As of June 2022, President Biden has authorized the use of the Defense Production Act (DPA) to accelerate domestic production of five energy technologies: solar, transformers and grid components, heat pumps, insulation, electrolyzers, fuel cells, and platinum group metals.
The Biden administration also invoked the DPA in March to increase the domestic output of critical materials needed to make electric cars, even though Biden’s environmental regulators are making it harder to build new mines. It seems the DPA is now the tool du jour for the president’s climate action agenda, and it is time for Congress, which has slowly been expanding the President’s ability to use the DPA, to reverse course and reign in these abuses.
The stated goal of these actions is to lower energy costs, strengthen national security, achieve lasting American energy independence that reduces demand for fossil fuels, and promote clean energy production. However, history shows that federal subsidy programs for energy technologies, particularly when there is a lack of consumer demand for those technologies, will not achieve any of these goals.
The DPA, passed in September of 1950 at the start of the Korean War, is the primary source of presidential authority to expedite and expand the supply of materials and services from the U.S. industrial base needed to promote national defense. The current version of this law allows the president, through executive order, to direct private companies to prioritize orders from the federal government. The law gives the federal government the ability to offer loans, make purchases or purchase commitments, and install equipment in either government or private sectors.
Currently, the DPA defines national defense as “programs for military and energy production or construction, military or critical infrastructure assistance to any foreign nation, homeland security, stockpiling, space, and any directly related activity,” including “emergency preparedness activities.” The inclusion of energy production specifically in the statute has given President Biden a gaping hole to drive through a truckload of subsidies and executive actions.
Energy prices are certainly at crisis levels right now, with gasoline prices at record highs and the reordering of global energy markets following the wave of bans on Russian energy exports. However, Biden’s orders, instead of facilitating more production of the oil, gas, coal, and nuclear energy that powers more than 85% of our economy and almost 100% of our front-line military operations, are focused on energy sources that provide less than 5% of our total energy.
Furthermore, the Biden administration is claiming the importance of heat pumps to reduce the amount of energy needed in our building which will lead to less reliance on foreign countries for oil and gas. However, there is no shortage of heat pumps. People just don’t want them, and they aren’t essential for national defense, as Biden is stating.
Presidents past and present have relied on the Defense Production Act to achieve items on their political agenda that would have been difficult to push through without an executive order. President Obama invoked the act in 2012 when setting a goal to reduce oil imports by one third by 2025, but he focused on handing out subsidies to biofuels while imposing more regulations on the oil and gas production that that America desperately needed at the time.
What did accomplish Obama’s goal was the lifting of the oil export ban in 2015 and the technological achievements of the shale revolution, which was already well underway when Obama signed his executive order. These innovations and the initiative of American entrepreneurs were in response to high energy prices and are what made American energy exports exceed imports in 2019.
Unfortunately, President Biden is following the same failed playbook as President Obama and taking it to a new level. It is long past time for Congress to stop allowing the President to use the DPA to solve his political problems or to subsidize favored industries. Congress should narrow the scope of the DPA and require a greater level of congressional authorization before the DPA can be invoked.