High Costs, Minimal Benefits

• Author: Scott Segal
• Position: Heads the Policy Resolution Group of Bracewell & Giuliani LLP. He is the director of the Electric Reliability Coordinating Council
• Pages: 48-48

Page 48 ❧ THE ENVIRONMENTAL FORUM Copyright © 2011, Environmental Law Institute®, Washington, D.C. www.eli.org.

Reprinted by permission from The Environmental Forum®, May/June 2011

Th e fo r u m

High Costs,

Minimal

Benef‌its

S S

Consumers across the

United States need ac-

cess to reliable, af‌ford-

able, and cleaner power.

However, recent history

has often shown an EPA preference

for overreaching rules without real

analysis of economic impact on, not

only the power companies, but the

hundreds of millions of Americans

who rely on them everyday. On

March 16, EPA released a proposed

Maximum Achievable Control

Technology standard for the electric

utility industry, known as the Utility

MACT. In the proposal, arguably

the most costly in EPA history, the

agency seeks to regulate these non-

mercury Hazardous Air Pollutants at

great expense for no real incremental

benef‌it.

EPA has or will promulgate nu-

merous new rules in 2010-12 with

compliance deadlines on, before,

or near 2015. Taken together, these

regulations will impact roughly

400,000 megawatts of oil- and coal-

f‌ired generation, which is about

40 percent of the current available

capacity in the United States, and

makes up nearly 50 percent of U.S.

total electricity generation.

e industry is concerned about

the ability to retrof‌it environmental

controls or build replacement capac-

ity in the three years to comply with

the Utility MACT rule (and then

other rules). A 2010 report issued

by the North American Electric

Reliability Corporation found sig-

nif‌icant threats to electric reliability,

particularly in certain regions. All

together, estimated ICF Internation-

al using models like those employed

by EPA itself, over 150 gigawatts,

half of the U.S. coal-f‌ired f‌leet, are

at risk of being unavailable in 2015

for the needed energy and required

reliability due to insuf‌f‌icient time to

install controls or replacement gen-

eration. ese circumstances could

lead to shortages and a rapid run-up

in prices, creating a reliability and

af‌fordability crisis.

In a recovering economy, we can

hardly af‌ford this real threat to jobs

in the United States. e ICF data

referenced above, when subjected to

further economic analysis and con-

trolled for appropriate sensitivities,

yield substantial net impacts on job

creation. U.S. employment income

is estimated to drop by an amount

equivalent to the earnings of about

2-2.5 million full-time workers. is

estimate includes any increase in of‌f-

setting compliance-related employ-

ment income, equivalent to about

0.2-1 million full-time workers

limited to the early years of imple-

mentation. Without the of‌fsets, the

estimated reduction in worker in-

come would be 2-3.5 million.

e tremendous cost of these

rules will land squarely on consum-

ers, small businesses, and manu-

facturers, and vulnerable sectors

like health care and educational

institutions. Retail electricity price

is estimated to increase by 10 to

20 percent to cover the costs of

complying with the new environ-

mental requirements. e average

U.S. household is estimated to lose

buying power of $400 to $500 per

year. And those living at or near

the poverty level pay a much higher

percentage of their annual income

on energy, making the impact of the

rules very regressive.

Unfortunately, these costs come

with no identif‌iable benef‌its. In the

Utility MACT proposal, EPA found

very limited benef‌its to mercury re-

ductions and has not supplemented

the record specif‌ically regarding

non-mercury HAPs. Rather than

identifying any incremental benef‌it

from very costly actual reductions

in non-mercury HAPs, the agency

uses reductions in particulate mat-

ter as a stand-in for relevant data.

e trouble with this approach is

that the control of PM has already

been addressed by Congress and

EPA in specif‌ic programs designed

to focus on PM directly. is is the

same kind of double accounting that

corporations are forbidden to do in

their own af‌fairs.

President Obama embraced the

need to closely scrutinize the cost

and economic impact of new agency

regulations. His January 18 Execu-

tive Order laid out the new review

process for regulations, instructing

the agency to impose the “least bur-

den” while taking into account “the

costs of cumulative regulations.”

Considering the multiple and

overlapping rules facing the power

sector, the President’s Executive

Order coupled with legislative and

oversight activity in Congress should

occasion the EPA to construct a

Utility MACT that imposes the

“least burden” on society. Where

EPA has the capacity for f‌lexibility

— such as in the control of non-

mercury HAPs, sub-categorization,

determination of the MACT f‌loor,

and other areas — EPA should do

so. Unfortunately, the agency has

a long distance to travel from the

options suggested by the current

proposal.

Scott Segal heads the Policy Resolution

Group of Bracewell & Giuliani LLP. He is the

director of the Electric Reliability Coordinat-

ing Council.