The EPA Train Wreck

1. The EPA Train Wreck Scott Manley Director of Environmental & Energy Policy Wisconsin Manufacturers & Commerce Contact: PO Box 352, Madison, WI 53701. Tel: 608.258.3400; email: smanley@wmc.org

3. The EPA Train Wreck • A series of environmental regulations targeting coal-fired electric utility and industrial boilers. • New Ozone Standard • Cross State Air Pollution Rule (CSAPR) • Utility MACT • Industrial Boiler MACT • Greenhouse Gas (GHG) Regulation • New SO2 Standard • New NO2 Standard • PM2.5 Standard Implementation • Various Water Intake & Effluent Rules • Coal Ash Regulations

4. The EPA Train Wreck • The “Train Wreck” rules individually will add considerable cost to manufacturers and utilities, but the cascading impacts of these rules are likely to be devastating. • "So if somebody wants to build a coal-powered plant, they can. It's just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that's being emitted." --Barack Obama, January 17, 2008 • "Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket. Coal-powered plants, you know, natural gas, you name it, whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers."  --Barack Obama, January, 2008

5. The EPA Train Wreck • President Obama’s cap-and-trade approach for bankrupting coal plants failed in Congress – the Democrat-controlled Senate would not even bring the bill to a vote in the 2009-2010 session of Congress. • The “Train Wreck” rules appear to be a surrogate vehicle to achieve the goal of making the use of coal economically untenable.

6. The EPA Train Wreck:Wisconsin in the Crosshairs • Wisconsin typically produces between 65-70% of its electricity from coal. • Wisconsin has the second-most manufacturing intensive economy in the U.S. • Manufacturing accounts for 18% of Wisconsin’s annual economic output. • Industrial ratepayers are the largest class of electricity consumers in Wisconsin. • Manufacturers need affordable energy to remain competitive.

10. New Ozone Standard • Obama Administration EPA proposed a new ozone standard between 60-70 parts per billion (ppb). • Current ozone standard of 75 ppb set in 2008. • EPA proposal would have placed much of Wisconsin (and the US as a whole) at risk of being an ozone nonattainment area. • Nonattainment area = nearly impossible for new or expanded power plants or factories.

11. New Ozone Standard • The EPA proposal would be incredibly expensive – up to $1 trillion per year between 2020 and 2030, and 7 million lost jobs by 2020 (Manufacturers Alliance Study). • Dodged a bullet (for now): President Obama recently announced no new ozone standard… • But…Clean Air Act process requires another review in 2013, so relief may be temporary.

12. Cross State Air Pollution Rule • Requires severe NOx and SO2 reductions of power plants to address air quality impacts in downwind states. • Phased compliance horizon beginning in January of 2012 (impractical timeline). • Wisconsin utilities were under-allocated the amount of emission “allowances” they need to operate, making a difficult rule even worse. • Nationally, expected to cost up to $120 billion by 2015.

13. Utility MACT • Imposes very stringent limits on mercury and other hazardous pollutants from utility boilers. • EPA to finalize the rule in November of 2011. • Will require compliance within a three-year timeframe. • Nationally, cost estimates range from $261 billion to $358 billion.

14. CSAPR & Utility MACT: Wisconsin Cost Study • American Coalition for Clean Coal Electricity commissioned a cost study for these two rules. • Used NERA model – same as U.S. DOE • Projected electric rate increase in Wisconsin of 21.7% by 2016. • Estimated 24,500 lost jobs

15. Industrial Boiler MACT • Like the Utility MACT rule, requires stringent reductions in mercury emissions from industrial boilers. • EPA rule on hold after major pushback nationally from industry and lawmakers. • EPA rule presents virtually impossible compliance requirements for many facilities. • Nationally, expected to cost more than $100 billion, and result in 800,000 lost jobs. • In Wisconsin, paper industry job losses expected to hit 7,500, with likelihood of 11 mills shut down -- $680 million overall cost for the rule.

16. GHG Regulation • Regulates GHG emissions from “large” facilities under the Clean Air Act. • Applies primarily to power plants and larger factories. • New regulation with no commercially available compliance technology – creates significant regulatory and cost uncertainty. • Projected to reduce GDP by $500 billion by 2030, and result in 2.5 million lost jobs.

17. GHG Regulation • Regulating CO2 under the Clean Air Act is projected to increase prices: • Gasoline – 50% increase • Industrial Electricity – 75% • Residential Natural Gas – 75% • Litigation Pending: If EPA’s effort to narrow scope of rule is found to be illegal, and its GHG regulations must be applied consistent with the plain language of the Clean Air Act, costs go up to $7 trillion and 800,000 lost jobs each year.

18. EPA Train Wreck: Next Steps • These EPA rules beg for reform of the federal Clean Air Act, and reform of the federal rulemaking process in order to put elected officials in charge of decisions involving hundreds of billions of dollars and hundred of thousands of jobs. • Public needs to be vocal with concerns with federal elected officials – political solution will not happen if voters remain silent and unaware. • Talk to your lawmaker, and urge your friends, family and coworkers to do the same. Be assured that environmental groups are sending loud messages in the opposite direction.