December 2013

In Utility Air Regulatory Group v. EPA, seven parties are petitioning the Supreme Court to overturn the EPA’s regulation of greenhouse gas emissions from stationary sources through the Clean Air Act’s prevention of significant deterioration (PSD) preconstruction permit program and Title V operating permit program.

The sole question before the Court is:

Whether EPA permissibly determined [in its April 2010 Timing Rule] that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.

UARG v. EPA is a very big deal. Congress has never enacted a bill to regulate greenhouse gases from stationary sources, and it’s far from certain courts will uphold the EPA’s proposed “carbon pollution rule” to regulate just one type of stationary source — electric power plants. Yet the Timing Rule extends regulatory requirements to potentially all “major” greenhouse gas emitters of whatever type or description, throughout the entire economy, in one fell swoop.

The Timing Rule codifies the EPA’s legal theory that regulation of any air pollutant under any part of the Clean Air Act automatically makes major sources of that pollutant “subject to regulation” under PSD and Title V. Thus, according to the Timing Rule, major sources of carbon dioxide (CO2), the chief anthropogenic greenhouse gas, became subject to regulation on Jan. 2, 2011, the day the EPA’s greenhouse gas Tailpipe Rule took effect.

As even the EPA acknowledges, however, the Timing Rule leads straight to absurd results, because CO2 is emitted in much greater quantities and by many more sources than any pollutant that can cause “significant deterioration” of air quality.

The Clean Air Act defines “major” source as one with the potential to emit 250 tons per year of an air pollutant (PSD) or 100 tons per year (Title V). Only large industrial facilities emit air quality contaminants in those quantities. In contrast, upwards of 1 million small entities, including office buildings, churches, hospitals, schools, and commercial restaurants, combust enough heating oil or natural gas to emit 250 tons of CO2 annually. An estimated 6.1 million small entities, including some large single-family residences, emit 100 tons of CO2 annually.

The regulatory results of the Timing Rule are absurd in two main ways:

1. Regulation of myriad small “major” sources conflicts with Congress’s intent to exclude non-industrial facilities from PSD and Title V regulation.
2. Expanding by orders of magnitude the number of PSD/Title V-regulated sources would overwhelm permitting agencies’ administrative resources, causing ever-growing bottlenecks and delays that cripple environmental enforcement and economic development alike.

Rather than draw the obvious conclusion that Congress never intended for the EPA to apply PSD and Title V to greenhouse gases, the agency in June 2010 issued a Tailoring Rule, which effectively rewrites the statutory definitions of “major” source so that only facilities emitting 100,000 tons of greenhouse gases will be subject to regulation. The Tailoring Rule is itself an absurd solution, however, because agencies have no power under the U.S. Constitution to amend statutes.

All seven petitioner groups in UARG v. EPA argue that the Timing Rule conflicts with congressional intent. However, the brief submitted by the Energy Intensive Manufacturers Working Group on Greenhouse Gas Regulation and the Glass Packaging Institute catalogues several ways in which the Timing Rule ‘deforms’ the permitting provisions. I found much of this discussion new and compelling.

Excerpts from the brief follow.

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Equality under law is a core principle of every free society. It means the law does not discriminate among persons based on irrelevant characteristics. It sets the ground rules for competition but does not seek to advantage one person or group at the expense of others.

Equality under law is not an arbitrary preference but the logical implication of a more fundamental, natural equality rooted in the unity of the human species. The Declaration of Independence, which proclaims the equality of all human beings in respect to certain unalienable rights, is the locus classicus of this philosophy. Thomas Jefferson concisely explained the natural basis for equality under law when he stated that, “the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of god.”

Societies that reject (or do not recognize) the Declaration philosophy include not only those based on explicitly anti-egalitarian ideologies (Hitler’s master race, the feudal hierarchy of noble and serf), but also those based on the false equality of Marx and Lenin, who asserted that the human race is fundamentally bifurcated into two unequal classes — bourgeois and proletariat. Unsurprisingly, in Marxist-Leninist regimes all power ends up in the hands of a corrupt self-selected elite (nomenklatura) posing as the ‘vanguard of the proletariat.’

I’ve been thinking about this lately, because ‘progressive,’ activist government continually seeks to rig energy markets to favor some industries (those deemed green) at the expense of others (those deemed dirty). Moreover, interest groups continually lobby for special privileges, usually based on some public-interest pretext (‘What’s good for General Motors is good for the country’).

In his treatise The Law, 19th century French economist Frédéric Bastiat, discusses how to tell when law is perverted into a system of legal plunder:

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

Then abolish this law without delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals. If such a law — which may be an isolated case — is not abolished immediately, it will spread, multiply, and develop into a system.

The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protect and encourage his particular industry; that this procedure enriches the state because the protected industry is thus able to spend more and to pay higher wages to the poor workingmen.

Do not listen to this sophistry by vested interests. The acceptance of these arguments will build legal plunder into a whole system. In fact, this has already occurred. The present-day delusion is an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.

Imagine if we had a government today that lived by Bastiat’s maxims! Bye-bye bridges to nowhere, the wind production tax credit, the ethanol mandate, green jobs programs, and Obamacare.

To Bastiat’s simple test for identifying legal plunder, I would add another — presumably with his approval were he alive today: The law aims to pick market winners and losers by imposing unequal burdens and/or conferring unequal benefits on different industries or firms.

The ethanol mandate clearly falls into the legal plunder category, and so does the campaign to restrict natural gas exports for the benefit of the chemical industry. I discuss those policies as equality-of-law-violating plunder schemes in recent comments on National Journal’s Energy Insiders blog. My comments (lightly edited) appear below. [click to continue…]

This post updates the analysis I presented last week in EPA Permitting of Greenhouse Gases: What Does Legislative History Reveal about Congressional Intent?

Petitioners’ merit briefs were due on Monday this week in Utility Air Regulatory Group v. EPA, the first Supreme Court case to examine the legality of an EPA regulation addressing greenhouse gases. Amicus briefs on behalf of petitioners are due next week.

The narrow question before the Court is whether the EPA permissibly determined that its May 2010 greenhouse gas Tailpipe Rule automatically triggered Clean Air Act permitting requirements for major stationary sources of greenhouse gases. In other words, the Court is reviewing the agency’s Timing Rule.

According to the Timing Rule, anyone seeking to build or modify a major source of greenhouse gas emissions must first obtain a “prevention of significant deterioration” (PSD) preconstruction permit. An applicant must conduct a multi-step analysis to determine the proposed facility or modification’s “best available control technology” (BACT) requirements. PSD permitting and BACT determinations are components of the Clean Air Act’s New Source Review (NSR) program.

As detailed in my post last week, I found a BREATHTAKING ABSENCE OF CONGRESSIONAL INTENT for the regulatory path prescribed by the EPA’s Timing Rule:

• During the 101st through the 111th Congress, senators and congressmen introduced 692 bills containing the term “greenhouse gas” and 55 bills containing the term “best available control technology.”
• Of those, only the SAFE Climate Act, introduced in the 109th and 110th Congresses, appears to contemplate a broad application of NSR/BACT to greenhouse gases (the terms NSR and BACT don’t occur in the statute). And then only at the EPA’s discretion, not, as per the Timing Rule, by automatic operation of the statute.
• More importantly, although the SAFE Climate Act garnered 155 co-sponsors in the 110th Congress, the bill never got beyond the introduction stage of the legislative process. No committee approved it, and the House did not vote on it.
• The bill’s chief sponsor, Rep. Henry Waxman (D-Calif.), did not reintroduce the SAFE Climate Act in the 111th Congress. Instead, he co-sponsored the American Clean Energy and Security Act (ACESA), the only cap-and-trade bill ever to pass in a chamber of Congress. ACESA specifically prohibited the application of NSR to stationary sources based on their greenhouse gas emissions.

In short, there is not a shred of evidence in the legislative history that Congress as a whole, the House or Senate separately, or any congressional committee ever intended for the EPA to broadly apply NSR/BACT provisions to greenhouse gases.

Just to make sure nothing fell through the cracks, I today did a search of all legislation introduced during the 101st through the 111th Congresses containing the term “prevention of significant deterioration” (PSD) — the specific type of NSR permit that is the focus of the Timing Rule.

Of 35 bills introduced containing the term, only one was a climate-related bill (S.1168 — the Clean Air/Climate Change Act of 2007). Significantly, it does not propose to apply PSD permitting to greenhouse gases.

The table below summarizes the results.

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A new study by Heritage Foundation analysts Nicholas Loris, Kevin Dayaratma, and David Kreutzer clarifies the economically-devastating potential of the war on coal.

In effect, the study asks: What if anti-coal ‘progressives’ get everything they wish for?

Using the Heritage Foundation Energy Model, which is based on the U.S. Energy Information Administration’s National Energy Model System (NEMS), the three researchers analyze the economic impacts of a regulatory agenda phasing-out coal electric generation between 2015 and 2038. They find that by the end of 2023:

• Employment falls by nearly 600,000 jobs.
• Manufacturing loses over 270,000 jobs.
• Coal-mining jobs drop 30 percent.
• A family of four’s annual income drops more than $1,200 per year, and its total income drops by nearly $24,400 over the entire period of analysis.
• Aggregate gross domestic product (GDP) decreases by $2.23 trillion over the entire period of the analysis.

What accounts for those losses? First, phasing out coal generation will dramatically increase demand for natural gas, boosting gas prices by 28%. Gas is a key feedstock for several manufacturing industries:

Natural gas is not only a critical source of electricity generation; natural gas and liquids produced with natural gas provide a feedstock for fertilizers, chemicals and pharmaceuticals, waste treatment, food processing, fuel for industrial boilers, increasingly used as a transportation fuel, and much more.

The main reason, though, is simply that killing a major source of affordable electric power will increase business and household energy costs:

It will cost more to heat, cool, and light homes, and to cook meals. These higher energy prices will also have rippling effects throughout the economy. As energy prices increase, the cost of making products rises. Higher operating costs for businesses will be reflected in higher prices for consumers. Because everything Americans use and produce requires energy, consumers will take hit after hit. As prices rise, consumers buy less, and companies are forced to shed employees, close entirely, or move to other countries where the cost of doing business is lower. The result is fewer opportunities for American workers, lower incomes, less economic growth, and higher unemployment.

Two maps in the Heritage study should remove any doubt that the war on coal is an attack on a vital component of the U.S. economy and, thus, a danger to public health and welfare. [click to continue…]