EPA Proposals Will Inflict More Economic Harm Than Good

Briefing Paper – 11.01.10

The Environmental Protection Agency (EPA) is overreaching its authority, moving forward
with a number of unrealistic proposals that could cost millions of jobs, hurt consumers and
put U.S. businesses at a competitive disadvantage globally. The agency’s recent waiver of
fuel blends containing up to 15 percent ethanol (E15) may endanger vehicles, while its push
to regulate greenhouse gas (GHG) emissions and alter ozone standards could destroy jobs
and raise energy costs.

The U.S. Senate Environment and Public Works Committee said in a September 2010 report:
“[T]hese rules threaten the economic viability of America’s manufacturing base and hundreds of
thousands of well-paying jobs. Moreover, these rules will bring little, if any, public health or
environmental benefits. As Americans suffer through a jobless recovery, EPA is pursuing policies
that exacerbate our economic problems and do not improve the environment.”

More Stringent Ozone Standards

Ground-level ozone is one of the air pollutants for which EPA is required to set National
Ambient Air Quality Standards (NAAQS). NAAQS are reviewed on a five-year cycle;
nevertheless, EPA is pushing forward with a more stringent standard just two years
following its last review, despite the fact that no new data exists on which to base new
standards.

EPA is proposing to tighten the ozone standard from 75 parts per billion to a range
between 60 to 70 parts per billion. More stringent standards would be costly, unattainable
and unnecessary. According to a Manufacturers Alliance/MAPI study, the tightest
standard proposed could result in the loss of 7.3 million U.S. jobs by 2020, add $1 trillion
in new costs per year between 2020 and 2030, and sharply reduce the nation's
productivity.

o Attaining these levels requires nitrogen oxides (NOx) reductions of 60 to 80 percent or

more from current levels. Reaching this level would essentially require the shutdown of
most, if not all, commercial and transportation activity in this country.

o The annual attainment cost of meeting these standards is estimated to be more than $1
trillion per year between 2020 and 2030—equivalent to 5.4 percent of projected GDP in
2020. GDP itself would be reduced by approximately $677 billion in 2020, according to
the same study.

o While the EPA invokes the “absurd results” legal doctrine to justify its climate proposals,
it ignores the absurdity of an ozone standard so stringent that it would put pristine areas
like Yellowstone National Park in non-attainment.

o In an Aug. 6 letter to EPA Administrator Lisa Jackson, a bipartisan group of seven U.S.
senators said:

“EPA should maintain the current ozone standards, which EPA finalized only two
years ago, and concluded were adequately protective of public health and
welfare with an adequate margin of safety. Moving to change the standard again,
outside of the Clean Air Act’s normal 5-year review process, as local
communities are struggling to meet the existing standard, would be unfair and
unwise.”
EPA Proposals Will Inflict More Economic Harm Than Good
Briefing Paper – 11.01.10

o The letter described EPA policies as “impacting our standard of living by drastically
increasing energy costs and decreasing the ability of our states to create jobs, foster
entrepreneurship, and give manufacturers the ability to compete in the global
marketplace.”

Regulating Greenhouse Gas Emissions (GHG)

EPA rules regulating GHG emissions under the Clean Air Act are scheduled to go into
effect on Jan. 2, 2011. API joined a lawsuit against EPA's GHG rules, because the rules
are an unconstitutional change to the Clean Air Act.

EPA has also proposed that some states be required to change their state implementation
plan (SIP) to ensure GHG emissions are accounted for in the permitting of large new or
expanded facilities, and to establish a federal implementation plan to apply to states that
do not adopt such a SIP. These rules could impose a significant burden on the U.S.
economy, requiring expensive investments in stationary sources by businesses across
the country, diverting capital that might otherwise create jobs and assist us in our
economic recovery.

o EPA does not have the legal authority to modify provisions of the Clean Air Act, as only
Congress can change laws, not a federal agency.

o As many as 6 million of America’s industrial facilities, power plants, hospitals, agricultural

and commercial establishments eventually will be subject to these rules and would be
required to get permits in order to expand or merely continue operating. State agencies
charged with issuing permits would be swamped, leading to a considerable burden on
state resources and the ability to move forward on a national climate policy.

o Even some Obama administration officials are concerned about the cost of EPA’s GHG
containment efforts and are questioning EPA’s proposals. Federal clean air laws allow
regulators to consider cost when determining emission reduction mandates.

o In a February 2010 letter to Jackson, a bipartisan group of six U.S. senators, led by Jay
Rockefeller (R-W.Va.) and Mark Begich (D-Alaska) cited:

“…serious economic and energy concerns relating to the potential regulation of

greenhouse gases (GHGs) from stationary sources under the Clean Air Act.”

“The President and you have been explicit in calling on Congress to pass
comprehensive legislation that would enhance our nation’s energy and climate
security. We strongly believe this is ultimately Congress’ responsibility, and if done
properly, will create jobs, spur new clean energy industries, and greatly advance the
goal of U.S. energy independence. If done improperly, these opportunities could be
lost.”
EPA Proposals Will Inflict More Economic Harm Than Good
Briefing Paper – 11.01.10

E15 Waiver

On Oct. 13, 2010, the EPA approved E15 gasoline blends for 2007 vehicle models and
newer—although testing conducted by the Coordinating Research Council (CRC) has not
yet been completed. The CRC is a non-profit organization comprising of API, a group of
automobile manufacturers and the Department of Energy.

o The oil and natural gas industry is committed to the use of renewable fuels properly
integrated into the energy mix. API members have invested or committed more than $13
billion in biofuels. However, EPA needs to be thorough in its examination of the impacts
of higher levels of ethanol on both engines and gasoline station equipment.

o Industry testing on vehicles approved for E15 has failed or shown inconsistent results in
leakage, valve clearance and compression on vehicle models 2007 and newer. Re-
testing plans for these vehicles are currently under CRC review.

o Vehicle and air quality testing for E15 fuels is scheduled to be completed in December
2011. Until testing is complete and all failures and inconsistencies have been addressed,
E15 remains a potentially unsafe and harmful fuel for vehicles. This waiver could also
threaten the environment, void warranties, confuse consumers through pump labeling—
and possibly create a public backlash against renewable fuels.

o Many in Congress, as well as a broad coalition of trade associations representing the

meat industry, boaters, grocery and dairy manufacturers, refiners, environmentalists and
others have warned the administration about the premature adoption of E15 before
research is completed.

EPA is playing politics with these rulemakings, proposing economically detrimental

measures as the nation recovers from the worst recession since the Great Depression.
The agency should not be overreaching its authority and setting premature and overly
stringent regulations.