This blog has kept a close eye on the Environmental Protection Agency’s aggressive expansion of its own authority (see here and here). The latest such power grab is taking place in the western United States, where the EPA is hybridizing disparate provisions of the Clean Air Act in order to engineer greater regulatory authority for itself. These Franken-regs are being used to trump the states’ rightful authority on visibility-improvement policy and impose billions of dollars of emissions controls for benefits that are literally invisible.

In 1977 and 1990, Congress passed amendments to the Clean Air Act providing that states work together to improve visibility at federal National Parks and Wilderness Areas. Together, these amendments are known as the Regional Haze provision. Notably, this provision accords states a uniquely high degree of control relative to the EPA. According to the EPA’s 2005 Regional Haze implementation guidelines, “[T]he [Clean Air] Act and legislative history indicate that Congress evinced a special concern with insuring that States would be the decision-makers” on visibility-improvement policy making. The courts, too, have interpreted the Clean Air Act such that states have primacy on Regional Haze decision making. In the seminal case American Corn Growers v. EPA (2001), which set boundaries between the states and the EPA on Regional Haze policy, the D.C. Circuit Court remanded the EPA’s 1999 Regional Haze implementation guidelines for encroaching on states’ authority.

The important take-aways about Regional Haze are that (1) it’s an aesthetic regulation, and not a public health regulation and (2) it accords states a unique degree of authority. Despite the Congress’s “special concern” that states take the lead on Regional Haze, the EPA in 2011 has proposed to impose a federal plan in North Dakota and Oklahoma, and it has imposed a plan in New Mexico.

• Oklahoma proposed to comply with the Regional Haze rule by fuel switching to natural gas at 6 coal-fired power plants by 2026. In March, the EPA rejected the state’s plan, and issued a federal plan requiring that Oklahoma install sulfur dioxide “scrubbers” that cost $1.8 billion. State officials and the affected utilities claim that the EPA’s preferred controls would increase electricity bills 15% to 20%.

• New Mexico proposed emissions controls that met EPA’s own recommended guidelines for visibility improvement, but the EPA nonetheless refused to even consider the state’s Regional Haze plan.  In August, the Agency imposed a federal plan that cost $700 million more.

• In September, the EPA rejected North Dakota’s Regional Haze submission, and proposed in its stead a plan that is $700 million more expensive. According to peer-reviewed research, the Agency’s preferred plan would affect visibility at the Theodore Roosevelt National Park by such an insignificant amount that only 40 percent of people would be able to perceive the “improvement.”

In light of the fact that the Congress structured the Regional Haze program such that state decision-making is paramount, it’s uncertain whether the EPA has the authority to run roughshod over these states. Indeed, Oklahoma and New Mexico already have filed suit, alleging that the EPA usurped their rightful authority. North Dakota undoubtedly will follow suit when the EPA finalizes the state’s federal implementation plan, as soon as this month. As such, the EPA is going to have to answer for its actions in court.

Presumably in order to preemptively bolster its case against these lawsuits, the EPA attempted to beef up its regulatory power, by claiming that it has an additional, independent source of authority to improve visibility under the Clean Air Act. The first, Regional Haze, is described above. The second is as unprecedented as it is illogical: The Agency claims that the revision of two health-based air quality standards fourteen years ago somehow gives it the authority to impose a federal implementation program for visibility improvement in New Mexico, North Dakota, and Oklahoma.

Here’s what the EPA is arguing. Under the “Good Neighbor” provision of the Clean Air Act, which was added by the Congress in 1990, states must ensure that emissions from upwind states do not impact compliance with federal air quality regulations in downwind states. In 1997, the EPA tightened national ambient air standards for two criteria pollutants–particulate matter and ozone. Accordingly, the Good Neighbor provision requires that states must ensure that their emissions of these two pollutants do not interfere with compliance in downwind states of the 1997 revisions.

Simply put, the EPA updated its emissions limits for two pollutants, so the Good Neighbor provision logically pertains to those two pollutants (particulate matter and ozone). Now, however, the EPA claims that the 1997 revisions to health based standards for particulate matter and ozone requires the agency to ensure that emissions of other regulated pollutants from upwind states do not interfere with downwind states, in addition to particulate matter and ozone. Specifically, the Agency alleges that the Regional Haze plans submitted by New Mexico, North Dakota, and Oklahoma are insufficient to ensure that these states do not adversely affect visibility protection in downwind states.

This is a dubious legal reasoning, because the Regional Haze provision explicitly mandates that states control emissions of haze-causing pollutants that significantly diminish visibility in all federal National Parks and Wilderness Areas, not just ones within their own borders. That is, the Regional Haze provision effectively requires states to meet the Good Neighbor provision. It makes no sense for Congress to create a program requiring states to work together to reduce visibility impairment in the Regional Haze provision, and then to also create a vague, amorphous, ill-defined separate source of authority with one phrase in the Good Neighbor provision, an altogether different section of the law.

More importantly, the EPA has yet to fully approve a single Regional Haze plan. How can the EPA know whether one state is adversely affecting other states’ visibility improvement programs that do not yet exist? Indeed, this is the exact reasoning used by the EPA in 2006, when it published implementation rules for the Good Neighbor provision. In the rules, the EPA said that, “is not possible at this time to assess whether there is any interference with measures in…another State designed to ‘protect visibility’…until regional haze [plans] are submitted and approved.”

New Mexico and Oklahoma already are challenging the EPA’s Good Neighbor Provision power grab in court; North Dakota soon will follow suit. I suspect that they will win. However, if they don’t, and the courts uphold the EPA’s expansive interpretation of the Good Neighbor provision, then the balance of power in America’s system of environmental federalism will have been tipped significantly away from the states and to the federal government. For starters, the EPA would gain a powerful new authority to trump the states’ rightful authority on visibility improvement. But it would affect other air quality regimes, too. On September 15, the EPA used its new interpretation of the Good Neighbor provision to partly justify its plan to impose greenhouse gas regulations for large stationary sources in Texas, over the objection of state officials.

The Senate held votes this week on competing Democratic and Republican oil bills.  The Democratic bill, S. 940, which would raise taxes on big oil companies, was defeated on a vote of 52 to 48. The Republican bill, S. 953, which would force the Obama Administration to increase offshore oil leasing, was defeated on a vote of 42 to 57. Under Senate rules, sixty votes were required to pass either measure.

Senate Majority Leader Harry Reid (D-Nev.) had this to say about those who voted against the bill to raise taxes on the five largest oil companies: “They would rather cut college scholarships, slash cancer research, and end Medicare than take away taxpayer-funded giveaways to oil companies that are raking in billions of dollars in profits.”  Three Democrats (Senators Mark Begich of Alaska, Mary Landrieu of Louisiana, and Ben Nelson of Nebraska) voted against the oil tax hike, while the two Republican Senators from Maine (Olympia Snowe and Susan Collins) voted for it.  And Senator James M. Inhofe (R-Oklahoma) had this to say about the Republican offshore bill:  “The solution to skyrocketing gas prices is simple: increase supply.”  The establishment media regularly try to portray Senator Reid as a statesman and Senator Inhofe as a conservative ideologue.  These contrasting quotes allow readers to judge for themselves.

House Committee Acts To Stop President’s de facto Drilling Moratorium

The House Natural Resources Committee marked up three bills on Wednesday that would require the Obama Administration to stop its obstructive tactics and start producing more oil and natural gas from federal Outer Continental Shelf areas.  Committee Democrats dragged out the mark-up for nine hours by offering and insisting on recorded votes on a series of amendments to weaken or gut the three bills—H. R. 1229, 1230, and 1231.  None of their amendments was adopted.

It is expected that the House will pass all three bills in May.  Committee Chairman Doc Hastings (R-Wash.) plans to introduce additional bills in the next few months to increase domestic oil and gas production on federal lands in Alaska and the Rocky Mountains as part of House Republicans’ American Energy Initiative.

House Leadership Tacitly Endorses Excellent EPA Strategy

Environment and Energy News reported this week that House Speaker John Boehner (R-Ohio) did not rule out attaching something like the Energy Tax Prevention Act (H. R. 910) to the bill to raise the federal debt ceiling.  H. R. 910 would block the Environmental Protection Agency from using the Clean Air Act to regulate greenhouse gas emissions.  It passed the House last week on a 255 to 172 vote, but failed as an amendment in the Senate on a 50 to 50 vote.

Rep. Fred Upton (R-Mich.), Chairman of the Energy and Commerce Committee and main sponsor of H. R. 910, made similar remarks earlier in the week: “No debt limit is going to pass by itself. You’ll have to have some significant pieces with it.”

House Committee Counters Coal Crackdown

The House Energy and Commerce Committee held subcommittee hearings this week on the proposed coal ash rule and on the proposed utility, boiler, and cement Maximum Available Control Technology (or MACT) rules.

Rep. David McKinley (R-WV) has introduced a bill, H. R. 1391, to deny EPA the authority to regulate coal ash as a hazardous waste under the Solid Waste Disposal Act.  Coal ash has many industrial uses, including as a replacement for part of the Portland cement in concrete and in drywall.  Classifying coal ash as a hazardous waste would threaten its commercial use and thereby raise costs of producing coal-fired power.

It has been reported that bills will be introduced next month to block or delay EPA’s proposed three Clean Air Act MACT rules.  Each rule would have devastating economic effects.

For example, Rep. Greg Walden (R-Oreg.) at the hearing raised the example in his district (and in my home county of Baker County, Oregon) of a cement plant that has spent $20 million to install technology to reduce mercury emissions by 95%.  Under the proposed cement MACT rule, the plant would be required to reduce mercury emissions by 98.5%.

Achieving the additional 3.5% reduction would be too expensive and therefore the plant will probably be shut down if the rule goes into effect.  With the closure of the National Forests to commercial timber production, the Ash Grove cement plant is the largest employer (after the taxpayer-funded Forest Service, Bureau of Land Management, and local school district) in the county.

House Ready To Pass Upton Bill Next Week

The House has scheduled H. R. 910, the Energy Tax Prevention Act, for floor debate and passage on Wednesday, 6th April.  This could still slip given the wrangling that is going on between the House and the Senate over the Continuing  Resolution to fund the federal government for the rest of FY 2011 after the current CR runs out on 8th April.

Energy and Commerce Committee Chairman Fred Upton’s (R-Mich.) bill will pass easily with over 250 votes.  That most likely includes all 241 Republicans and 12 to 20 Democrats.

The Rules Committee has not yet met to decide which amendments will be in order.  Conservative Republicans in the Republican Study Committee are considering offering several amendments to strengthen the bill.

H. R. 910 as marked up by the Energy and Commerce Committee prohibits the EPA from using the Clean Air Act to regulate greenhouse gas emissions, but does not prohibit the Administration from using other existing statutes to regulate emissions.  Nor does it ban common law nuisance lawsuits against emitters of greenhouse gases, such as power plants, manufacturers, railroads, airlines, and cement producers.

Thus one obvious amendment would be to ban common law nuisance suits.  The Supreme Court is currently considering such a case.  It may find that such suits may proceed, but even if it does not it could do so for the wrong reason—namely, that the EPA is regulating emissions and has thereby pre-empted common law.

Democrats led by Rep. Henry Waxman (D-Beverly Hills) will undoubtedly offer some of the same silly, irrelevant grandstanding amendments that they offered in committee.  Waxman was reported this week as expressing confidence that the bill has no chance in the Senate.

That was certainly true of his Waxman-Markey cap-and-trade bill in the last Congress.  One significant difference is that Waxman-Markey barely passed the House, 219-212.  The Upton-Whitfield bill will pass by a much wider margin.

Moreover, cap-and-trade was swimming against strong public opposition, while blocking EPA’s attempt to achieve cap-and-trade through the regulatory backdoor is swimming with public opinion.  That’s why, for example, Senator Claire McCaskill (D-Mo.) is still undecided about voting for the McConnell amendment (which is identical to the Senate version of H. R. 910) in the Senate.  She doesn’t want to vote for it, but she’d like to be re-elected in 2012.

Will the Senate Ever Vote on the McConnell Amendment?

The Senate spent another week without voting on Senator Mitch McConnell’s (R-Ky.) amendment to block EPA from using the Clean Air Act to regulate greenhouse gas emissions or either of the two Democratic alternatives.  It is quite possible that there will be votes next week.  It is also quite possible that Majority Leader Harry Reid (D-Nev.) will work out a deal with McConnell to dispose of many of the amendments to the underlying bill without votes and proceed to passage of the Small Business Innovation Research Re-Authorization Act.  Or Reid may keep stalling.

McConnell originally introduced his amendment (#183 if you’re keeping track) to S. 493 on 15th March.  It is identical to Senator James M. Inhofe’s (R-Okla.) Energy Tax Prevention Act, S. 482, which is identical to the House bill of the same name, H. R. 910.

Senator Jay Rockefeller (D-WV) introduced an amendment to try to provide cover for fellow Democrats and thereby siphon support from McConnell’s amendment.  Rockefeller would delay EPA regulations for two years.

That hasn’t gained much support, so Senator Max Baucus (D-Mont.) introduced another amendment that would codify EPA regulation of major emitters, but permanently exempt minor emitters, such as small businesses, farms, and ranches.  The American Farm Bureau Federation’s strong opposition has discredited the case for Baucus’s amendment.

The wrangling has gone on for so long that a third Democratic amendment, combining some of the worst aspects of the two other Democratic amendments, was introduced this week by Senator Debbie Stabenow (D-Mich.).  Her amendment has fallen flat, too.

Should the Senate vote on the McConnell amendment, it looks to have the support of all 47 Republicans and three Democrats—Joe Manchin of West Virginia, Mary Landrieu of Louisiana, and Ben Nelson of Nebraska.  That makes 50.  Because of the Senate rules on non-germane amendments, passage requires 60 votes.

That’s not going to happen, but I think it’s important that they get at least 51 votes.  That would demonstrate majority support and would give Reid problems in trying to keep it from being introduced as a germane amendment to other bills.  There appears to be only a couple more possible Democratic votes in favor—Claire McCaskill of Missouri and Debbie Stabenow of Michigan.  Both are up for re-election in 2012.

Energy Secretary Steven Chu today testified before the Senate Energy and Natural Resources Committee on the Obama administration’s  budget for the Department of Energy (DOE). Despite the fact that the DOE has yet to spend $21 billion in stimulus money (about 60% of its 2010 budget), the White House proposed a 12% budget increase.

Minnesota Senator Al Franken was unconcerned with the deficit implications of giving billions more taxpayer dollars to a bureaucracy that has yet to spend the billions of taxpayer dollars it already has. Instead, he had a much more parochial matter in mind.

His line of questioning for the Energy Secretary focused on Sage Electrochromic, a Minnesota-based window manufacturer. Senator Franken explained that the window company had received a $70 million loan guarantee from the Department of Energy, which you’d think would be  pleasing to the Senator. After all, a federally backed loan is a taxpayer subsidy that allows recipients to obtain better financing.

Yet it wasn’t generous enough for Senator Franken. He noted that the company was still on the hook for the credit subsidy cost, which is (roughly speaking) the value of the risk that the government undertakes by backing the loan. Point blank, the Minnesota Senator told Secretary Chu, “I’d like to get this credit subsidy cost waived.”

Is this not a shakedown?

The primary Republican talking point for today’s hearing was that the government should not be picking and choosing winners and losers in the energy industry. Secretary Chu vigorously denied this accusation; Senator Franken proved it.

The 112th Congress was sworn in on Wednesday, and Rep. John Boehner (R-Ohio) was elected Speaker of the House.  Nineteen Democrats voted against Rep. Nancy Pelosi (D-San Francisco), which is extraordinary when you consider that Pelosi as Minority Leader still controls committee assignments for her party’s members.  The House began Thursday by reading the Constitution (my thoughts on that may be found here), which surprised me by causing a lot of foaming at the mouth on the left.  Later that morning, Senator Barbara Boxer (D-Marin County), who remains Chairman of the Environment and Public Works Committee, held a press conference during which she vowed to block any attempt to prohibit or delay the EPA from regulating greenhouse gas emissions using the Clean Air Act.

Boxer may be very busy.  The hottest item of the first week of the new Congress was introducing a bill to block EPA.  Rep. Marsha Blackburn (R-Tenn.) along with 45 co-sponsors re-introduced her bill (H. R. 97) to remove greenhouse gas emissions from the list of things that can be regulated under the Clean Air Act.  Rep. Shelley Moore Capito (R-WV) introduced a bill to delay EPA from regulating greenhouse gas emissions for two years.  This is similar to the bill that Senator Jay Rockefeller (D-WV) introduced last year and announced this week that he would re-introduce in the 112th Congress.  And Rep. Ted Poe (R-Tex.) introduced a bill to prohibit any funding to be spent on implementing or enforcing a cap-and-trade program to reduce greenhouse gas emissions.

Lame Duck Session a Big Success So Far

The first week of Congress’s lame duck session has been a big success.  They haven’t done anything.  Senate Majority Leader Harry Reid (D-Nev.) pulled a scheduled vote to invoke cloture and proceed to S. 3815, the “Promoting Natural Gas and Electric Vehicles Act of 2010,” because he did not have the 60 votes required.

S. 3815 is known around town as the Boone Pickens Payoff Bill.  Pickens told Bloomberg News this week that he thought there was a better than 50-50 chance that the bill would be enacted, so we can’t celebrate yet.

The bill would provide $4.5 billion in subsidies for natural gas vehicles and $3.5 billion in subsidies for electric vehicles plus $2 billion in loans to manufacturers of natural gas vehicles.  The subsidies to purchasers would range from $8,000 to $64,000.  The larger payments would be for purchasers of heavy trucks that run on natural gas.

But the Lame Ducks Will Be Back after Thanksgiving

Congress will be in recess next week for Thanksgiving and will return on November 29th.  There are enough big must-do items that it still seems unlikely to me that the Senate will be able to take up Pickens’s bill or the Renewable Electricity Standard (or RES) bill, S. 3813.  The RES bill is sponsored by Senator Jeff Bingaman (D-NM), the Chairman of the Energy and Natural Resources Committee, and retiring Senator Sam Brownback (R-Ks.), who has just been elected Governor of Kansas.  It now has 31 co-sponsors, including three other Republicans.

The RES bill would raise electric rates in those States that haven’t yet followed the failed California model of raising rates to impoverish consumers and drive out energy-intensive industries.  My guess is that it will be blocked in the Senate by Republican and Democratic Senators from those States in the Mideast and Southeast that still depend on low-cost coal and therefore still have manufacturing.  On the other hand, there is an incentive for Senators from States that have already enacted their own renewable requirements to support a national standard in order to lower the competitiveness of the States that have not adopted renewable requirements.

“Greens Desperate to Avoid Blame” was the headline on Darren Samuelsohn and Robin Bravender’s story in Politico on Wednesday. Environmental pressure groups moved quickly to spin the election results as having nothing to do with them.  In particular, they claimed that passage in the House of the Waxman-Markey cap-and-trade bill did not cause Democrats to lose.  On the contrary, the reality is that Waxman-Markey did contribute to the defeat of a number of Democrats, as I argue in Politico’s Energy Arena.

More significant is the fact that the new Republican majority in the House is largely skeptical of the claim that global warming is a potential crisis and is close to unanimously opposed to cap-and-trade and other energy-rationing measures.  Not only is cap-and-trade dead, but there is a good chance that the House next year will move legislation to block or delay the EPA from using the Clean Air Act to regulate greenhouse gas emissions.

The question is, can such a measure pass the Democratic-controlled Senate?  There is certainly a majority in the Senate for blocking EPA, but sixty votes will be needed.  My guess is that there will be more than sixty votes.  As EPA regulations start to bite next year, Senators will start to hear complaints from their constituents.  And a number of Democratic Senators are up for re-election in 2012 and will want to avoid the fate of so many of their colleagues this year.

Humor me for a moment and imagine that I am a superhero who is part of a Super Friends team at the Competitive Enterprise Institute. We have sworn to use our superpowers only to combat a particular form of evil: rent-seeking. Naturally, we’d need a nemesis. This caricature of evil would represent everything we stand against; it would be the ultimate political panhandler.

Without a doubt, our nemesis would be King Corn.

Fantasies aside, the corn lobby, a.k.a King Corn, is unbeatable inside the beltway. In the 1980s, it secured federal giveaways to NOT grow corn. The lobby has since moved on to the ultimate boondoggle: corn fuels. By playing up jingoistic fears of “energy dependence,” King Corn has convinced the Congress that ethanol, a motor fuel distilled from corn, is a national security imperative, despite the fact that it increases gas prices, it’s awful for the environment, it contributes to asthma, and it makes food costlier.

So, in 2007, the Congress passed a Soviet-style ethanol production quota that forces Americans to use corn-fuel in their gas. Thanks to this mandate, American farmers devoted a third of this year’s corn crop to ethanol. Thus corn, soy, and cotton (the three crops grown on corn-hospitable soil in the U.S.) have become recession-resistant.

You’d think that a production quota, along with generous subsidies (to the tune of 51 cents a gallon), would be enough, but there can never be “enough” for King Corn. Now it has its eyes on an even higher production quota. There was, however, an intermediate step to this higher goal-the EPA had capped the percentage of ethanol that could be included in regular gasoline at 10%, due to concerns about engine harm beyond that point. For years, the corn lobby has been trying to lift that cap to 15%. Yesterday, the EPA relented.

Raising the ethanol cap was opposed by the oil industry, the environmental lobby, and the public health lobby. These are K-street titans, and they were vanquished by King Corn.

Behold, the power of King Corn.