EPA’s Power Sapper - The Cross-State Air Pollution Rule is an economy killer.

On July 7, the Environmental Protection Agency adopted strict new standards on power-plant emissions that cross state lines — the Cross-State Air Pollution Rule (CSAPR). The rule has been the focus of multiple White House meetings, hastily called legislative hearings, and last-ditch letters from congressmen, unions, industry, and the states — all pleading with EPA to consider the jobs that will be lost because of this single rule. And it is only the latest installment in dizzying series of new EPA rules with multi-billion-dollar compliance costs and dubious or entirely speculative environmental benefits.

In Texas, CSAPR could eliminate the use of lignite coal that now fuels critical base-load electricity generation. According to the National Electric Reliability Council (NERC), the new EPA rules could so abruptly suppress coal-fired generators that basic electric reliability in the U.S. could suffer a loss of up to 100 gigawatts (GW) by 2014 — 10 percent of the nation’s total electric capacity.

With compliance beginning January 2012, the new air-pollution rule leaves many coal-fired power plants with no alternative but to reduce output or shutter entirely. Congress provided almost a decade to implement the acid-rain rules of the 1990s. EPA’s national program to reduce nitrogen oxides allowed almost five years before initial compliance. But the industry will have only a few months to comply with the first phase of this new rule.

Although Texas has some of the lowest emission rates in the country and has massively reduced emissions of the EPA’s criteria pollutants, the state remains a target for the agency because of the size and vigor of our economy and population. Texas also generates 11 percent of its electricity from native lignite coal, which has higher sulfur content than most other coals. Here EPA has devised a specious methodology to require that Texas reduces SO2 levels by 46 percent within two years — an impossible task.

On June 30, Bryan Shaw, chairman of the Texas Commission on Environmental Quality, testified before the U.S. Senate Environment and Public Works Committee that the rule “represents another case where EPA has inadequately rationalized the need for a complex regulatory scheme to solve a nonexistent problem.” The rule reveals EPA’s wanton disregard for the real-world consequences of unachievable environmental mandates. For the magnitude of costs this rule would impose, EPA’s technical errors are appalling, arising either from incompetence or an activist agenda to kill coal now, whatever the socio-economic costs.

For example, EPA uses obsolete emissions data from 2005 to project emission impacts from Texas. The analysis assumes the existence of 19,000 tons of nitrogen oxide (NOx) emissions from Texas that have been eliminated by state regulation since 2005.

EPA’s avowed intent is to prohibit interstate transport of power-plant emissions of sulfur dioxide (SO2) and nitrogen oxide, as these emissions hinder attainment of the National Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter (PM 2.5) in downwind states. EPA’s purpose in including Texas is to reduce particulate-matter pollution in St. Louis by imposing stringent limits on SO2 emissions from Texas power plants. St. Louis, however, officially satisfies the federal air-quality particulate-matter standard in question, as does Texas.

EPA acknowledges that it has no technical basis for regulating Texas emissions of SO2 in this transport rule but decided to “err on the side of regulation.” If Texas is not regulated under a new air-pollution rule, EPA conjectures, the investor-owned electric utilities might decide to use more of the less expensive but higher-sulfur lignite coal: “If . . . price effects took place and if the rule is finalized as proposed [without Texas], sources in states not covered by the proposed rule might choose to use higher-sulfur coals. Increased use of such coals could increase SO2 emissions in those states.”

The Clean Air Act gives the EPA no authority to regulate current hazards to human health based on speculative scenarios. EPA’s rationale for pulling Texas into the scheme also overlooks the almost prohibitive legal constraints on using more lignite. EPA’s hazy precautionary analysis is its justification for destroying the lignite-mining industry in Texas — jettisoning 11 percent of the state’s electric generation, destroying more than 2,500 jobs directly and some 10,000 more indirectly in the lignite-mining industry, and forfeiting $2.4 billion in annual expenditures by the lignite-coal industry – the tax base for many Texas communities. The International Brotherhood of Electrical Workers (IBEW) told EPA that the new rule could destroy the jobs of 1,500 IBEW members working at six power plants in Texas.

The abrupt elimination of lignite in the Texas fuel mix could mean the loss of 7,000–13,000 MW of generation capacity in Texas. This could reduce the generating capacity of Texas to as much as 3.8 percent below demand, as projected by the Electric Reliability Council of Texas (ERCOT) for the next two years. This is a sobering statistic for Texas this hot summer: ERCOT has already issued energy-emergency alerts when electric demand threatens to exceed available generation. Under the new rule, power outages could become routine.

The technical data underlying this rule assume that most Texas power plants already have ceased, or will immediately cease, using lignite. Thirty percent of coal-fired generation in Texas depends on lignite. And Texas has new state-of-the-art coal plants using lignite and built with layers of emission-control technology.

EPA also assumes that switching to lower-sulfur coal from the Powder River Basin (PRB) in Wyoming is a timely, cost-effective solution. Such snap-of-the-finger fuel-switching is logistically and legally impossible. Retrofitting plants that now use lignite would involve three to four years of engineering, fabrication, boiler reconstruction, new rail construction, and complex new permits.

The new rule’s impact on other states, particularly the Midwestern and Eastern states more dependent than Texas on coal-fired generation, are comparably severe. America Electric Power, one of the largest power generators in the Midwest and Eastern U.S., has invested billions in advanced pollution-control technology to reduce its fleets’ emissions of SO2 and NOx by 64 and 84 percent, respectively. EPA’s proposed transport rule would eliminate the use of SO2 allowances banked under a previous transport rule. As a result, the market price of SO2 allowances has dropped to almost zero. Beware when EPA develops a “market mechanism” for regulatory compliance.

Executives of major electric companies in Texas recently testified about the insurmountable challenges of retrofitting plants to suit the new rule’s timetable. In the deregulated Texas electric market, customers do not pay all the costs of retrofits or new construction. Investor-owned utilities absorb a significant portion of the costs and — unlike government-owned utilities — they can’t be forced to operate at a loss.

Because the new air-pollution rule is only one of many EPA rules in the hopper, later rules could render irrelevant the expensive retrofits undertaken to comply with the CSAPR. For many firms, closing some plants and idling others may be the only prudent economic decision. When questioned about the risk of shutting down power plants, EPA assistant administrator for air Gina McCarthy asserted that such eventualities are purely “business decisions” not caused by EPA’s environmental rules.

And when asked about job loss, McCarthy said the new EPA rules will create jobs to fabricate and operate the new emission-control hardware. Put those jobs in the box labeled non-productive, along with all the “green” jobs created by wasteful taxpayer subsidies. And although EPA estimates a one-time cost of compliance in the $7–11 billion range, Ms. McCarthy speculates that the health benefits from CSAPR could total $26 to $840 billion annually — the latter figure amounting to 5.7 percent of GDP in 2009. (Really?)

EPA calculates health benefits by assigning an arbitrary figure ($5 million) to statistical lives and work days “not lost” as a result of PM 2.5 levels. Without a single study demonstrating a causal connection between PM levels and adverse health effects, EPA establishes statistical associations or correlations between certain PM levels and any hospital visit or death attributed to a range of respiratory and cardiological conditions. This is at least double counting, and more likely quadruple counting. EPA counts the same deaths and hospital visits for multiple pollutants. EPA also does public surveys to gauge what people would pay to decrease their risk of dying from PM pollution below the current estimate of 1/100,000. A hypothetical question, an arbitrary answer, and no money earned, spent, or saved: EPA’s calculation of health benefits is absurd.

The air-pollution rule is only one of at least ten EPA rules with converging effective dates in the next three years. EPA promulgates these rules in piecemeal fashion with no consideration of how overlapping requirements and compliance costs will impact the economy. After 40 years of regulation under federal environmental laws, EPA is now using environmental law to force a national energy policy that has been repeatedly rejected by Congress — aiming in this case to supplant coal-fired electric generation. The nation simply cannot afford to let EPA keep imposing crushing burdens on our working families without any regard to scientific method or realistic cost-benefit analysis.

— Kathleen Hartnett White is director of the Armstrong Center for Energy and Environment at the Texas Public Policy Foundation. From 2001 to 2007, she was chairman of the Texas Commission on Environmental Quality.

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