Background: In the last few decades, innovative technologies dramatically expanded the amount of available oil reserves in the United States. U.S. natural gas reserves have grown by 78 percent from 2004-2014 leading to an abundant growth of jobs in the energy sector. The energy industry, on its own, saved the country from a deeper and longer economic recession. From 2007-2012, total private sector job growth increased by only 1 percent. During that same period, job growth in the oil and gas industry, specifically, grew by 40 percent.
But instead of allowing the industry to flourish, the federal government and its agencies, most notably the Environment Protection Agency (EPA), have undermined the energy sector by regulating and confiscating land and enacting onerous rules with little regard to their impact on the economy and subsequent impact on the real estate community.
Regulating and Confiscating Private Land: Last summer, the EPA and the Army Corps of Engineers proposed a new rule defining “waters of the United States” under the Clean Water Act (CWA). Under this new rule, the federal government can regulate nearly every body of water, even man-made ditches. This rule is an egregious attack on property rights, potentially forcing property owners to obtain a permit to engage in common activates, such as home building, on their own land. The “waters of the U.S. rule” also poses a serious threat to real estate developers by raising the cost of development or preventing it from happening altogether.
In addition to regulating private land, the federal government is addicted to owning land. The federal government currently owns over 635 million acres of land, an area larger than California and Mexico combined. Despite this fact, the Senate is currently considering the Energy Policy Modernization Act of 2015 (S. 2012), which would permanently reauthorize the Land and Water Conservation Fund (LWCF) empowering the government to buy even more private land. More federally owned land decreases the availability of private land useful for commercial, industrial, and residential real estate development.
Regulating Energy Production: From 2009-2015, the EPA issued 3,243 regulations, 33 of which are “major regulations” with a combined compliance cost exceeding $100 billion. Not only do excessive EPA regulations raise the cost of doing business, destroy jobs, and raise the cost of electricity, they do almost nothing to prevent global warming.
Take for example the Clean Power Plan, issued under the Clean Air Act (CAA) and finalized last summer. According to models created in part by the EPA itself, the Clean Power Plan rule fails to lower global temperatures, all the while doing tremendous damage to our economy. According to the U.S. Chamber of Commerce, taken together, this administration’s proposed new carbon regulations will cost as many as 442,000 jobs in 2022, put an average of 224,000 Americans out of work every year, cost an annual $51 billion in GDP, lower household income by $586 billion, and drive electricity prices up by more than $289 billion.
The effect of EPA overregulation directly impacts the real estate community. Without a dynamic economy defined by job growth and rising household income, demand for commercial and residential real estate will collapse.
Solutions: Protecting private property rights is important for the real estate community and one of the most important duties of government. Congress should rein in the power of the EPA and stop regulatory overreach, including the waters of the U.S. rule. Accountable representatives to the American people, not federal bureaucrats, should approve major environmental regulation before they take effect. This includes defining what waters are covered under the CWA.
The availability of private land for development is essential for the real estate market to continue growing. Instead of taking land from businesses, property owners, and local governments, the federal government should transfer land back to the private sector. This will encourage economic development and result in improved land use and management. Congress should eliminate and sunset the LWCF.
Using the CAA, the EPA is systematically destroying businesses and job growth necessary to support the real estate market. Congress should prohibit the EPA from regulating greenhouse gas emissions and must act now to stop climate change regulation coming from the EPA, especially the Clean Power Plan, which destroys jobs and prevents economic growth.