Taming the EPA

March 17, 2014
The US House of Representatives deserves applause for passing legislation to limit the Environmental Protection Agency's regulation of electric power plants. But the welcome move has two problems.

The US House of Representatives deserves applause for passing legislation to limit the Environmental Protection Agency's regulation of electric power plants. But the welcome move has two problems. It will not become law. And it necessarily targets only one monster in a herd of regulatory beasts. Oil and gas companies must worry about both problems.

With its power-plant regulation, the EPA has foreclosed construction of coal-fired generators by essentially requiring that emissions of carbon dioxide be captured and sequestered underground. For most prospective plants in most places, the technology isn't economic. EPA required it anyway because it has appropriated the mission of cutting emissions of greenhouse gases to combat global warming. The Supreme Court bone-headedly said the agency had authority to regulate greenhouse gases under the Clean Air Act if it determined emissions endangered health. Eagerly, EPA made the determination and has been restructuring energy use ever since. Whether the EPA can use Clean Air Act authority to selectively regulate emissions from stationary sources is a legal question argued last month before the Supreme Court in a case in which oil companies have more than passive interest. If the high court upholds its authority, EPA will turn next to existing power plants and, after that, to refineries.

A say for Congress

The bill passed by the House, which Republicans control, would give Congress a say in the timing of EPA's regulations on existing power plants, establish feasibility tests for the imposition of technological requirements, and make EPA report on economic effects related to its regulation of emissions from power plants. Despite the support of a few coal-state Democrats, the bill probably won't be passed in the Senate. If it did pass, President Barack Obama would veto it.

Still, the measure brings constructive attention to the excesses of an agency that needs taming. Under Obama, the EPA has mass-produced restrictive, costly regulations in pursuit of environmental benefits that often are, at best, questionable. A recent example is a rule cutting the sulfur content of gasoline, the cost of which EPA incredibly claims will be minor and the benefits of which it has oversold. EPA disregarded warnings that the extra processing required to remove more sulfur from gasoline streams will increase energy use and consequent emissions of greenhouse gases. Nothing slows EPA when there's a regulation to impose.

Behind EPA's regulatory gush lie tactics typical of conspiratorial fervor. One of them is a practice known as sue-and-settle. In it, a pressure group sues the agency to accelerate development of a regulation or to make it stricter than the law might have intended it to be. A complicit EPA and the plaintiff agree on a regulatory strategy, which they present to a court as a negotiated settlement. The court then issues a consent decree enshrining the deal. And it all happens with limited involvement of parties that might oppose the consequent regulation.

The sue-and-settle tactic predates the Obama administration. But it has never been used more frequently than it is now—or more effectively by activist groups eager to influence policy.

Social cost of carbon

Another furtive manipulation at EPA distorts the social cost of carbon (SCC), which is supposed to indicate the economic reward of incurring cost to lower CO2 emissions—such as by replacing cheap coal with costly solar power. As the SCC estimate rises, the relative cost of regulating carbon seems to decline. The illusion helps win political support for carbon regulation. In its calculations, therefore, the EPA uses below-standard discount rates and other tricks, while ignoring the cost of rejecting carbon-based commercial energy, to levitate SCC values. Last year it raised the SCC even though stabilization of globally averaged temperature argued for a lower number.

The EPA has grabbed too much power and used it with too little regard for democratic processes. Driven by cost-blind activism, it produces regulations that hurt the economy too much and help the environment too little. Congress should increase the pressure.