IPAA: EPA Should Avoid Imposing Huge Economic Burdens with New Ozone Rule

Today, the Independent Petroleum Association of America (IPAA) submitted comments to the U.S. Environmental Protection Agency (EPA) regarding its proposed revision of the National Ambient Air Quality Standards (NAAQS) for ozone.

Just to provide a bit of background, the EPA is considering a proposal to tighten its regulations for the ozone standard from 75 parts per billion (ppb) to a range between 70 ppb to 65 ppb.  EPA is going ahead with this plan even though large portions of the country have yet to meet the agency’s current standard, and despite the fact that states and counties are making great strides in improving air quality.  If a county doesn’t meet EPA’s standard, it is considered in “non-attainment” and must comply with additional permitting requirements to start a new business or new construction project, making economic growth exceedingly difficult.

EPA claims that the tightened standard would provide big health benefits, but as IPAA points out in its comments, EPA’s health assessment “does not withstand scrutiny.”

IPAA highlights research from Energy In Depth, which outlined the questionable data that EPA used to claim the new rule would deliver significant health benefits.  In 2011, when the EPA proposed (and later withdrew) a 70 ppb standard, its median “net benefits” estimate for a 65 ppb standard was only $700 million, with a high possibility that the costs could outweigh any benefits. But in 2014, the EPA changed its mind, claiming net benefits of the same lower ozone standard are now as high as $23 billion – a 3,100 percent increase in net benefits for the exact same standard.

Not only are EPA’s calculations on health benefits questionable, but areas of the country that have yet to meet EPA’s existing standard would be saddled with all the costs of the rule without gaining any health benefits.  From IPAA’s comments:

“EPA’s analysis shows that there are certain areas of the country that are enduring Ozone NAAQS nonattainment areas – areas that cannot meet any Ozone NAAQS that has been promulgated. The same areas that failed to meet the 1997 Ozone NAAQS and the 2008 Ozone NAAQS will also fail to meet the proposed NAAQS by 2025 and, realistically, it seems unlikely any time until well after 2030. What this means is that EPA’s claimed health benefits from the proposed NAAQS will not occur in these enduring nonattainment areas.”

As IPAA further explains, if an area is in “non-attainment,”

“… new construction must not only comply with rigorous emissions controls, but all remaining emissions must be “offset” by reductions in existing emissions that are not otherwise regulated. Many of the areas that would fall into initial Ozone NAAQS nonattainment but would later attain the NAAQS are largely rural or with smaller municipalities. These areas will likely have limited existing emissions sources to regulate. The areas would face either an effective construction prohibition or the choice of shutting down existing operations that employ current workers.”

Of course, this rule won’t only affect the areas in non-attainment, but will have nationwide ripple effects touching every American family. According to the National Association of Manufacturers (NAM), EPA’s proposed rule will be “the most expensive regulation ever imposed on the American public.”  NAM points out that it will come with a $140 billion a year price tag and will put approximately one million jobs at risk.

A recent report published by the Baton Rouge Area Chamber (BRAC) warns that EPA’s proposed ozone standard would put 18 of the top 20 metro area economies in non-attainment. The report also notes that the EPA’s proposal to tighten the regulation is already having a negative effect in Louisiana:

“Since the EPA first proposed lowering the ozone standard in December, the Baton Rouge Area has seen four major industrial projects totaling 2,000 direct and indirect jobs, and more than $7 billion in capital investment, either put on hold or redirected elsewhere.  These losses are in direct correlation with the uncertainty created by the newly proposed ozone standards rule.”

This week, the governors of eleven states sent a letter to EPA Administrator Gina McCarthy urging her to reconsider the plan to move forward with a rule that would do so much economic harm to their states:

“The proposed NAAQS is so extreme that even some of our pristine national parks may not be able to satisfy it.  It goes without saying that most cities and counties have no chance of attaining this standard. Indeed, many areas of our states have background levels of ozone at or near the levels you are proposing… Nonattainment is an economic penalty box so severe that needed economic growth is stunted. In nonattainment areas, any growth is predicated on successfully navigating a bureaucratic maze of federal and state regulators. New development resulting in any new ozone emissions in the area must be offset with emission reductions elsewhere—turning economic development into a zero-sum game. Some businesses will be forced to employ costly control measures. Some will likely scrap existing facilities and equipment altogether. The end result, of course, is that the costs will be passed on to hard-working Americans. Millions of Americans could be affected in a much more direct and devastating way: it is estimated that the proposed standard could cost the equivalent of 1.4 million jobs annually.”

Notably, Democratic governors have weighed in opposing the new ozone rule. West Virginia Governor Earl Ray Tomblin, for example, sent a letter earlier this month to the EPA noting:

“The new proposal standard for ground-level ozone … is extremely concerning.  With work still being done to implement the 2008 standard, this new standard is impractical and unattainable.

“Though West Virginia maintains a strong commitment to preserving out environment for generations to enjoy, I am simply unable to endorse a proposal that will cause hardship for already-struggling West Virginia families.  I urge you to maintain the current ozone standard of 75 (parts per billion).”

Governor Steve Beshear of Kentucky urged EPA to reconsider its plan to tighten the standard as well. As the Courier Journal reported, the governor said,

“protecting the health of Kentuckians is of critical importance to me. However, I must share with you my concern that I have that the ozone standard could create a hardship for many of our communities.”

It’s clear that the cost burden of this rule would be enormous, while the health benefits — considering EPA’s strange calculations — are questionable at best.

As IPAA explains, EPA should turn its attention to “developing cost effective– if they exist – measures to reach attainment in the enduring nonattainment areas” instead of placing onerous burdens on American families.

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