The EPA Is Overreaching Again

New boiler regulations could cost economy more than $10 billion

On October 13th, the House voted to postpone the implementation of Environmental Protection Agency’s “Boiler MACT” regulations. Coming only a few weeks after President Obama’s high profile intervention to scrap the EPA’s proposed new ozone rules, the House vote, which was supported by 41 Democrats, should be a wake-up call to an agency that has over-reached. Instead, the EPA looks set to push forward with final rules in the next few weeks that would significantly increase the cost of energy for consumers and industrial users. The “EPA Regulatory Relief Act of 2011” would postpone implementation of the EPA’s “Boiler MACT” rules, which aim to curb emissions from boilers used to produce electricity and heat for industry and commercial use.

While policies that reduce harmful air pollution are obviously desirable, the methods used by EPA in this instance would be enormously difficult to achieve and impose huge costs on society. The EPA is aware of these problems and delayed the promulgation of a final rule by a year in order to “calculate standards that fully reflect operational reality” but it now says it will likely not address major issues in the final rules scheduled for release at the end of the month.

One major issue is the way the EPA has cherry-picked emissions data from various different boilers and then sought to apply the results to all boilers. The result is a set of standards that have never been demonstrated as operationally achievable when applied together. Some observers have dubbed the hypothetical boiler to which these standards would apply a “frankenboiler.” Unless EPA addresses this and other important issues, such as the dubious basis for its cost-benefit test, Congress is justified in intervening to prevent these rules from being promulgated.

The EPA says that its frankenboiler standards are justified under the Clean Air Act, which requires the elaboration of standards based on the “maximal available control technology”, or MACT. It is true that MACT standards impose stringent emission limits on boilers used in manufacturing, processing, mining, refining, and other industries, as well as commercial boilers used in malls, apartments, restaurants, and hotels. Under the Clean Air Act, EPA may force companies to upgrade to the technologies used in the top 12 percent of facilities within any particular industry. For example, EPA can require existing steel mills to apply technologies used in the cleanest 12 percent of steel mills nationwide.

The most natural interpretation of the MACT standard is that EPA should take a look across an industry, identify the least polluting 12 percent of facilities and direct the rest of the industry to move towards similar controls. Instead, EPA looked at individual pollutants at facilities, cherry-picked the lowest emitters of any particular pollutant (regardless of the same boiler’s emissions of other pollutants), spiced them together, and set the bar there. And like Dr. Frankenstein’s cobbled together freak show in Mary Shelley’s famous novel, this monstrous boiler is entirely imaginary.

The EPA has taken a similarly burdensome approach before on a smaller scale – and the result was devastating. In 1997, it issued regulations for incinerators used in the disposal of hospital waste. Environmentalists sued, claiming that the standards were too lax, and two years later the agency was told by a court to redo them. EPA took its time issuing new standards, but the regulations deemed too weak by environmentalists nevertheless decimated the industry – cutting the number of facilities from over 2,300 to 57 in just one decade.

By the time the EPA finally issued new standards for hospital waste, in 2007, it had taken the environmentalists’ message to heart. Not only did it use new data, from 2007 when 98 percent of businesses had already exited the industry, but, claiming that “there appears … to be a substantial ambiguity in the statutory language about whether the MACT floor is to be based on the performance of an entire source or on the performance achieved in controlling particular hazardous air pollutants.” It decided that the obvious solution to the ambiguity is to take the most perverse interpretation. Thus begat the frankenboiler.

Earlier we noted that there are no boilers that comply with the new MACT standards. We may have exaggerated. We said may: it has been estimated that between zero and two percent of boilers in the country might comply with the proposed standard. Ninety eight percent would fail. Unfortunately, industrial and commercial boilers are not part of an industry America can afford to decimate. Under the regulation, the majority of the country’s 14,000 large boilers will have to be retrofitted with new and costly technologies. The EPA estimates the upfront price tag of doing this at $10 billion and annual compliance costs of around $3 billion. Industry estimates are much higher.

Earlier this year President Obama signed an executive order requiring federal agencies to use the “least burdensome tools” that take “into account benefits and cost” when creating regulations. This is an example where EPA can adhere to this mandate by making simple, sensible policy decision: withdraw the proposed standards and as EPA Administrator Lisa Jackson has put it: “calculate standards that fully reflect operational reality.”

Unless the EPA withdraws the proposed standards voluntarily – and it seems unlikely to do so – Congress should require it to. It’s time to rein in this Dr. Frankenstein Agency.

Julian Morris is vice president at Reason Foundation. Adam Peshek is a research associate at Reason Foundation.