The Bulletin -- December 19, 2012

Whose Job Is It Anyway?

The EPA is hard at work implementing regulations based on a model that can best be described as smack-down economics. A National Association of Manufacturers (NAM) study says the regulations will create a “ripple effect” through the economy and cost no less than “several million jobs and hundreds of billions of dollars.”  In keeping with the spirit of this new economic model, it seems it will accomplish little else.

 “The regulations coming out of Washington continue to dampen growth and job creation in Pennsylvania,” said PMA Executive Director David N. Taylor. “Just the implementation of the EPA’s regulations will cost our commonwealth billions of dollars and shed jobs at a time when we are faced with an 8.1% unemployment rate. Pennsylvania’s businesses are struggling to gain momentum, and these regulations are only holding us back and costing jobs.”

Other groups aligning with PMA and NAM on this issue include: SMC Business Councils, the Manufacturer and Business Association, the Mid-Atlantic Employers Association, the Manufacturers Association of South Central Pennsylvania, the Greater Reading Chamber of Commerce, the Northeast Pennsylvania Manufacturers and Employers Association, and the Metals Service Center Institute.

The NAM study scrutinizes proposed EPA rules with bland-sounding labels: Utility and Boiler MACT, Cooling Water Intake Structures, Coal Combustion Residuals, Cross-State Air Pollution Rule and National Ambient Air Quality Standards for Ozone.

Don’t be fooled - they are much more malign than they sound. An examination of the proposed Boiler MACT rules, for instance, illustrates the EPA’s complete ostrich view of both the costs and the nearly non-existent benefits. MACT stands for Maximum Achievable Control Technology and the proposed rules target hazardous gases from some 200,000 boilers nationwide. These boilers burn natural gas, fuel oil, coal, biomass (e.g., wood), refinery gas, or other gas to produce steam, which is used to generate electricity or provide heat for factories and other industrial and institutional facilities.

Bob Bessett, President of the Council of Industrial Boiler Owners, said that when the rules were initially proposed in 2009, the Council contracted with the econometrics firm IHS Global Insight to measure the cost and the casualty figures in jobs. Bessett ultimately summarized that the original standards proposed by EPA were “unachievable”. Reconfigured rules were released in May and only minimally soften the blow.

“Even with the reconfiguration our least pessimistic prediction is that we will lose 220,000 jobs at a cost of $12 billion,” Bessett said.

Bad press from news of the jobs losses delayed implementation of the Boiler MACT rules until after the election. Now, the fiscal cliff negotiations have further delayed their release, Bessett and other industry officials say. However, they fear that the White House may finalize them on December 20, when the EPA is under court order to implement other related rules.

Rules this severe suggest some benefit on the other end, but Bessett said they have received nothing from the EPA showing the value in terms of the economy or overall health.  “We have businesses increasing capital costs with no return for them or the environment,” Bessett said.

An economist with the American Council for Capital Formation, Margo Thorning, says a comparison of two EPA studies regarding the economic impact of its regulation points to another agenda. Thorning investigated the EPA’s recent claim of $2 trillion in economic benefits from the rules and separate initiatives to reduce Green House Gas emissions under amendments to the Clean Air Act.

“Their (EPA’s) ‘economic value’ calculation is based on (1) surveys that ask individuals what they would be “willing to pay” (“stated” WTP) for a small increase in life expectancy and (2) the wage differential between occupations of different riskiness, such as a commercial fisherman compared to an office worker (“revealed” WTP),” Thorning wrote in an e-mail. “The academic surveys of WTP used by EPA have no link to overall economic activity and do not address how (or if) WTP affects the components of GDP (consumption, investment, government spending and net exports).”

Thorning said the $2 trillion claim is an about face from an earlier EPA study as to the economic effects of the rules.  

“In sharp contrast to EPA’s $2 trillion estimate of the “economic value” of the CAAA (Clean Air Act Amendments) described above, the EPA’s own simulations with an earlier, macroeconomic model show that the CAAA has significant negative impacts on U.S. GDP growth over the 2010- 2020 period. GDP declines by $79 billion in 2010 and by $110 billion in 2020 relative to the baseline forecast. In other words, the already implemented CAAA regulations have real, quantifiable costs to the economy.”

The NAM study shows that in Pennsylvania Utility MACT, Boiler MACT and Coal Combustion Residuals regulations alone will have the following impact:

  • Annual compliance costs: $1.5 billion
  • Annual manufacturing sector compliance costs: $651.6 million
  • Total upfront capital expenditures to comply: $8.9 billion
  • Total manufacturing sector upfront capital expenditures: $3.7 billion.

The news is even more appalling given that many of the lost jobs pay family-sustaining wages.

So what is going on? Republican Senator from Oklahoma, James Inhofe, captured it well:

“The economic analysis of the Obama EPA’s Utility MACT paints a bleak picture for economic recovery as it will cost $11 billion to implement, increase electricity rates for every American, and, along with the Cross-State rule, destroy nearly 1.4 million jobs. This contrasts sharply with the mere $6 million in direct benefits the Agency projects from the rule’s implementation. Sadly, this rule isn’t about public health. It is a thinly veiled electricity tax that continues the Obama Administration’s war on affordable energy and is the latest in an unprecedented barrage of regulations that make up EPA’s job-killing regulatory agenda.”

The jobs and people losing them are apparently collateral damage in a push to toss aside the free market and remake the energy industry in America.

As regulations are debated and implemented at the federal level, Pennsylvania must continue, under the direction of the Corbett administration, to create a regulatory environment that is sound and cooperative. Regulations and processes more stringent and complicated than those handed down from Washington, D.C. will negatively and disproportionally affect Pennsylvania’s prosperity compared to our competitor states. To date, the Corbett administration has opened the lines of communication between regulators and businesses and they have increased efficiencies through initiatives such as “Project Syllabus” in the Department of Environmental Protection. 

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