Commentary Magazine


Topic: Utility MACT

Weighing the Costs and Benefits of EPA Regulations

While Secretary of Energy Stephen Chu was giving himself an A- grade on gas prices, the White House was rolling out a new rule that would ostensibly require federal agencies to weigh the cumulative effects of energy regulations. It’s a laudable idea in theory, but then again, so was President Obama’s executive order to cut down on regulatory red tape last year. And apparently that was such a runaway success that the White House needed to announce another rule a year later intended to do basically the same thing:

Agencies now will consult stakeholders and the public on how a new rule might interact with existing rules — and whether, for example, a string of upcoming rules on one industry would create an undue burden. Officials will also consider the cumulative effects of rules in their cost-and-benefit analysis, a process that currently weighs the costs against the benefits of each individual rule.

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While Secretary of Energy Stephen Chu was giving himself an A- grade on gas prices, the White House was rolling out a new rule that would ostensibly require federal agencies to weigh the cumulative effects of energy regulations. It’s a laudable idea in theory, but then again, so was President Obama’s executive order to cut down on regulatory red tape last year. And apparently that was such a runaway success that the White House needed to announce another rule a year later intended to do basically the same thing:

Agencies now will consult stakeholders and the public on how a new rule might interact with existing rules — and whether, for example, a string of upcoming rules on one industry would create an undue burden. Officials will also consider the cumulative effects of rules in their cost-and-benefit analysis, a process that currently weighs the costs against the benefits of each individual rule.

If the White House was serious about weighing the cost-benefit of its energy regulations, it might want to take a look at some of the ways its EPA policies have impacted businesses during the past year. Take GenOn Energy, Inc., a company that was reportedly forced to shut down its energy plant in Ohio due to the financial burden of EPA regulations. Its dilemma was highlighted yesterday at a Senate hearing on the impact of Utility MACT, a new and exceptionally expensive regulation on coal plant emissions:

On February 29th of this year, GenOn Energy, Inc. announced that it would close the coal and fuel-oil fired electric generating plant in Avon Lake in 2015.  The Avon Lake Generating Station is capable of generating 734 megawatts,  providing baseload electric capacity and load-following capability to the grid, as well as essential peaking capacity and black start capability. This facility plays an important role in providing a reliable and affordable supply of electricity.

The reasons behind the closure are clear.  GenOn stated that the closure was a result of the rising costs associated with EPA’s regulations, and the fact that the overwhelming costs associated with complying with the rules could not be recovered by continuing to operate the facility.

It’s not just the closure of the facility that’s the problem. It’s also the loss of jobs, income taxes, property taxes, and energy generation along with it. This isn’t meant to diminish the real concerns over the environmental impacts of coal-fueled power plant emissions. But if the White House claims the benefit of these rules has to be weighed against the costs to communities, businesses and the economy, then it should explicitly address why it believes Utility MACT is worth these job losses and plant closures.

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