Issues in Brief

EPA’s “December to Remember” for Manufacturers

Associate General Counsel
December 4, 2012

The Environmental Protection Agency’s Christmas gift came early this year in the form of President Obama’s reelection. His victory paved the way for more stringent industrial environmental policies, and EPA’s eagerness to impose them means it will most likely be a “December to Remember” for the manufacturing industry.

EPA currently has 98 environmental regulations it’s preparing for implementation.[1] Five of these rules are projected to be finalized by the end of 2012, and at least another five are set for 2013. What should manufacturers expect from this snow globe–like flurry of activity? More regulations, increased expenditures, and the potential for lost jobs—a real joy to the manufacturing world.

Even using EPA’s conservative estimates, six of the largest-impact regulations set for finalization within the next year could cost roughly $100 billion annually and more than 2 million lost jobs.[2] Industry estimates are even bleaker, with these six regulations costing an estimated $630 billion (4.2 percent of GDP) and more than 9 million jobs.[3]

What exactly is in EPA’s gift bag for manufacturers?


  1. Boiler and utility MACT regulations. EPA has been pursuing strong industrial and utility emission regulations since 2004. Both MACT (Maximum Achievable Control Technology) rules require affected utilities and manufacturers to install essentially the “best available technologies” to limit emissions of dioxin, mercury, and carbon monoxide. Utility MACT applies to all coal- and oil-fired power plants, and the rule has been finalized; EPA is currently reconsidering limits for new units only. Boiler MACT applies to emissions from industrial boilers. A U.S. District Court vacated EPA’s rule earlier this year. EPA projects it will publish a revised final rule in December 2012. Expect the furor to continue.
    • Other NESHAPs. In addition to the more widely known Boiler and Utility MACT regulations, EPA is in some process of rulemaking and/or updating standards for at least 12 other “National Emission Standards for Hazardous Air Pollutants” (NESHAPs) that will impact manufacturers. These include rules pertaining to phosphates, bricks and clay, petroleum refinery heat exchangers, polymers and resins, pesticides, secondary aluminum production, flexible polyurethane foam, wool and wool fiberglass, radon emissions, and off-site waste. EPA projects that at least two of these rules will be finalized by December 2012.
  2. Ozone air quality standards. EPA reviews ozone air quality standards every five years, and they are set for review again in 2013. These “Ozone NAAQS” (National Ambient Air Quality Standards) limit emissions from cars, power plants, industrial facilities, and others. EPA tried to tighten the standards early in 2011, but backed down because of fears of political fallout during the election. This is arguably one of the most costly environmental regulatory proposals. Following EPA’s proposed revision in 2008, MAPI published an analysis in September 2010 estimating the rule would cost the U.S. 7.3 million jobs and cost the economy $677.8 billion (or 3.6 percent of GDP) by 2020.[4]  EPA is currently projecting that a final rule will be issued in December 2012.
  3. Greenhouse gas (GHG) emissions. EPA imposed mandatory GHG reporting regulations in 2009. In June 2012, EPA won a major court decision that upheld the agency’s rules limiting emissions of six greenhouse gases. Most watchful observers believe EPA will move full steam ahead to impose similar emission restrictions on other entities, including power plants and petroleum refineries.
  4. Alternative and clean energy. The Obama administration made commitments in recent international climate talks to reduce U.S. GHG emissions by 4 percent below 1990 levels by 2020, and to craft a global agreement to combat climate change by 2015. President Obama has also pledged to cut U.S. oil imports in half by 2020. How the administration plans to achieve these lofty goals is not well defined, but it has vowed to increase support for alternative and clean energy sources. President Obama remains steadfast in continuing tax breaks for solar and wind technology, but lost broader support when solar power company Solyndra collapsed after receiving $535 million in federal loan guarantees. Nonetheless, the administration wants the U.S. to be a world leader in clean energy, so expect continuing proposals for tax credits and loan guarantees for big alternative energy projects, including solar, wind, and nuclear. Existing tax cuts are set to expire at the end of 2012, and given the looming fiscal cliff and lack of support in the Republican-controlled House, their continuation is tenuous.
  5. Cooling water intake structures. EPA initiated efforts in 2001 to impose limitations on the location, design, construction, and capacity of cooling water intake structures to “minimize adverse environmental impacts.” Essentially, though, what this rule requires is for all existing and new cooling water intake structures to use the “best available technology” to limit fish mortality. EPA estimates the cost to implement these rules at between $0.3 billion and $4.6 billion per year, while industry estimates compliance at a whopping $8 billion per year, plus an additional $149 billion in upfront capital spending. EPA projects final rules to be published in June 2013.
  6. Solid and hazardous waste. EPA remains committed to addressing both solid and hazardous waste. This includes defining solid waste, regulating hazardous waste management systems, and establishing new requirements for underground waste storage tanks. These three waste rules are projected to be finalized by the end of 2013. EPA is also working on six other waste-related rules, but has not projected a completion for them.
  7. More (or less?) access to federal lands. Perhaps one ray of hope for manufacturing is the apparent willingness of the administration to open up access to more federal land for oil and gas exploration. A post-election headline in Scientific American proclaimed “Climate Change Action and More Drilling Likely in Obama’s Second Term.”[5] Reuters, though, reported that “more restrictions are expected for companies drilling on federal lands.”[6] Despite the language, it appears the two propositions are not mutually exclusive. On November 28, the Bureau of Ocean Energy Management held the first oil and gas lease sale under the administration’s five-year plan. The sale included more than 20 million acres in the Western Gulf of Mexico, and could yield 116-200 million barrels of oil and 538-938 billion cubic feet of natural gas, according to bureau estimates.

 

Conclusion
EPA, bolstered by the reelection of President Obama, will forge ahead with many more environmental regulations that will impact the manufacturing sector. While only seven of those areas have been highlighted here, rest assured there are more. Call them the EPA gifts that keep on giving.


Footnotes

[1] See http://yosemite.epa.gov/opei/RuleGate.nsf/content/upcoming.html for a complete list of upcoming EPA rules.

[2] These six regulations are (1) Utility MACT, (2) Boiler MACT, (3) Disposal of Coal Combustion Residuals (CCR) From Electric Utilities, (4) the Cross-State Air Pollution Rule (CSAPR), (5) Cooling Water Intake Structures, and (6) Ozone NAAQS. EPA provides some sort of cost estimate analysis for each of these rules on its website. See, for example, EPA's Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters, February 2011, www.epa.gov/ttnecas1/regdata/RIAs/boilersriafinal110221_psg.pdf.

[3] Nam D. Pham and Daniel J. Ikenson, ndp|consulting on behalf of the National Association of Manufacturers, A Critical Review of the Benefits and Costs of EPA Regulations on the U.S. Economy, November 2012, www.nam.org/~/media/423A1826BF0747258F22BB9C68E31F8F.ashx.

[4]  Economic Implications of EPA's Proposed Ozone Standard, ER-707, MAPI, September 2010.

[5] David Biello, Scientific American, November 7, 2012, http://blogs.scientificamerican.com/observations/2012/11/07/what-does-obamas-win-mean-for-energy-and-environment.

[6] Nichola Groom and Braden Reddall, "Harsher energy regulations seen in Obama's second term," Reuters, November 7, 2012, www.reuters.com/article/2012/11/07/us-usa-campaign-energy-companies-obama-idUSBRE8A60N920121107.


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