Category: Regulation and Risks

Heavy Ozone Regulation Hurts

A recent study by the National Association of Manufacturers found that the new ozone regulation from the Obama Administration could have a very high cost in jobs and to the economy. The NERA Economic Consulting report found that a stricter new ozone regulation could:

  • Reduce U.S. GDP by $270 billion per year and $3.4 trillion from 2017 to 2040.
  • Result in 2.9 million fewer jobs per year on average through 2040.
  • Cost the average U.S. household $1,570 per year.
  • Increase natural gas and electricity costs for manufacturers and households across the country.

New oil and natural gas production could be significantly restricted in parts of the country classified as “nonattainment” areas, limiting supplies of critical energy resources and potentially driving up costs for manufacturers and households.

The study found that restrictions to new natural gas production from tighter ozone regulations, in combination with the costs to reduce emissions, could:

  • Reduce the present value of GDP by nearly $4.5 trillion through 2040, result in a loss of 4.3 million job equivalents per year and cost households $2,040 annually.
  • Increase industrial natural gas costs by an average of 52 percent and electricity costs by an average of 23 percent over what they would be if the ozone standard was unchanged.

Heavy regulations like this one, cost too many jobs and wrecks the economy. Businesses will choose to go to other countries with friendlier business environments. Further negatively impacting our economy in the long run. We must look at the bigger picture and see the other side of the issue and understand that more harm than good is achieved through many existing regulations like this new one.

Environmental Regulation through Litigation

Through sue and settle litigation, interest groups have forced the Environmental Protection Agency (EPA) to issue new regulations, often bypassing proper procedures.

How does this happen? Twenty U.S. statutes contain what are known as “citizen suit” provisions, allowing citizens to file suit against a federal agency when that agency has failed to carry out a nondiscretionary duty by its prescribed deadline. The Clean Air Act, the Clean Water Act and the Endangered Species Act, for example, allow for citizen suits. And because federal agency rulemaking is notoriously behind schedule, every missed deadline provides an opportunity for litigation. The EPA has been a party to a number of these lawsuits.

  • After environmental groups file a complaint against the EPA based on these missed deadlines, the parties work out a settlement or consent decree between themselves. This process allows regulation-friendly plaintiffs to work out a rulemaking plan with a federal agency without involving third parties.
  • Intervening in these cases is difficult, and affected parties are frequently unaware that a lawsuit has even been filed until an agreement has already been worked out.
  • From 2009 to 2012, the U.S. Chamber of Commerce puts the number of sue and settle lawsuits at 71, with the Sierra Club and WildEarth Guardians leading the way as plaintiffs in 34 and 20 cases, respectively. The EPA was a defendant in 60 of these cases.

Plaintiffs have used sue and settle with great success. However, the agreements are often procedurally deficient, and the deadlines to which the litigants agree often leave interested parties with insufficient time to comment effectively on the proposed rules:

  • After a lawsuit by the Environmental Defense Fund and the Sierra Club, among others, the EPA issued its Utility MACT rule, which regulates mercury emissions for power plants. The strict deadlines in the consent decree gave the EPA a very short period of time to assess public comments and issue a final rule, despite the complexity of the rulemaking. The regulation carries an annual cost of $9.6 billion, and it has forced many coal plants to shut down. At the end of 2012, 9.5 percent of coal-fired generation capacity had decided to retire due to Utility MACT, and 20.4 percent were undecided about whether to retire.
  • Environmental groups used sue and settle in five separate lawsuits to force EPA action on states’ Regional Haze plans. The Regional Haze program is intended to be a state program. But in multiple instances, the EPA imposed its own federal plan on states, rather than allowing the states time to correct and develop their own plans, because of the deadlines to which the agency had agreed in the consent decrees. Ratepayers in these states are facing extraordinarily high electricity costs as a result of these lawsuits.

Sue and settle is an attractive vehicle for regulation, because it is very difficult for states and industries to intervene in these lawsuits. Moreover, plaintiffs are often compensated for their attorneys’ fees, incentivizing litigation.

The Challenging Process of Becoming a Green Nation (Part 1)

People often feel a little pious when they actively support regulatory efforts that subsidize the use of alternative energy sources. And why not? When politicians and environmentalists claim such regulations help alleviate our nation’s dependence on fossil fuels, reduce our air pollution emissions and decrease our contribution to global warming, what could possibly be wrong with supporting greater government control over the energy resources of our national economy?

Well, there is much to consider in the process of creating public policy. Let’s explore how environmental or energy policy would be crafted in any nation that is a representative democracy.

We’ll start with the most important question concerning energy sustainability and global warming: Who decides if the current rate of fossil fuel consumption is too reckless for a morally responsible generation to enjoy? Who decides the optimal level of carbon dioxide production for us all to tolerate when producing the energy and goods that the citizens of a prosperous nation require?

We must remember that making a democratic government the arbiter over these important questions doesn’t remove the inherent struggle that exists between the many competing visions of how our nation’s energy resources should be used. Handing the over the reins to the government merely changes the process by which these important decisions are made.

Observation #1: Our energy resources have multiple, competing uses — even across future generation. Such competition will always exist, whether decisions over using these resources are made in the public or the private sectors.

The presumption justifying greater regulation is that citizens in the private marketplace pursue only their self-interest when allocating their income dollars across competing energy resource uses. If the voluntary actions between buyers and sellers in the private energy marketplace fail to reflect the “better angels of our nature,” what’s wrong with electing politicians to hire expert bureaucrats to regulate our scarce energy resources more effectively?

Well, we must be consistent in our assumptions about human nature. These same citizens will also pursue their self-interest when they cast their ballots in the public sphere. When choosing between candidates for office with competing platforms, voters will not suddenly grow the halo and wings of angels when closing the curtain behind them in the polling booth. They will vote their own self-interest.

Observation #2: Self-interest guides citizen choices in both public and private decision making processes.

But isn’t citizen influence over resource allocation decisions made in the public sector more equitably distributed than in the private sector? Wouldn’t the “one-person, one-vote” characteristic of a democracy help us more equitably select the right legislators, who will in turn appoint the right bureaucrat experts, who will then create policies that are more likely to reflect the public interest?

In short, the answer is no. While people and organizations with higher incomes will always have more sway over what all is produced and how it is all distributed in the private sector, they will also have more sway over how public policy is created, and how its benefits (and costs) are distributed. Why? Much political influence resides beyond each citizen’s allocation of one vote. Let’s take a look.

Political action groups (PACs) seek soft money donations to promote political party platforms. Beltway lobbyists seek to influence legislators and bureaucrats on behalf of well-funded for-profit and non-profit organizations. Highly organized and informed special interest groups seek public policy with localized benefits that are to be paid for by uninformed and unorganized taxpayers.

Indeed, OpenSecrets.org tracks lobbying expenses and PAC donations in the U.S. each year. In the Presidential election year of 2012, over 12,000 lobbyists helped their organizations spend $3.3 billion trying to influence legislators and bureaucrats in their design of public policy. Further, PACs raised over $1.4 billion that same year, with Democrats raising a slightly larger share of all funds than Republicans.

Observation #3: Power and influence are unequally distributed in both the public and private sectors of a democratic nation.

The reality is this: If self-interest dominates citizen voter choices over competing energy policies, and if their influence over the legislative process is unequally distributed across society, then it does NOT automatically follow that public policy will be more economically efficient or environmentally effective than the aggregation of all the independent, voluntary activities between consumers and producers in the private sector.

This implies that the process of both private and public sector decision making in resource allocation must be clearly understood and directly compared before we can determine which process for allocating our energy resources would be in the best interests of our nation. In my next article, we will explore the challenges of efficiently and effectively implementing public policy over our energy resources.

Has the EPA Hurt the Economy?

Last week, the EPA held public hearings on its “Clean Power Plan” proposal — a regulation that, unsurprisingly, sounds a lot better (who doesn’t want clean power?) than it actually is. The regulation won’t just cut greenhouse gas emissions from power plants (with a miniscule temperature impact of just 0.018 degrees Celsius by 2100), it will cut jobs while raising energy prices for families across the country.

Over at the Daily Signal, Nicholas Loris of the Heritage Foundation pointed out that EPA Administrator Gina McCarthy has written a post on the EPA’s website about the public hearings. According to McCarthy: “We expect great feedback at these sessions. And unfortunately, we also expect a healthy dose of the same tired, false and worn out criticism that commonsense EPA action is bad for the economy.” So, it’s simply false that EPA action hurts the economy. Want proof? McCarthy offered up some slam-dunk evidence: “Just look at our history: since EPA has existed we’ve cut air pollution by more than 70 percent, while GDP has tripled.”

If that’s the same type of analytical rigor that the EPA uses when churning out regulations, no wonder the agency continues to label job-killing restrictions that hike consumer prices “commonsense.”

Never mind that a Chamber of Commerce report projects $51 billion in annual economic losses from the Clean Power Plan rule through 2030 — not to mention 224,000 annual job losses.

  • Or that the EPA’s analysis predicting that its rule will cause job gains largely anticipates those gains because power plants will have to purchase renewable energy equipment thanks to the EPA rule.
  • Or that the EPA’s analyses of employment impacts routinely use flawed models that only partially assess economic costs.
  • Or that more than 34 gigawatts of electric generating capacity are retiring due to just two EPA regulations, costing jobs and raising energy costs along the way.
  • Or that a moderate projection from the National Association of Manufacturers finds that just six EPA regulatory proposals from 2010 and 2011 could cost 2 million jobs and $100 billion annually.
  • Or that its energy regulations disproportionately hurt the poor, who spend more of their incomes on energy.

And these are just a handful of recent EPA rules. To most readers, that might sound like the agency is not exactly helping the economy — in fact, that the agency is doing quite the opposite. But never mind all of that. Because, according to the agency, the fact that the United States has grown since the EPA’s inception must be evidence that the EPA has done nothing but promulgate commonsense regulations; certainly, it cannot be the case that the economy has grown in spite of them.

If you read any of the EPA’s regulatory impact analyses, you’ll see that their regulatory benefits are often those of job creation by regulation (i.e. their rules impose costs on one industry by requiring that industry to spend money, thereby spurring growth in another industry) — hardly a solid growth principle. If government-mandated expenses and restrictions created jobs and economic growth, we’d have regulated ourselves into prosperity quite effortlessly over the last six years.

McCarthy’s logic makes just as much sense as saying that you’ve eaten Oreos for lunch every day for the last week while maintaining a healthy weight — therefore, Oreos have clearly had no negative impact on your health.

The fact that growth has occurred in the face of overreaching regulations is hardly evidence that those regulations haven’t hurt the economy.

According to a study published in the Journal of Economic Growth last year, federal regulation from 1949 to 2005 has cost the American economy an average of 2 percentage points of growth. Altogether, by year-end 2011, regulations since 1949 had reduced American GDP by $38.8 trillion.

Homeland Security/EPA Seize Family’s Land Rover

Department of Homeland Security agents were required to seize a family Land Rover for violating EPA emission standards. The imported Land Rover Defender is on a list of vehicles that are being illegally imported to the United States because they do not meet very strict emission standards.

  • All vehicles entering the U.S. must meet both very strict safety and emissions standards.
  • A list of vehicles are to be seized from their owners because apparently, the VIN number for their cars have different owners listed.
  • Owners of the seized vehicles have 35 days to appeal the seizure.
  • If all VIN numbers on the vehicle match, then the vehicle should be returned to the owner.
  • DHS agents in this case are not telling the owner of the Defender where the vehicle is located so that the VIN numbers can be checked.

EPA’s Expanded Interpretation of its Permit Veto Authority Under the Clean Water Act

Congressional Hearing on the EPA’s Expanded Interpretation of its Permit Veto Authority Under the Clean Water Act

The hearing explored the power and reach of the Environmental Protection Agency’s ability to veto permits after a length of time. The section in question is 404 C, which states;

Section 404(c) authorizes EPA to prohibit, restrict, or deny the discharge of dredged or fill material at defined sites in waters of the United States (including wetlands) whenever it determines, after notice and opportunity for public hearing, that use of such sites for disposal would have an unacceptable adverse impact on one or more of various resources, including fisheries, wildlife, municipal water supplies or recreational areas.

    • Since the Clean Water Act was drafted in 1972, over 2.5 million permits have been filed in conjunction with this section. Of those 2.5 million, only 13 have ever been vetoed. 12 of which, were under republican leadership.
    • Expanded interpretation of the term “Navigable waters” has given the EPA powerful abilities to regulate anything it deems is a navigable water.
    • Of the 13 times that the EPA issued a veto, it was challenged every time. Every time, the EPA won.
    • The costly and lengthy permit process increases the values of the projects, sometimes far too much and they are forced to shut down.
    • Permits should not be allowed to utilize environmental safety as a cause to delay projects.
    • There are numerous recommendations about limiting the amount of time the EPA can veto a permit. The reason this was suggested is because the last permit was delayed after 3 years. That is far too long of time to issue a veto. Congress is currently looking over ways to implement this change to the EPA.
    • Further agenda will look to clarify the scope of jurisdiction of the Clean Water Act and interpret navigable waters.

A good question posed by Democrats is why 13 vetoes are /2.5 million permits a cause for precedence and concern? Republicans responded that they do acknowledge 12 of them were under Republican presidencies, but are still political maneuvers none the less.

EPA, I Shall Call You Sybil

This week, President Obama is formally proposing a new EPA regulation to reduce greenhouse gas emissions by 30 percent from existing U.S. power plants by 2030. After many attempts at passing carbon cap and trade legislation through the Congress over the last decade have failed, the President is now taking unilateral action to directly regulate greenhouse gas emissions. How did we get here?

The EPA receives its power to regulate those economic activities that impose environmental impacts from air pollution through the Clean Air Act of 1990. In 2007, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) had the ability to regulate greenhouse gas emissions, even though such emissions had not been considered air pollutants. However, this regulatory power was conditional on the EPA submitting an “endangerment finding,” in which a careful review of the existing science clearly indicates that greenhouse emissions directly endanger the health of Americans.

Marlo Lewis at the Competitive Enterprise Institute points out that section 202 of the Clean Air Act specifically requires the EPA to perform its own scientific assessment and to exercise its own independent judgment when finding evidence of endangering human health. This means the EPA cannot rely on the scientific assessment and judgment of outside organizations to find conclusive evidence of health endangerment to justify its regulatory powers.

The EPA entered its endangerment finding into the April, 2009 section of the Federal Register, which is the official log of all regulations proposed by federal agencies. However, this endangerment finding, and the EPA’s defense of this finding to its many critics, stretches the boundaries of logic.

Logical Inconsistency #1: Senator Jim Inhofe (R-Oklahoma) had a careful look at page 18,901 of the 2009 Federal Register. (BTW, does it bother anyone else that by April, the annual log book of proposed federal regulations had already reached over 18,000 pages?) Senator Inhofe is bothered by the fact that the EPA states:

To be clear, ambient concentrations of carbon dioxide and the other greenhouse gases, whether at current levels or at projected ambient levels under scenarios of high emissions growth over time, do not cause direct adverse health effects such as respiratory or toxic effects.

 The Senator sees this as a direct contradiction to the finding that greenhouse gas emissions endanger human health.

Logical Inconsistency #2:  Marlo Lewis points out that the U.S. Inspector General has issued a report that claims the EPA failed to perform its own scientific analysis to reach the conclusion that endangerment to human health existed. Page 23 of that report states that the EPA responded to this criticism by claiming that the documented analysis was “not a scientific assessment,” but merely a summary of findings by organizations, like the the recently discredited Intergovernmental Panel on Climate Change, or IPCC. This statement makes it appears the EPA simply relied upon other organizations for both the scientific assessment and the conclusion that greenhouse gas emissions directly threaten human health. Even the Inspector General feels that this endangerment finding fails to meet the requirements specified in the Clean Air Act.

Have greenhouse gas emissions been proven to be an endangerment to human health? I guess it depends on which EPA you are talking to… Sybil? Is that you?

Species deniers: Now that is a horse of a different color…

We have all heard the activists and politicians who blame “climate deniers” for not supporting public policies that address the alleged man-made causes of climate disruption, despite all the “settled science” that justifies their push to limit our individual freedoms.

Please allow me draw your attention to an example where “settled science” is currently frustrating the efforts of wildlife activists who are trying to create effective public policy. And it involves their deep romance with the mustang herds that roam the vast American West.

First, some quick background: I stated in an earlier blog post regarding the Endangered Species Act (ESA) that even though a majority of scientists consider the existing biological taxonomy of wildlife as settled science, some scientists disagree as to what exactly defines a distinct species of animal or plant life.

What is wrong with ignoring the critics of “settled science” for deciding what constitutes a “species” when designing effective wildlife policy?

If two very similar types of animals were incorrectly considered separate species when in reality they were biologically identical, the potential elimination of one animal type while the other animal type continues to thrive is not likely to create a meaningful loss to the larger ecosystem.

If you fail to recognize that two similar looking animal types were truly two distinct species, then allowing one type to disappear as long as the other type is thriving may well damage our larger ecosystem. It is important to not make either mistake.

But what is wrong with assuming that choosing more definitions of species is better than choosing fewer when making policy?

As I discussed in yet another blog post, when a given animal species is considered endangered under the ESA, a private land owner or a lessee of federal lands could be required to endure significant economic losses to preserve the natural habitat of this endangered species. These very real and personal economic losses are never discussed when the federal agencies tabulate their costs for enforcing the ESA.

Well, wouldn’t a federal agency directed by a representative democracy make sure that any individual economic sacrifice be required only to prevent a real threat to our ecosystem?

Perhaps, but it is in any wildlife management agency’s best interest to sidle up with wildlife activists to define a “species” as narrowly as possible. This maximizes the opportunities to exercise control over private land owners and federal land lessees, which would then justify their growing mission and budget needs.

Surely you are being overly pessimistic!

Back to the lead story: A recent development regarding activists concerned about the dwindling herds of wild horses roaming the American West is clearly justifying my fears.

Most land owners or federal land lessees in the western states see wild horses as a nuisance animal, much like feral dogs that terrorize an urban neighborhood or feral hogs that destroy golf courses and farm lands. These folks even organize annual round-ups to limit the damages arising from these herds, paying the participants with the very horses they catch.

However, supporters of these wild horses see them as mustangs. They are romantic, living mementos of a defining era in American history (and I admit that I share that perspective). Yet, these mustang activists are seeking explicit protection of these wild horses under the ESA. I just cannot support that approach. It involves manipulating science for the sake of romance.

You see, the ESA empowers various federal agencies to severely restrict the individual liberties of private land owners and lessees of federal lands — but only if such restrictions are a necessary consequence of protecting and preserving an endangered species of wild animal or plant life. In other words, an entire native species must be at risk before this act can be invoked.

As I predicted, mustang activists are lobbying the federal government to deny settled science in defining what constitutes a native species. As AP reporter Scott Sonner notes:

Efforts to halt mustang roundups in Congress and the courts have been unsuccessful over the past decade, but two groups in a petition to the U.S. Fish and Wildlife service are focusing on genetics and research they say prove the (wild) horses are a native species. They say growing threats from development, livestock grazing and government gathers are jeopardizing the genetic viability of individual herds in 10 states from California to Montana.

Jeopardizing the “genetic viability” of a specific herd comprised of a species that exists abundantly elsewhere does not create the same threat to our ecosystem that jeopardizing an entire species would create. You see, the meaning of biological definitions really does matter for making good public policy.

Today, most of the scientific community considers both domesticated and wild horses as a single species, known as equus ferus. Mustangs are simply considered invasive, feral horses that were introduced to the American West by humans. Defining both wild and domesticated horses as a single species was legitimated by the International Commission on Zoological Nomenclature in 2003. In other words, this biological species definition is “settled science.”

Yet, mustang activists think the federal definition of “species” should ignore settled science and divide horses into two separate species: wild and domesticated. Their motive does not appear to be promoting scientific clarity over biological taxonomy. Instead, after failing to convince a representative democratic governments to create legislation strong enough to preserve our dwindling Mustang herds, these wildlife activists are willing to deny “settled science” for effective political maneuvering.

It seems that when it comes to that great American icon, the noble mustang, wildlife activists are happy to be “settled science” deniers too.

A Government of Regulation-The EPA’s New Rules

On Thursday the EPA will question Janet McCabe, EPA’s Assistant Administrator for the Office of Air and Radiation. The hearing will seek to sort out several questions regarding Obama’s recent proposal on power plants, specifically coal. The rules set out to curb emissions, but its indirect harm will not only shut down coal plants but cut thousands of jobs. The EPA itself has said that;

The rules could cost close to 80,000 jobs by 2030 at power plants and fossil fuel companies, but could create about 111,000 jobs in energy efficiency.

To make the assumption that jobs will be picked up through renewable energy is not only unfair but wrong. The ability to operate a coal plant versus say, a wind farm is very different. The workers who are in the coal plants will not be able to find new and comparable jobs to what they already have. These policies come at a time when natural gas prices and coal use are at an all-time low.

Production of Coal and Nat. Gas

It is also interesting to point out that the market is naturally selecting natural gas in favor of coal for production. In fact, as seen by the graph, as natural gas has risen in recent years coal has been dropping off. This has allowed the market to gradually adjust, as well as allow states to use what is best for them. While the proposal details letting the states determine what is fit for them, some states are better off continuing to use coal. There are states like North Dakota where 80 percent of their electricity comes from coal. This will surely guarantee an increase in the price of electricity for the state, as well as a large job loss.

Share of US Energy

None of this is even necessary as since 2006 the U.S. share of energy production has been steadily shifting. In 2006, a staggering 49 percent of energy in the U.S. came from coal. At the time it was the cheapest energy source available, at least until now. Advancements in natural gas production and renewable energies such as solar and wind have come a long way in 6 years. In just 6 years the energy production from coal dropped 12 percent. If that much can happen in 6 years, trends can predict that similar drops will happen.

However, The EPA and President Obama want to force the markets hand, and introduce large market fluctuations that will only make life harder on Americans. The questioning of the Assistant Administrator will no doubt be harsh and rough but it needs to be. This administration must learn that the best involvement is no involvement.

EPA Advancing on Numerous Fronts

The Environmental Protection Agency has been all over the new recently with a flurry of activity. Joining the President’s strategy of going forward with their agenda and without Congress, the EPA is taking bold steps while receiving some harsh criticism.

The latest action by the EPA directs bold new standards/regulations on carbon emissions. According to the EPA, by 2030:

  • Cut carbon emission from the power sector by 30 percent nationwide below 2005 levels, which is equal to the emissions from powering more than half the homes in the United States for one year.
  • Cut particle pollution, nitrogen oxides, and sulfur dioxide by more than 25 percent as a co-benefit.
  • Avoid up to 6,600 premature deaths, up to 150,000 asthma attacks in children, and up to 490,000 missed work or school days — providing up to $93 billion in climate and public health benefits.
  • Shrink electricity bills roughly 8 percent by increasing energy efficiency and reducing demand in the electricity system.

While the EPA clearly states some benefits to the new carbon emissions regulations, greater consequences could result from such carelessly calculated action. Electricity rates could skyrocket and the entire economy suffer.

According to the Heritage Foundation there will be serious economic damage:

  • Cumulative gross domestic product (GDP) losses are nearly $7 trillion by 2029 (in infla­tion-adjusted 2008 dollars), according to The Heritage Foundation/Global Insight model (described in Appendix A).
  • Single-year GDP losses exceed $600 billion (in inflation-adjusted 2008 dollars).
  • Annual job losses exceed 800,000 for several years.
  • Some industries will see job losses that exceed 50 percent.

Further action by the EPA has modified the Clean Water Act and directly affects the definition of water ways and the productive aspects of agriculture. EPA also modified the Reasonable and Prudent Alternative (RPA).

The EPA ruling on carbon emission gives the opponents of the Keystone XL Pipeline greater hope that they will succeed in their fight on the pipeline front.

“Going it alone” is a reckless decision for the entire Obama administration. Already reinforcing greater partisan divisions in Washington, completely ignoring entire branches of our government will only lead to greater problems for our entire country.