Costly Rules Will Move Forward Now That Election Is Over

Now that the national election has passed, many of the environmental regulations that were delayed or put on hold before the election are moving or will move forward. These are regulations that were in various stages of development prior to the election but which were delayed for various reasons. Many said at the time that the Obama Administration was not willing to face the economic consequences of these rules at a politically inconvenient time.

The ozone standard provides a general example of the regulations to be implemented over the next four years. In March, 2008, the ozone standard was lowered to 0.075 parts per million (ppm) from 0.080 ppm. However, in 2009, the Obama Administration announced it would review that action because it was not stringent enough. EPA claimed that the standard should be between 0.060 and 0.070 ppm to be fully protective of human health. Eventually, the EPA settled on 0.070 ppm, which would create a situation in which at least 650 counties violate the lower standard and would thus be subject to more stringent permitting (and economically costly) regulations. However, in 2011, at the outset of the election cycle, it was announced that the review would be put on hold until 2013, the next mandated review period. It was widely reported at the time that the decision to delay the review until 2013 was politically motivated. In other words, the administration did not want to implement the lower standard because it would negatively impact employment at a politically sensitive time.

Now that 2013 looms, there is no impediment to moving forward with the review and implementation of the lower standard, even though EPA admits that achieving the 0.070 ppm standard is based on the use of a mixture of known air pollution control technologies and unknown future technologies. However, the same economic pain that prompted the postponement of the review is still inherent in the rule. EPA states that the costs of the new rule are $8.8 billion while the benefits are $17 billion. However, 42 – 99 percent of those benefits are based on health benefits from decreases in particulate matter, not ozone. If the particulate matter benefits are removed from the equation, net benefits range between $1 billion and a negative $8.6 billion.

Other rules will move forward. Regulations on greenhouse gases, hydraulic fracturing, expanding the scope of the wetlands program, post-construction stormwater run-off, cooling towers, coal ash, and boilers are scheduled to be proposed or finalized. These rules will obviously have an impact on the economic viability of the businesses and industries subjected to them.

The boiler rules are a case in point. Originally published as a final rule in 2011, the portion of the rule governing smaller boilers with lower emissions (called ‘area sources’) was widely criticized for being too costly and not producing appropriate benefits. Among other entities, it applied to institutional sources, such as hospitals and schools, and commercial entities, including small businesses. EPA indicated it was reconsidering the rule. The cost of the rule was estimated to be around $535 million, which would include the mandated installation of controls, boiler ‘tune-ups,’ energy assessments, and testing and monitoring requirements.   However, the benefits of the rule ranged from $190 – $470 million and were mostly based on monetized health benefits from reductions in mortality induced by particulate matter. Simple math, though, establishes that the costs outweigh the benefits.

The EPA’s regulatory agenda will move forward, imposing intrusive regulations and burdensome costs although based on speculative health benefits or health benefits not attributable to the pollutant being regulated. Overall, the rules to be proposed and implemented in the coming years will place enormous financial and economic strain on large and small businesses and, in the case of the area source boiler rule, on small institutional establishments. It remains to be seen whether a coalition of affected entities, the public, and elected officials will join together to stop or temper this regulatory onslaught.

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