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Commentary By Diana Furchtgott-Roth

EPA Tries To Pull a Fast One

Economics, Economics, Energy Tax & Budget

You’re a savvy political appointee, and you’re bringing out the Mercury and Air Toxic Standards for Power Plants rule that will raise electricity rates all over the country, particularly in battleground states of Illinois, Ohio, Indiana, Florida, and Michigan. What can you do to get the public to swallow the costs?

Timing is everything, and you choose the Wednesday before Christmas, when most people aren’t paying attention.

And then you schedule the announcement at a place designed to tug at the heartstrings, say the National Children’s Hospital in Washington D.C. You ask the hospital’s CEO and the national volunteer chair of the American Lung Association to make remarks.

You say that this costly initiative is for the children, and that millions of children will be protected. You talk about how 15 years ago your son spent his first Christmas in hospital, suffering from asthma.

Of course, you say nothing about the costs. Your state-by-state interactive map shows benefits for each state, but no costs. (These are buried in the 510-page Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards report.) And you throw in some job creation for good measure, 46,000 new construction jobs and 8,000 utility jobs.

Environmental Protection Agency Administrator Lisa Jackson is one smart politician, and that’s what she did yesterday.

It’s too bad that the Regulatory Accountability Act of 2011, the brainchild of Ohio Republican Senator Rob Portman, has not been made law. His bill would require a detailed analysis of the costs and the benefits, which would have saved Americans, including residents of his state, billions of dollars.

The Mercury and Air Toxic Standards for Power Plants rule would make electricity generation far more complex and expensive, especially in the eastern half of the United States. It would require the closure of many coal and oil fired power plants, and placement of emissions control equipment on others. Forty-five percent of American electricity is produced by coal.

EPA would restrict power plants’ and boilers’ emissions of “heavy metals,” including mercury, arsenic, chromium, and nickel, and acid gases, such as hydrogen chloride and hydrogen fluoride.

Most people’s eyes glaze over when they hear about EPA’s new Utility Maximum Achievable Control Technology rule. But when they hear that it would raise their electricity bills, they start to pay attention.

Maximum Achievable Control Technology means that plants and boilers have to use the most stringent methods possible to get the heavy metals out of the air, even if these methods cost billions and the benefits are worth far less-as is the case with the new utility rule. That’s why many plants will have to close.

Susan Dudley, director of the Regulatory Studies Center at George Washington University, has actually read all of the 510 page regulatory impact statement. She wrote in the National Journal on Monday, “If the enormous public benefits EPA predicts from these mercury standards were real, they would justify the cost to Americans of almost $11 billion per year. Unfortunately, they are not.”

Dudley explains that EPA derives its benefits by assigning high values to reducing emissions of fine particles (not air toxics or acid gases) that will occur as a side-effect of the required controls on mercury. But EPA already regulates these particles through other rules. Through sleight of hand, EPA calculates almost all of the benefits for this rule from particle reductions that fall well below the levels it has already established as safe in other proceedings.

Mercury and arsenic are well-known to the public as toxic, and in certain doses can be lethal. But the new EPA rules would push emissions caps unnecessarily low, driving up generating costs and the price of power to industry and households, and forcing some boilers and plants to shut down.

EPA estimates its new rules would cost households and businesses $10 billion a year in 2016. Industry groups have estimated the costs at $40 billion to $120 billion for full compliance, with many older coal and oil-fired plants forced to close. Illinois, Ohio, Indiana, Missouri, and Michigan are the hardest-hit, because they are home to the oldest plants with the fewest emissions controls.

These additional costs would come on top of those to be imposed, starting around 2015, by EPA’s other planned standards for carbon, water, coal ash, and particulates.

The benefits, calculated at $33 billion to $81 billion each year, starting from 2016, supposedly come from improvements in Americans’ health, mostly from decreases in asthma. But these projected benefits are “guesstimates,” gains that are hard to specify given that other factors, such as obesity and lack of exercise, are in play.

These vast projected savings from asthma make no sense. America’s air has been gradually getting cleaner since 1980, as EPA’s own data show, but the number of children with asthma has risen. According to the Centers for Disease Control, 3.6 percent of children had asthma in 1980, and almost twice the percentage, 7.5 percent, in 1995.

In 2009, using a slightly different measure, 10 percent of children had asthma. CDC acknowledges that “the causes of asthma remain unclear and the current research paints a complex picture.” Yet on Wednesday EPA forecast 130,000 fewer asthma cases from its new rule, mostly from fewer particulates.

Mr. Portman no doubt knows what the new EPA regulations will do to Ohio, and his Regulatory Accountability Act of 2011, cosponsored with Senator Mark Pryor, an Arkansas Democrat, seeks to check agencies such as EPA. The House companion bill, introduced by House Judiciary Committee Chairman Lamar Smith of Texas and Democratic Representative Collin Peterson of Minnesota, passed with a 253-167 vote on December 2, 2011.

The bill would provide greater transparency and cost-benefit scrutiny to the most expensive rules, and would require the least burdensome option, rather than the most expensive. In addition, it would require a more rigorous process for costly rules, including formal hearings, at which substantive evidence would have to be provided.

The bill requires cost-benefit analysis to be undertaken at each step in the rulemaking process (proposed rule, final rule, and judicial review), and requires high quality data to be used in the analysis.

Following the analysis, agencies are required to select the “least costly rule considered during the rule making...that meets relevant statutory objectives” unless ’’the additional benefits of the more costly rule justify its additional costs.“ The bill establishes a more rigorous standard of judicial review regarding costly rules (those with an estimated impact of $1 billion or more), such as the mercury rule.

There are five more government business days before the end of the year. Who knows what other rules will emerge before 2012?

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets