INSIGHT: US industries fear chaos in greenhouse gas rule

19 November 2009 17:49  [Source: ICIS news]

Industry worries that EPA is gambling with the US economyBy Joe Kamalick

WASHINGTON (ICIS news)--US manufacturing, fuel and agriculture officials painted a grim picture this week of what might happen to the broad US industrial and farming sectors if the Environmental Protection Agency (EPA) implements a proposed rule on greenhouse gases.

They cautioned that the new rule could be a catastrophe in the making.

Oddly enough, the EPA more or less agrees.

The hearings this week concerned the EPA’s announced plan to use its authority under the Clean Air Act (CAA) to require large industrial facilities - those that emit 25,000 tonnes or more of greenhouse gases (GHG) annually - to obtain new construction or modification permits from the EPA.

Those permits are required by the New Source Review (NSR) regulatory programme under the Clean Air Act. The NSR is not new, but until now it has been applied only to air pollutants such as carbon monoxide, sulphur dioxide, nitrogen oxide and particulate matter or fine dust.

But now, under a 2007 US Supreme Court decision holding that EPA can regulate greenhouse gases as pollutants, the agency is moving on several fronts to do so.

In order to obtain NSR permits to proceed with new construction or major improvements, facilities such as electric power stations, factories and refineries would have to demonstrate to the EPA’s satisfaction that they are installing the best available emissions-control and energy-efficiency technologies to reduce their GHG emissions as much as possible.

If the agency does not approve a permit application, new facility construction or existing plant improvements would not be allowed to proceed.

The EPA said it estimates that its anticipated rulemaking on GHG emissions by major facilities likely will apply only to some 14,000 US power stations, refineries and factories.

However, even the EPA recognises that if it were to fully regulate GHG emissions under the New Source Review provisions, it would necessarily apply to hundreds of thousands, even millions of entities - office buildings, schools, hospitals, even family farms, you name it - and the result would be instant gridlock and crippling chaos.

As written by Congress in 1976, the Clean Air Act specifies that any source that emits more than 250 tonnes/year of pollutants is subject to the law and EPA regulation.

In the context of greenhouse gas emissions, such as carbon dioxide (CO2), almost any facility larger than a corner hotdog stand will have a carbon footprint larger than 250 tonnes.

Consequently, in its proposed rule on GHG emissions, the EPA is trying to “tailor” the regulation so that it will affect only major facilities.

The agency said it set the emissions threshold at 25,000 tonnes/year specifically to exempt farms, restaurants, other small businesses and facilities such as hospitals, schools and office buildings from the planned regulations.

In fact, both EPA Administrator Lisa Jackson and President Barack Obama have said that they would prefer that Congress pass comprehensive climate control legislation, rather than have the EPA regulate greenhouse gas emissions at all.

Cynics contend that the president and Jackson claim to be reluctantly proceeding with climate action through the EPA in order to pressure Congress into delivering the cap-and-trade emissions mandate that the administration wants.

But many of those testifying this week are concerned that in playing a game of rule-making brinkmanship with Congress, the EPA will, intentionally or not, go past the tipping point and plunge US industry and the economy into regulatory hell.

Industry officials argue that the EPA cannot legally limit its proposed GHG emissions rule to major facilities and that environmental activists will use court action to force full implementation of the New Source Review permitting process on any entity that emits more than 250 tonnes annually of greenhouse gases.

Rick Krause, director of congressional relations for the American Farm Bureau Federation (AFBF), told EPA officials that their plans to limit GHG emissions by major US utilities and factories will cause “catastrophic economic impacts” even to small farms and businesses.

He warned that if the EPA proceeds with its plan, it could bring a halt to construction of new facilities and improvement of existing factories or farms across the country.

Krause and other witnesses argued that such low-level sources of greenhouse gases will in fact be “unwittingly swept into the regulatory nightmare” even though the agency does not intend that result.

David Friedman, director of environmental affairs for the National Petrochemical & Refiners Association (NPRA), joined Krause in contending that the EPA’s effort to “tailor” its planned emissions requirement to large facilities will fail.

The EPA’s tailoring rule, said Friedman, “does not have a statutory basis in the Clean Air Act” and is “a fundamentally flawed legal position”.

“The Clean Air Act stipulates unequivocally that the threshold to permit major stationary sources is 250 tonnes,” Friedman said, adding that “EPA lacks the legal authority to categorically exempt sources that exceed the Clean Air Act’s major source threshold [250 tonnes/year] from permitting requirements.”

As did Krause, Friedman said that the EPA action, if implemented, will impose major costs on an untold number of small facilities nationwide. 

According to the EPA, a new construction or major improvement emissions permit costs $125,000 (€83,750) and about 850 man-hours to complete.

Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute (API), told the hearing that the proposed rule is a “clearly unlawful attempt to change the statutorily mandated threshold” for emissions permits. He termed the EPA effort a “costly, ill-suited regulatory approach”.

Bryan Brendle, director of energy and resources policy at the National Association of Manufacturers (NAM), charged that in seeking to regulate greenhouse gas emissions at major utilities and production sites, the EPA is “laying the groundwork for even greater expansion of its regulatory power”.

The so-called tailoring rule, said Brendle, “will result in the inability of the manufacturing industry to plan and expand their operations and facilities and subsequently result in a continued loss of potential revenue, jobs and improvement of the US economy”.

“New mandates from EPA, especially establishing permitting requirements on GHG emissions, ... will further erode US industrial competiveness and eliminate jobs by limiting energy sources available to consumers,” Brendle added.

He noted that if brought into force, the new rule would accelerate the existing trend among electric utilities to switch from coal-fired power generation to natural gas.

That prospect is a special concern for US petrochemical and downstream chemical makers who are heavily dependent on natgas as both a feedstock and power fuel. 

Many manufacturers outside of the chemicals sector also are dependent on gas and could see their cost structures change dramatically as well if climate change regulations accelerate the power shift to natural gas.

This might be a good time to invest in one of those corner hotdog stands.

($1 = €0.67)

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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