Energy and Power Subcommittee Examines Cost and Consumer Impacts of EPA's Utility MACT Rule

February 8, 2012

WASHINGTON, DC - The House Energy and Commerce Subcommittee on Energy and Power, chaired by Rep. Ed Whitfield (R-KY), held a hearing today to discuss the cost and consequences of EPA's recently finalized Utility MACT rule on consumers and the economy.
 
EPA's Utility MACT rule, which applies to electric utilities, is expected to be the most expensive rule ever imposed on our nation's power sector. EPA states the cost of the rule will be $9.6 billion annually, however the agency has not provided an estimate of the total cost of the regulation. One independent analysis projects capital costs could total up to $84 billion through 2015. These high costs will stifle investment, destroy jobs, and will ultimately be passed down to consumers in the form of higher electricity rates.
 
Members pressed EPA Assistant Administrator Gina McCarthy to produce an accurate estimate of the total cost of the rule, yet she could only provide a cost estimate for a single year - $9.6 billion in 2016 -stating the agency could not project the total cost. The annualized cost estimate is misleading to the American people as it only accounts for a "snapshot" year of the rule, and does not portray the total "sticker price," as required by one of President Obama's Executive Orders on regulatory reform.
 
Anne Smith, Senior Vice President of NERA Economic Consulting, conducted an in-depth analysis on the cost, risks, and benefits of the Utility MACT rule, and her conclusions show EPA's calculations to be deceptive as the benefits associated with the regulation appear to be heavily inflated. "Many in the public who read or hear only these misleading summaries of EPA's analyses may consider the MATS rule's high cost of approximately $10 billion per year to be worth undertaking. When the onion layers are peeled back on both the benefits and cost estimates, however, a very different picture emerges," said Smith. "First, the reported benefits have nothing to do with HAPs [Hazardous Air Pollutants] at allIn light of this fact, the rule's large cost of $9.6 billion per year begins to appear quite disproportionate. That cost may appear larger still when one learns that it is likely to destroy thousands more jobs than the several thousand jobs the EPA's Fact Sheet states will be created."
 
Members are concerned EPA's Utility MACT rule is not intended to promote good environmental policy and believe the rule is merely designed to shutdown the nation's coal plants -making good on President Obama's campaign promise that he would bankrupt the coal industry. Republican members asserted that in these times of sustained high unemployment, we should be promoting pro-growth, pro-jobs solutions rather than policies that put more Americans out of work and make energy more expensive. Studies have concluded the Utility MACT rule, taken together with other major EPA power sector rules, threaten over 183,000 jobs per year through 2020. Several power plants across the country have already announced closures as a result of EPA's rules and the massive costs associated with them.
 
Ralph Roberson, President of RMB Consulting and Research, testified that EPA's rules will not only shut down current power plants, but will also prevent the construction of any new coal-fired units. "The standards EPA has set forth for new coal-fired EGU's in the MATS rule are so stringent that new units, even using the best technology available in the market, cannot comply. These standards therefore will prevent new coal-fired EGUs from being built," said Roberson.
 
Harrison Tsosie, Attorney General for the Navajo Nations, explained the real-life implications of plant retirements and cost increases for local economies and consumers. "The Nation has already suffered the ripple effects of one EPA rulemaking that, through the imposition of financially untenable emissions controls, resulted in the closure of the Mohave Generating Station, and as a consequence, the closure of the Black Mesa Mine, which until then had supplied 30% of the Nation's general revenues," stated Tsosie. "If FCPP or NGS were to close as the result of the imposition of cost-prohibitive emission controls, the mine supplying coal to that plant would also close. Revenue and jobs losses of that magnitude would be cataclysmic for the Navajo Nation and its People, and would certainly impugn the very solvency of the Navajo Nation government."

Darren MacDonald, Director of Energy for Gerdau Long Steel North America, expressed concern over the uncertainty surrounding EPA's combination of new power sector rules, which he fears will greatly increase the cost of business, threaten electric reliability, and ultimately raise for consumers. "While we don't know for certain who is right regarding the different cost estimates, we do know that additional costs for electricity will directly impact our bottom line, reducing competitiveness and potentially putting jobs in jeopardy," said MacDonald. "Simply not knowing who is right about the price of electricity over the next five to ten years - EPA or other forecasters - creates too much uncertainty with respect to large capital investments. We must be able to operate a profitable business while we transition to a cleaner generation fleet."

"The Obama EPA's regulatory agenda continues to weigh heavily on the economy. Multiple costly new regulations impose significant new costs on job creators, and inject uncertainty into the regulatory process. It is simply unacceptable for this administration to continue to impose policies that are driving up energy prices and putting the economy and jobs at risk for speculative benefits," said Whitfield.

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