The 2012 presidential election is starting to bend some of the Obama Administration’s environmental and energy policies.  I have noted previously that the White House realizes that gas prices are a huge threat to President Barack Obama’s re-election.  Consequently, the President is trying to shift the blame to oil companies and speculators while at the same time talking up what his Administration is doing to increase domestic oil production.  The reality, of course, is that the Obama Administration has moved across the board to decrease oil production in federal lands and offshore areas.

Another sign of the Administration’s focus on the President’s re-election is that the Environmental Protection Agency has suddenly started paying attention to the concerns of industry.  The timetables for new regulations of coal ash disposal and of surface coal mining in Appalachia have been extended.  EPA announced last week that it was reconsidering, but not delaying, some parts of its new Clean Air Act rule for cement plants.  This week EPA suspended indefinitely a similar rule for industrial boilers that it had promulgated in February.  EPA said that it will conduct more analyses and re-open the public comment period for the boiler rule.

EPA is also considering acceding to requests from Congress and electric utilities to extend the public comment period for its proposed Clean Air Act rule for coal-fired power plants. A good excuse for extending the comment period is that a simple mathematical error in EPA’s calculations has been pointed out by the Utility Air Regulatory Group, a utility industry coalition.

The boiler MACT (which stands for Maximum Achievable Control Technology), cement MACT, and utility MACT rules would limit air emissions of mercury and approximately 70 other metals and other substances.  The delays in finalizing and implementing these three rules may postpone the considerable economic damage that each of them will do until after the election.  Environmental pressure groups are naturally not happy with anything that delays shutting down the U. S. economy, but there are rumors that they have been told by the White House to shut up until after the election.

Today, the Environmental Protection Agency proposed a major rule to regulate power plants under the Hazardous Air Pollutants (HAP) Section 112 of the Clean Air Act.

This post is a primer on this consequential and controversial decision.

Section 112 of the Clean Air Act

• In 1970, the Congress added Section 112 to the Clean Air Act, requiring that the EPA list and regulate Hazardous Air Pollutants (HAPs) that could “cause, or contribute to, an increase in mortality or an increase in serious irreversible or incapacitating reversible illness.” The Congress ordered the EPA to establish standards for HAPs that provided “an ample margin of safety to protect public health.”
• Due to difficulties interpreting what should constitute “an ample margin of safety,” the EPA largely ignored Section 112 for two decades.
• In 1990, the Congress, frustrated with the slow pace of HAP regulation, amended the Clean Air Act to remove much of EPA’s discretion over the implementation of Section 112. Lawmakers listed 189 pollutants for regulation. They also legislated HAP pollution controls, known as Maximum Achievable Control Technology (MACT) standards. The Clean Air Act amendments set a “MACT floor” (i.e., a minimum HAP pollution control) at “the average emission limitation achieved by the best performing 12 percent of the existing sources.”
• Section 112 MACT standards apply to both new and existing stationary sources.
• Notably, the Congress required the EPA to proceed with caution before it regulated Electricity Generating Units (“EGUs,” or power plants). The 1990 Clean Air Amendments mandated a study on the public health threats posed by EGU HAP emissions, and the EPA Administrator was authorized to proceed with the regulation of HAPs from EGUs only after evaluating the results of this study, and concluding that “such regulation is appropriate and necessary.”

Clinton’s Lame Duck Machinations

• In 1998, the EPA completed the study on the public health threats posed by EGU HAP emissions. It found a “plausible link” between EGU mercury emissions and harm to public health.
• On this evidence, the Clinton Administration EPA found it was “appropriate and necessary” to regulate HAPs from EGUs under Section 112 of the Clean Air Act. This decision was made during the ex-President’s lame-duck session.

Courts Kill Bush Administration’s Proposed Regulation

• As I explain above, the Congress narrowly defined MACT pollution controls in the 1990 amendments to the Clean Air Act, so the EPA had little discretion in creating a regulatory regime for HAP emissions from EGUs.
• In an effort to impart more flexibility, and thereby reduce costs, the Bush Administration EPA in 2004 proposed to delist EGUs from Section 112, and instead regulate HAPs from power plants under Section 111, the New Source Performance Standards. In particular, the EPA proposed regulation of HAPs from EGUs under Section 111(d), which (possibly) authorizes a cap-and-trade emissions trading scheme for existing sources.
• In February 2008, a federal appeals court struck down the Bush Administration’s proposed cap-and-trade for HAPs. The Court found that the EPA had failed to take a number of procedural steps before it tried to “de-list” EGUs from regulation under Section 112.

HAP Regulations Comport Well with Obama’s War on Coal

• In the wake of the federal appeals court’s decision to strike down President Bush’s proposed HAP regulation, environmentalist special interests sued the EPA to force it to promulgate a new regulation. In April 2010, a federal court approved a settlement between environmentalist litigants and the EPA, which set a March 16 2011 deadline for the proposal of HAP regulations for EGUs. Today is that deadline.
• Of course, environmentalists didn’t have to twist the President’s arm. Then-Senator Barack Obama campaigned for the White House on a promise to “bankrupt” the coal industry. The EPA’s proposed HAP regulation for EGUs is particularly onerous on fossil fuel generation, so it comports well with the President’s war on coal.
• The EPA concedes that the regulation would cost $10 billion a year by 2015. This is likely a low ball. According to the Electric Reliability Coordinating Council, the price tag is as much as $100 billion a year. There are also reliability concerns. In 2010, the North American Electric Reliability Corporation performed an analysis showing that the proposed HAP rule could lead to the retirement of up to 15 gigawatts of electricity generation.

What’s Next?

• Litigation. The aforementioned 1998 study on the public health effect of HAPs emitted by EGUs addressed only the effects of mercury. Today’s rule, however, covers mercury, arsenic, chromium, nickel and acid gases, despite the fact that EPA has yet to demonstrate an incremental health benefit caused by reductions in non-mercury HAPs from EGUs. It is likely that industry will challenge today’s proposed rule for including these non-mercury HAPs from EGUs without also providing evidence that their regulation would improve public health.