Energy / Regulation

The State of the Agencies: The Environmental Protection Agency and the Need for Reform

Tuesday night, with Speaker Boehner having seemingly mastered the art of the stoic expression, President Barack Obama delivered his first State of the Union address since winning reelection. This performance had been touted by the administration as the capstone, complimentary finish to a two-part series begun with the President’s Inaugural address. These speeches have draped the mantle of Obama’s leadership with a vision of expansive government in 21st century America. While much of the focus of the discussion has swirled around such stalwart political issues as immigration, taxes, and entitlements, President Obama managed to take a moment to highlight a subtle, yet rapidly expanding leviathan of his administration: the U.S. regulatory agency.

By his statements, the President has effectively mandated that this discussion take the Environmental Protection Agency (EPA) as a case-study. During his address the President declared, “no area holds more promise than our investments in American energy. After years of talking about it, we are finally poised to control our own energy future.” The tally so far, however, demonstrates that the only promise delivered has been that of a crippling cavalcade of costly regulatory burdens imposed on energy producers.

Despite describing the growth of U.S. energy production, spurred on by the natural gas boom, with inclusive terms such as ‘we’, the costs imposed on these industries have swelled dangerously. A year-end study by the American Action Forum found that the EPA’s burden on private industries has increased 50 % since Fiscal Year (FY) 2007. The cost of complying with EPA reporting requirements totals $2.4 billion as industry leaders wade through a flood of 176 million hours of paperwork. This total burden represents the highest single year imposition by the agency in this young century.

These paperwork estimates are taken from the agency’s own examination of their burden, which often fail to admit true economic cost. The Forum study notes however, that these burdens will necessitate the dedication of 88,000 employees working full-time to ensure reporting and compliance, at an actual economic loss of $10 billion.

For coal country, this may mean the end.

Already facing the threat of an expanding natural gas market, the high emissions standards being enacted by the EPA early this year have ensured that it is unlikely new coal facilities will create jobs in the United States, with existing jobs disappearing daily. Coal facilities at 150 sites around the country will be shuttered, joining the 100 already retired since 2010. This new turn comes as coal-fired facilities grapple with 2011’s Utility MACT rules which industry representatives predict may ultimately cost the nation 1.4 million jobs.

At what benefit?

The answer to this question is unclear. As is often the case for EPA regulations, the proposed emissions standards do not make quantitative projections of benefits but rather focus their appeal on vague value judgments about air quality and decreased pollutants. Through this tactic the EPA meets the mandated requirements of cost-benefit study while never approaching the true spirit of the regulatory impact analysis needed. A quick scroll through the possible benefits section of the ‘GHG Standards for Stationary Sources’ proposed rule reveals little meaningful research to guide expectations.

The President was correct in his assessment that the warmth of the solar power that heats the earth is good, and wind turbines are certainly neat technology. A quiet factory, proud workers cast out by a stifling regulatory apparatus, and the painful death of bedrock American industries are not.  Reform is critical, but not only in immigration and the tax code. The EPA is just one example of the need for meaningful examinations of the costs and benefits of regulation.

“No area holds more promise than our investments in American energy,” the President boldly declared.  Without a more direct requirement that agencies thoroughly review their regulatory menu, the only hope for millions of American workers is that he’s right.