U.S. Faces Regulatory Cliff

Looming rules could drive up costs, report says


The U.S. faces a regulatory as well as a fiscal cliff in 2013 thanks to a slew of environmental regulations that could drive up the cost of electricity and put manufacturers out of business, according to a report authored by Sen. Jim Inhofe (R., Okla.), ranking member of the Senate Committee on Environment and Public Works.

Beginning in 2013, the Environmental Protection Agency (EPA) will resume its consideration of a number of stringent air and water quality regulations that threaten tens of thousands of jobs in the coal and manufacturing industries.

"These rules will cost more than $300 to $400 billion a year, and significantly raise the price of gas at the pump and energy at home," the report states. "If the Obama-EPA continues to hold reins in 2013, the outlook for jobs and economic recovery is bleak."

William Yeatman, an environmental regulation expert at the Competitive Enterprise Institute, said Inhofe’s steep price tag is no exaggeration.

"This has been a very aggressive EPA that has adopted many costly rules," he said. "These new regulations that are not yet final have the potential to be extremely onerous and extremely expensive."

The reported price tag would place additional stress on an economy already facing the $1.2 trillion in spending cuts and up to $1 trillion in tax increases set to go into effect on January 1.

Many of the regulations were supposed to be finalized during President Barack Obama’s term but have been "punted" to 2013 because of campaign politics, according to Inhofe’s report.

"In a thinly veiled political move, the agency has put off finalizing [regulations] until after the election," the report says.

Inhofe pointed to Obama’s decision to postpone an amended proposal of the 2008 Ozone Rule, an anti-greenhouse gas measure that was expected to cost the private sector $1 trillion.

Obama postponed the updated rule in 2011 because of "the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover."

EPA spokeswoman Enesta Jones denied that any politics were at play in the considerations of the Ozone Rule, adding that the agency’s decision to revisit the regulation in 2013 follows standard 5-year review timeline of the regulations.

Obama’s EPA will consider several rules that would devastate an already reeling manufacturing center and threaten coal production, which serves as the lifeblood for communities in swing states such as Ohio and Virginia.

The EPA finalized an update to the Boiler MACT Rule in 2011 that would force factories to abandon the use of coal in their boilers.

Although the rule was set to go into effect in the spring of 2012, the EPA has yet to implement it.

Don Wolf, an environmental consultant at Burns & McDonnell, said the rule would cost $1.4 billion and be targeted mostly at the manufacturing base of Ohio, Pennsylvania, and nearly every state "east of the Mississippi." That figure is higher than Inhofe’s estimate of $1.2 billion.

"Facilities that are burning coal would have to either replace or shutdown their boilers; many plants aren’t going to have the money," Wolf said. "This is going to displace a lot of jobs."

Yeatman, the regulations expert, said it is no accident that the MACT rules were strict enough to bar the use of coal. Many of the EPA’s proposals under the Obama administration have purposely set coal, mercury, and emissions standards "below measurable levels."

"They are trying to mandate coal emissions at natural gas levels—that’s literally impossible," he said.

"Boiler MACT is the most stringent, onerous, rigidly uncompromising regulation in the Clean Air Act, and it is evident that Obama’s EPA brazenly punted to 2013 because of where it would hit hardest."

The EPA’s Jones said the agency’s handling of the MACT rule demonstrated that it "fully considers the economic impacts of regulations."

"EPA’s proposed changes would achieve extensive public health protections while increasing the rule’s flexibility, which would cut the cost of implementation by nearly 50 percent from the original 2010 proposed rule," Jones said.

Environmentalists are confident that Obama will follow through on the strict green agenda if he is reelected.

"At every turn he has looked at what are the tools available to him to really help build a clean-energy future for this country and has been committed throughout his first four years in office, and there’s no doubt in my mind [environmental regulation] will be a big part of his to-do list and he will remain committed in the next four years," former global warming czar Carol Browner told a group of the president’s supporters in September. "The president has laid out a set of aggressive goals and is committed to [continuing] to build on the progress that he has made to date."

The uncertainty associated with the fiscal cliff has already hurt the economy. The National Association of Manufacturers released a report on Friday estimating the uncertainty eliminated 1 million jobs in 2012.

The prospect of further EPA regulations could also take its toll on job creation in 2012 and beyond, according to Wolf.

"Industry is nervous…they don’t know what the final rules are and they’re still trying to set their capital budgets for 2013," he said. "They don’t know if they’re going to have to set aside millions for environmental compliance—that’s money they could have used to build new plants or add new people."

Bill McMorris   Email Bill | Full Bio | RSS
Bill McMorris is a staff writer for the Washington Free Beacon. He joins the Beacon from the Franklin Center for Government and Public Integrity, where he was managing editor of Old Dominion Watchdog. He was a 2010 Robert Novak Fellow with the Phillips Foundation, where he studied state pension shortfalls. His work has been featured on CNN, Fox News, The Economist, Colbert Report, and numerous print publications and radio stations. He lives in Alexandria, Va, with his wife and three daughters. His Twitter handle is @FBillMcMorris. His email address is mcmorris@freebeacon.com.

Get the news that matters most to you, delivered straight to your inbox daily.

Register today!
  • Grow your email list exponentially
  • Dramatically increase your conversion rates
  • Engage more with your audience
  • Boost your current and future profits