In 2010, President Barack Obama failed to pass his signature cap-and-trade legislation in the Democrat-controlled Senate. Among the concerns was that the expensive, onerous mandates placed on manufacturers and energy producers would destroy jobs and lead to increased energy costs for consumers and businesses. Realizing Congress was unwilling to pass such destructive and far-reaching mandates, Obama took an alternate route of pursuing his cap-and-trade policies through backdoor regulations at the Environmental Protection Agency.
Since then, the EPA has undertaken the most expansive regulatory assault in the agency’s history on the production and distribution of affordable and reliable energy. Numerous regulations, many proposed within a short time frame, have created regulatory uncertainty, contributed to an unprecedented number of announced power plant shutdowns, destroyed jobs, increased energy costs and raised concerns about electric reliability. The EPA’s rules, moreover, are contributing to the increasingly growing costs of federal regulations. A recent George Washington University analysis projects that the Obama administration regulations issued in 2012, including those issued by the EPA, will impose more costs on the economy than all the regulations issued during the entire first terms of Presidents George W. Bush and Bill Clinton combined.
The costs of the EPA’s recent regulations are high. The EPA, for example, has finalized its mercury and air toxics regulation that aims to reduce mercury air emissions, which sharply declined by 58 percent from 1990 to 2005. The EPA estimates the regulation will impose $9.6 billion in annualized costs on energy producers. Similarly, the EPA’s proposed ozone standards, which were withdrawn in 2011 but are expected to be reproposed in early 2014, were estimated by the agency to impose even higher costs, projected to be $19 billion to $90 billion annually.
In March, the EPA proposed a new regulation that would require refineries to further reduce the amount of sulfur in gasoline. A study commissioned by the American Petroleum Institute found that such mandates could raise the cost of gasoline by 6 to 9 cents per gallon. Even the EPA concedes that the costs of the rule will reach $3.4 billion annually once fully implemented. The agency claims significant environmental and public health benefits from the new rule, but this is doubtful given that the already-strict existing sulfur standard has driven down exhaust emissions by 77 to 95 percent. At a time of expensive gasoline prices, the last thing we need is more unnecessary red tape to raise them even higher.
There are also concerns that the EPA has a track record of inflating the benefits while underestimating the costs of its regulations, including the economy-wide effects of major rules. The EPA itself acknowledges limitations and uncertainties in its benefits analyses. For example, in its Regulatory Impact Analysis for its proposed ozone standards, the EPA stated that “there are significant uncertainties in both cost and benefit estimates for the full range of standard alternatives.” The uncertainties, however, have not prevented the EPA from moving forward with costly and complex regulations.
The EPA’s science has also been subject to scrutiny. For example, in a 2011 report, the National Academy of Sciences criticized the EPA for having “overstated” the evidence in concluding that formaldehyde damages the nervous system, raised concerns about the agency’s methodologies and stated that the EPA had problems with “clarity and transparency” in other assessments.