INSIGHT: US greenhouse rules generate smoke, fire and ire

11 November 2010 20:16  [Source: ICIS news]

New EPA greenhouse gas rules stir up heated oppositionBy Joe Kamalick

WASHINGTON (ICIS)--The Obama administration’s plans to begin enforcing restrictions on greenhouse gases emissions by US industries actually may contribute to global warming - if only because the new rules are making business and political leaders boiling mad.

On Wednesday, the administration alerted state governments on how to begin enforcement of new federal rules to limit greenhouse gas emissions that go into effect on 2 January, a plan that businesses warn could halt industrial expansion.

The Environmental Protection Agency (EPA) said it was providing guidance and advice to state governments that bear responsibility for enforcing the agency’s first-ever limits on greenhouse gas emissions by electric utilities, refineries, chemical plants and other major industrial facilities.

EPA assistant administrator Gina McCarthy told a press conference that the guidance and industry-specific advisories being issued by the agency would help ensure that “permitting for greenhouse gases runs smoothly”.

Under the EPA’s “endangerment” ruling of December 2009, carbon dioxide (CO2) and other greenhouse gases were deemed pollutants under the Clean Air Act (CAA) and therefore subject to the agency’s regulation and obligatory reductions.

In May, the agency issued a related “tailoring rule”, which limited the EPA’s initial greenhouse gas restrictions to only major industrial facilities and electric power plants.

Beginning 2 January next year, any major facility that wants to make major improvements, and any company that wants to build a new production plant must first demonstrate to state regulators that the improvement or new facility would include the best available control technology (BACT) to limit greenhouse gas emissions.

But US chemical producers, refiners, cement manufacturers and other industries have warned that the agency’s controversial rules were cost-prohibitive and would establish a de facto moratorium on major improvements to production facilities and the construction of new manufacturing or electric utility capacity.

Industries have expressed worries that because there are no commercially available technologies to capture and store CO2 and other greenhouse gases, that the permitting process will collapse and investors will be reluctant to put money into projects that might not get state approval under the EPA’s new emissions restrictions.

McCarthy dismissed those complaints, telling a press conference that “The states are fully prepared to begin issuing permits, and this will not be an opportunity for any construction moratorium”.

“There will be no stoppage,” McCarthy said.

In response to a question, McCarthy conceded that the EPA does not know and cannot forecast how much greenhouse gases reductions might result from the agency’s new requirements.

“This is not about capping or overall reductions,” she said.  “This is just ensuring that facilities look at the most cost effective means of reducing pollution. We have no overall projection of how much emissions will be reduced.”

Noting that the EPA’s endangerment finding of late 2009 and its May 2010 tailoring rule have been challenged by various lawsuits, McCarthy said that the agency is confident that both decisions were “on a sound legal basis and will hold up in a court of law”.

That remains to be seen, but even if the EPA’s endangerment finding and/or the tailoring rule ultimately are ruled invalid by the Supreme Court, such a decision could be a year or two away.

In the meantime, say industrial and electric power leaders, the agency’s actions could well bring US manufacturing and general development to a shuddering halt.

Scott Segal, director of the Electric Reliability Coordinating Council (ERCC), said that in its guidance to state governments on how to start regulating and permitting under the greenhouse gases rule, “EPA tacitly admits that such regulation could have a real and lasting impact on affordable and reliable power in the US as well as on the competitiveness of US manufacturing”.

The EPA itself acknowledged in separate rulemakings in August this year that state governments might not be able to implement the agency’s greenhouse gases rules, causing delay or cancellation of new plant construction or modifications.

Segal, whose ERCC represents US electric utility companies, contends that “internal EPA sources have even conceded that it will be two years before EPA can start making permit determinations”.

“In this period, the energy and manufacturing sectors essentially will be in a construction moratorium that could materially hamper economic recovery and could eliminate many more jobs than federal stimulus programmes have supposedly created,” he said.

He also challenged McCarthy’s statement that state-level environmental regulatory agencies are primed and ready to begin processing and approving greenhouse gases permitting applications.

“We think that’s a misrepresentation,” Segal said, arguing that some state regulators have simply given up trying to gear up for the new regimen and are relying on the EPA to handle the processing.  In addition, he said, some states, most notably but not only Texas, have vigorously opposed the agency in this - or they lack state statutory authority to carry out the EPA’s greenhouse gases rules.

The National Association of Manufacturers (NAM) agrees.

“It is questionable whether the state agencies have the resources or the capacity to expeditiously issue new permits,” said NAM President John Engler.

“Manufacturers remain very concerned with EPA’s overreaching agenda, and the release of the agency’s greenhouse gas permitting guidance raises more questions than answers,” he said.

“The EPA continues to create uncertainty for manufacturers as we move closer to the 2 January deadline,” Engler said, adding: “Manufacturers cannot afford additional permitting delays that will hinder decision-making and certainty for their business.”

The uncertainty surrounding the EPA’s greenhouse gases regulations involve confusion about the rules themselves, whether and how promptly states will be able to implement the plan, and whether federal or state courts or Congress itself may variously alter, suspend or disallow the agency’s actions.

Among the 50 states, global warming activists might file suits seeking to enforce state implementation of the EPA greenhouse gases programme, and opponents likely will seek state court injunctions to block the plan - actions entirely separate from the already pending federal court challenges.

Despite the EPA’s claim that the new rules should cause no industrial slowdowns, those uncertainties are certain to have effect.

“Litigation, delay, higher costs all make investment riskier and more expensive, and that chills investment,” said Jennifer Scott, a spokeswoman for the American Chemistry Council (ACC).

While the council said that it could support some of the EPA’s guidance on how to move forward with implementing its greenhouse gases rules - such as flexibility on technologies used to reach “best available” controls - the chemicals trade group still is troubled by the underlying legal authority for the agency’s action.

“We remain concerned that the risks that chill business investment - from permit delays and costs to legal challenges - remain unresolved,” the council said.

“We continue to believe that Congress must impose a ‘time out’ on the regulation of GHG emissions” from industrial and utility sources, the council said.

That option may develop soon.

A bill sponsored by Senator Jay Rockefeller (Democrat-West Virginia) to suspend EPA greenhouse gases regulation for two years is pending in the US Senate and may come to a vote later this month.

That bill, S-3072, does not challenge the EPA’s authority to regulate greenhouse gases, but it would give Congress two years to craft a more measured and comprehensive approach to addressing climate change concerns - an approach that likely would not reflect the sort of mandatory restrictions of the EPA rules.

Although President Barack Obama has threatened to veto the Rockefeller bill, a similar measure won the votes of all 41 Senate Republicans and six Democrats.  Rockefeller has six Democrat senators as cosponsors to his bill.

Given the recent widespread political defeats suffered by Democrats in the elections - what Obama himself called a “shellacking” - the president might think twice about vetoing a bill that sidelines EPA greenhouse gases regulation if it gets strong bipartisan approval in both the House and Senate.

It might be the best deal he can get. When the new 112th Congress convenes in January, the House will be under Republican majority control, the Senate will have stronger Republican numbers, and much more aggressive congressional action against the EPA in this and other areas of environmental regulation is virtually guaranteed.

“I am concerned that the EPA has not provided employers enough time to process and understand rules that they will be required to comply with in just two months time,” Rockefeller said this week after the agency announced its guidance to states.

“In fact, it is still unclear what exactly will be required to receive a greenhouse gas air permit next year, as each state will be making case-by-case decisions,” Rockefeller added, noting that “Such an unstable regulatory environment prevents companies from making long range investment decisions.”

“That is why the Senate needs to pass my legislation to suspend EPA’s ability to regulate greenhouse gases,” he said.

Senator James Inhofe (Republican-Oklahoma), a leading and outspoken Senate opponent of the idea of anthropogenic global warming (AGW), warned on Wednesday that the EPA was taking the Obama administration down a road to further political disaster.

“Make no mistake, this is an important part of the Obama administration’s backdoor cap-and-trade agenda,” Inhofe said after the EPA issued its guidance documents.

“These are the very rules and regulations that can’t pass in Congress, and that the voters resoundingly rejected,” he said.

To discuss issues facing the chemical industry go to ICIS connect
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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