced by each NGO to mobilize opposition, such as those based upon the project's economic impacts, health and environmental risks, or environmental justice. The data are limited to siting disputes arising between 2000 and 2017. Part II also suggests some informal hypotheses about when we might expect to see particular tactics or issue arguments predominate across the different project categories and NGO types.

Some key findings from the data are reported in Part III. First, NGOs tend to focus on mobilizing the broader public to lobby decisionmakers (rather than, say, to litigate, boycott, or protest), and to do so around environmental and health risk issues. Interestingly, that conclusion holds true across all project types, fossil fuel and clean energy projects alike. Second, local NGOs were more likely to engage in risk amplification--that is, to advance claims about health risks that lacked solid scientific support--while national groups tended to be more circumspect about the way they discussed risk. Third, the tactical and substantive similarities among NGOs within project categories (particularly fossil fuel project categories) implies the possibility of coordination among NGOs. Together, these findings seem consistent with the twenty-first century hyperpolarized, hyperconnected political environment. Mass mobilization is more efficient and effective than ever: digital communication tools enable NGOs to transmit messages almost costlessly, and to target audiences that are particularly receptive to individual...

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